INVESTIGATION 284 ALLEGED DUMPING OF HOT ROLLED PLATE ... · the republic of korea (by hyundai iron & steel co. ltd and posco steel) and taiwan . importer visit report . commercial

INVESTIGATION 284

ALLEGED DUMPING OF

HOT ROLLED PLATE STEEL

EXPORTED FROM

THE REPUBLIC OF KOREA (BY HYUNDAI IRON & STEEL CO. LTD AND POSCO STEEL) AND TAIWAN

IMPORTER VISIT REPORT

Commercial Metals Company Pty Ltd

THIS REPORT AND THE VIEWS OR RECOMMENDATIONS CONTAINED THEREIN

WILL BE REVIEWED BY THE CASE MANAGEMENT TEAM AND MAY NOT REFLECT THE FINAL POSITION OF THE ANTI-DUMPING COMMISSION

JUNE 2015

Hot Rolled Plate Steel – Importer Visit Report – Commercial Metals Company Pty Ltd

FOR PUBLIC RECORD

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

ABBREVIATIONS ........................................................................................................................................................ 3

1 BACKGROUND AND PURPOSE .......................................................................................................................... 4

1.1 BACKGROUND .................................................................................................................................................. 4 1.2 PREVIOUS INVESTIGATIONS .................................................................................................................................. 4 1.3 MEETING ........................................................................................................................................................ 5 1.4 PURPOSE OF VISIT ............................................................................................................................................. 5 1.5 MEETING DETAILS ............................................................................................................................................. 5 1.6 INVESTIGATION PROCESS AND TIMEFRAMES ............................................................................................................. 6 1.7 VISIT REPORT ................................................................................................................................................... 7

2 THE GOODS ...................................................................................................................................................... 8

2.1 DESCRIPTION ................................................................................................................................................... 8 2.2 TARIFF CLASSIFICATION ....................................................................................................................................... 8 2.3 LIKE GOODS ..................................................................................................................................................... 8

3 COMPANY DETAILS .......................................................................................................................................... 9

3.1 COMPANY BACKGROUND .................................................................................................................................... 9 3.2 COMMERCIAL OPERATIONS.................................................................................................................................. 9 3.3 ACCOUNTING................................................................................................................................................... 9 3.4 RELATIONSHIP WITH SUPPLIERS ............................................................................................................................ 9 3.5 RELATIONSHIPS WITH CUSTOMERS....................................................................................................................... 10

4 IMPORTS ........................................................................................................................................................ 11

4.1 IMPORT VOLUMES ........................................................................................................................................... 11 4.2 ORDERING PROCESS AND PRICE .......................................................................................................................... 11 4.3 VERIFICATION ................................................................................................................................................ 12 4.4 EXPORT PRICES FOR SHIPMENTS .......................................................................................................................... 14 4.5 FORWARD ORDERS ......................................................................................................................................... 14 4.6 WHO IS THE IMPORTER? ................................................................................................................................... 14 4.7 WHO IS THE EXPORTER? ................................................................................................................................... 14

5 SALES ............................................................................................................................................................. 16

5.1 GENERAL ...................................................................................................................................................... 16 5.2 SALES .......................................................................................................................................................... 16 5.3 SALES VERIFICATION (ACCURACY) ........................................................................................................................ 17 5.4 UPWARDS VERIFICATION (RELEVANCE AND COMPLETENESS) ....................................................................................... 17 5.5 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A) ..................................................................................... 17 5.6 PROFITABILITY OF SALES AND SELLING PRICE ........................................................................................................... 17

6 ARMS LENGTH................................................................................................................................................ 18

7 GENERAL COMMENTS .................................................................................................................................... 19

8 UNSUPPRESSED SELLING PRICE ...................................................................................................................... 20

9 RECOMMENDATIONS ..................................................................................................................................... 21

10 APPENDICES AND ATTACHMENTS .................................................................................................................. 22

Hot Rolled Plate Steel – Importer Visit Report – Commercial Metals Company Pty Ltd 2

FOR PUBLIC RECORD

ABBREVIATIONS

AUD Australian dollars

ACBPS Australian Customs and Border Protection Service

ADN Anti-Dumping Notice

CFR Cost and Freight

the Commission the Anti-Dumping Commission

FAS Free alongside ship

FOB Free on board

GUC Goods Under Consideration

BlueScope BlueScope Steel Limited (Applicant)

PAD Preliminary Affirmative Determination

the Parliamentary Secretary

The Parliamentary Secretary to the Minister for Industry and Science

SEF Statement of Essential Facts

SG&A Selling, general and administrative expenses

the Act Customs Act 1901

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


FOR PUBLIC RECORD

1 BACKGROUND AND PURPOSE

1.1 Background

On 26 February 2015, BlueScope Steel Limited (BlueScope) lodged an application requesting that the Parliamentary Secretary to the Minister for Industry and Science (the Parliamentary Secretary) publish a dumping duty notice in respect of hot rolled plate steel exported to Australia from Korea, by Hyundai Iron & Steel Co. Ltd (Hyundai) and POSCO Steel (POSCO), and Taiwan. BlueScope alleges that the Australian industry has suffered material injury caused by hot rolled plate steel exported to Australia from Korea, by Hyundai and POSCO, and Taiwan at dumped prices. BlueScope alleges that the industry has been injured through:

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

After consideration of the application, an investigation was initiated on 27 March 2015, and public notification of the initiation of the investigation was published in The Australian newspaper on 31 March 2015.

Anti-Dumping Notice (ADN) No. 2015/40 refers to the initiation of the investigation and is available at www.adcommission.gov.au.

1.2 Previous investigations

On 25 March 2004, the then Minister for Justice and Customs imposed anti-dumping measures on certain hot rolled plate steel exported to Australia from the People’s Republic of China (China), Republic of Indonesia (Indonesia), Japan and Korea with the exclusion of one Korean exporter and two Indonesian exporters. The measures expired on 2 April 2009. On 12 February 2013, the Commission commenced an investigation into the alleged dumping of hot rolled plate steel exported to Australia from China, Indonesia, Japan, Korea and Taiwan, and the alleged subsidisation of the goods exported to Australia from China. On 10 September 2013, the Commission terminated its dumping investigation into the goods exported by all exporters from Taiwan, Hyundai and POSCO from Korea and Shandong Iron and Steel, Jinan Company (JIGANG) from China. Termination Report No. 198 (TER 198) sets out the reasons for these terminations. On 19 December 2013, the Minister for Industry imposed dumping measures on certain hot rolled plate steel exported to Australia from China, Indonesia, Japan and Korea with


FOR PUBLIC RECORD

the exclusion of one Chinese exporter and the two Korean exporters the subject of this application; and countervailing measures on certain hot rolled plate steel exported to Australia from China.

1.3 Meeting

Following initiation of the investigation, a search of the Australian Customs and Border Protection Service (ACBPS) import database indicated that CMC Australia Pty Ltd (CMC) had imported hot rolled plate steel from Taiwan during the investigation period. The verification team contacted CMC advising the company of the initiation of the investigation, requesting co-operation with the investigation and provided the company with a copy of the importer questionnaire to complete. CMC was also provided with a list of its imports during the investigation period, extracted from the ACBPS import database. Twelve transactions from the list were identified for verification. CMC completed the importer questionnaire, providing details regarding the company, overseas supplier information, imports and importation costs and sales data, including selling, general and administrative (SG&A) expenses. A copy of CMC’s importer questionnaire response is at Confidential Attachment GEN1.

1.4 Purpose of visit

The purpose of the visit to CMC was to:

• confirm that CMC is the importer of hot rolled plate steel and to obtain information to assist in establishing the identity of the exporter(s) of the goods;

• verify information on imports of hot rolled plate steel to assist in the determination of export prices;

• establish whether the purchases of hot rolled plate steel were arms length transactions;

• establish post-exportation costs;

• identify sales and customers and verify sales volume, selling prices and selling costs;

• obtain general information about the Australian market for hot rolled plate steel; and

• provide the company with an opportunity to discuss any issues it believed relevant to the investigation.

Prior to the visit, the verification team provided an agenda to CMC. A copy of the visit agenda is at Confidential Attachment GEN2.

1.5 Meeting details

The details of the visit were as follows:

COMPANY CMC Australia Pty Ltd ABN 39 164 131 855 ADDRESS Level 6, 697 Burke Road

Camberwell, VIC 3124


FOR PUBLIC RECORD

TEL NO 03 9805 0409 FAX NO 03 9805 0455 DATE 15 June 2015

The following were present at the meetings.

CMC Australia Pty Ltd

The verification team

Jukka Mäntynen Assistant Director, Operations 4

Rebecca Oliver Assistant Director

Chris Kunaratnam Senior Investigator, Operations 4

1.6 Investigation process and timeframes

At the visit, the verification team provided a summary of the investigation process and timeframes as follows:

• the investigation period is 1 January 2014 to 31 December 2014.

• the injury analysis period is from 1 January 2010 for the purpose of analysing the condition of the Australian industry.

• a Preliminary Affirmative Determination (PAD) will not be made by the Commission until it becomes satisfied that there appears to be sufficient grounds, or that it appears there will be sufficient grounds subsequent to the importation into Australia of such goods, for the publication of a dumping duty notice. This is distinguished from the ‘reasonable grounds’ threshold for the initiation of an investigation;

• the Statement of Essential Facts (SEF) for the investigation is currently due to be placed on the public record by 19 July 2015; or such later date1 as the Parliamentary Secretary allows under section 269ZHI of the Customs Act 1901 (the Act);2

• the SEF will set out the material findings of fact on which the Commissioner intends to base his recommendations to the Minister, and will invite interested parties to respond, within 20 days, to the issues raised therein;

• following receipt and consideration of submissions made in response to the SEF, the Commissioner will provide his final report and recommendations to the Parliamentary Secretary; and

1 The Parliamentary Secretary has subsequently allowed an extension of time to place the SEF on the public record to 12 October 2015. 2 All references in this report to sections of legislation, unless otherwise specified, are to the Customs Act 1901.


FOR PUBLIC RECORD

• the final report is due to the Parliamentary Secretary no later than 2 September 2015, unless an extension is approved by the Parliamentary Secretary. 3

1.7 Visit report

The verification team explained to the company that it would prepare a report of the visit (this report) and provide it to the company to review its factual accuracy, and to identify those parts of the report it considers to be confidential.

It was explained that, in consultation with the company, the verification team would prepare a Public Record version of the report, and place this on the Public Record available at www.adcommission.gov.au.

3 The extension of time to place the SEF on the public record to 12 October 201 allowed by the Parliamentary Secretary has subsequently extended the due date for the Final Report to 26 November 2015.


FOR PUBLIC RECORD

2 THE GOODS

2.1 Description

The goods the subject of the investigation are flat rolled products of:

• iron;

• non-alloy steel; or

• other alloy steel of a width greater than 600 millimetres (mm), with a thickness equal to or greater than 4.75mm, not further worked than hot rolled, not in coils, with or without patterns in relief.

2.2 Tariff classification

The goods are classified to the following subheadings in Schedule 3 of the Customs Tariff Act 1995.

• 7208.40.00 statistical code 39;

• 7208.51.00 statistical code 40;

• 7208.52.00 statistical code 41; and

• 7225.40.00 statistical codes 22 and 24.

The goods imported from Korea and Taiwan classified to 7208.40.00, 7208.51.00 and 7208.52.00 are free of duty.

The goods classified under 7225.40.00 attract a 5 per cent rate of duty for Taiwan.

Under the Korea-Australia Free Trade Agreement (KAFTA), the duty rate applicable to imports from Korea reduced to zero from 13 December 2014.

2.3 Like goods

CMC confirmed that the imported goods under investigation have the same physical characteristics as the domestically produced goods and that it considered them to be like goods. CMC did not consider any alternative products as a suitable substitute for hot rolled plate steel.


FOR PUBLIC RECORD

3 COMPANY DETAILS

3.1 Company background

CMC was established in 1980 as an importer and marketer of long and flat steel products for the domestic market. CMC is a subsidiary of US based Commercial Metals Company (CMC) Ltd, which is publicly listed on the New York stock exchange. The CMC Group operates offices in North America, Europe, Asia and Australasia and

with corporate head office in Irving, Texas. CMC operated three divisions across Australia: steel trading, steel distribution and raw materials but sold its distribution business (CMC Distribution), effective 2015.

3.2 Commercial operations CMC is the largest marketer of imported steel in Australia and sells product to its customers through its bulk store warehouses in Melbourne, Sydney, Perth, Brisbane and Adelaide

.

CMC uses warehouse facilities at several Australian ports for distribution purposes for delivery and logistics management. CMC competes in the market on

. According to CMC,

CMC charges customers a “funding” cost to store the orders for several months, as required.

CMC employs some people in trading and a further people in CMC Distribution. Given the downturn in the steel markets generally, it has

3.3 Accounting CMC advised that its financial year was from October to September each year as its headquarters are based in the United States, and the financial year is similar for the whole group.

3.4 Relationship with suppliers CMC advised that it has imported all of its steel products since 1980 and confirmed that it has no relationship, other than a purely commercial one, with all of their suppliers as all transactions occur at arm’s length. CMC also explained that they do not receive any rebates or discounts from their suppliers and negotiate each purchase as required.

CMC purchased from the following suppliers from Taiwan over the investigation period:


FOR PUBLIC RECORD

4.3 Verification

Prior to the visit, the verification team selected twelve shipments which were identified in Part B of the importer questionnaire (Confidential Appendix 2 refers) and asked CMC to provide the verification team with the following source documents:

• commercial invoices; • packing lists; • purchase orders; • bills of lading; and • Customs broker and domestic freight invoices.

Prior to the visit, CMC provided the source documents for all twelve shipments. (Confidential Attachment IMP1 refers). For each shipment, the source documents provided by CMC were used to cross-check the listed quantity, invoice value, insurance, exchange rate, customs duty, importation costs, expenses and average selling prices in the import sales spread sheet. A sample of these documents was verified for proof of payment of the shipment and post-exportation costs. The verification team was able to reconcile the shipment number, quantity, value, and price and delivery terms for the twelve selected shipments with the data in the source documents. Post visit, CMC provided a revised Part B statement which took into account its recently released 2014 financial results.

4.3.1 Commercial Invoices

Prior to the visit, copies of invoices for each shipment were provided. These invoices were used to verify the data provided by CMC in response to Part B of the importer questionnaire, including the goods description, volume and the value. Payment of the invoice and the exchange rate applied were also verified to source documents for the twelve selected transactions.

4.3.2 Shipment Costs

Shipment costs comprised marine insurance and overseas freight. CMC advised that these costs were allocated via the following methodology:

• Marine Insurance costs are allocated to each of the sampled transactions based on the premium rate specified under an annual insurance policy taken out by CMC. A copy of this policy was previously provided by CMC (Confidential Attachment IMP 2). The methodology used in allocating the insurance premium to each order was per cent of the invoice price of the import excluding GST in Australian dollars from September 2013 to end June 2014 and per cent from July 2014 onwards.

• Overseas freight costs are allocated based on a negotiated rate. The rate varies and is between per tonne and per tonne, with the majority around per tonne.


FOR PUBLIC RECORD

It is common for traders and other intermediaries to play a role in the exportation of the goods. These parties will typically provide services such as arranging transportation, conducting price negotiations and arranging contact with the producer.

In such cases, the trader typically acts as an intermediary who, although one of the principals, is essentially a facilitator in the sale and shipment of the goods on behalf of the manufacturer. Typically the manufacturer, as a principal who knowingly sent the goods for export to any destination, will be the exporter. Based on the information available, the verification team is satisfied that

are the exporters of hot rolled plate steel to CMC.


FOR PUBLIC RECORD

5.3 Sales verification (accuracy)

CMC provided the verification team with a line by line sales list of its sales of hot rolled plate steel for the for the investigation period. There were only returns (out of over sales) due to for example, Such returns were not subject to marine insurance and the customer was provided with a credit note. Prior to the visit CMC provided copies of source documents (purchase orders, commercial invoices) for sales related to the twelve shipments selected from their total imports. Copies of these documents are at Confidential Attachment IMP 1. The invoice number, customer name, quantity, and amount reconciled with the information in the sales list. The verification team noted that the customer for one of the selected shipments Pty Ltd, did not appear in the Part C Sales spreadsheet. CMC advised that was invoiced in January 2015, which was outside the investigation period. Confidential Attachment SALES 1. The verification team was able to reconcile the other selected shipments and respective sales to the sales spreadsheet at Part C of the importer questionnaire.

5.4 Upwards verification (relevance and completeness)

At the visit, CMC provided its Income Statement - Steel (for all products) for the 2013 financial year. It later advised that it had received approval to provide its 2014 Income Statement (for all products) to the Commission and provided a copy to the verification team. A copy of this document is at Confidential Attachment SALES 2. CMC also provided a Sales spreadsheet containing line by line transaction data for sales of all of its products for the 2014 financial year. The total amount in the 2014 Income Statement – Steel was million and this was compared to the total amount in the Sales spreadsheet of million. The difference was considered to be minimal and the verification team was therefore satisfied of the relevance and completeness of the sales data provided in the spreadsheet.

5.5 Selling, general and administrative expenses (SG&A)

At Part B of its importer questionnaire response, CMC included SG&A expenses as per cent of total sales revenue.

Following an examination of the 2014 financial statements, the verification team was able to verify this percentage allocation as being an accurate reflection of the actual SG&A costs for the 2014 financial year.

5.6 Profitability of sales and selling price

The verification team found that all of CMC’s selected import transactions were sold at a profit, with profit ranging from per tonne to per tonne.


FOR PUBLIC RECORD

6 ARMS LENGTH

In determining export prices, subsection 269TAB(1)(a) requires that the relevant sales are arms length transactions. Section 269TAA outlines the circumstances in which the price paid or payable shall not be treated as arms length. These are where:

• there is any consideration payable for in respect of the goods other than price;

• the price is influenced by a commercial or other relationship between the buyer, or an associate of the buyer, and the seller, or an associate of the seller; and

• in the opinion of the Minister, the buyer, or an associate of the buyer, will, directly or indirectly, be reimbursed, be compensated or otherwise receive a benefit for, or in respect of, the whole or any part of the price.

The verification team reviewed the documentation for the selected shipments and did not find any evidence, in respect of the purchase of hot rolled plate steel, that:

• there is any consideration payable for or in respect of the goods other than price; • the price was influenced by a commercial or other relationship between CMC or

an associate of CMC, and its suppliers or an associate of the supplier; and/or • CMC or an associate of CMC was directly or indirectly reimbursed, compensated

or otherwise received a benefit for or in respect of the whole or any part of the price.

Subject to further investigation, at this stage the verification team is satisfied that import transactions between CMC and its suppliers and between CMC Corporation and its suppliers are at arms length in terms of subsection 269TAA.


FOR PUBLIC RECORD

7 GENERAL COMMENTS

At the visit, CMC advised that in its opinion, that imports of hot rolled plate steel had not caused injury to the Australian Industry. CMC also claimed that hot rolled plate steel products were not being dumped from Taiwan but may have been dumped from Korea. CMC claimed that BlueScope controlled the steel market and was the market price leader.


FOR PUBLIC RECORD

8 UNSUPPRESSED SELLING PRICE

Unsuppressed selling price (USP) and non-injurious price (NIP) issues are examined at an early stage of an investigation and, where possible and appropriate, preliminary examinations are made during the application consideration period for the purpose of assessing injury and causal link and therefore the appearance of reasonable grounds for the publication of a dumping duty notice. The Commission generally derives the NIP by first establishing a price at which the applicant might reasonably sell its product in a market unaffected by dumping. This price is referred to as the USP. The Commission’s preferred approach to establishing USPs observes the following hierarchy:

• industry selling prices at a time unaffected by dumping;

• constructed industry prices – industry cost to make and sell plus profit; or

• selling prices of un-dumped imports. Having calculated the USP, the Commission then calculates a non-injurious price by deducting the costs incurred in getting the goods from the export free on board point (or another point if appropriate) to the relevant level of trade in Australia. The deductions normally include overseas freight, insurance, into-store costs and amounts for importer expenses and profit. At the visit, the verification team explained the purpose and calculation of the USP and NIP. CMC did not have any comments on the calculation of an USP or NIP.


FOR PUBLIC RECORD

9 RECOMMENDATIONS

The verification team is of the opinion that, for the goods imported by CMC:

• the goods have been exported to Australia otherwise than by the importer;

• the goods have been purchased by the importer from the exporters; and

• the purchases of the goods by the importer were arms length transactions. Subject to further inquiries with exporters, the verification team recommends that the export price for hot rolled plate steel imported by CMC be established under subsection 269TAB(1).


FOR PUBLIC RECORD

10 APPENDICES AND ATTACHMENTS

Title Description

Confidential Attachment GEN1 Importer Questionnaire

Confidential Attachment GEN2 Visit Agenda

Confidential Appendix 1 Import data spreadsheet

Confidential Appendix 2 Cost to import and sell and Forward Orders spreadsheet - Part B spreadsheet

Confidential Attachment IMP 1 Source documents for selected transactions provided by CMC

Confidential Attachment SALES1 Sales Listing – Part C spreadsheer

Confidential Attachment SALES2 Income Statement - Steel for 2014


Documents

INVESTIGATION 284 ALLEGED DUMPING OF HOT ROLLED PLATE ... · the republic of korea (by hyundai iron & steel co. ltd and posco steel) and taiwan . importer visit report . commercial