ALLEGED DUMPING OF A4 COPY PAPER EXPORTED FROM AUSTRIA, FINLAND… · Australia from Finland, Korea, Russia and Slovakia. 1.4.4 Statement of Essential Facts The Commissioner must,

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SEF 463 A4 Copy Paper – Austria, Finland, Korea, Russia and Slovakia

CUSTOMS ACT 1901 - PART XVB

STATEMENT OF ESSENTIAL FACTS

NO. 463

ALLEGED DUMPING OF A4 COPY PAPER

EXPORTED FROM AUSTRIA, FINLAND, THE REPUBLIC OF KOREA, THE RUSSIAN FEDERATION AND THE SLOVAK

REPUBLIC

19 November 2018

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CONTENTS

CONTENTS ................................................................................................................................................................. 2

ABBREVIATIONS ........................................................................................................................................................ 4

1 SUMMARY AND RECOMMENDATIONS ............................................................................................................ 5

1.1 INTRODUCTION ........................................................................................................................................................ 51.2 PROPOSED RECOMMENDATION TO THE MINISTER .......................................................................................................... 51.3 PROPOSAL TO TERMINATE PART OF THE INVESTIGATION ................................................................................................... 51.4 APPLICATION OF LAW TO FACTS .................................................................................................................................. 51.5 FINDINGS AND CONCLUSIONS ..................................................................................................................................... 7

2 BACKGROUND ................................................................................................................................................ 10

2.1 INITIATION ............................................................................................................................................................ 102.2 PREVIOUS MEASURES AND CASES .............................................................................................................................. 102.3 RESPONDING TO THIS SEF ....................................................................................................................................... 112.4 PUBLIC RECORD ..................................................................................................................................................... 12

3 THE GOODS AND LIKE GOODS ........................................................................................................................ 13

3.1 PRELIMINARY FINDING ............................................................................................................................................ 133.2 LEGISLATIVE FRAMEWORK ........................................................................................................................................ 133.3 THE GOODS .......................................................................................................................................................... 133.4 TARIFF CLASSIFICATION ........................................................................................................................................... 143.5 LIKE GOODS .......................................................................................................................................................... 143.6 COMMISSION’S ASSESSMENT .................................................................................................................................... 15

4 THE AUSTRALIAN INDUSTRY .......................................................................................................................... 16

4.1 PRELIMINARY FINDING ............................................................................................................................................ 164.2 LEGISLATIVE FRAMEWORK ........................................................................................................................................ 164.3 PRODUCTION PROCESS ............................................................................................................................................ 164.4 PRELIMINARY CONCLUSION ...................................................................................................................................... 16

5 AUSTRALIAN MARKET .................................................................................................................................... 17

5.1 FINDING ............................................................................................................................................................... 175.2 MARKET STRUCTURE............................................................................................................................................... 175.3 MARKET SIZE......................................................................................................................................................... 22

6 DUMPING INVESTIGATION ............................................................................................................................. 26

6.1 PRELIMINARY FINDING ............................................................................................................................................ 266.2 INTRODUCTION AND LEGISLATIVE FRAMEWORK ............................................................................................................ 266.3 COOPERATIVE EXPORTERS ........................................................................................................................................ 276.4 UNCOOPERATIVE EXPORTERS .................................................................................................................................... 276.5 DUMPING ASSESSMENT – HANKUK PAPER .................................................................................................................. 276.6 DUMPING ASSESSMENT – MONDI AUT ...................................................................................................................... 336.7 DUMPING ASSESSMENT – MONDI SVK ...................................................................................................................... 346.8 UNCOOPERATIVE AND ALL OTHER EXPORTER DUMPING MARGINS .................................................................................... 346.9 THE COMMISSIONER’S ASSESSMENT .......................................................................................................................... 356.10 VOLUME OF DUMPED IMPORTS ................................................................................................................................. 36

7 APPROACH TO INJURY AND CAUSATION ANALYSIS ........................................................................................ 37

7.1 INTRODUCTION AND LEGISLATIVE FRAMEWORK ............................................................................................................ 377.2 INJURY CLAIMS MADE BY AUSTRALIAN INDUSTRY .......................................................................................................... 377.3 CUMULATIVE EFFECTS OF EXPORTATIONS .................................................................................................................... 387.4 THE INJURY ANALYSIS PERIOD ................................................................................................................................... 397.5 SUMMARY OF APPROACH TO INJURY AND CAUSATION ANALYSIS ...................................................................................... 39

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8 ECONOMIC CONDITION OF THE AUSTRALIAN INDUSTRY ............................................................................... 41

8.1 FINDING ............................................................................................................................................................... 418.2 VOLUME EFFECTS ................................................................................................................................................... 418.3 PRICE EFFECTS ....................................................................................................................................................... 448.4 REVENUE.............................................................................................................................................................. 458.5 PROFIT EFFECTS ..................................................................................................................................................... 478.6 OTHER ECONOMIC FACTORS ..................................................................................................................................... 478.7 COMMISSION’S ASSESSMENT .................................................................................................................................... 48

9 HAS DUMPING CAUSED MATERIAL INJURY? .................................................................................................. 49

9.1 FINDING ............................................................................................................................................................... 499.2 LEGISLATIVE FRAMEWORK ........................................................................................................................................ 499.3 SIZE OF THE DUMPING MARGINS ............................................................................................................................... 499.4 EXPORTS OF A4 COPY PAPER FROM AUSTRIA ............................................................................................................... 499.5 VOLUME EFFECTS ................................................................................................................................................... 499.6 PRICE UNDERCUTTING ............................................................................................................................................. 519.7 PRICE EFFECTS ....................................................................................................................................................... 579.8 REVENUE.............................................................................................................................................................. 599.9 PROFIT EFFECTS ..................................................................................................................................................... 599.10 OTHER FACTORS .................................................................................................................................................... 599.11 CONCLUSION ........................................................................................................................................................ 60

10 IS DUMPING THREATENING TO CAUSE INJURY? ............................................................................................. 61

10.1 FINDING ............................................................................................................................................................... 6110.2 INTRODUCTION AND LEGISLATIVE FRAMEWORK ............................................................................................................ 6110.3 SUPPLY NEGOTIATIONS ............................................................................................................................................ 6210.4 THE IMPACT OF THE CUSTOMERS’ PRICE OFFERS ........................................................................................................... 6410.5 WILL DUMPING CONTINUE? ..................................................................................................................................... 6810.6 THE COMMISSION’S ASSESSMENT OF THREAT OF MATERIAL INJURY .................................................................................. 6910.7 CONCLUSION ........................................................................................................................................................ 73

11 NON-INJURIOUS PRICE ................................................................................................................................... 74

11.1 DETERMINATION.................................................................................................................................................... 7411.2 INTRODUCTION ...................................................................................................................................................... 7411.3 CALCULATION OF THE NIP ....................................................................................................................................... 7411.4 THE COMMISSIONER’S ASSESSMENT .......................................................................................................................... 75

12 PROPOSED MEASURES ................................................................................................................................... 76

12.1 FINDING ............................................................................................................................................................... 7612.2 FORM OF MEASURES AVAILABLE ................................................................................................................................ 7612.3 FORM OF SECURITIES APPLIED FOLLOWING PAD 463 .................................................................................................... 7612.4 SUBMISSIONS RECEIVED .......................................................................................................................................... 7612.5 THE COMMISSION’S ASSESSMENT ............................................................................................................................. 76

13 REVISION TO SECURITIES ................................................................................................................................ 78

13.1 BACKGROUND ....................................................................................................................................................... 7813.2 AMENDMENT TO SECURITIES .................................................................................................................................... 78

14 APPENDICES AND ATTACHMENTS .................................................................................................................. 79

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ABBREVIATIONS

$ Australian dollars

ABF Australian Border Force

ADN Anti-Dumping Notice

The Act Customs Act 1901

The applicant, Australian Paper Paper Australia Pty Ltd

Central National Central National Australia Pty Ltd

CFR Cost and freight

COGS Cost of goods sold

the Commission the Anti-Dumping Commission

the Commissioner the Commissioner of the Anti-Dumping Commission

COS Complete Office Supplies

CTM Cost to make

CTMS Cost to make & sell

CTS Cost to sell

EBIT Earnings before interest and tax

EDITA Earnings before interest, tax, depreciation and amortisation

FOB Free On Board

FXPC Fuji Xerox Asia Pacific Pte Ltd

GAAP Generally accepted accounting principles

the goods the goods the subject of the application (also referred to as the goods under consideration or GUC)

Hankuk Paper Hankuk Paper Mfg. Co., Ltd

International Paper International Paper Nordic Sales Co Oy

Jackaroo Jackaroo Pty Ltd

the Minister The Minister for Industry, Science and Technology

Mondi AUT Mondi Neusiedler GmbH

Mondi SVK Mondi SCP a.s.

NIP Non-injurious Price

Officeworks Officeworks Ltd

PAD Preliminary Affirmative Determination

Russia The Russian Federation

SEF Statement of Essential Facts

Slovakia the Slovak Republic

Tjiwi Kimia Pt Pabrik Kertas Tjiwi Kimia Tbk

UPM Australia UPM Kymmene Pty Ltd

UPM Finland UPM-Kymmene Asia Pacific Pte Ltd

USP Unsuppressed Selling Price

Vital Office Vital Office Stationery Solutions (part of Vital Solutions Pty Ltd)

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1 SUMMARY AND RECOMMENDATIONS

1.1 Introduction

This Statement of Essential Facts (SEF) No. 463 has been prepared in response to an application by Paper Australia Pty Ltd (Australian Paper) seeking the publication of a dumping duty notice in respect of A4 copy paper (the goods) exported to Australia from Austria, Finland, the Republic of Korea (Korea), the Russian Federation (Russia) and the Slovak Republic (Slovakia).

Australian Paper alleges that it has suffered material injury caused by A4 copy paper exported to Australia from Austria, Finland, Korea, Russia and Slovakia at dumped prices, and is threatened with material injury by dumped exports from those countries.1

This report sets out the findings on which the Commissioner of the Anti-Dumping Commission (the Commissioner) proposes to base recommendations to the Minister for Industry, Science and Technology (the Minister) regarding this investigation, subject to any submissions received in response to this SEF.

1.2 Proposed recommendation to the Minister

Based on the findings in this SEF, and subject to any submissions received in response to this SEF, the Commissioner proposes to recommend to the Minister that a dumping duty notice be published in respect of A4 copy paper exported to Australia from all exporters in Finland, Korea, Russia and Slovakia.

1.3 Proposal to terminate part of the investigation

Based on the findings in this SEF, and subject to any submissions received in response to this SEF, the Commissioner proposes to terminate the investigation in so far as it relates to A4 copy paper exported from Mondi Neusiedler GmbH (Mondi AUT) in accordance with subsection 269TDA(1) of the Act on the basis that the dumping margin is negligible. The Commissioner further proposes to terminate the investigation in so far as it relates to Austria in accordance with subsection 269TDA(13), on the basis that the injury to the Australian industry that has been, or may be, caused by exports from Austria (excluding the volume exported by Mondi AUT) is negligible.

1.4 Application of law to facts

1.4.1 Authority to make decision

Division 2 of Part XVB of the Act describes, among other things, the procedures to be followed and the matters to be considered by the Commissioner in conducting investigations in relation to the goods covered by an application under subsection 269TB(1) for the purpose of making a report to the Minister.

1 Australian Paper’s claim regarding threat of material injury was made via submission on 4 September 2018. Refer to document 46 on the electronic public record for investigation 463.

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1.4.2 Application

Australian Paper alleges that the Australian industry producing A4 copy paper has suffered material injury caused by A4 copy paper exported to Australia from Austria, Finland, Korea, Russia and Slovakia at dumped prices.

The application sought the publication of a dumping duty notice in respect of the goods exported to Australia from Austria, Finland, Korea, Russia and Slovakia.

Having considered the application, the Commissioner decided not to reject the application and initiated an investigation on 19 March 2018. Public notification of the initiation of the investigation was also made on 19 March 2018.

Consideration Report No.463 (CON 463) and Anti-Dumping Notice (ADN) No. 2018/39 provide further details relating to the initiation of the investigation and are available on the Commission’s website at www.adcommission.gov.au.

1.4.3 Preliminary Affirmative Determination

In accordance with subsection 269TD(1), the Commissioner may make a Preliminary Affirmative Determination (PAD) if satisfied that there appear to be sufficient grounds for the publication of a dumping duty notice, or it appears that there will be sufficient grounds subsequent to the importation of the goods into Australia.

A PAD may be made no earlier than day 60 of the investigation (day 60 in relation to this investigation was 18 May 2018) and the Commonwealth may require and take securities at the time of a PAD, or at any time during the investigation after a PAD has been made, if the Commissioner is satisfied that it is necessary to do so to prevent material injury to an Australian industry occurring while the investigation continues.

On 18 May 2018 the Commissioner was satisfied that there were sufficient grounds for publication of a dumping duty notice in relation to exports of the goods from Finland, Korea, Russia and Slovakia and made a PAD to that effect.2 Following the PAD, and to prevent material injury to the Australian industry occurring while the investigation continued, securities were taken in respect of any interim dumping duty that may become payable in respect of the goods exported from Finland, Korea, Russia and Slovakia and entered for home consumption in Australia on or after 21 May 2018.

As outlined in Chapter 13 below, the Commissioner remains satisfied that there appear to be sufficient grounds for the publication of a dumping duty notice in respect of the goods exported to Australia from Finland, Korea, Russia and Slovakia. The Commissioner will revise the level of securities required and taken under section 42 of the Act in respect of interim dumping duty that may become payable in relation to the goods exported to Australia from Finland, Korea, Russia and Slovakia.

1.4.4 Statement of Essential Facts

The Commissioner must, within 110 days after the initiation of an investigation, or such longer period as allowed under subsection 269ZHI(3), place on the public record a SEF on

2 Refer to document 22 on the electronic public record for investigation 463.

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which the Commissioner proposes to base a recommendation to the Minister in relation to the application.

The SEF was originally due to be placed on the public record by 7 July 2018. The Commissioner was granted extensions of time to publish the SEF.3 The Commissioner is now required to place the SEF on the public record by 19 November 2018.

1.4.5 Final Report

The Commissioner’s final report and recommendations in relation to this investigation must be provided to the Minister on or before 3 January 2019, unless the investigation is terminated earlier or an extension of time is granted to provide the final report.

1.5 Findings and conclusions

The Commissioner’s assessments and conclusions in this SEF are based on available information at this stage of the investigation. A summary is provided below and greater detail is provided in the remainder of this report.

1.5.1 The goods and like goods (Chapter 3)

The Commissioner considers that locally produced A4 copy paper is ‘like’ to the goods that are the subject of the application.

1.5.2 Australian industry (Chapter 4)

The Commissioner has found that there is an Australian industry producing like goods and that the goods are wholly manufactured in Australia. The Commissioner has also found that the Australian industry producing the goods wholly consists of Australian Paper.

1.5.3 Australian market (Chapter 5)

The Australian A4 copy paper market is supplied from local production by Australian Paper and by imports from multiple countries. Imports from Austria, Finland, Korea, Russia and Slovakia supply approximately 11 per cent of the Australian market.

1.5.4 Dumping assessment (Chapter 6)

The Commissioner’s assessment of dumping margins are set out below, in Table 1.

Country Exporter (and other exporters) Dumping Margin

Austria Mondi Neusiedler GmbH 1.7%

Uncooperative and all other exporters 4.2%

Finland Uncooperative and all other exporters 16.3%

Korea Hankuk Paper Mfg. Co. Ltd 3.8%


3 Refer to documents 33, 40 and 49 on the electronic public record for investigation 463.

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Russia Uncooperative and all other exporters 14.4%

Slovakia Mondi SCP a.s. 5.8%


Table 1: Preliminary dumping margins

1.5.5 Approach to injury and causation (Chapter 7)

The Commissioner has outlined its approach to the injury and causation analysis. This includes the claims of the Australian industry during the course of the investigation and the cumulative effect of exports from the subject countries.

1.5.6 Economic condition of the Australian Industry and Causation (Chapter 8)

The Commissioner considers that the Australian industry has experienced injury in the form of:

• price suppression; • price depression; • decreased profits and profitability • reinvestment unattractiveness; and • reduced return on investment/sales.

1.5.7 Causation analysis (Chapter 9)

The Commissioner is not satisfied that dumped imports of A4 copy paper from the subject countries caused material injury to the Australian industry during the investigation period.

1.5.8 Threat (Chapter 10)

The Commissioner is satisfied that dumped imports of A4 copy paper from Finland, Korea, Russia and Slovakia threaten to cause material injury to the Australian industry.

1.5.9 Non-injurious price (Chapter 11)

The Commission has calculated a non-injurious price (NIP) for exports of A4 copy paper from Finland, Korea, Russia and Slovakia that is considered to be the minimum price necessary to prevent the injury threatened by the dumped goods.

The Commission has assessed the NIP from an USP based on Australian Paper’s CTMS during the investigation period, with an appropriate amount for profit from that period.

For all exports from Finland, Korea, Russia and Slovakia, the NIP is above the normal value and therefore the lesser duty rule does not come into effect.

1.5.10 Proposed form of measures (Chapter 12)

The Commissioner proposes to recommend to the Minister that measures be imposed in respect of dumping duty for Finland, Korea, Russia and Slovakia, using the combination duty method (i.e. the combination of fixed and variable duty).

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1.5.11 Revision to securities (Chapter 13)

The Commissioner proposes to publish a notice following this SEF notifying interested parties of amendments to be made to the securities. These amendments will be made to reflect the findings in this SEF in relation to the changes in dumping margins only.

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2 BACKGROUND

2.1 Initiation

On 12 February 2018, Australian Paper lodged an application under subsection 269TB(1) of the Act. The application sought the publication of a dumping duty notice in respect of the goods exported to Australia from Austria, Finland, Korea, Russia and Slovakia (collectively referred to as the nominated countries).

Australian Paper alleged in its application that the Australian industry had suffered material injury caused by A4 copy paper exported to Australia from the nominated countries at dumped prices. Australian Paper alleged that the industry had been injured through:

• loss of sales volume; • reduced market share; • price depression; • loss of profits; • reduced profitability; • reduced employment; • reduced capacity utilisation; and • reduced return on investment

Having considered the application, the Commissioner decided not to reject the application and initiated an investigation into the alleged dumping of A4 copy paper from the nominated countries on 19 March 2018. Public notification of initiation of the investigation was also made on 19 March 2018.

ADN No. 2018/39 provides further details relating to the initiation of the investigation.

In respect of the investigation:

• the investigation period4 for the purpose of assessing dumping is 1 January 2017 to 31 December 2017; and

• the injury analysis period for the purpose of determining whether material injury to the Australian industry has been caused by exports of dumped goods is from 1 January 2014.

2.2 Previous measures and cases

Previous investigations relating to A4 copy paper have included:

• In April 2016 the Commissioner initiated an investigation into the alleged dumping of uncoated A4 copy paper exported to Australia from the Federative Republic of Brazil (Brazil), the People’s Republic of China (China), the Republic of Indonesia (Indonesia) and the Kingdom of Thailand (Thailand), as well as the alleged countervailing in respect of uncoated A4 copy paper exporter from China and Indonesia (referred to as Investigation 341 in this report). Following the investigation the Minister accepted the recommendations contained in Report No. 341 and a dumping duty notice was published in respect of A4 copy paper exported to Australia

4 Subsection 269T(1).

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from all exporters in Brazil, China, Indonesia (excluding Pt Pabrik Kertas Tjiwi Kimia Tbk (Tjiwi Kimia)) and Thailand. A countervailing duty notice was published in respect of A4 copy paper exported to Australia from all exporters in China except for UPM (China) Co. Ltd, while the countervailing investigation in respect of A4 copy paper exported from Indonesia was terminated due to the volume of A4 copy paper exported from Indonesia in which a countervailable subsidy was received was negligible.

• In October 2013 the Commissioner initiated an investigation5 into the alleged dumping of uncoated A4 and A3 cut sheet paper exported to Australia from China following consideration of an application from Australian Paper (referred to as Investigation 225 in this report). This investigation was terminated on 7 August 2014 as a result of the Commissioner determining that the imports of the goods the subject of the investigation had either not been dumped, the dumping margin was negligible (less than 2 per cent) and/or that the total volume of exports to Australia from all Chinese exporters that had been dumped was negligible (less than 3 per cent).

• In July 2003 Australian Paper lodged an application in relation to the alleged dumping of A4 copy paper exporter to Australia from China. Customs terminated the investigation as negligible dumping margins were identified during the relevant investigation period.

• In May 1993, Australian Pulp and Paper Mills lodged an application in respect of exports of certain A4 copy paper from Austria, Brazil, Finland, France, Germany, Indonesia, South Africa and the United States of America. Following the investigation and review by the Anti-Dumping Authority in February 1994, the then Minister for Customs accepted the recommendations contained in Anti-Dumping Authority Report No. 119 and a dumping duty notice was published in respect of copy paper exported to Australia from Brazil, Finland, Germany, Indonesia, South Africa and the USA (including price undertakings). A number of reviews, continuation inquiries and Federal Court proceedings ensued in the years following that affected either individual exporters or countries of export. The final measures relating to the 1993 investigation expired on 20 February 2004.

2.3 Responding to this SEF

This SEF sets out the essential facts on which the Commissioner proposes to base his final recommendations to the Minister.

This SEF represents an important stage in the investigation. It informs interested parties of the facts established and allows them to make submissions in response to the SEF.

It is important to note that the SEF may not represent the final views of the Commissioner.

Interested parties have 20 days to respond to the SEF. The Commissioner will consider these responses in making its final report to the Minister. The report will recommend whether or not a dumping duty notice should be published, and the extent of any interim duties that are, or should be, payable.

5 Investigation 225 on the electronic public record.

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Responses to this SEF should be received by the Commissioner no later than 10 December 2018. The Commissioner is not obliged to have regard to any submission made in response to the SEF received after this date if to do so would, in the opinion of the Commissioner, prevent the timely preparation of the report to the Minister.

The Commissioner must report to the Minister by 3 January 2019.

Submissions should preferably be emailed to [email protected].

Alternatively, they may be posted to:

Director Investigations 2 Anti-Dumping Commission GPO BOX 2016 Canberra ACT 2601 AUSTRALIA

Confidential submissions must be clearly marked accordingly and a non-confidential version of any submission is required for inclusion on the Public Record.

A guide for making submissions is available at the Anti-Dumping Commission’s web site www.adcommission.gov.au.

2.4 Public Record

The Public Record contains non-confidential submissions by interested parties, the non-confidential versions of the Commission’s visit reports and other publicly available documents. It is available by request in hard copy in Melbourne (phone (03) 8539 2477 to make an appointment), or online at www.adcommission.gov.au

Documents on the Public Record should be read in conjunction with this SEF.

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3 THE GOODS AND LIKE GOODS

3.1 Preliminary finding

The Commissioner considers that the locally manufactured A4 copy paper is a like good to the goods the subject of the application.

3.2 Legislative framework

Subsection 269TC(1) of the Act requires that the Commissioner must reject an application for a dumping duty notice if, inter alia, the Commissioner is not satisfied that there is, or is likely to be established, an Australian industry in respect of like goods.

In making this assessment, the Commissioner must firstly determine that the goods produced by the Australian industry are “like” to the imported goods. Subsection 269T(1) defines like goods as:

“Goods that are identical in all respects to the goods under consideration or that, although not alike in all respects to the goods under consideration, have characteristics closely resembling those of the goods under consideration”.

An Australian industry can apply for relief from injury caused by dumped or subsidised imports even if the goods it produces are not identical to those imported. The industry must however, produce goods that are “like” to the imported goods.

Where the locally produced goods and the imported goods are not alike in all respects, the Commissioner assesses whether they have characteristics closely resembling each other against the following considerations:

i. physical likeness;

ii. commercial likeness;

iii. functional likeness; and

iv. production likeness.

3.3 The goods

The goods the subject of the application (the goods) are:

uncoated white paper of a type used for writing, printing or other graphic purposes, in the nominal basis weight range of 70 to 100 gsm and cut to sheets of metric size A4 (210 mm x 297 mm) (also commonly referred to as cut sheet paper, copy paper, office paper or laser paper).

In its application, Australian Paper provided the following further details in relation to the goods:

The paper is not coated, watermarked or embossed and is subjectively white. It is made mainly from bleached chemical pulp and/or from pulp obtained by a mechanical or chemi-mechanical process and/or from recycled pulp.

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3.4 Tariff classification

The goods are classified to the following tariff subheadings in Schedule 3 to the Customs Tariff Act 1995:

Tariff classification

Tariff code Statistical

code Unit Description Duty rate

4802.56.10 03 tonnes A4 paper 40-89 gsm white Austria, Finland, Russia

and Slovakia – 5% Korea – zero

4802.56.10 09 tonnes A4 paper 90 to less than 150 gsm 5%

Korea – zero

Table 2: Tariff classifications for the goods

3.5 Like goods

The following analysis outlines the Commission’s assessment of whether the locally produced goods are identical to, or closely resemble, the goods the subject of the application and are therefore like goods.

3.5.1 Physical likeness

The Commission has found that both the imported goods and the goods produced by the Australian industry are physically alike in all practical aspects being white paper cut in rectangular sheets and generally wrapped in reams of 500 sheets, but also sold in packs containing different numbers of sheets. Both are what the Australian consumer would recognise as white copy paper. Unless placed side by side, the average consumer would be unlikely to notice any difference between them. This is consistent with the findings in Investigation 225 and Investigation 341.

3.5.2 Commercial likeness

The Commission has found that the goods are commercially similar as they compete in the same market. There is direct head-to-head competition between imported goods and the goods produced by the Australian industry for goods wrapped and sold as the purchaser’s own brand e.g. Fuji Xerox and ‘plain wrap’ and generic products. Some customers that purchased imported A4 copy paper also purchased A4 copy paper from Australian Paper.

This is consistent with the findings in Investigation 225 and Investigation 341, and the Commission considers the locally produced goods to be commercially like to the goods the subject of the application.

3.5.3 Functional likeness

The Commission has found that the imported and locally produced A4 copy paper were functionally alike as they had the same end use, including high speed and low speed copying, printing and general use in business, education and home offices as well as in

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small offset printers. This is consistent with the findings in Investigation 225 and Investigation 341. Although the export countries in those investigations differ to the countries the subject of this application, the Commission considers the finding applies equally to copy paper exported from the other countries.

3.5.4 Production likeness

The Commission has found that the paper production and finishing processes are substantially identical across the large scale industry. While some mills may use paper pulp purchased from bleached pulp mills located elsewhere, others have their own bleached pulp mills on site.

The imported goods and the goods produced by the Australian industry appear to be manufactured using equipment and processes which are alike in all significant practical aspects. This includes the way in which the paper is formed, drained and pressed before ultimately being cut to the correct diameter.

3.6 Commission’s assessment

Based on the above the Commissioner considers the locally produced A4 copy paper to be like to the imported A4 copy paper.

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4 THE AUSTRALIAN INDUSTRY


The Commissioner finds that like goods are wholly manufactured in Australia and that Australian Paper represents the Australian industry.


The Commissioner must be satisfied that the “like” goods are in fact produced in Australia. Subsections 269T(2) and 269T(3) of the Act specify that for goods to be regarded as being produced in Australia, they must be wholly or partly manufactured in Australia. In order for the goods to be considered as partly manufactured in Australia, at least one substantial process in the manufacture of the goods must be carried out in Australia.

4.3 Production process

Australian Paper claims that the entire manufacturing process from wood to wrapped, boxed and palletised cut sheet paper takes place in Australia (at its Maryvale mill in Gippsland, Victoria).

The major raw material used in papermaking is wood-free pulp (made from wood), including recycled pulp. The majority of pulp used is produced on site at Maryvale and this is supplemented by up to 10 per cent imported pulps. The other two key materials used are calcite and starch, which for Australian Paper are both produced and supplied from within Australia.

Australian Paper’s production process was provided in its application and it claims this is consistent with the papermaking process in all printing and writing paper mills. Subsequent to the Australian industry verification visit the Commission attended the Maryvale mill to view the production process for A4 copy paper.

The Commission’s assessment

The Commission considers that at least one substantial process of manufacture is carried out in Australia and considers the like goods to have been manufactured in Australia, consistent with Investigation 341.

4.4 Preliminary conclusion

The Commissioner is satisfied that there are like goods wholly manufactured in Australia. The Commission considers that the Australian industry consists of Australian Paper.

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5 AUSTRALIAN MARKET

5.1 Finding

The Commissioner has found that the Australian market for A4 copy paper is supplied by the Australian industry and imports from a number of countries. The countries subject to this investigation (excluding Austria) supplied approximately 10 per cent of the Australian market.

5.2 Market structure

Australian Paper advised that in Australia, cut sheet paper (copy paper, office paper or laser paper) is predominantly A4 (210 x 297 mm) in size and 80 gsm in weight with a much smaller quantity sold in other sizes (i.e. A3 and A5). Australian Paper also advised that small quantities of A4 copy paper is sold in other sheet weights of 70, 75, 85, 90 and 100 gsm.

The Commission verified that the Australian market for the goods is supplied by Australian Paper (as the sole Australian manufacturer) and imports from a number of countries.

5.2.1 Distribution and supply

The Australian A4 copy paper market for manufacturers of the goods consists of four key market segments, being;

• retail – ranging from small to medium businesses (e.g. newsagents) serviced by buying groups to large operations such as Officeworks;

• corporate stationery – such as Winc and COS;

• resellers – Ball & Doggett and Fuji Xerox Asia Pacifica Pte Ltd (FXPC); and

• original equipment manufacturers (OEM) – for example, Fuji Xerox Australia Pty Ltd.

These primary market segments can be broadly grouped to form the key sales channels:

• Business to Consumer (B2C), e.g. Officeworks; and

• Business to Business (B2B), e.g. Winc.

The key supply channels from manufacturers to the downstream (end user) consumer market, where the goods are consumed is categorised as:6

• home and home office / small office;

• medium and large business, government and education; and

• industrial users including instant print and in-plant printing operations.

In practice, the primary market acts as an intermediary for the supply of A4 copy paper to the downstream market, where the goods are consumed. Whilst supply channels for the

6 Australian Paper confirmed that these end-user categories and supply channels had not changed since Investigation 341.

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consumer groups remain typical, as identified in Investigation 341, sales ‘leakage’ occurs in the primary market segments as consumer groups are not limited to purchases from one market segment, i.e. corporate entities may have a contract with a corporate stationer, however office purchases may still be made with a retailer.

The Commission has represented this market structure graphically at Figure 1 below.

Figure 1: The Commission’s representation of the Australian market

Sellers of A4 copy paper, particularly in the corporate stationer and retail segments commonly source a range of A4 copy paper products multiple sources, both Australian made and imported. Therefore, consumer groups also have access to and consume A4 copy paper from a variety of sources.

Australian Paper stated in its application that copy paper supply channels are concentrated through a limited number of national resellers and retailers. Australian Paper provided information (in its application and at the verification visit) on proportions of the channels it supplied and its understanding of the key competitors operating within each of the key supply channels. Australian Paper further claimed that such concentration “...places the balance of power firmly in the hands of the reseller.”7

5.2.2 Competition

As there are no significant product substitutes in the market, both Australian Paper’s goods and imported A4 copy paper products are purchased by the same primary market segments and sold to the same downstream consumers, via the same supply channels, resulting in direct competition in the primary market.


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The Commission has also identified that brand is a secondary characteristic, which differentiates products in the downstream consumer market and accordingly there is also competition between brands.

Australian Paper claimed in its application that the lack of market growth has also created a more competitive market between Australian Paper and imported goods in 2017, where the only way to increase sales volumes is to compete for market share. Australian Paper also commented that the number of market participants has condensed with buying power concentrated with a few resellers and retailers.

The Commission notes that Australian Paper supplied private label paper to a variety of market segments, including multiple corporate stationers, retailers and resellers. Based on the available information the Commission understands that imports from Finland, Korea, Russia and Slovakia were limited to a small number of corporate stationers and retailers, to which Australian Paper also supply other paper brands.

The Commission’s assessment of the Australian A4 copy paper market is at Confidential Appendix 1 – Market and Economic Performance.

5.2.3 Brand segmentation and marketing

The Commission identified three broad brand segments of A4 copy paper in the Australian market during Investigation 341, being:

• manufacturer brands;

• private label/customer brands; and

• plain or generic labelled brands.

This brand segmentation was considered to be one of the secondary characteristics which did not affect the essential physical likeness of domestically produced A4 copy paper to imported copy paper but was used to differentiate between products for marketing and pricing purposes.

The Commission verified in this investigation that such brand segmentation remains in the Australian market. Notwithstanding these brand segments, Australian Paper claimed that consumers are unlikely to discern significant physical or functional differences between brands, other than brand recognition and price, particularly where promotions (for example, retail promotions on brands such as Reflex) are in place.

The Commission confirms that downstream consumers of A4 copy paper (regardless of which market segment that consumer obtained and used the goods) would, on the most part, be unlikely to discern any physical differences between brands, if the paper’s wrapper was removed.

However, the Commission also considers that manufacturers and intermediary purchasers of A4 copy paper in the primary market, such as retailers and corporate stationers, do consider physical differences an important feature (such a whiteness or brand). The Commission determined that these secondary characteristics were introduced by Australian Paper, importers and exporters, in part, due to the highly competitive nature of the market and this behaviour is a normal characteristic of such a competitive market, with highly substitutable products.

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Brand differentiation does appear to be an important feature (as a secondary characteristic) and is used for commercial purposes, including pricing, marketing and tenders, particularly for sales to the downstream consumer market. Brand differentiation is an important selling consideration in the primary market and each of the participants in this investigation identified a brand of paper (regardless of brand segment or market segment) that it considered to be an important commercial differentiator or offered a commercial advantage, value proposition or was in demand by its customers in the downstream commercial market.

Jackaroo Pty Ltd (Jackaroo) is an importer of A4 copy paper. Jackaroo submitted that there were differences in the physical characteristics of the A4 copy paper imported from Brazil in Investigation 341, and from Russia in Investigation 463. Jackaroo claim that any price differences that may have occurred are explained by identifiable differences in the subject imports.

The Commission has considered differences in the physical characteristics of the goods where appropriate, and where verified information has been provided to support this.

5.2.4 Pricing

Investigation 341 identified that A4 copy paper is price sensitive and that price is a key driver for sales.8 In addition, the Commission established that the price of imported A4 copy paper is a relevant consideration when Australian Paper enters into contracts, and undertakes price reviews during the course of a contract. Price reviews are set periodically over the life of a contract and offer a mechanism to increase or decrease the contract price of the goods. Depending on contracted calculation methodologies, paper prices can be reviewed with reference to:

• price and volume of imports;

• price and volume of Australian Paper’s exports;

• Australian Paper’s costs of production; or

• any other method.

The Commission identified in this investigation that manufacturers, both domestic and foreign, offer a variety of on and off-invoice discounts and rebates to purchasers as an incentive to increase volumes purchased. Such discounts and rebates are applied to:

• conditional – pay on time discounts, volume or revenue quotas; and

• unconditional – customer related, product related (with no value or volume conditions), however such unconditional discounts and rebates would have been established with the buyer, based on the anticipated volume and revenue to be obtained.

Off-invoice discounts and rebates are typically paid periodically: monthly, quarterly or annually and as agreed with the purchaser in the primary market segment.

8 Jackaroo acknowledged this still to be the case. Refer to document 24 on the electronic public record for investigation 463.

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Further, the evidence before the Commission indicates that there is significant transparency in the pricing of A4 copy paper, such that customers in various channels and segments of the market are aware of prices in the market.

5.2.5 Demand and consumption

As discussed at section 5.3 below, Australian Paper claimed that importers had ceased stockpiling A4 copy paper, which resulted in a market correction and overall decline in the size of the Australian market from 2015 to 2016. Australian Paper claimed that whilst this “de-stocking” was occurring, there was decreased demand for new imports and local production alike.

Removing the temporary effects of this de-stocking and accounting for the corrected market, Australian Paper estimates that domestic copy paper consumption is decreasing at a rate of approximately 3 per cent per annum. Australian Paper advised that a declining market creates a situation for increased competition for market share through the concentration of resellers and retailers driven by decreasing prices.

Australian Paper claimed in its application that traditionally, population and hence workforce growth in Australia has offset declining per capita demand for cut sheet paper, however such economic activity no longer is an accurate predictor of future demand. Volume growth is predicted to either remain flat or decline slightly on an annualised basis.

Australian Paper also claimed in its application that the market is not prone to seasonal volume fluctuations. Investigation 341 confirmed this and analysis of data submitted in this investigation did not indicate a different finding.

5.2.6 Market segment participants

Due to the lack of participation from importers, the Commission sought data and information from the primary Australian market for the goods and received responses from:

• Vital Office Pty Ltd (Vital)9;

• Officeworks Pty Ltd (Officeworks)10;

• Complete Office Supplies (COS)11; and

• Winc Pty Ltd. (Winc)12.

Whilst some data and information was received from these market participants, certain data relevant to this investigation was incomplete and unable to be verified for use. File notes for meetings with the above parties are available on the Commission’s electronic public record.

9 Refer to document 28 on the electronic public record for investigation 463. 10 Refer to document 29 on the electronic public record for investigation 463. 11 Refer to document 30 on the electronic public record for investigation 463. 12 Refer to document 52 on the electronic public record for investigation 463.

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5.2.7 Importers

The Commission examined the ABF import database to identify importers of A4 copy paper in the investigation period. Five importers and traders were contacted to participate with the investigation and complete an Importer Questionnaire where applicable and to provide other relevant data and information. The following importers and traders participated:

• Jackaroo13;

• Fuji Xerox Asia Pacific Pte Ltd (FXPC)14; and

• Central National Australia Pty Ltd (CNA)15.

Importer visit reports and file notes for the above are available on the Commission’s electronic public record.

5.3 Market size

The Commission has estimated the size of the Australian A4 copy market using data from the ABF import database (at date of import)16 and Australian Paper’s verified data, Figure 2 below refers.

The import volumes from subject countries includes Finland, Korea, Russia and Slovakia. For reasons outlined later in this SEF, the Commission proposes to terminate the investigation against both Mondi AUT and Austria overall. Accordingly, the volumes from Austria for 2014 to 2017 have been analysed under the “Other countries (no measures)” country grouping.

13 Refer to document 24 on the electronic public record for investigation 463. 14 Refer to document 26 on the electronic public record for investigation 463. 15 Refer to document 27 on the electronic public record for investigation 463. 16 For clarification and in response to Jackaroo’s submission (document 31 on the electronic public record) that the Commission’s use of valuation date for assessing import volumes was incorrect.

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Figure 2: The Commission’s estimate of the total Australian A4 copy paper market (MT)17

5.3.1 Market contraction

The Commission’s analysis confirms Australian Paper’s claim that the Australian market contracted after the 2015 calendar year. However, the Commission is not in a position to substantiate Australian Paper’s claims that the overall contraction of the market is a result of an importer ceasing to stockpile the goods, which subsequently “corrected” the market to a typical size. To substantiate this claim, Australian Paper provided a copy of an Industry Edge Report18, which it commissioned to provide analysis and forecasts for the Australian paper industry.

Whilst the Commission confirms that Industry Edge offered this as one of the possible contributing scenarios to explain the decline in market size, the analysis relies on certain assumptions without the presentation of data and information sources. Further, Industry Edge identified other possible reasons for a decline in the market size for cut paper, including consumption-led trends resulting in lower demand such as process automation and content digitisation.

The Commission also questioned importers, traders and market participants if they were aware of this market correction, post “de-stocking”, however no verifiable information could be obtained.

Figure 2 supports Australian Paper’s claim that it increased domestic sales volumes during the investigation period, where the market stabilised for a second consecutive year.

5.3.2 Market consolidation and exits

Australian Paper provided a summary of its understanding of the key office paper supply channels in the Australian market. The Commission further identified some market

17 In Investigation 341, PT. Pabrik Kertas Tjiwi Kimia TBK (an exporter of A4 copy paper from Indonesia) was found not to be dumping. For the purposes of this analysis and subsequent analysis in this report, the volume of exports from this exporter for the period from 2014 to 2017 is represented in the segment for “Other countries (no measures)”.18 The Report referenced is marked Commercial in Confidence as it uses confidential Australian Paper data as well as other data sources. Therefore the Commission is unable to detail specific information in the report as it relates to Australian Paper.

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movements resulting in significant consolidation of the supply channels for the goods, since Investigation 341. The Commission’s understanding of the market changes is outlined below:

• Jul-2016: Australian Paper acquired BJ Ball’s Edwards Dunlop Office Products (EDOP) business (industry acquisition of competitor importer);

• Apr-2017: Investigation 341 measures imposed on exports from Brazil, China, Indonesia and Thailand;

• Apr-2017: Platinum Equity (US-based M&A and operations firm) acquired Staples Australia and New Zealand operations – rebranded as Winc (equity firm acquisition of industry customer);

• Jul-2017: K.W Doggett Fine Paper merges with BJ Ball to form Ball & Doggett (importer acquisition of competitor importer). Japan Pulp and Paper Company Ltd also acquired 51 per cent controlling share in the new entity

• Feb-2018: Winc acquired Office Max (ACCC approved Winc’s bid in 2017) (industry customer acquisition of competitor importer);

• Feb-2018: Office Choice leaves Office Products ANZ (OPANZ) and starts new buying group;

• Feb-2018: Fuji Xerox Asia Pacific Pte Ltd market exit with consolidation into Fuji Xerox Australia Pty Ltd (subsidiary competitor merge);

• May-2018: COS acquires Lyreco (importer acquisition of competitor importer).

The potential sale of Officeworks (touted in 2017) and the entry of Amazon into the Australian market are possible sources of distribution change for cut paper.

FXPC advised the Commission that it was exiting the market for A4 copy paper from February 2018, after the consolidation of Fuji Xerox businesses to form Fuji Xerox Australia Pty Ltd, which included a business-wide decision to focus on its specialisation in printer sales and service.

The Commission accepts Australian Paper’s assessment that since 2015 market dynamics have changed, based on the following:

• the stabilisation of the size of Australian market in 2016 and 2017 (as demonstrated in Figure 2);

• market consolidation of competitors in the primary market, leading to a smaller number of competitors in the market;

• the concentration of purchasers, based on a comparison Australian Paper’s 2015, 2016 and 2017 sales data; and

• the smaller number of exporting countries, exporting material volumes of the goods, as a result of the implementation of measures from Investigation 341.

5.3.3 Country of origin changes

In Investigation 341, the Commission found that 52 per cent of the market in 2015 was supplied by dumped imports from Brazil, China, Indonesia and Thailand and that Australian

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Paper held 44 per cent. The remaining 4 per cent of the market consisted of imports from a number of countries including a small volume from Korea and Finland.

Australian Paper claimed in its application that the increase in volumes during the investigation period from Finland, Korea, Russia and Slovakia was a result of the securities and final measures imposed from Investigation 341 and that these volumes replaced the volumes from the countries subject to measures. The Commission observes from ABF data that imports from Slovakia and Russia increased with the implementation of securities for Investigation 341 and that imports from Finland and Korea increased closer to the implementation of duties. However, it can be observed that volumes declined for all countries except Russia towards the end of the investigation period.

Based on this data the Commission also observed that some importers changed supplier origins in response to the outcomes of Investigation 341.

However, the Commission observes from Figure 2 that both Australian Paper and the subject countries both gained volumes from the exporters found to be dumping from Brazil, China, Indonesia and Thailand.

The Commission has calculated the comparative share of the Australian market from 2014 at Table 3 below.

2014 2015 2016 2017

Australian industry 42% 44% 57% 75%

Finland, Korea, Russia, Slovakia 0% 1% 0% 10%

Countries subject to measures (excl. Tjiwi Kimia) 53% 52% 38% 11%

Countries not subject to measures (incl. Austria) 5% 3% 5% 4%

Table 3: Comparative share of the Australian market

Table 3 demonstrates that imports from the subject countries had a presence in the Australian market in 2017 only. As the market size was stable in 2016 and 2017, the Commission concludes that the share of the imports subject to measures in 2017 from Brazil, China, Indonesia and Thailand were gained by the Australian industry and the subject countries Finland, Korea, Russia and Slovakia.

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6 DUMPING INVESTIGATION


The Commissioner has found that:

• A4 copy paper exported to Australia by Hankuk Paper Mfg. Co. Ltd (Hankuk Paper) and Mondi SCP a.s. (Mondi SVK) was dumped;

• A4 copy paper exported to Australia from Finland and Russia was dumped; • Mondi AUT was found to be dumping A4 copy paper at a negligible level; • A4 copy paper exported to Australia by all other exporters in Austria was dumped. • the volume of dumped goods from Austria, Finland, Korea, Russia and Slovakia was

not negligible.

The preliminary dumping margins are summarised in Table 4, below.


Austria Mondi Neusiedler GmbH 1.7%









6.2 Introduction and legislative framework

In any report to the Minister under subsection 269TEA(1) following a dumping investigation, the Commissioner must recommend whether the Minister ought to be satisfied as to the grounds for publishing a dumping duty notice under section 269TG.

Under section 269TG, one of the matters the Minister must be satisfied of in order to publish a dumping duty notice is that the goods have been dumped.

Dumping occurs when a product from one country is exported to another country at a price less than its normal value. The export price and normal value of goods are determined under sections 269TAB and 269TAC respectively. Further details of the export price and normal value calculations for each exporter are set out below.

Dumping margins are determined under section 269TACB. For all dumping margins calculated, the Commission compared the weighted average of export prices over the whole of the investigation period with the weighted average of corresponding normal values over the whole of that period, in accordance with subsection 269TACB(2)(a).

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6.3 Cooperative exporters

Subsection 269T(1) provides that, in relation to a dumping investigation, an exporter is a ‘cooperative exporter’ where the exporter’s exports were examined as part of the investigation and the exporter was not an ‘uncooperative exporter’. At the commencement of the investigation, the Commission contacted known exporters of the goods and each identified supplier of the goods within the relevant tariff subheading for A4 copy paper as identified in the ABF import database, and invited them to complete an exporter questionnaire. The Commission received completed exporter questionnaire responses from the following exporters:

• Hankuk Paper; • Mondi AUT; and • Mondi SVK.

The Commission undertook verification visits to these three entities. These exporters are considered to be cooperative exporters.

6.4 Uncooperative exporters

Subsection 269T(1) provides that, in relation to a dumping investigation, an exporter is an ‘uncooperative exporter’, where the Commissioner is satisfied that an exporter did not give the Commissioner information that the Commissioner considered to be relevant to the investigation within a period the Commissioner considered to be reasonable, or where the Commissioner is satisfied that an exporter significantly impeded the investigation.

The Commission received three responses to its exporter questionnaires. These exporter questionnaire responses were complete and enabled the Commission to conduct a verification visit.

The Commission considers those exporters that did not provide a response to the exporter questionnaire to be uncooperative. For uncooperative and all other exporters, the Commissioner will use subsection 269TAB(3) and subsection 269TAC(6) to calculate dumping margins for those exporters, having regard to all relevant information and as required by subsection 269TACAB(1).19

6.5 Dumping assessment – Hankuk Paper

6.5.1 Verification

The Commission conducted an in-country visit to Hankuk Paper to verify the information disclosed in its response to the exporter questionnaire. A more detailed assessment of the

verification process is contained in the verification report published on the public record.20

6.5.2 Export Price

As noted in the verification visit report for Hankuk Paper, the Commissioner is satisfied that the goods have been exported to Australia otherwise than by the importer and were

19 Refer to documents 10 and 11 on the electronic public record for investigation 463. 20 Refer to document 34 on the electronic public record for investigation 463.

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purchased in arms length transactions by the importer from the exporter. Therefore, the export price for Hankuk Paper was calculated under subsection 269TAB(1)(a), as the price paid by the importer to the exporter less transport and other costs arising after exportation.

6.5.3 Normal Value

As noted in the verification visit report for Hankuk Paper, the Commissioner is satisfied that the domestic sales provided by Hankuk Paper were suitable for use in determining normal value under subsection 269TAC(1).

6.5.4 Adjustments

To ensure the comparability of normal values to export prices, the Commission made adjustments pursuant to subsection 269TAC(8) as follows:

Adjustment Type Deduction/addition

Domestic packing Deduct the cost of domestic packing

Domestic inland freight Deduct the cost of domestic inland freight

Domestic warehousing Deduct the cost of domestic warehousing

Domestic credit costs Deduct the cost of domestic credit

Domestic handling Deduct the cost of domestic handling

Export packing Add the cost of export packing

Export inland freight Add the cost of export inland freight

Export handling Add the cost of the export handling

Export brokerage Add the cost of export brokerage fees

Export bank charges Add the cost of export bank charges

Export credit costs Add the cost of export credit

Table 5: Adjustments to Hankuk Paper’s normal value

6.5.5 Sustained movement in USD/KRW exchange rate

During the verification visit, Hankuk Paper claimed that there was a sustained movement in the Korean Won (KRW) to US Dollar (USD) exchange rate that caused an unfavourable distortion in its export prices, for the comparison required under subsection 269TAF(1) of the Act.

Subsection 269TAF(4) allows, for the purposes of comparing export prices and normal values in different currencies, to fix an exchange rate for a period of 60 days if satisfied that the rate of exchange between those currencies has undergone a sustained movement. As explained at section 20.3 of the Dumping and Subsidy Manual (the Manual), this is to allow a 60 day period for the exporter to respond to the currency changes and, if seeking not to be dumping, the exporter has the opportunity to set new export pricing levels.

The Commission has considered the chart provided by Hankuk Paper (the USD/KRW chart) showing the USD/KRW exchange rate and the underlying data. This chart was presented as follows:

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Figure 3: USD/KRW chart (covering investigation period) provided by Hankuk Paper

The Commission observes that that vertical axis of the USD/KRW chart starts at 1,050 KRW. Setting the vertical axis at a value above zero can be useful for observing how different variables interact however it tends to overemphasise the magnitude of changes in observed variables.

The Commission has recharted the USD/KRW chart with the vertical axis starting at zero. The result is below:

Figure 4: USD/KRW chart with zeroed vertical axis, for investigation period

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Nevertheless, the verification team has tested whether there was a sustained exchange rate movement in the review period by applying the methodology used previously by the Commission (in Investigations 240 and 341), which is based on the methodology used by the United States antidumping investigating authority.21

The Commission’s methodology is as follows:

• calculate weekly averages of actual daily exchange rates; • calculate an eight week moving average of those weekly rates (benchmark rate); • where the weekly average exceeded the benchmark rate by more than five per cent,

that week is identified as a period of unusual movement; and • count the number of consecutive weeks of unusual movement.

The Commission considered the following:

• In principle, subsection 269TAF(4) is designed to avoid findings of dumping based on a technicality, i.e. where the dumping resulted from movements in currency that occur after an export price has been agreed to and that price has become payable.

• As stated in the Manual, the notion of a “sustained movement” suggests something outside of a normal range of fluctuation. There must have been a “movement”, and this “movement” must have been “sustained” throughout subsequent periods.22

• The Commission considers a “sustained movement” to be a period of eight consecutive weeks of unusual movement. The Commission considers this interpretation of a “sustained movement” to be a reasonable methodology to assess currency exchange rate movement and reflective of the ordinary terms of subsection 269TAF(4). This methodology has been used in previous cases and has been endorsed by the Anti-Dumping Review Panel in a previous case.23

The result of applying this methodology in this case is shown in the following chart.

21 United States Enforcement and Compliance Antidumping Manual at pages 81 to 83. 22 The Manual, page 121. 23 ADRP Report No. 55 at paragraph 287.

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Figure 5: USD/KRW exchange rate and percentage difference to previous eight weeks

The Commission’s analysis showed that there were no weeks of unusual movement during the investigation period. In establishing there were no weeks of unusual movement, the Commission has determined that there is no weekly average exchange rate deviation of more than five per cent from the benchmark (it is not a peak to trough measurement).

Therefore, the Commission considers that section 269TAF(4) of the Act does not apply to the USD/KRW rate during the investigation period.

6.5.6 Preliminary dumping margin

The Commission has calculated a preliminary dumping margin for Hankuk Paper as 3.8 per cent.

6.5.7 Submissions regarding verification of Hankuk Paper

6.5.7.1 Submission from Central National24

Central National queried the calculations for the normal value in Korea at the time of initiation, and noted several issues with the approach taken by Australian Paper in its application.

The Commission notes Hankuk Paper provided a response to the exporter questionnaire, and subsequently were visited for the purposes of verification. This verified data has been utilised to determine the normal value and the dumping margin.


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6.5.7.2 Submission from Australian Paper25

In response to the verification visit report published for Hankuk Paper, Australian Paper submitted the following:

• model matching should not be based on the whiteness of the paper, but rather only on size and grammage per square metre (gsm);

• there is no justification for the selection of a specific day’s exchange rate for the purposes of calculating the export price; and

• adjustments to the normal value for both packing and warehousing expenses need to be further addressed.

6.5.7.3 Submission from Hankuk Paper26

Hankuk Paper also submitted the following:

• it is appropriate for the Commission to model match on the basis of gsm and whiteness, to ensure identical goods sold on the domestic market are compared to the exported goods;

• adjustments in relation to packing and warehouse expenses have been correctly reported and verified; and

• the Commission should adjust the exchange rate applicable to export sales for the period from 7 October 2017 to 29 December 2017, as there was a sustained movement in the exchange rate during this period.

The Commission considered the criteria for model matching and confirmed that based on the verified data, there were identifiable differences in the cost of production and selling prices based on the gsm and whiteness of models of A4 copy paper sold on the domestic market. For this reason, the Commission is satisfied that model matching on the basis of both gsm and whiteness of A4 copy paper is appropriate.

The Commission has addressed the issue of subsection 269TAF (the sustained movement in currency) above at section 6.5.5.

Australian Paper queried why the actual export packing cost for goods exported to Australia was not obtained, and stated that this was the preferred basis for an adjustment rather than a weighted average amount. The Commission revisited the adjustment in relation to packing and confirmed that actual packing costs for export sales were verified. In order to apply an upwards adjustment to the normal value for export packing costs, a weighted average (per tonne) amount for these export packing costs must be calculated and applied to the normal value.

Australian Paper also queried warehousing expenses, noting that a downwards adjustment had been made for domestic sales but there was no upwards adjustment for export sales. The Commission revisited the specific sales processes undertaken by Hankuk for both

25 Refer to document 38 on the electronic public record for investigation 463. 26 Refer to document 39 on the electronic public record for investigation 463.

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domestic and export sales and is satisfied that a downwards adjustment to the normal value for warehousing expenses is required, with no upwards adjustment.

6.6 Dumping assessment – Mondi AUT

6.6.1 Export Price

As noted in the verification visit report for Mondi AUT, there is an intermediary entity that purchased the goods from the exporter and on-sold the goods to the Australian importer. Therefore, the export price for Mondi AUT was calculated under subsection 269TAB(1)(c), as the price paid by the importer to the exporter less the commission paid to the intermediary, and less transport and other costs arising after exportation.

6.6.2 Normal Value

As noted in the verification visit report for Mondi AUT, the Commissioner is satisfied that the domestic sales provided by Mondi AUT were suitable for use in determining normal value under subsection 269TAC(1).

6.6.3 Adjustments




Domestic sales commissions Deduct the cost of domestic sales commissions

Domestic waste disposal fees Deduct the cost of domestic waste disposal fees


Export handling and port Add the cost of the export handling and port costs

Export sales commissions Add the cost of export sales commissions

Export carbon certificates Add the cost of export carbon certificates


Table 6: Adjustments to Mondi AUT’s normal value


The Commission has calculated a preliminary dumping margin for Mondi AUT as 1.7 per cent. As outlined in section 1.3 above, the Commissioner proposes to terminate the investigation in so far as it relates to A4 copy paper exported by Mondi AUT in accordance with subsection 269TDA(1) of the Act on the basis that the dumping margin is negligible. The Commission has not received submissions from interested parties with respect to the verification of Mondi AUT.

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6.7 Dumping assessment – Mondi SVK

6.7.1 Export Price

As noted in the verification visit report for Mondi SVK, there is an intermediary entity that purchased the goods from the exporter and on-sold the goods to the Australian importer. Therefore, the export price for Mondi SVK was calculated under subsection 269TAB(1)(c), as the price paid by the importer to the exporter less the commission paid to the intermediary, and less transport and other costs arising after exportation.

6.7.2 Normal Value

As noted in the verification visit report for Mondi SVK, the Commissioner is satisfied that the domestic sales provided by Mondi SVK were suitable for use in determining normal value under subsection 269TAC(1).

6.7.3 Adjustments




Domestic sales commissions Deduct the cost of domestic sales commissions

Domestic inland freight Deduct the cost of domestic inland freight

Domestic handling Deduct the cost of domestic handling

Domestic environmental recycling fees Deduct the cost of domestic environmental recycling fees


Export handling Add the cost of the export handling

Export sales commissions Add the cost of export sales commissions fees


Table 7: Adjustments to Mondi SVK’s normal value


The Commission has calculated a preliminary dumping margin for Mondi SVK as 5.8 per cent. The Commission has not received submissions from interested parties with respect to the verification of Mondi SVK.

6.8 Uncooperative and all other exporter dumping margins

Subsection 269TACAB(1) sets out the provisions for calculating export prices and normal values for uncooperative exporters. This provision specifies that for uncooperative exporters, export prices are to be calculated under subsection 269TAB(3) and normal values are to be calculated under subsection 269TAC(6).

Upon initiation of the investigation the Commission sent exporter questionnaires to major exporters from each of the five subject countries. This included International Paper Nordic

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Sales Co Oy (International Paper), an exporter from Russia, and UPM-Kymmene Asia Pacific Pte Ltd (UPM Finland), an exporter from Finland. Both International Paper and UPM Finland subsequently advised the Commission that they would not cooperate with the Commission’s investigation by completing an exporter questionnaire. As a result, the Commission notified International Paper and UPM Finland that they were treated as uncooperative exporters pursuant to subsection 269T(1).27 The Commission has therefore determined an export price pursuant to subsection 269TAB(3) after having regard to all relevant information. Specifically, the Commission has calculated the export price for goods exported from International Paper using a deductive export price methodology, given the Commission was able to verify data provided by the importer of goods from Russia, Jackaroo. The export price for goods exported from UPM Finland was determined using ABF import data.

The Commission has determined normal values for the uncooperative exporters pursuant to subsection 269TAC(6) after having regard to all relevant information. Specifically, the Commission has had regard to the normal values provided in the application. The Commission notes that in their application, Australian Paper provided estimates of the normal value for two manufactures of A4 copy paper from Russia. The Commission has relied upon the estimate specifically for International Paper.28

The Commission has also calculated uncooperative dumping margins for the other subject countries. The dumping margins for uncooperative and all other exporters from the subject countries are as follows:

Country Exporter (and other exporters) Export Price

Normal Value

Dumping Margin

Austria Uncooperative and all other exporters s.269TAB(3) s.269TAC(6) 4.2%

Finland Uncooperative and all other exporters s.269TAB(3) s.269TAC(6) 16.3%

Korea Uncooperative and all other exporters s.269TAB(3) s.269TAC(6) 16.4%

Russia Uncooperative and all other exporters s.269TAB(3) s.269TAC(6) 14.4%

Slovakia Uncooperative and all other exporters s.269TAB(3) s.269TAC(6) 14.6%

Table 8: Preliminary dumping margins for uncooperative and all other exporters

6.9 The Commissioner’s assessment

The Commissioner has found that:

• A4 copy paper exported to Australia by Hankuk Paper and Mondi SVK was dumped;

27 Refer to documents 10 and 11 on the electronic public record for investigation 463. 28 Refer to document 31 on the electronic public record for investigation 463.

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• A4 copy paper exported to Australia by all other exporters in Korea and Slovakia was dumped;

• A4 copy paper exported to Australia from Finland and Russia was dumped;

• Mondi AUT was found to be dumping A4 copy paper at negligible levels; and

• A4 copy paper exported to Australia by all other exporters in Austria was dumped.

6.10 Volume of dumped imports

Pursuant to subsection 269TDA(3), the Commissioner must terminate the investigation, in so far as it relates to a country, if satisfied that the total volume of goods that are dumped is a negligible volume. Subsection 269TDA(4) defines a negligible volume as less than three per cent of the total volume of goods imported into Australia over the investigation period if subsection 269TDA(5) does not apply. The Commission confirmed that subsection 269TDA(5), relating to aggregation of volumes of dumped goods, does not apply.

Using the ABF import database and having regard to the information collected and verified from the importers and exporters, the Commission determined the volume of imports in the Australian market.

The Commission is satisfied that, when expressed as a percentage of the total Australian import volume of the goods, the volume of dumped goods from each of the subject countries was greater than three per cent of the total import volume and is therefore not negligible. The Commission notes that the volume of imports from Austria is above three per cent of the total volume of goods imported into Australia during the investigation period. This includes the volume imported from Mondi AUT as, pursuant to subsection 269TDA(6), imports with a negligible dumping margin are included in the calculation under subsection 269TDA(3).

Accordingly, the Commissioner does not propose to terminate this investigation in respect of any of the subject countries under subsection 269TDA(3).

6.10.1 Submissions regarding volume of dumped imports

The Commission received multiple submissions requesting reconsideration and confirmation of the volume of goods imported from Russia, and that this was above three per cent of the total import volume.29 The Commission reconsidered the information obtained from the ABF and confirmed that, when expressed as percentage of the total Australian import volume of the goods, the volume of dumped goods from Russia was greater than three per cent and therefore not negligible.

29 Refer to documents 7 and 31 on the electronic public record for investigation 463.

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7 APPROACH TO INJURY AND CAUSATION ANALYSIS


For the publication of a dumping duty notice under section 269TG, the Minister must be satisfied, among other things, that because of the dumping, material injury to an Australian industry producing like goods has been, or is being caused or is threatened.

Subsection 269TAE(1) provides a non-exhaustive list of factors which the Commission can examine, and that the Minister may have regard to, in determining whether material injury to an Australian industry has been, or is being caused, or is threatened.

The following three chapters detail the Commission’s assessment of whether material injury has been, or is being caused or is threatened by the dumped goods. The Commission has had regard to the Ministerial Direction on Material Injury 2012 (the Material Injury Direction) in undertaking its assessment of material injury.

7.2 Injury claims made by Australian industry

7.2.1 The original claim of material injury

Australian Paper claimed in its application30 that dumped imports of A4 copy paper from Austria, Finland, Korea, Russia and Slovakia in 2017 delayed its anticipated recovery from the impacts of dumped imports of A4 copy paper from Brazil, China, Indonesia and Thailand in 2015. Specifically, Australian Paper claimed that the price undercutting of imports from the subject countries and the resulting deterioration of its own prices in the Australian market, has caused material injury in the form of:

• price suppression; • price depression; • deterioration of profits; • decline in profitability; • diminished reinvestment – unattractiveness to reinvest; and • diminished return on sales.

Australian Paper’s primary contention is that since the implementation of securities in 2016 and the implementation of measures in 2017 (as a result of Investigation 341) it should have been able to:

• raise its selling prices in 2017 to recover its cost of production and selling expenses, and in turn,

• improve profit and profitability (the recovery).

Australian Paper claims it was unable to recover in 2017 with the effects of dumped imports from the subject countries in the market.


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7.2.2 The subsequent claim of threat of material injury

Australian Paper subsequently submitted on 4 September 201831, that the dumped imports threatened material injury which would occur at a future time. Specifically, Australian Paper submitted that “…in the absence of anti-dumping measures, [the injury experienced in 2017] will extend to lost sales volumes and further price depression and suppression, impacting profit and profitability.”32

7.3 Cumulative effects of exportations

Subsection 269TAE(2C) sets out the requirements for assessing the cumulative effects of goods exported to Australia from subject countries to this investigation. In relation to a dumping investigation, where exports from more than one country are the subject of an investigation resulting from an application under section 269TB (as is the case in this investigation), the cumulative effects of such imports should be assessed if:

• the margin of dumping for the exporter of each of the exportations is at least two per cent of the export price or the weighted average of export prices used to establish that dumping margin; and

• the volume of dumped imports from each country is not negligible; and • cumulative assessment is appropriate having regard to the conditions of competition

between the imported goods and between the imported goods and like goods that are domestically produced.

In this investigation the assessment of the cumulative effect of exportations is made with reference to Finland, Korea, Russia and Slovakia. Austria has not been included in the cumulative effects analysis as the Commissioner proposes to terminate against Mondi AUT, the verified exported from Austria, and Austria overall for the reasons outlined at section 6.6.4 above and section 9.4 below.

7.3.1 Subsection 269TAE(2C)(c) – the size of the dumping margins for each exporter

The Commission’s preliminary dumping margins for each exporter (refer to Chapter 6 above) are not negligible and are above 2 per cent.

The exception is Mondi AUT, with a dumping margin of less than 2 per cent.

7.3.2 Subsection 269TAE(2C)(d) – the volume of dumped imports from each country

The volume of the dumped imports from each country is not negligible and is above 3 per cent of the total volume of subject imports.

7.3.3 Subsection 269TAE(2C)(e) – the conditions of competition

The Commission considers it appropriate to examine the cumulative effect of the dumped imports from Finland, Korea, Russia and Slovakia in accordance with the requirements of subsection 269TAE(2C), as the domestically produced goods and the goods from the subject countries are physically, functionally and commercially like and in direct competition

31 Refer to documents 46 on the electronic public record for investigation 463. 32 Ibid.

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with Australian Paper in the Australian primary market segments. Refer to section 5.2.2 for further detail.

7.3.4 The Commissioner’s assessment – cumulating exports

The Commission considers the conditions of competition are such that it is appropriate to consider the cumulative effect of the dumped imports from Finland, Korea, Russia and Slovakia.

7.4 The injury analysis period

Australian Paper claimed that injury to the Australian industry caused by imports from the subject countries commenced in 2017, as importers switched sources of supply (in part or all) away from the countries and exporters subject to measures from Investigation 341 (Brazil, China, Indonesia and Thailand).

The Commissioner advised at the date of initiation of this investigation ADN 2018/3933 that the injury analysis period for assessing the economic condition of the Australian industry would commence from 1 January 2014 onwards. During the course of the investigation, the Commission received evidence from Australian Paper that key customer supply negotiations occurring in 2018 are threatening material injury to it in the future. Notwithstanding that this negotiation process occurred post-investigation period, the Commission considers that;

• by public notice, ADN 2018/39, the end of the injury analysis period is not defined; and

• the Act does not define the injury analysis period or prescribe a minimum or maximum period for an injury analysis.

Accordingly the Commission has considered evidence from 1 January 2014 in assessing the economic condition of the Australian industry and the evidence which demonstrates that the Australian industry is threatened with material injury because of dumped imports from the subject countries.

Investigation 341 found dumping of A4 copy paper from Brazil, China, Indonesia and Thailand in the 2015 calendar year. Whilst this year is a period covered by the injury analysis period, the effect of dumping from these four countries has not been attributed to the subject countries in this investigation.

7.5 Summary of approach to injury and causation analysis

The central question for the analysis in the next three chapters is whether dumped imports from Finland, Korea, Russia and Slovakia:

• prevented Australian Paper from raising its prices in 2017 and delayed or prevented its recovery from the effects of dumped imports in 2015; or

• threaten to cause material injury in the future.


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In undertaking an assessment of the economic condition of the Australian industry for the period 1 January 2014 onwards, the Commission has relied on verified data from Australian Paper, which included production, cost and sales data for A4 copy paper on a quarterly and annual basis from 2014. The Commission’s analysis of Australian Paper’s data relates only to domestic sales of A4 copy paper, unless otherwise noted.34

The Commission has also utilised data from the ABF import database in its analysis where relevant and has considered data and information provided by cooperating importers and market participants, where this information is verifiable or can be relied on for the purposes of this investigation.

As discussed at section 7.4 above, the Commission considers that the injury analysis period can extend past the end of the investigation period and therefore for the purposes of the injury and causation analysis, evidence and information obtained regarding events from 1 January 2018 has been utilised.

Various submissions have also been received in relation to Australian Paper’s claims of injury. Consideration of these submissions is discussed throughout this SEF.

34 Analysis of Australian Paper’s export performance was completed in relation to reviewing other potential causes of injury to Australian Paper. This analysis is discussed in chapter 9.

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8 ECONOMIC CONDITION OF THE AUSTRALIAN INDUSTRY

8.1 Finding

The Commissioner is satisfied that Australian Paper experienced injury in the form of:

• price suppression; • price depression; • decreased profits and profitability; • reinvestment unattractiveness; and • reduced return on investment/sales.

8.2 Volume effects

8.2.1 Sales volume

Australian Paper claimed that it experienced an increase in sales volume which coincided with the preliminary measures and final measures imposed as a result of Investigation 341. Figure 6 below shows the total volume of domestic sales of Australian Paper’s manufactured A4 copy paper between 1 January 2014 and 31 December 2017.

Figure 6: Australian Paper’s domestic sales from 2014 to 2017

The Commission observes from Figure 6 that Australian Paper’s sales volume increased from 2015. However, the Commission considers that whilst the securities and measures imposed in relation to Investigation 341 had a significant impact on the Australian market, the following factors in the injury analysis and investigation periods collectively influenced Australian Paper’s sales volumes:

• April 2016 – initiation of Investigation 341; • July 2016 – Australian Paper’s acquisition of BJ Ball’s EDOP business – where

Australian Paper was able to negotiate supply contracts with existing EDOP

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customers over the course of 2016, resulting in a supply source switch from imports to Australian-made;

• September to December 2016 – the implementation of securities (and revisions to securities) for Investigation 341 – three PAD’s were published in this period, with a range of dumping margins calculated in the period from 2.7 per cent to 86.6 per cent and subsidy margins calculated from 2.2 per cent to 8 per cent;

• March 2017 – termination of the investigation with respect to Tjiwi Kimia, an Indonesian exporter; and

• April 2017 – the implementation of measures – the range of dumping margins calculated from 2.9 per cent to 45.1 per cent and a subsidy margin for exports from China calculated at 7 per cent.

Figure 7 below demonstrates the influence of the above events on Australian Paper’s ability to sell A4 copy paper in the Australian market and that Australian Paper’s claim is in part, supported.

Figure 7: A4 copy paper sources and volumes in the Australian market35

The Commission’s analysis of domestic sales volume is contained in Confidential Attachment 1 – Market and Economic Performance.

8.2.2 Market size and share

Australian Paper claimed that it gained market share during the investigation period as a result of measures being imposed against imports of A4 copy paper from Brazil, China, Indonesia and Thailand in Investigation 341.

Figure 8 below shows the total annual size of the Australian market between 1 January 2014 and 31 December 2017. Figure 8 demonstrates the respective shares of

35 Note that the volumes from Tjiwi Kimia are included in the volumes for “Countries/Exporters (no securities/measures) after the termination in March 2017, but included in the analysis of “341 countries (securities/measures)” as Tjiwi Kimia was subject to securities prior to the termination.

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Australian domestic sales, imports from the countries subject to this investigation, imports from those countries subject to measures as a result of Investigation 341, and other countries.

Figure 8: Australian market size

Note: same figure as Figure 2 at Chapter 5

As discussed at section 8.2.1 above, Australian Paper’s claim that it increased market share as a result of securities and measures resulting from Investigation 341, is in part, supported. However, Figure 8 above demonstrates that the overall size of the Australian market declined from 2014. The Commission considers that the factors outlined above at section 8.2.1 and a declining market, had a positive impact on Australian Paper’s ability to increase its sales volumes and therefore, increase its share of the Australian market in 2016 and 2017.

Figure 9: Market share in Australia36

36 The European Commission referred to the market share changes in 2017 in a submission dated 16 April 2018 – refer to document 5 on the electronic public record for investigation 463.

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The Commission also makes the following observations from Figure 9:

• imports from countries and exporters subject to measures (from Investigation 341) did decline after the imposition of securities and then further again after measures, however continued to be imported for the remainder of 2017;

• imports from these countries, whilst reduced, maintained a relatively consistent volume in the last three quarters of 2017;

• imports from countries and exporters with no measures maintained a consistent, but small portion of Australian market share from 2014;

• Australian Paper did not obtain the full market share (in 2017) of lost sales by exporters and countries subject to measures from Investigation 341, as imports from Finland, Korea, Russia and Slovakia increased and replaced a portion37 of those dumped imports after measures were imposed.

The Commission’s market size and share analysis is contained in Confidential Attachment 1 – Market and Economic Performance.

8.2.3 Conclusion – volume effects

The Commissioner concludes that Australian Paper has increased its sales of A4 copy paper in 2017, as a consequence of its acquisition of EDOP and effects from the initiation of and imposition of securities and measures from Investigation 341. Combined with the decline in the size of the Australian market, Australian Paper has also increased its market share in 2017. The Commissioner is satisfied with Australian Paper’s claim that they have not experienced injury in the form of lost sales volume and loss of market share.

8.3 Price effects

Australian Paper claimed that it suffered price suppression and price depression.

8.3.1 Price suppression

Price suppression occurs when price increases, which otherwise would have occurred, have been prevented.

In determining whether price suppression has occurred the Commission may assess:

• whether prices have increased at the same rate as costs over time (e.g. the injury analysis period) or within a specified period (e.g. the investigation period); and/or

• whether prices for the Australian industry’s product are lower than prices that may have been achieved absent dumping.

Figure 10 below demonstrates movements in Australian Paper’s domestic weighted average unit costs and prices (net of customer rebates and discounts) for all models38 and brands of A4 copy paper between 2014 and 2017.

37 Refer section 5.3.3 for the Commission’s analysis on the portion of imports from 341 countries obtained by Australian Paper and the countries subject to this investigation during 2017.38 Australian Paper segmented its CTMS data (in Appendix A.6 as part of its application) according to recycled content (model groups) - 0-20%, 21-79% and 80-100%.

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Figure 10: Australian Paper’s domestic price & CTMS between 2014 and 2017

Figure 10 shows that while Australian Paper’s unit selling prices exceeded its unit CTMS in 2014 and 2015, there was a convergence in 2016 and during the investigation period where the unit price and unit CTMS remained closely aligned. Despite increasing sales volume and gaining market share in 2017, Australian Paper did not increase selling prices commensurate with the increase in CTMS.

Figure 10 demonstrates that Australian Paper experienced price suppression.

8.3.2 Price depression

Figure 10 indicates that Australian Paper’s unit pricing declined consistently across the injury analysis period and, specifically, in the investigation period (2017). This indicates price depression.

8.3.3 Conclusion – price effects

The Commissioner’s assessment is that during the investigation period Australian Paper suffered injury in the form of price suppression and price depression.

The Commission’s price effects analysis is contained in Confidential Attachment 1 – Market and Economic Performance.

8.4 Revenue

The Commission noted in the Australian Paper Verification Report39 and PAD 463 that whilst Australian Paper did not specifically claim injury to its total revenue position, a claim was indirectly made with respect to unrealised revenue gains as a result of an inability to raise selling prices after the conclusion of Investigation 341.


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Hankuk Paper submitted40 in response to the Commission’s preliminary conclusion on this point that:

• “unrealised” gains as a form of material injury cannot safely be established; • subsection 269TAE(2AA) of the Act requires an injury determination to be based on

facts and not merely on allegations, conjecture or remote possibilities; and • the facts indicate that Australian Paper are in an improved position with regard to

sales volumes, market share, revenue and profitability.

In response to Hankuk Paper, the Commission considers that the fact that Australian Paper’s prices were both suppressed and depressed in 2017 (as determined in section 8.3 above), this indicates that had these prices not been suppressed or depressed then Australian Paper would have achieved higher selling prices and hence achieved greater revenue.

The Commission considers that Hankuk Paper’s position that unrealised revenue gains affecting Australian Paper is an illegitimate form of injury per se is not supported. However, the Commission considers that in these particular circumstances a conclusion on unrealised revenue gains during the investigation period cannot be made.

The Commission has analysed Australian Paper’s total revenue (AUD) in comparison to its total volume (MT) since 2015. Figure 11 below demonstrates that Australian Paper was able to increase its total revenue in 2017 and that this revenue correlates with an increase in sales volume.

Figure 11: Australian Paper’s revenue and the relationship with volume


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8.5 Profit effects

Australian Paper claimed that it suffered injury in the form of reduced profit and profitability. Figure 12 below shows Australian Paper’s profit and profitability for A4 copy paper between 2014 and 2017.

Figure 12: Australian Paper’s profit & unit profitability between 2014 and 2017*

*Profitability plotted on secondary axis

Figure 12 shows that while Australian Paper experienced higher profit amounts and levels of profitability in 2014 and 2015, it experienced a sharp decline in 2016 such that it suffered a loss on A4 copy paper in that year. Despite an increase in sales volume in 2017, the Commission observes that Australian Paper did not experience a commensurate increase in the level of profit.

Based on the above, and taking into account the Material Injury Direction, there appear to be reasonable grounds to support the claim that Australian Paper has experienced injury in the form of reduced profits and reduced profitability.

8.6 Other economic factors

Australian Paper did not claim injury to capacity, capacity utilisation, employment, wages or cash flow and instead noted that there had been improvements across these economic factors since 2015. The Commission examined Australian Paper’s claims and considers the verified data supports improvements in these areas as a result of increased production and sales volumes and subsequent revenue.

8.6.1 Diminished return on investment and attractiveness for reinvestment

Australian Paper has represented its return on investment by considering return on sales (profitability), as depicted in Figure 12 above. The Commission considers that profitability of A4 copy paper production is a suitable assessment of attractiveness to reinvest, given that Australian Paper was looking to recover from the period of dumping in 2015 by primarily raising unit selling prices.

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The Commission’s assessment is that during the investigation period the Australian industry has suffered injury in the form of reduced return on investment and attractiveness for reinvestment.

8.7 Commission’s assessment

The Commissioner is satisfied that Australian Paper experienced injury in the forms listed in section 8.1 above.

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9 HAS DUMPING CAUSED MATERIAL INJURY?

9.1 Finding

The Commissioner is not satisfied that dumped goods from the subject countries caused material injury to the Australian industry during the investigation period.


In order to publish a dumping duty notice under section 269TG, the Minister must be satisfied, among other things, that because of the dumping, material injury to an Australian industry producing like goods has been, or is being caused or is threatened.

Subsection 269TAE(1) provides a non-exhaustive list of factors which the Commission can examine, and that the Minister may have regard to in determining whether material injury to an Australian industry has been, or is being caused or is threatened.

This chapter outlines the Commission’s assessment of whether the injury assessed in the previous chapter has been caused by dumping and whether any injury caused has been material.

9.3 Size of the dumping margins

Subsection 269TAE(1)(aa) of the Act provides that the Minister may have regard to the size of each dumping margin in respect of like goods exported to Australia in determining whether the Australian industry has been materially injured by the dumping.

The dumping margins outlined in Chapter 6 for Finland, Korea, Russia and Slovakia are material, i.e. above the de minimus two per cent. However, for the reasons set out in below, the Commission is not satisfied that the dumping caused material injury to the Australian industry during the investigation period.

9.4 Exports of A4 copy paper from Austria

The Commission considered the remaining volume of exports of A4 copy paper from Austria, having excluded the volume exported by Mondi AUT. Based on ABF data, this remaining volume exported to Australia was below 100 MT. In addition, the FOB price for this remaining volume of A4 copy paper was significantly higher than the FOB prices of other countries subject to this investigation (in some cases almost 100 per cent higher). Given that this volume of A4 copy paper represents less than 0.1 per cent of the total Australian market during the investigation period, and was exported at a much higher price, the Commission considers that this volume of goods has caused negligible injury to the Australian industry. For this reason, the Commissioner proposes to terminate the investigation in so far as it relates to Austria, pursuant to subsection 269TDA(13).

9.5 Volume effects

Whilst the Commission has not found that Australian Paper suffered volume injury during the investigation period, the Commission considers Australian Paper’s strategy to gain

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market share via the acquisition of BJ Ball’s EDOP business in 2016, established some pricing behaviour that was material to Australian Paper’s price injury in 2017.

9.5.1 Australian Paper’s acquisition of EDOP

Australian Paper acquired BJ Ball’s EDOP distribution business in July 2016, at a time where imports from Finland, Korea, Russia and Slovakia held less than 1 per cent market share.

Jackaroo41, Central National42 and Hankuk Paper43 all submitted that Australian Paper had committed to honouring the existing EDOP customer contracts until they expired on 30 June 2017 and it was this that prevented Australian Paper from raising prices. Hankuk Paper also noted that in Investigation 341, BJ Ball (an importer of A4 copy paper via a trading entity in Singapore) was found to be selling the goods at “significant” losses, and at prices that undercut those of Australian Paper. Jackaroo also submitted that this had the (perhaps unintended) consequence of other non-EDOP customers in the market demanding the same lower prices. Jackaroo cited Officeworks as an example of requiring the lowest comparable price (regarding its low price consumer guarantee).

International Paper44 also submitted that the Commission should assess whether the alleged injury claims are the result of voluntary decisions by Australian Paper rather than import offers during the investigation period. International Paper note the sharp increase in Australian Paper’s supply position and the conclusions that can be made regarding the selling prices.

Australian Paper confirmed that it had honoured existing prices for EDOP customers, but stated that this was in order to ensure they could obtain that sales volume. The Commission recognises the good-faith position employed by Australian Paper and that this strategy was a genuine strategy to gain sales and increase market share. The Commission also notes that Australian Paper was not guaranteed an automatic transfer of business (volumes and revenues) from EDOP customers, but that it had to negotiate with these customers in order to win this business.

The Commission analysed Australian Paper’s 2016 sales in relation to an existing and significant customer where a new supply contract was negotiated in late 2016 to change supply from both Australian Paper and EDOP, which resulted in this customer becoming Australian Paper’s third largest contract (by volume and value). The Commission notes the following clauses in the supply contract:

• honour certain EDOP financial benefits until a set date for renegotiation; • first price review to be effective 1 July 2017; • price increases can be calculated with consideration of market prices, including

domestic, import and Australian Paper’s exports, however with a percentage cap on such price increases; or

• price increases can calculated based on increases to costs of production – which was utilised for 1 July 2017 increase.

41 Refer to document 19 on the electronic public record for investigation 463. 42 Refer to document 09 on the electronic public record for investigation 463. 43 Refer to document 25 on the electronic public record for investigation 463. 44 Refer to document 21 on the electronic public record for investigation 463.

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The Commission observes from this sales data that:

• net prices (weighted average of all products) declined from contract signing to mid-2017 by approximately 4 per cent;

• volumes in this same period to this customer increased four-fold; and • prices increased to this customer, effective 1 July 2017, and occurred on the basis

of an increase in production costs.

The Commission considers that Australian Paper:

• established supply terms with this customer in 2016 prior to the presence of dumped imports from Finland, Korea, Russia and Slovakia;

• committed to honour EDOP financial arrangements, which were the subject of a dumping investigation and that these commitments caused a delay in raising prices until mid-2017;

• successfully implemented its market share strategy, but at the expense of price, where the supply terms included a range of products with pricing that appears to be volume dependent and based on the imports subject to Investigation 341;

• raised prices in mid-2017 and that the price review mechanism adopted was in reference to production costs; and

• the price obtained was the maximum capped price allowed under the contract.

The Commission is unable to comment on the accuracy of Jackaroo’s claim that Australian Paper’s acquisition of EDOP had the unintended consequence of non-EDOP customers demanding lower prices as the Commission did not receive submissions on this point from these customers.

9.6 Price undercutting

Price undercutting occurs when imported goods are sold at a price below that of the domestically produced goods.

9.6.1 Methodology to calculate prices

As noted above, Jackaroo and FXPC were the only importers to cooperate somewhat with the Commission’s investigation. Jackaroo provided a complete importer questionnaire, which was verified at a verification visit.45 FXPC provided some data and information, but did not complete an importer questionnaire. Whilst the Commission met with FXPC46, an importer verification was not able to be undertaken.

The lack of cooperation from importers of A4 copy paper from the subject countries resulted in a lack of verified selling prices in the Australian market during the investigation period. The Commission has instead calculated selling prices using the best available information as outlined below.


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In order to address price undercutting, the Commission has calculated the FIS (free into store) invoice price of the imported 80 gsm A4 copy paper in 2017. As the Commission did not receive information regarding discounts and rebates applicable to imports and sales from Russia and Finland, the Commission considers that a fair comparison of prices should be performed at the invoice level – the value of the goods without the application of discounts and rebates.

Russia

Whilst Jackaroo cooperated with the investigation, it was not the sole importer of A4 copy paper from Russia. For imports from Russia, the Commission calculated:

• the quarterly volume (MT) and quarterly invoice value (AUD, delivered) of Jackaroo’s verified sales in Australia;

• the quarterly volume (MT) and quarterly landed value (AUD) of imports of A4 copy paper from Russia, excluding Jackaroo, using data from the ABF import database. The landed value includes all post exportation costs and Australian duties and taxes. Jackaroo’s verified weighted average port/handling charges and Australian inland transport costs and an amount of profit and SG&A were added to this value;

• the quarterly volumes were added and the quarterly values were added and a quarterly weighted average unit price (AUD/MT) was calculated.

Korea & Slovakia

The Commission had limited participation from FXPC, the importer of the goods from Korea and Slovakia. As there was no verified sales data, the Commission calculated the weighted average, quarterly landed price (AUD/MT) of the goods using data from the ABF import data base. As FXPC did not complete an importer questionnaire and provide relevant import costs for the purposes of verification, the Commission used the best available data obtained from Jackaroo in this investigation for the calculation of port/handling, inland transport, profit and SG&A. The Commission considers these values to be the best available data for the purposes of calculating selling prices in Australia from these countries.

Finland

The importer of these goods, UPM Kymmene Pty Ltd (UPM Australia), did not cooperate with the investigation by completing an importer questionnaire and providing relevant information for the purposes of verification.

For imports from Finland, the Commission calculated the weighted average, quarterly landed price (AUD/MT) of the goods using data from the ABF import data base. The Commission used the best available data obtained from Jackaroo in this investigation for the calculation of port/handling, inland transport, profit and SG&A. as this is considered to be the best available data for the purposes of calculating selling prices of imports from Finland.

9.6.2 The Commission’s analysis

The calculated FIS prices of the imported A4 copy paper was compared to the FIS invoice prices of Australian Paper’s 80 gsm paper. The Reflex brand was excluded from the analysis to ensure fair comparison of prices.

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Both Australian Paper47 and Jackaroo48 made submissions with regards to the importance of the price of A4 copy paper and the physical characteristics of the goods. Australian Paper claimed that there is little discernible difference in A4 copy paper besides the price. Jackaroo claimed that there is little differentiation within each market segment, but that there are key differences between levels of recycled content in the paper (through to a virgin grade). Jackaroo claimed that this product segmentation affecting price comparability is supported by the Commission’s approach to price undercutting in investigation 341, where it took into account market segments and product categories.

Given the lack of cooperation of importers in this investigation, the Commission could not use verified sales data to confirm the actual market segments to which imported A4 copy paper was sold, the physical characteristics of those goods and the sales price. In the absence of this information the Commission has not been able to complete a price undercutting analysis of each product segment, including the varying levels of recycled content and other physical characteristics, as well as the levels of trade as was completed in Investigation 341.

However, the Commission has undertaken some product category analysis in its price undercutting analysis by removing Reflex brand sales from the calculation of the Australian industry’s prices, as this brand is considered a premium brand (attracting higher prices). The Commission’s understanding of the product categories imported is that most of the imports are not of a premium product category, based on verified data from exporters and the limited information provided by importers and customers.

The result of this analysis is outlined in Figure 13 below.

Figure 13: Comparison of Australian industry FIS price with FIS price of subject imports

47 Refer to documents 23 and 35 on the electronic public record for investigation 463. 48 Refer to documents 19 and 31 on the electronic public record for investigation 463.

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The Commission observes from Figure 13 that:

• imports of A4 copy paper from Finland, Korea and Russia have undercut the Australian industry for the duration of the investigation period; and

• imports of A4 copy paper from Slovakia undercut the Australian industry for the first three quarters of the investigation period, but did not undercut the Australian industry in the final quarter of the investigation period. The Commission notes that despite this increase in price, that imports from Slovakia still undercut Australian industry’s when calculated as a weighted-average single price for the investigation period.

The European Union submitted49 that the Commission’s price undercutting analysis in CON 463 showed only slight undercutting in 2017, though Article 3.2 of the World Trade Organisation Anti-Dumping Agreement determines that price effects should have taken place “to a significant degree."

The Commission has revised its approach to calculate selling prices in the Australian market since CON 463 and PAD 463. The Commission considers that undercutting may be significant or material depending on the effect of that undercutting on the industry during the investigation period.

Notwithstanding the European Union’s submission on this point, the Commission has determined undercutting at material levels during the investigation period.

Central National Australia acts as an intermediary to facilitate sales of A4 copy paper exported from Korea . It submitted50 that:

• there were price differences of over 50 per cent when considering the products offered by Australian Paper and the Fuji Xerox Professional product offered by Central National, with the Fuji Xerox Professional product more expensive than three of the Australian Paper products.

• the price of imported A4 copy paper from Korea is above the pricing of Australian Paper’s lower price products for the entire investigation period.

The Commission has considered the specific points raised by Central National with regards to price undercutting and accepts that Australian Paper have multiple products within their range of A4 copy paper, and that these products are sold at varying price points to a variety of customers. For the purposes of its undercutting analysis, where possible, the Commission has sought to compare the most comparable product categories.

Central National also indicated that the Korean A4 copy paper did not undercut Australian Paper’s lower priced products during the investigation period. During the verification visit Central National provided data and evidence with regards to their sales of imported A4 copy paper, noting that their sales are as an intermediary between the exporter (Hankuk Paper) and importer (FXPC). The Commission verified that Central National’s prices to FXPC were below the selling prices of the three brands referred to in the Central National submission (Keji, J Burrows and Reflex). However, the Commission notes that Central National acts as an intermediary with FXPC being the importer. Therefore, the A4 copy paper is sold in the


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Australian market once FXPC makes the sale. The Commission sought FXPC’s cooperation through the completion of an importer questionnaire. While FXPC did meet with representatives from the Commission to discuss aspects of the investigation, they were not able to provide the Commission with complete import and sales data, such that the Commission could accurately determine the selling prices of A4 copy paper via Central National.

The Commission must rely on the best available evidence in order to assess price undercutting. In the absence of verified data from FXPC, the Commission considers the methodology detailed above to be reliable and relevant to these imports.

The Commission’s price undercutting analysis is contained in Confidential Attachment 1 – Market and Economic Performance.

9.6.3 Retail paper prices

As noted above, the Commission was unable to analyse prices at the levels of trade or market segments identified in Chapter 5. In its application, Australian Paper provided market intelligence of price undercutting of sales (per ream) from the retail sector to the home/office segment of the downstream consumer market. Australian Paper also provided the Commission with confidential price monitoring data, which is Australian Paper’s own record of retail prices of A4 copy paper during the investigation period. Further, Australian Paper included a number of examples of imported A4 copy paper in store during the investigation period, at prices that were undercutting Australian Paper’s selling prices for the Reflex brand.

These examples illustrated:

• A4 copy paper, with the ‘Fuji Xerox Professional’ brand manufactured in Austria (by Mondi AUT), was on sale in Officeworks in July 2017 for $4.50 per ream. Australian Paper stated that the sale price of their ‘Reflex Ultra White A4’ brand was reduced to $4.99 at this time;

• A4 copy paper, with the ‘Fuji Xerox Professional’ brand manufactured in Korea (by Hankuk Paper), was on sale in Officeworks. No date or month was provided for this example, although Australian Paper claim that the price of this product undercut the price of their Reflex brand;

• A4 copy paper, with the ‘Xerox Perfect Print’ brand manufactured in Russia, was on sale in Australia through an Australian entity, MediaForm. Australian Paper claim that this A4 copy paper was manufactured by another entity within the Mondi group, and refer to the declining price of this paper during the investigation period. Australian Paper referred to export statistics for their analysis of the declining price of imports from Russia; and

• A4 copy paper, either with the ‘IQ’ or “Xerox” brands manufactured in Slovakia (by Mondi SVK) was on sale, however no date or month was provided for this example. Australian Paper understood that the majority of this paper was destined for Costco.

In a submission dated 17 May 2018, Jackaroo51 made the following claims with regard to price undercutting:


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• Australian Paper have not provided information or evidence to indicate that Jackaroo’s imports and sales have undercut its prices;

• any price differences that may have occurred are explained by identifiable differences in the subject imports when compared to Australian Paper’s product.

The Commission has considered the information provided by Australian Paper (both the specific examples and the price monitoring data). The Commission acknowledges that these retail prices could be indicative of the prices paid by retailers of the goods, on the assumption that retailers:

• demand profit on the goods sold; and therefore • would charge a higher price (than its purchase price) downstream to consumers in

order to achieve profit.

However, the Commission requires consistent price data and terms of trade to analyse prices over the full investigation period. The retail price information provided by Australian Paper does not allow the Commission to calculate price undercutting at the same level of trade as Australian Paper because such prices;

• are temporally sporadic; • do not take into account specific events such as promotions; • do not identify the suppliers and traders in the supply chain; • do not demonstrate the terms of trade, including rebates, discounts and

commissions and payment of post exportation costs; • do not take into account decisions made by retailers, including setting regular retail

prices (RRP), promotions and the amount of profit obtained; and • in the retail environment are not competitive with Australian Paper’s sales.

Australian Paper has also confined its analysis of price undercutting of these example brands to its Reflex brand, which as discussed above, does not permit a fair product category price comparison.

In a submission dated 2 July 2018, Jackaroo also claimed that the price undercutting analysis in PAD 463 was flawed as the Commission did not have regard to Jackaroo’s importer questionnaire response which was received within 40 days of initiation (in accordance with 269TD(2))52. Jackaroo further requested the Commissioner to reconsider securities for Russia. The data provided by Jackaroo, together with other information and data gathered and verified during the investigation, has been considered in this SEF.

The Commission’s analysis above at Figure 13 indicates that imports of A4 copy paper from Russia are undercutting Australian Paper.

9.6.4 The Commission’s assessment – price undercutting

The Commissioner is satisfied that there is positive evidence of price undercutting of Australian Paper’s prices by dumped exports of A4 copy paper from Finland, Korea, Russia and Slovakia in 2017.


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9.7 Price effects

The Commissioner found, at section 8.3, that Australian Paper experienced price suppression and price depression during the investigation period and that there was price undercutting from the subject countries. Information and data provided by Australian Paper indicates that the Australian market for A4 copy paper is price sensitive. The Commission considers this claim to be supported by the primary market segment who also experience upwards price pressure from its customers in the consumer market.

However, the Commission considers that the impact of the dumped imports from the subject countries on the price suppression and depression experienced by Australian Paper was immaterial during the investigation period. As noted above at Chapter 5, the Commission has observed that there are several factors to be considered in the determination of pricing of A4 copy paper. The Commission considers the following events during 2016 and 2017 had a material impact on Australian Paper’s ability to raise prices and therefore achieve the profit required to recover from the dumping experienced in 2015.

9.7.1 Australian Paper’s customer price reviews

The Commission has also analysed the contracted price reviews with key customers of Australian Paper, based on information provided by both Australian Paper and other interested parties. This analysis is outlined below.

Customer One

Australian Paper provided evidence of its price review mechanism with a major customer, which represented approximately 25 per cent of Australian Paper’s volume and revenue in 2017. The evidence received was for price increases negotiated in:

• 2016 for 2017 supply; and • 2017 for 2018 supply.

The Commission examined the contracts with this customer and the price review data submitted by Australian Paper and notes the following:

• the percentage price increase achieved in 2016 for 2017 was smaller than the percentage price increase of the cost to make the goods sold;

• the price increase proposed by Australian Paper in the April-June 2017 quarter for 2018 supply was rejected by the customer and a lower price was agreed;

• the contractual terms between the parties stipulated price reviews with reference to import prices from a period before the investigation period; and

• any price increases achieved with reference to import pricing were capped at a maximum percentage increase.

As the volume of dumped imports from the subject countries was negligible prior to the investigation period, the Commission does not consider this evidence to be indicative of price injury caused by dumped imports from the subject countries. Analysis of this evidence is contained in Confidential Attachment 2.

The Commission notes the major customer in this example also provided the Commission with a submission claiming that injury with respect to this price review could not have been caused by imports of A4 copy paper from the subject countries. This submission included

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a timeline of events from the time the contract was finalised through to the price reviews that occurred during the investigation period. The evidence provided confirmed the Commission’s finding with regard to this price review.

Customer Two

Australian Paper provided evidence of a price review with a major customer during the investigation period. There were multiple price reviews during this period with import pricing a relevant factor to be considered. Australian Paper claimed that as the contract provided for the consideration of import prices as part of a price review, the dumped imports were causing injury. The Commission considered the information provided and noted that Australian Paper obtained the maximum price increase allowable under the contract with this customer and that the price increase was calculated with reference to an increase in production costs. Therefore, the dumped imports could not be said to have caused injury with respect to this customer. Analysis of this evidence is contained in Confidential Attachment 3.

In relation to the above two examples, the Commissioner finds that dumped imports from the subject countries has not caused injury to the Australian industry.

9.7.2 The impact of Australian Paper’s exclusivity arrangements

COS and Jackaroo53 raised an argument that they are not able to purchase a private label brand from Australian Paper, due to commercial arrangements that Australian Paper have with another entity. For this reason, COS claim that they have no option but to consider importing this product. COS also outlined that this issue is relevant to Lyreco.

The Commission has considered this commercial arrangement in the context of whether the imported A4 copy paper purchased by COS and Lyreco has caused injury to the Australian industry. Noting that the Commission was unable to obtain the commercial documentation (including contracts and other supporting documents) to evidence this commercial arrangement, the Commission is unable to provide a considered comment on this claim.

9.7.3 The Commission’s assessment of price effects

The Commission concludes that during the investigation period, Australian Paper experienced price suppression and price depression and that there was price undercutting by the dumped imports during 2017. However, the Commission considers that the dumped imports from Finland, Korea, Russia and Slovakia had an immaterial effect on Australian Paper’s ability to raise its prices as:

• the trend of declining prices in 2016 set the market’s price expectations, such that the market would not accept a rise in prices to 2015 levels;

• the volume of imports from the subject countries was less than 1 per cent of the Australian market in 2016 and had no influence on the 2014 to 2016 price trends;

• Australian Paper’s contracted price review mechanisms for its two largest customers were set with reference to imports in a period before this investigation period;


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• Australian Paper delayed price increases which would have recouped its costs of production, for three of its largest customers by volume and revenue; and

• Australian Paper’s acquisition of EDOP successfully assisted with a gain in sales volume and market share, however it was at the expense of prices, where the commitment to honour existing financial terms meant the continuance of the effects of dumping from Investigation 341.

9.8 Revenue

The Commission concluded at Chapter 8 that it was not in a position to determine if Australian Paper has suffered injury from unrealised revenue gains, as a result of not raising prices.

The Commission considers that as dumped imports had an immaterial effect on Australian Paper’s ability to raise prices, that in turn, the dumped imports had an immaterial effect on Australian Paper’s revenue.

9.9 Profit effects

9.9.1 Reduced profit and profitability

Australian Paper claimed that its inability to raise prices in 2017 affected its profit and profitability and accordingly its recovery after the dumping from Brazil, China, Indonesia and Thailand.

The Commission analysed Australian Paper’s data and established that Australian Paper obtained a small unit profit during the investigation period, as demonstrated in Figure 12 at section 8.5 above. However, the improvement in profit experienced by Australian Paper has not been significant and can be linked to the price effects discussed at section 9.7 above.

The Commission concludes that the presence of dumped imports during the investigation period had an immaterial effect on Australian Paper’s profit and profitability in 2017.

9.10 Other factors

9.10.1 Global Pulp prices

Jackaroo claimed54 that Australian Paper “strategically” limited domestic price increases to suppress import prices at a time when global pulp and paper prices were increasing. Australian Paper responded55 that if its intention was to limit domestic prices then it would not have announced the price increases “from injuriously low levels” in 2017.

The Commission verified Australian Paper’s claim that it sought to increase selling prices to major customers during the investigation period (and since that time). The Commission did not establish evidence to support the view that Australian Paper had strategically sought to keep domestic selling prices at lower levels when global pulp prices were increasing.


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9.10.2 Capacity to supply the Australian market

A number of interested parties raised concerns regarding Australian Paper’s ability to supply customers with their required volumes and brands. The Commission has examined email evidence which demonstrates that on at least one occasion Australian Paper was unable to supply a specific brand to a customer. However the Commission has also cited other email evidence that Australian Paper was able to respond to a last minute order of paper to assist a customer.

Given the evidence in support of this claim consists of one occasion when Australian Paper could not provide a specific brand to a customer, the Commission is not satisfied this is indicative of the claim that Australian Paper cannot supply the Australian market.

9.10.3 Exports of A4 copy paper

The Commission considered whether Australian Paper’s exports of A4 copy paper, and how volumes had fluctuated during the injury analysis period, had contributed to the injury it experienced. Consistent with the finding in investigation 341, the Commission’s assessment is that changes in export volumes have not had an impact on Australian Paper’s cost to manufacture A4 copy paper or on domestic sales of A4 copy paper.

9.11 Conclusion

Based on the above analysis, and noting that the prices of the imports from Finland, Korea, Russia and Slovakia had undercut the Australian industry, the Commission is not satisfied that the dumped imports caused material injury to the Australian industry during the investigation period. The Commission considers that there are other factors that have caused the injury experienced by the Australian industry, whereby:

• contracted prices with their key customers were set at a time prior to the investigation period, when imports from the subject countries were minimal;

• price review mechanisms for increasing prices when set with reference to imports, were for a period when imports from the subject countries were minimal; and

• price increases that were achieved in 2017 were set with reference to increasing costs of production and did not reference imports in the market.

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10 IS DUMPING THREATENING TO CAUSE INJURY?

10.1 Finding

The Commissioner finds that dumped imports from Finland, Korea, Russia and Slovakia in 2017 threaten to cause material injury to the Australian industry.

Specifically, the Commissioner finds that the dumped selling prices in the Australian market are influencing current supply negotiations between Australian Paper and two key customers, such that the prices currently being negotiated are threatening to cause:

• ongoing price suppression; • ongoing price depression; • ongoing reductions in profits and profitability; • lost sales volume; and • lost revenue.


Subsection 269TAE(2B) states that, in determining whether or not material injury is threatened, “the Minister must take account only of such changes in circumstances […] as would make that injury foreseeable and imminent unless dumping […] measures were imposed. The Manual outlines the Commission’s approach to assessing whether there is a threat of injury. The Manual provides that:

The [Anti-Dumping Agreement] gives a non-exhaustive list of factors that should be considered in totality when making a determination of threat of material injury.

• a significant rate of increase of dumped imports into the domestic market indicating the likelihood of substantially increased importation;

• sufficient freely disposable, or an imminent, substantial increase in, capacity of the exporter indicating the likelihood of substantially increased dumped exports to the market, taking into account the availability of any other export markets to absorb any additional exports;

• whether imports are entering at prices that will have a significant depressing or suppressing effect on domestic prices, and would likely increase demand for further imports; and

• inventories of the product being investigated.56

The factors and indices that are relevant to demonstrate the consequent impact of imports on the domestic industry will vary depending on the nature of the allegations and the industry itself.57

With respect to cases where injury is threatened by dumped imports, the application of measures shall be considered and decided with special care. A determination of threat of material injury is thus subject to stringent tests. A totality of factors must lead to the

56 The Manual, page 23. 57 The Manual, page 24.

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conclusion that dumped exports are imminent, and that, unless action is taken, material injury would occur.58

10.3 Supply negotiations

The Commission observes from the following two examples that A4 copy paper supply negotiations are for the supply of each customer’s private label A4 copy paper. Multiple interested parties throughout the course of this investigation advised the Commission of the importance of their private label brands as part of the product mix offered to the downstream consumer market. Private labels provide Australian Paper’s customers with control over pricing, marketing and sales and distribution to its customers in the consumer market, whereas Australian Paper is responsible for its proprietary brands, such as Reflex.

Private label brands offer distinction in a largely homogeneous paper market and hence the supply of private label A4 copy paper is a key component of the commercial agreements between Australian Paper and its customers.

10.3.1 Negotiation background – Customer A

Australian Paper provided the Commission with evidence of negotiations occurring in 2018 with a significant customer (to be referred to as customer A, representing approximately 25 per cent of Australian Paper’s net revenue and volume in 2017). The email evidence did not demonstrate the complete supply negotiations for all products, rebates and discounts however the Commission considers that the evidence supplied for the negotiation of customer A’s private label brands was sufficient for the purposes of examining Australian Paper’s threat of material injury claim. The evidence shows that:

• July 2018: Australian Paper provided a price offer for the supply of the customer’s private label paper. The price was an invoice price, exclusive of discounts and rebates and inclusive of freight and distribution.

The price offered by Australian Paper was higher than prices paid by this customer in 2017.

• August 2018: in reply, the customer stated that it could import the brands “…significantly cheaper than your [Australian Paper’s] proposed increase. The cost of shipping, freight, holding costs and all other on-costs have been built into our comparison…”59;

• September 2018: email evidence60 provided by Australian Paper shows that the customer offered a substantially lower invoice price on two grades, but appeared to accept Australian Paper’s price on a third grade.

Whilst the customer did not identify the country of origin, the Commission had received evidence from an importer that sold A4 copy paper to Customer A in 2017. This evidence noted invoice prices paid by Customer A for A4 copy paper exported from the subject

58 The Manual, page 23. 59 Confidential email evidence. 60 Confidential email evidence.

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countries. The invoice prices from the importer to Customer A were exactly the same value as proposed by Customer A in its September counter-offer to Australian Paper.

This evidence confirmed for the Commission that Customer A had access to imported A4 copy paper at the prices stated during the negotiations. Further, the Commission identified from the 2017 pricing evidence that Customer A’s importer sourced the paper from Finland, Korea, Russia and Slovakia.61

10.3.2 Negotiation background – Customer B

Australian Paper provided the Commission with evidence of negotiations occurring in 2018 with a second significant customer (representing approximately 25 per cent of Australian Paper’s net revenue and volume in 2017). The email evidence did not demonstrate the complete supply negotiations for all products, rebates and discounts however the Commission observes from the evidence provided;

• that Customer B based its 2019 pricing for the range of brands and grades on 2017 volumes purchased from Australian Paper;

• the brands included Customer B’s private label and Australian Paper’s brands; • the prices proposed (which included delivery and distribution costs) by Customer B

were significantly lower than the prices paid in 2017 for the majority of the brands listed;

• there were some price increases on some brands; • Customer B stated that it had an alternate import supply source that was willing to

manufacture and sell its private label brands at the prices proposed to Australian Paper, however Customer B did not disclose this source to Australian Paper. The Commission notes that this customer purchases Australian Paper proprietary brands such as Reflex, and this claim of alternate supply would only apply to the customer’s private label brands; and

• Australian Paper did not state that a price counter offer had been provided to Customer B. Therefore, the Commission considers that this negotiation appears to be not as progressed as Customer A’s.

The Commission analysed the prices offered and found that:

• the weighted average price (AUD/ream) proposed by Customer B for its private label brands (based on 2017 volumes) was of a comparable price to the prices calculated in the Commission’s price undercutting analysis (also a delivered price) in Chapter 9.6; and

• as the price offered was based on volumes purchased in 2017 (and into 2018 as the negotiations occurred), the change in price is independent of volume.

61 The Commission had also requested that Customer A provide it with a complete list of its A4 copy paper purchases. However Customer A provided the Commission with a summary of purchases, which could not be verified or relied upon.

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10.4 The impact of the customers’ price offers

10.4.1 Methodology

In order to assess the impact of the prices offered by Customers A and B, the Commission has used Australian Paper’s verified 2017 data to make certain assumptions to model scenarios for 2018 and 2019. Table 9 below details the assumptions and the reasons for making these assumptions.

The impacts the Commission has modelled relate to the effect of prices on Australian Paper’s profits and profitability. The year 2017 was used as the baseline year as this was the most recent and complete data set verified by the Commission. Australian Paper’s verified data permitted the Commission’s analysis of the private label brands sold, as distinct from other brands manufactured and sold.

Scenario one (S1):

• Australian Paper accept Customer A’s price offer (price is a dumped price from 2017); and

• Customer B’s negotiations not finalised.

Scenario two (S2):

• Australian Paper accept Customer A’s price offer, but the price is corrected for dumping (price is an undumped price in 2017); and

• Customer B’s negotiations not finalised.

Scenario three (S3):

• Australian Paper accept Customer A’s price offer (price is a dumped price from 2017); and

• Australian Paper accept Customer B’s price offer (price is a dumped price from 2017).

Scenario four (S4):

• Australian Paper accept Customer A’s price offer, but the price is corrected for dumping (price is an undumped price in 2017); and

• the same price corrected for dumping is applied to Customer B’s negotiations.

Assumption Reasons

S1,

S2,

S3

, S

4

Volume produced and sold

Customer A and all other customers

No change in 2018 and 2019

• The Australian market size stabilised in 2016 and 2017.

• The Commission received evidence that Customer B based its 2018 negotiations (for 2019 supply) on 2017 volumes

• The evidence of negotiations with Customer A did not stipulate any volume changes.

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Assumption Reasons S

1,

S2,

S3

, S

4

Cost to Make

Annual increase of X% for brands purchased by Customer A in 2018 and 2019

Annual increase of Y% for all other production in 2018, 2019

• Australian Paper’s verified data demonstrated a consistent year-on-year increase of X% (weighted average) of Customer A’s three models from 2015, 2016 and 2017;

• Australian Paper’s verified data demonstrated a consistent year-on-year increase of Y% (weighted average) of all other production from 2015, 2016 and 2017.

S1,

S2,

S3

, S

4

SG&A


• Australian Paper’s verified data did not demonstrate patterns of SG&A increase or decrease with respect to the sale of the goods.

Rebates and discounts


• Evidence from Australian Paper demonstrated that the rebates and discounts for both Customer A and Customer B for 2017/18 were to be applied for 2019.

Scen

ari

o S

1

Price

2018 Price for Customer A

2018 Price for Customer B

2019 Price – Customer A – offer for models 1 and 2 (based on dumped prices in 2017)

Model 3 remained at the price offered by Australian Paper

Annual increase of Y% for all other sales.

• The Commission received evidence of the price paid by Customer A in 2018 for the three models;

• The Commission noted from 2015, 2016 and 2017 that there had been no price increase on Customer B’s private label goods. No price increase applied for 2018;

• The Commission received evidence of the price offer for 2019 supply made by Customer A;

• The Commission received evidence that Australian Paper had obtained prices increases of Z% (effective 2018) and that the price increases were based on costs of production – this aligns with the Commission’s calculations that CTM increase occurred at Y%.

Scen

ari

o S

2

Price



2019 Price – Customer A – offer for the models 1 and 2, uplifted by 10.8% (undumped price for 2017)



• The Commission received evidence of the price paid by Customer A in 2018 for the three brands;



• The Commission calculated an average of the dumping margins from Finland, Korea, Russia and Slovakia and applied this to Customer A’s price offer.


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Assumption Reasons S

cen

ari

o S

3

Price



2019 Price – Customer A – offer for models 1 and 2 (based on dumped prices in 2017)


2019 Price – Customer B – offer based on dumped prices in 2017





• The Commission received evidence of the price offer for 2019 supply made by Customer B;


Scen

ari

o S

4

Price



2019 Price – Customer A – offer for the models 1 and 2, uplifted by 10.8% (undumped price for 2017)


2019 Price – Customer B – same price as Customer A (undumped price for 2017)





• The undumped price calculated for Customer A also applied to Customer B as the Commission considered this to be the undumped price in the market from the subject countries.

• The Commission calculated an average of the dumping margins from Finland, Korea, Russia and Slovakia and applied this to Customer A’s price offer.

• The Commission received evidence that Australian Paper had obtained prices increases of Z% (effective 2018) and that the price increases were based on costs of production – this aligns with the Commission’s calculations that CTM increase occurred ay Y%.

Table 9: Modelling assumptions

10.4.2 The Commission’s analysis of Australian Paper’s performance

Whilst certain assumptions have been made regarding the prices and volumes of the goods sold to other customers, the Commission’s analysis isolates the impact of price of the private label brands sold, relative to the dynamics of Australian Paper’s operations.

Figure 14 below demonstrates the scenarios described above.

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Figure 14: the effect of dumped prices on Australian Paper’s profits and profitability

The Commission concludes from Figure 14 that:

• in the absence of the dumping from 2017, Australian Paper would not have received these particular lower price offers from its two customers for the supply of its private label A4 copy paper;

• if Australian Paper accepted the price offer of Customer A, whilst Customer B’s negotiation is ongoing, its profit and profitability performance would be worse in 2019 than if Customer One’s price offer was unaffected by dumping (S1 compared to S2); and

• if Australian Paper received the undumped 2017 prices for future supply, its performance would be significantly improved (S4).

The Commission also notes that Australian Paper’s first price offered to Customer A (July 2018) was a price:

• Australian Paper calculated to achieve a profit on the manufacture and sale of Customer A’s private label;

• that would put it in a position to commence recovery from the dumping that occurred in 2015; and

• within 1 to 2 per cent of the Commission’s calculation of the 2017 price remedied for dumping.

The Commission has also examined the indexed comparative future benefit on performance for other economic factors, where dumping is remedied and volumes are constant.

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Economic factor Scenario 3 – Acceptance of dumped

prices

Scenario 4 - Benefit of remedied prices

2017 2018 2019 2017 2018 2019

Unit price 100 104 105 100 104 112

Total Revenue 100 103 104 100 103 111

Profit 100 22 -218 100 21 553

Profitability 100 21 -209 100 21 497

Table 10: Benefit of undumped prices to Australian Paper

The Commission’s comparison of economic factors shows that Australian Paper, in an environment of consistent volumes and increasing costs, would perform better in 2019 with a price unaffected by dumping.

The Commission’s modelling can be found at Confidential Attachment 4 – Threat modelling.

10.5 Will dumping continue?

The Commission’s dumping analysis found dumping margins between 3.8 per cent and 5.8 per cent for cooperating exporters, and up to 16.3 per cent for uncooperative and all other exporters of A4 copy paper during the investigation period.

The Commission calculated the weighted average quarterly export prices for imports of the goods in 2018, using ABF data, and found that prices in 2018 remained stable from the 2017 dumped prices. The Commission considers that such export price stability in 2017 and 2018, indicates that export prices are likely to remain at similar levels in the immediate future.

The Commission also refers to the information provided from cooperating exporters and submissions from interested parties that global pulp prices are increasing. Therefore, the Commission concludes that if the pricing trend in an environment where the significant raw material costs are increasing, then the dumping will continue.

As a result of the limited cooperation from importers of A4 copy paper, the Commission was unable to establish the volume of forward orders for the goods from the subject countries. The Commission examined import volumes for 2017 and 2018 from the ABF import database. The Commission observes from Figure 15 below, that:

• import volumes from Finland have remained consistent in 2018 when compared to 2017;

• import volumes from Korea have remained consistent in 2018 when compared to 2017;

• import volumes from Russia have increased in 2018 when compared to 2017; and • there have been no imports from Slovakia to date, in 2018.

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Figure 15: Import volumes of the goods in 2018

The Commission also notes information provided by Mondi SVK during the verification visit, with regards to their decision-making in exporting A4 copy paper to Australia. Mondi SVK stated that they set a minimum price for exports of the goods to Australia, and once the price fell below this point they ceased exports to Australia. The Commission confirmed that the volumes of the goods exported by Mondi SVK declined during the investigation period, such that there were minimal volumes in the final two quarters. In addition, the Commission notes that Mondi SVK had not exported A4 copy paper since the end of the investigation period.

However, the Commission considers that Mondi SVK may return to exporting the goods to Australia in certain circumstances, where market conditions were suitable. No evidence was presented to indicate that Mondi SVK would not export the goods to Australia in the future, but rather that where price and market conditions were suitable, further exports may take place.

Based on the dumping margins found, and the further analysis outlined above, the Commissioner considers that dumping from Finland, Korea, Russia and Slovakia will continue if anti-dumping measures are not imposed.

10.6 The Commission’s assessment of threat of material injury

10.6.1 The changes in circumstances from 2017 to 2019

In order to undertake an assessment of whether or not material injury is threatened to the Australian industry, the Commission must consider changes in circumstances as would make that injury foreseeable and imminent unless dumping measures were imposed.62

The Commission considers that with respect to Customers A and B:

62 In accordance with subsection 269TAE(2B).

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• the existing contracts with each customer which established the price of private label goods sold, was determined at a time prior to the investigation period, when there were minimal imports of the goods from the subject countries in the market;

• in 2017, when Australian Paper undertook price reviews with Customer A, price increases were achieved and the price increase calculation was set either to a period prior to the investigation period (where the influence of imports from the subject countries was immaterial) or as a result of Australian Paper’s costs of production;

• there were no price reviews conducted for Customer B in 2017; and • that as a result of the contract negotiations occurring in 2018, the contracts signed

with these two customers prior to the investigation period continued on with the same terms and conditions in 2018 – until the negotiations for 2019 supply are complete.

The above situation is a situation where the dumped imports had an immaterial effect on the condition of the Australian industry.

The Commission considers that the change in circumstances that give rise to the threat of material injury to the Australian industry is the negotiation of the 2019 supply contracts for Customer A and B’s private label product.

In 2017, Australian Paper sold private label to Customers A and B according to terms set in a prior period and without the influence from imports from the subject countries. The contracts with Customers A and B expired and negotiation for new supply agreements – for 2019 supply - commenced in 2018.

The Commission considers that the change in circumstances which gives rise to a threat of material injury is the fact that the contracts in force expired and negotiations for new contracts commenced, and that the prices proposed by Customers A and B for supply of its private label brands are the same prices as the dumped prices from the subject countries in 2017.

The Commission also considers that:

• if Australian Paper accepted the proposed prices, based on dumped prices in 2017, (so as not to lose the volumes), then Australian Paper’s performance, commencing in 2019 and for the duration of the contract, would decline as per the scenarios modelled above;

• If Australian Paper rejected the proposed prices, based on dumped prices in 2017, then Australian Paper is likely to lose the volumes; and

• these volumes would be diverted to the exporters offering those prices, which are from the subject countries.

10.6.2 Significant rate of increase of dumped imports

The Commission analysed ABF import data for the period following the imposition of measures in investigation 341. As discussed in section 5.3 above, the Commission observed a significant increase in the level of imports of A4 copy paper from the subject countries during the investigation period. Specifically, the volume of A4 copy paper imported from the subject countries increased from holding less than 1 per cent of the Australian market in 2016 to above 10 per cent of the Australian market.

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Australian Paper provided evidence that Customers A and B have access to alternate import supply for its private label A4 copy paper at the dumped 2017 prices. The Commission considers that should Australian Paper not agree to those prices in the course of negotiation, then these two customers will obtain their private label supply from the subject countries. Figure 16 below demonstrates the significant rate of increase of the dumped imports, projected for 2019.

The Commission notes that in order to calculate this projection for 2019, the following assumptions have been made with respect to the size of the Australian market;

• Australian Paper’s volumes remained constant (from 2017) in 2018 and 2019 (excluding the volume of private label for the two customers);

• 2018 import volumes (to date) have been included in the analysis; • 2019 import volumes for countries subject to measures and all other countries

remained at the volumes from 2018; and • 2019 import volumes for Finland, Korea, Russia and Slovakia remained constant

from 2018, but uplifted for gaining supply of customer A and B’s private label A4 copy paper.

Figure 16: The Australian market with private label supply in 2019 from subject countries

The Commission observes from Figure 16, that if Australian Paper loses supply of Customer A and B’s private label brands, because of price, it would also lose market share.

The Commission has analysed the comparative shares of the market, if supply changes from Australian Paper to the subject countries. Refer Table 11 below:

2017 2018 2019

Australian industry 75% 84% 55%

Finland, Korea, Russia, Slovakia 10% 6% 34%

Countries subject to measures (excl. Tjiwi Kimia) 11% 7% 7%

Countries not subject to measures (incl. Austria) 4% 4% 4%

Table 11: Change in market share if Australian Paper loses supply to Customers A and B

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10.6.3 The effect of the 2017 price on Australian Paper’s performance

The Commission analysed at section 10.4.2 above, that if Australian Paper accepted the proposed prices from Customers A and B (the 2017 dumped prices), then in 2019, Australian Paper’s performance would decline.

Economic factor Scenario 3 – Acceptance of dumped

prices

Scenario 4 - Benefit of remedied prices

2017 2018 2019 2017 2018 2019

Unit price 100 104 105 100 104 112

Total Revenue 100 103 104 100 103 111

Profit 100 22 -218 100 21 553

Profitability 100 21 -209 100 21 497

Table 12: Effect of 2017 import prices on Australian Paper

The Commission is of the view that the modelling demonstrates (in a constant market size with increasing costs) that the continuity of the 2017 dumped prices (would cause Australian Paper to experience:

• price suppression; • decline in profit and profitability, or unrealised profits and profitability; • reinvestment unattractiveness; and • reduced return on investment/sales

In addition, Australian Paper would experience reduced or unrealised revenue gains in 2019 as it would not have been able to achieve a higher price, unaffected by dumping.

10.6.4 The Commission’s consideration of threat of material injury

The Commission received evidence that the 2017 dumped prices are having an impact on the 2018 negotiations for supply commencing in 2019 and onwards.

The Commission considers that the present situation, where Australian Paper is being prevented from raising its baseline contracted prices for 2019 supply because of the price counter-offers with reference to 2017 dumped prices, demonstrates a repeat of the situation that Australian Paper experienced in 2015, 2016 and 2017. The Commission considers that given the 2019 supply negotiations are underway, the material injury to Australian Paper’s performances (as analysed above) is foreseeable and imminent if dumping measures are not imposed.

If dumping measures are not imposed, then Australian Paper will face two options with respect to Customer A and B’s private label supply:

• accept the proposed prices (set at 2017 dumped prices) and retain Customer A and B’s volumes; or

• reject the proposed prices (set at 2017 dumped prices) and lose Customer A and B’s volumes

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Either one of these decisions, will result in a decline in performance in 2019, and represent material injury to the Australian industry.

10.6.5 Exports of A4 copy paper from Austria

As noted in section 9.4 above, the volume of exports of A4 copy paper from Austria, having excluded the volume exported by Mondi AUT, was below 100MT during the investigation period and represented less than 0.1 per cent of the total Australian market. The Commissioner has not found that imports of A4 copy paper from Austria threaten to cause material injury to the Australian industry.

10.7 Conclusion

The Commissioner considers that continuity of the 2017 dumped prices, proposed by Customers A and B is threatening Australian Paper with material injury in the form of;

• ongoing price suppression; • ongoing price depression; • ongoing reductions in profits and profitability; • lost sales volume; and • lost revenue.

The Commission concludes that the current private label supply negotiation for two of Australian Paper’s customers is a change in circumstance due to the expiration of existing supply agreements which would make the material injury described above foreseeable and imminent unless dumping measures were imposed.

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11 NON-INJURIOUS PRICE

11.1 Determination

The Commission has calculated a NIP for exports of A4 copy paper from Finland, Korea, Russia and Slovakia that is considered to be the minimum price necessary to prevent the injury threatened by the dumping.

The Commission has assessed the NIP from an USP based on Australian Paper’s CTMS during the investigation period, with an appropriate amount for profit from that period.

For all exports from Finland, Korea, Russia and Slovakia, the NIP is above the normal value and therefore the lesser duty rule does not come into effect.

11.2 Introduction

Interim dumping duty (IDD) may be applied where it is established that dumped imports have caused material injury to the Australian industry producing like goods. The level of IDD imposed by the Minister cannot exceed the margin of dumping.

Where the Minister is required to determined IDD and the NIP of the goods is less than the normal value of the goods, the Minister must have regard to the ‘lesser duty rule’ in accordance with subsection 8(5B) of the Customs Tariff (Anti-Dumping) Act 1975 (Dumping Duty Act), unless one of the exceptions in subsection 8(5BAA) of the Dumping Duty Act applies.

The NIP is relevant to the application of the lesser duty rule.

11.3 Calculation of the NIP

Under subsections 269TACA(a) and 269TACA(b), the NIP of the goods exported to Australia is the minimum price necessary to prevent the injury, or a recurrence of the injury, or to remove the hindrance to the Australian industry caused by the dumping of the goods.

The Commission generally derives the NIP by first establishing a price at which the local industry might reasonably sell its product in a market unaffected by dumping. This is referred to as the USP.

The preferred approach of the Commission is to establish the USP, as outlined in chapter 23 of the Dumping and Subsidy Manual, observing the following hierarchy:

1. industry selling prices at a time unaffected by dumping;

2. constructed industry prices – industry CTMS plus profit; or

3. selling prices of undumped imports.63

Having calculated the USP, the Commission then calculates a NIP by deducting the costs incurred in getting the goods from the export FOB point (or another point if appropriate) to

63 The Manual, page 133.

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the relevant level of trade in Australia. The deductions normally include overseas freight, insurance, into-store costs and amounts for importer expenses and profit.

11.3.1 Exceptions to the application of the lesser duty rule

Pursuant to subsection 8(5BAA) of the Dumping Duty Act, the Minister is not required to, but may still, have regard to the lesser duty rule where one or more of the following circumstances apply:

a) The normal value of the goods was not ascertained under subsection 269TAC(1) because of the operation of subsection 269TAC(2)(a)(ii);

b) There is an Australian industry in respect of like goods that consists of at least two small-medium enterprises, whether or not that industry consists of other enterprises.

11.3.2 Submissions received

Australian Paper claim that the USP should be based on industry selling prices for A4 copy paper from the 2012/13 financial year, adjusted for inflation using the consumer price index (CPI).64

11.4 The Commissioner’s assessment

The Commission noted that in investigation 225 (for which the investigation period was 1 July 2012 to 30 June 2013), either no dumping or negligible levels of dumping were established. However, as noted in the Manual, selling prices will generally be used provided that those prices are no older than five years.65

For this reason, the Commission considers the USP should be determined based on the CTMS of Australian Paper during the investigation period, with an appropriate amount for profit included. Given this approach, it is not necessary to consider making an adjustment for CPI.

Having calculated an USP, the Commission then deducted verified costs relating to importer profit and SG&A costs, as well as other verified import costs. This then provided a NIP for the exporters and the Commission then undertook analysis to compare this with the weighted-average normal values of A4 copy paper for each country. This analysis is contained in Confidential Attachment 5. As the NIP is above the normal values of A4 copy paper in Finland, Korea, Russia and Slovakia, the lesser duty rule does not come into effect.

64 Refer to document 6 on the electronic public record for investigation 463. 65 The Manual, page 134.

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12 PROPOSED MEASURES

12.1 Finding

The Commissioner proposes to recommend to the Minister that measures be imposed in respect of dumping duty for Finland, Korea, Russia and Slovakia using the combination duty method (i.e. the combination of fixed and variable duty).

12.2 Form of measures available

In relation to interim dumping duty (IDD), the methods the Minister may utilise to work out the duty are prescribed in the Customs Tariff (Anti-Dumping) Regulation 2013 and include:

• Combination of fixed and variable duty method; • Floor price duty method; • Fixed duty method ($x per tonne); and • Ad valorem duty method (i.e. a percentage of the export price).

12.3 Form of securities applied following PAD 463

Following PAD 463, the Commonwealth took securities in respect of IDD that may become payable on goods exported from Finland, Korea, Russia and Slovakia. The securities were worked out in accordance with the combination method.

12.4 Submissions received

The Commission received one submission in regard to the proposed form of measures.66

Australian Paper submitted that the combination duty method represents the most effective form of measures to be applied, and ensures that the Australian industry does not again experience injury from dumping following the imposition of measures.

12.5 The Commission’s assessment

The Commission, in considering which form of measures to use, has had regard to the Commission’s Guidelines on the Application of the Form of Dumping Duty 2013 (the Guidelines), relevant factors in the A4 copy paper market and the submission received from Australian Paper.

The Guidelines set out issues to be considered when determining the form of duties. It is important to note that the various forms of dumping duty available all have the purpose of removing the injurious effects of the dumping. However, in achieving this purpose certain forms of duty will better suit particular circumstances more so than other forms of duty. The Guidelines list the key advantages and disadvantages of each form of duty.

The combination duty method is considered appropriate where circumvention behaviour is likely (particularly because of related party dealings), where complex company structures exist between related parties, and where there has been a proven case of price manipulation in the market. Conversely, the combination duty method is less suitable in


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situations where there are many model types of the goods under consideration which exhibit a large price differential or where a falling market exists.

On the other hand, the ad valorem duty method is one of the simplest and easiest forms to administer when delivering the intended protective effect, is common in other jurisdictions, is similar to other types of Customs duties, is advantageous where there are many models or types and is suitable where the market prices of goods fluctuate over time. The ad valorem duty method may also require fewer duty assessments and reviews than other duty methods. Conversely, the ad valorem duty method has a potential disadvantage in that export prices may be lowered to avoid the effects of the duty.

During the course of the investigation the Commission noted that:

• there was limited cooperation from importers of the goods, together with uncooperative exporters, such that the Commission was unable to determine whether certain transactions were arms length;

• UPM Australia, an entity within the UPM Group of companies, appears to be acting as a selling agent of UPM Finland in the Australian market; and

• no evidence or views were provided to discount findings in investigation 341 regarding characteristics of the A4 copy paper market in Australia, particularly the role of certain entities acting as both an importer and distributor.

The Commission considers that these circumstances are indicative of a higher risk of possible circumvention as transactions are not necessarily at arms length. As a consequence, the Commission decided that the securities for Finland, Korea, Russia and Slovakia should be calculated using a combination method. The Commission considers that the reason for applying a combination method outweigh any potential disadvantage of applying this methodology where there are multiple models in the market.

The Commission notes that this approach is consistent with the existing measures following Investigation 341.

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13 REVISION TO SECURITIES

13.1 Background

On 18 May 2018 the Commission made a PAD. On that date, the securities were as follows:

Country Exporter (and other exporters) Export Price

Normal Value

Dumping Margin

Finland Uncooperative and all other exporters s.269TAB(3) s.269TAC(6) 16.3%

Korea Hankuk Paper Mfg. Co., Ltd (and all other exporters)

s.269TAB(1)(a) s.269TAC(1) 7.1%

Russia Uncooperative and all other exporters s.269TAB(3) s.269TAC(6) 14.4%

Slovakia Mondi SCP a.s. (and all other exporters)

s.269TAB(1)(a) s.269TAC(1) 6.5%

Table 13: Preliminary dumping margin summary as at 18 May 2018

13.2 Amendment to securities

Based on the further assessment as set out in this SEF, and pursuant to subsection 269TD(1)(a) of the Act, the Commissioner remains satisfied that there appear to be sufficient grounds for the publication of a dumping duty notice in respect of the goods exported to Australia from Finland, Korea, Russia and Slovakia.

Under subsection 269TD(4)(b) the Commissioner is satisfied that it is necessary to require and take securities in relation to exports of the goods from Finland, Korea, Russia and Slovakia to prevent material injury that is threatened to the Australian industry while the investigation continues.

The Commissioner proposes to revise the level of securities required and taken under section 42 of the Act in respect of interim dumping duty that may become payable in relation to the goods exported to Australia from Finland, Korea, Russia and Slovakia. This revision will take place shortly after the publication of this SEF.

The revised securities will be imposed at the rates specified in table 14 below:









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14 APPENDICES AND ATTACHMENTS

Confidential Attachment 1 Market & Economic Performance

Confidential Attachment 2 Customer One - price review

Confidential Attachment 3 Customer Two - price review

Confidential Attachment 4 Threat modelling

Confidential Attachment 5 USP & NIP