Notification No. 14/4/2002- DGAD DATE 13/02/2003

Notification No. 14/4/2002- DGAD DATE 13/02/2003

Anti-Dumping investigations concerning import of Phenol originating in or exported from European Union,South Africa and Singapore
Having regard to the Customs Tariff Act, 1975, as amended in 1995 and the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 thereof:

A. PROCEDURE

The procedure described below has been followed with regard to the investigations:

(a) The Designated Authority (hereinafter referred to as Authority), under the above Rules, received a writtenpetition from M/s Hindustan Organic Chemicals Limited (HOCL) on behalf of the domestic industry, allegingdumping of Phenol (hereinafter referred to as subject goods) originating in and exported from European Union,Singapore and South Africa (hereinafter referred to as subject countries/territories);

(b) The Authority notified the Embassies/Representative of the subject countries in India about the receiptof petition made by the petitioner before proceeding to initiate the investigation in accordance with subrule(5) of Rule 5 supra;

(c) The Authority issued a Public Notice dated 15th February 2002 published in the Gazette of India,Extraordinary, initiating anti dumping proceedings concerning imports of Phenol originating in orexported from the subject countries falling under Customs Sub-heading 2907.11 and 2707.60 underchapter 29 and 27 respectively of the Customs Tariff Act, 1975;

(d) The Authority notified Preliminary Findings vide notification No. 14/4/2002- DGAD dated 24/6/2002 withregard to anti-dumping investigations concerning imports of Phenol originating in or exported fromEuropean Union, South Africa and Singapore and requested the interested parties to make their viewsknown in writing within forty days from the date of its publication;

(e) The Authority forwarded a copy of the preliminary findings to the known interested parties, who wererequested to furnish their views, if any, on the said findings within forty days from the date of the letter;

(f) The Authority provided an opportunity to all interested parties to present their views orally on 17thSeptember 2002. All parties presenting views orally were requested to file written submissions of theviews expressed orally. The parties were advised to collect copies of the views expressed by theopposing parties and offer rejoinders, if any. The petitioners, exporters and members of the userindustry were present at the oral hearing.

(g) The Authority made available the public file to all interested parties containing non-confidential versionof all evidence submitted and arguments made by various interested parties.

(h) The arguments raised by the petitioners and other interested parties have been appropriately dealt within the preliminary findings and/or these findings;

(i) In accordance with Rule 16 supra, the essential facts/basis considered for these findings weredisclosed to known interested parties and comments received on the same, have been duly consideredin these findings;

(j) Investigations were carried out for the period 1st April 2001 to 31st December 2002 (9 months).

(k) **** in this notification represents information furnished by an interested party on confidential basis andso considered by the Authority under the Rules.

B. VARIOUS ISSUES COVERED IN THE INVESTIGAATIONS AND EXAMINED BY THE AUTHORITY.

Product under consideration and Like Article

Views of Importers and exporters

Views of M/s Kesar Petroproducts Ltd, Mitsui & Co and Others

1. The product under consideration in this investigation is phenol. The Authority has determined that phenolproduced by the domestic industry and those being imported from the subject countries are like articles. However, it is submitted that we exported number one class of phenol with typical purity of 99.99%, which the petitioner industry is not capable of producing. This high purity material is required in advanced applications like pharmaceuticals and special resins for automobile industry. By defining the product under investigation in very broad terms, protection is sought to be extended to products, which are not manufactured in the country. It is suggested that the production capabilities of the Petitioner Company be suitably verified and the product under consideration be amended accordingly.

M/s HOC is not in a position to give Phenol of the grade required for the manufacture of BPA which goes intomanufacture Polycarbonates and is required for special epoxies.

In response to the disclosure, M/s Kesar Petroproducts Ltd, Mumbai, have reiterated their observationregarding product under consideration and like article by maintaining that phenol required for manufacture ofPolycarbonate grade BPA is not a like article.

Views of the Domestic Industry

2. The product under consideration in the present petition is Phenol also known as Carbolic Acid. Phenol is abasic organic chemical normally classified under Chapter 29 of the Customs Tariff Act. It is marketed in two grades–Crystalline and Hydrated - and in two forms - loose/bulk and packed.

There is no difference in Phenol produced by the Indian industry and Phenol exported from the subjectcountries. Phenol produced by the Indian industry and imported from the subject countries are comparable in termsof characteristics such as physical & chemical characteristics, manufacturing process & technology (followed bymost of the producers from the subject countries), functions & uses, product specifications, pricing, distribution &marketing and tariff classification of the goods. The two are technically and commercially substitutable. Theconsumers are using the two interchangeably. Phenol produced by the petitioner and imported from the subjectcountries are like articles in accordance with the Anti-Dumping Rules.

In response to the disclosure, with regards to issue of purity and polycarbonate grade raised by opposinginterested parties, the petitioner reiterates that it produces phenol containing 99.9% purity. Moreover, Phenolproduced by the domestic industry can be used in production of Bisphenol-A polycarbonate grade.

Examination By the Authority

3. The Product under consideration in this investigation is Phenol. Phenol is a basic organic chemical classifiedunder Chapter XXIX of Customs Tariff Act under sub heading 2907.11 and subheading 2707.60 under ChapterXXVII of Customs Tariff Act. The present investigations are in respect of the product under considerationirrespective of the classification under which they are imported. Custom classification is indicative only and is in noway binding on the scope of the present investigations.

Rule 2(d) of the Anti-dumping Rule specifies that Like articles mean an article, which is identical and alike inall respects to the product under investigation or in the absence of such an article, another article havingcharacteristics closely resembling those of the articles under examination.

In order to establish that Phenol produced by the domestic industry is a Like Article to that exported from EU,South Africa and Singapore, characteristics such as technical specifications, manufacturing process, functions anduses and tariff classification have been considered by the Authority.

The petitioner claimed that the goods produced by him are like articles to the goods originating in or exportedfrom subject countries. However, some of the exporters and importers have argued that the phenol imported bythem is different in quality. No evidence has been adduced by any of the interested parties to indicate that imported phenol is not substituting the domestically produced phenol either technically or commercially. The Authority notes that the sole producer of Bispenol A has been sourcing their requirements of phenol from the petitioner. The Authority, therefore, notes that phenol produced by domestic industry has characteristics, which are similar to those of the phenol imported from subject countries. In view of the above the Authority holds that phenol produced by the domestic industry and those being imported from the subject countries are like articles within the meaning of the rules.

The Authority confirms the provisional findings with regards to product under consideration and like article.Initiation, Standing and Domestic Industry:

4. Views of M/s Merisol, South Africa, Mitsui & Co, Singapore, M/s Atul Ltd, M/s Foseco, M/s FMA, Mumbai, M/sKesar Petroproducts Ltd, Mumbai

1. Rule 5(3) (b) of the Customs Tariff (Anti Dumping Duty on Dumped Articles), Rules, 1995, (‘the Rules’) make itincumbent upon the Hon’ble Designated Authority not to initiate an investigation unless it examines the ‘accuracyand adequacy of the evidence provided and satisfies itself that there is sufficient evidence regarding:

(i) Dumping,
(ii) Injury, where applicable; and
(iii) Where applicable, a causal link between such dumped imports and alleged injury, to justify aninvestigation."

While petitioners may satisfy Part (b) of the test, the onus is on the Hon’ble Designated Authority to verify Part(a) of the test, until such time as is done, it is submitted that this initiation is ultra vires and illegal.

In the instant case, the Petitioner namely Hindustan Chemicals Organic Limited (HOCL) admittedly accountfor 46.11% of the total production of the Domestic Industry. As the Hon’ble Designated Authority has failed to verify the accuracy and adequacy of the petitioner to file the application, at the time of initiation, therefore, the initiation of the investigation is illegal and bad in law as mandated under the Anti Dumping rules.

The Hon’ble Designated Authority has erred in initiating this investigation without completing the two-part testrequired for the initiation. Besides, ensuring that the petitioner accounted for over 25% of the domestic industry, the law mandates that the Hon’ble Designated Authority should ascertain the support for the application by ‘polling’ the remaining constitutes of the domestic industry.

First para of the initiation notification dated 15th February 2002 acknowledges the Petition was lodged byHOCL without any support from any other domestic industry and not on behalf of the Domestic Industry. However,the authority in spite of complete absence of any support from any quarters in para 2 of the initiation notificationproceed to record that the Petition has been filed by M/s. Hindustan Organic Chemicals Limited on behalf of thedomestic industry in spite of the fact that no support authorization was also lodged along with the Petition.

The details of preliminary findings reveal that the applicability of standing of the petition has not beenadequately dealt with and verified by the Authorities before initiating the investigation, considering certaincontradictory information which we feel, does not fulfill the condition under 5(3)(b) wherein the domestic producersexpressly supporting the application must account for more than 50% of total production. The petitioners themselves admit that during the period of investigation they accounted for less than 50% of domestic production.

There is contradiction in the findings that it is first stated that HCL has supported the petition and it is thenstated that HOCL does not qualify as ‘Domestic Industry’ and hence excluded for applying the criteria of standing.As stated above HCL support was not available in the public file and excluding HCL due to imports is not correctsince such imports were not for domestic market. Thus, on this basis itself, the initiation of this investigation does not satisfy the prescribed criteria and should not be proceeded with further.

In response to disclosure, M/s Kesar petroproducts Ltd have again reiterated their stand that condition underarticle 5(3)(b) is not satisfied and safeguard duty in combination with Anti Dumping duty would give doubleprotection. M/s Merisol RSA, M/s Merisol RSA (Pty), South Africa has reiterated his earlier submission regarding theincorrect initiation of the investigation by Authority as the it has failed verify the twin tests under 5(3)(a) and 5(3)(b) of the Anti Dumping rules. M/s Mitsui & Co have also submitted that their submissions regarding standing have not taken into consideration.

Views of the Domestic Industry

5. The petition has been filed by M/s. Hindustan Organic Chemicals Limited on behalf of the domestic industry.There are three producers of subject goods in India. Petitioner accounts for 47% of Indian Production. However, out of three producers, M/s. Herdillia is an importer of product concerned. The Designated Authority has, therefore,excluded M/s Herdillia Chemicals Ltd, from the scope of eligible domestic industry. Furthermore, the company hasexpressed its support to the petition and has provided its costing information. Should Herdillia be excluded from theeligible domestic producers, the petitioner would command significantly more than 50% of Indian Production.Further, should Herdillia be included as an eligible domestic producer, then petitioner along with support commandsmore than 50% of Indian Production. The petitioner, therefore, satisfies standing requirement in all thecircumstances and constitute domestic industry within the meaning of the Rules.

It would be worthy to mention here that the all imports made by Herdillia were for exports of Phenolderivatives only, under advance license, as earlier clarified by the company.

In response to the disclosure, Petitioner reiterates its earlier submissions on these issues, which are not beingrepeated for sake of brevity.

Examination by the Authority

6. The petition has been filed by HOCL, Mumbai on behalf of the domestic industry. The petitioners accounts foralmost 47% of the total Indian production of the subject goods. A large number of exporters/importers/users haveargued that the petitioners do not have the standing to file the applications. They have quoted 5(3) of the antidumping rules which says that the DA shall not initiate any investigations pursuant to the application made undersub rule (a) unless it determines on the basis of an examination of the degree of support for, or opposition to theapplication expressed by domestic producers of the like product that the application has been made by or on behalfof the domestic industry provided that no investigation shall be initiated if domestic producers expressly supportingthe application account for less than 25% of the total production of the like article by the domestic industry. It hasalso been explained in the sub rules that the application is deemed to have been made by or on behalf of thedomestic industry if it is supported by those domestic producers whose collective output constitutes more than 50% of the total production of the like article produced by that portion of the domestic industry expressing, either support for or opposition as the case may be to the application.

The Authority has examined the contention made by importers/users/exporters in this regard as well as theevidence available on record. It is seen that M/s Herdillia Chemicals Ltd (HCL) is another major producer of Phenolin this country and has supported the petition filed by HOCL. However the Authority notes that Herdillia ChemicalsLtd has imported the subject gods during the POI from the subject countries/territories and therefore the Authorityhas excluded them from the scope of Domestic Industry. Excluding Herdillia Chemicals ltd, M/s HOCL satisfies thecriteria of standing.

Thus, the Authority holds that the petitioner satisfies the criteria of standing to file the petition on behalf of theDomestic Industry in terms of Rule 5(3) (a) of the Rules supra. The Authority also proposes to consider thispetitioner company as ‘domestic industry’ within the meaning of Rule 2(b) supra.

Safeguards, Anti Dumping and Double Protection

7. Views of M/s Meisol, South Africa, Mitsui & Co Ltd, Singapore, M/s Atul Ltd, M/s Foseco Ltd, M/s Kesar Petro,M/s MPCL, Mumbai, FMA, Mumbai , EU and Others

Safeguard duties are an emergency measure permitted pursuant to Article XIX of GATT. It is applied whendomestic industry cannot compete with the sudden increase in imports. Prior to the imposition of safeguard duties,the Domestic Industry must be suffering from "serious injury’. This serious injury must have been caused by thesudden increase of imports.

Unlike in the Anti Dumping sphere, where the Authority may recommend duties to the full extent of thedumping margin, in the Safeguard sphere there is no such concept duties under safeguard sphere can be maximumto address the serious injury by the sudden increase in imports. Countervailing duties on the other hand are dutiesimposed in the exporting country. Countervailing duties are also country specific and exporter specific, as in thecase of Anti Dumping Duties. In view of the jurisprudence above, it is conceivable that both countervailing duties and anti dumping duty may co-exist as the "material injury’ can be compensated in terms of the dumping margin and the subsidy margin, thus, it is possible to have duties simultaneously. However, in the case of safeguard duties, the only measure for imposition of duty is the serious injury to the domestic industry. It is a matter of consensus that the "serious injury" is far greater than ‘material injury and subsumes the latter. Clearly, it is inherent that there is an admission of serious injury being caused by the sudden increase in imports, thus, warranting the imposition of safeguard duty, there can be no imposition of anti dumping duties which require a causal link between the material injury and the dumping.

In view of the above, it is submitted that there can be no imposition of anti dumping duties and safeguardduties on the same product.

Safeguard duty is primarily protection granted to compensate for ‘serious injury’ brought about out by thetechnological state of the domestic industry of the Member state. It is for this precise reason that the WTOagreements provide for the payment of compensation to the affected Member States.

Thus, it is clear that the law in India precludes the imposition of both anti dumping duty/countervailing dutyand safeguard duty

M/s Mitsui & Co has pointed out that as against the concept of ‘serious injury’ to the domestic injury to the domestic industry under the safeguard provisions, the Anti dumping Rules provide only for material injury. Thus, if sufficient duties have been recommended for removing material injury, which under the very same Act is a less serious situation. Thus, it is obvious that an anti dumping investigation cannot be initiated in a case where safeguard duties have been recommended taking into account almost the same period of investigation

The International Price of phenol during the POI for anti dumping has remained at the same at US $ 382 PMTas the price based on which SGD Protection for phenol was extended. Thus, extension of SGD was sanctioned onthe ground that international price of phenol of $382 PMT and the price remain at the same level. Therefore, there is no justification for sanctioning additional protection in form of anti dumping duty.

It is to be further noted that the grounds on which this safeguard application was made exactly the same asthe grounds mentioned in the present petition for imposition of anti dumping duty namely increase in imports fromSouth Africa and Singapore from April 2001 and more particularly major increase in imports from July 2001.

While recommending Safeguard duty on phenol DG (Safeguard) had obtained commitment from phenolmanufacturers that they would achieve cost reduction of Rs.6000/MT. Thus, profit of phenol must have gone up tothe extent of saving per annum since such saving were not passed on to the customers.

In response to the disclosure, M/s Kesar Petroproducts Ltd, Mumbai submits that SGD must be consideredfor working out the landed value from subject countries. On the Issue of safeguard duty and Anti Dumping Duty, M/s Merisol RSA, has asked the Authority to verify that methodologies for calculating serious injury and material injury are synchronized and though the injury analysis is for different periods, practically the burden is on the consumer in two folds as duties are prospective. M/s Mitsui & Co has submitted that there is an over lapping of the POI for the Anti Dumping Investigations and safeguard investigations and the Authority has not addressed the issue of as to how the concept of material injury is different in scope than the scope of serious injury. EU, in response to the disclosure has submitted that concrete evidence must be provided to aall parties showing that double protection has been avoided.

Views by Domestic Industry

8. It can be argued that this is the first product wherein safeguard duty is in force and anti dumping duty has beenrecommended. However, there is no legal basis argued by any interested party to state that the two duties cannotrun concurrently. Countervailing duty and anti dumping duty have a condition which prohibit simultaneousapplication of anti dumping duty and countervailing duty. More importantly, even when there is specific legalprovision that anti dumping duty and countervailing duties can not be applied simultaneously, there is no legalprovision that the safeguard duty and anti dumping duty can not be applied simultaneously. Thus, the entireargument of the other interested parties is without any legal basis. . Thus, strictly speaking, the safeguard dutyregulation does not provide that anti dumping duty and safeguard duty can not be applied simultaneously againstthe same injury

It is a matter of common knowledge that Indian Exporters are suffering anti dumping duty and countervailingduties simultaneously against their exports to Other Countries. When other countries can impose the two dutiessimultaneously, it follows that the two duties can be imposed simultaneously.

In a situation wherein the import price were earlier fair but became unfair subsequently due to variousreasons, it is obvious that the dumping of the product starts in subsequent period. In the instant case, there was no evidence that the imports (in 1999 and before) were at dumping prices. However, there is a positive evidenceavailable now that the imports are at unfair and dumped prices. When the market situation and behavior of importshas changed, naturally, the domestic industry would be entitled to another remedy available. To put otherwise,dumping of the product has surfaced with the imposition of safeguard duty on the product. Naturally, the safeguardduty would is taking care of that part of the injury which is due to fairly priced imports and industry requiresprotection in terms of anti dumping duty when dumping has surfaced.

Review 2 was initiated by the Director General (Safeguards) on 22nd October 2001. Though, the periodinvestigation by the Director General (Safeguards) overlaps with the period being investigated by the DesignatedAuthority, the scope of this review 2 was restricted to extension of safeguard duty to developing countries (whichwere not in the purview of the duty). The initiation notification of review 2 states as under in this regard.

The matter has been examined and it appears that prima facie the imports of Phenol from the aforementioneddeveloping countries are more than de-minimus level stipulated under section 78B of the Customs Tariff Act 1975and accordingly it has been decided to initiate review proceedings through this notice. The purpose of the review isto determine whether such notified developing countries are eligible to the exemption from payment of safeguardduty on imports of Phenol from these countries." (Emphasis added).

In response to the disclosure, on the issue of the adding of safeguard duty for the calculation of the landedvalue, the domestic industry submits that , while on the one hand safeguard duty has been included in the landedprice of imports, the non-injurious price has been lowered for the domestic industry on account of optimization andnormations. Should the safeguard duty be included in the calculations, there is then no justification for calculatingoptimum cost of production. The cost of production should then be taken at actual levels.

Examination by the Authority

9. It has been argued by various interested parties that since the safeguard duty has been imposed on the subjectgoods originating from the subject countries, there is no need for any Anti-Dumping duty as safeguard duty hasaddressed the issue of serious injury which is a part of material injury that Anti-Dumping duty addresses. There arealso arguments that after having got the redressal by way of safeguard duty, the domestic industry can not havedouble benefit by the way of ant dumping duty also. It has been further argued that the cost savings measures that the domestic Industry was required to do has not been passed on to consumers. There are also argumentsregarding the lack of enough Jurisprudence in this matter. It has also been pointed out that Indian Exporters aresuffering anti dumping duty and countervailing duties simultaneously against their exports to Other Countries.

The Authority has examined the issues concerning this case where safeguard duty has been imposed prior tothe initiation of anti dumping investigations and concludes that The POI in the safeguard investigation was differentthan the present investigation and hence the injury determination cannot be assumed to be the same andcorrelated. It has also been examined and confirmed by the Authority that the purpose of the second review in 2001 was to determine whether such notified developing countries are eligible to the exemption from payment ofsafeguard duty on imports of Phenol from these countries.

With regard to the argument that the DG, Safeguards has removed serious injury and the same impliedremoval of material injury also, the Authority notes that the nature of injury has changed with exporters now resorting to unfair pricing from a situation of fair pricing (safeguard duty). The Authority concludes that petitioner now needs the protection of anti dumping when the exporters have resorted to unfair pricing of their products. Hence, there is no merit in the argument raised by exporters/users regarding double protection being accorded to the petitioner. It has been claimed by the exporters and importers/users that imposition of anti dumping duty would amount to double protection to the domestic industry. On the other hand the domestic industry has submitted that the safeguard duty has been imposed on the imports of the subject goods to take into account injuries (serious injury) coming out of fair imports as against unfair imports for which anti dumping duty is required. The authority has carefully considered the issues in this regard and notes that the purpose of Anti dumping investigations is to examine whether the firm is undergoing any injury due to unfair imports from subject countries during POI. The Authority feels that occurrence of injury is common in anti dumping and safeguard investigations and the imposition of anti dumping and safeguard duty is to grant protection to the domestic industry for a limited timeframe against dumped/unfair and fair imports respectively. The authority concludes that while calculating injury margin, the safeguard duty would be taken into account in determining landed value of subject goods from the subject countries.

Period of Investigation :

Views by M/s Foseco Ltd, FMA, Mumbai and Others

10. It is also stated that the period of investigation is not representative because apart from being a small periodof 9 months it was abnormal period since there was major addition to supply of phenol in the world market due tocommissioning of MPSL new plant of 2,00,000 MT capacity and depressed market demand. The phenol industryalways under goes cyclic variations production, sales, closing stock and prices of finished product.

The petitioner has stated that dumping of phenol started since July 2001 and has submitted statistics up toNov 2001 only. It is submitted that this period of 5 months is too short a period for taking a decision on long-termmeasure like imposition of Anti Dumping Duty.

Views of Petitioner

11. At one place, it has been stated that there is no bar or limitations on the power to the Designated Authority topick any particular period as period of investigation. In the same paragraph, other statement states that six monthsperiod is too short for investigation.

We submit that the statement of the opposing interested parties is contradictory. When, there is no bar, theDesignated Authority has discretion to choose any period as investigation period. Neither WTO agreement norIndian Anti Dumping Rules provides any restrictions in this regard.

Examination of the Authority

12. The Authority has taken POI from 1St April 2001-31st December 2001 being the most recent period for theinvestigation when this case was initiated on 15th February 2002. This period was also taken because of the closing of the quarters and the feasibility of getting the complete data. The Authority confirms that nine months time is adequate and just for Anti Dumping Investigation since it also synchronizes with the three quarters for which the relevant data could be available.

Fixed Duty, Variable Duty and Ad valorem Duty

Views of M/s Atul Ltd, M/s Foseco Ltd, Government of Maharastra, Mumbai and Alta Labs, MPCL and Others

13. Without prejudice to our stand, that initiation of investigation is improper and further processing of theinvestigation should be discontinued, we suggest imposition of graded anti dumping duty if the authorities decide togo ahead with the imposition of anti dumping duty. As the calculations of injury and dumping margin are based on aprice of US $ 360/- per MT we suggest imposition of AD duty in suitable slabs of CIF prices till the injury is takencare of beyond which there should not by any levy of anti dumping duty.

If it is still felt that Anti Dumping Duty is to be levied it should be based on import price of US $ 360 withreducing duty structure on increase in phenol price and at imports of US $ 450 there should be "zero" Anti DumpingDuty which should protect the domestic consumers and domestic industry, as domestic industry need protectionbetween phenol price of US $ 360-450 PMT.

In response to the disclosure, M/s Kesar petroproducts Ltd, has requested that if at all such duty is to beconsidered then it should be linked such that no duty is levied for import price above US$ 450PMT.

Views of the Petitioner:

With regard to the argument on graded duty, it is submitted that the duty has to be lower of dumping marginand injury margin. So long as the margins remains unchanged, the duties cannot be modified.

Examination by the Authority

Anti Dumping duty has to be the lower of the dumping margin and injury margin. Graded duty would imply thatthe test of lower of the dumping margin and injury margin would not be met.

Demand and Supply, Monopoly and Indian Industries Interest

15. Views of M/s Ficom Organics Ltd, Mumbai, Kesar Petroproducts, M/s Foseco, Pune, and Others

Various interested parties have commented on the fact that there is a large supply and demand gap and there isinadequate domestic indigenous domestic manufacturing capacity which is the major reason for the imports ofPhenol. They have also highlighted the fact that M/s Mitsui Singapore Ltd (MPSL) set up a new plant with the latest technology which enabled it to sell phenol at a very competitive price. They have also highlighted on the net shortfall between the consumption and combined production capacity of the two domestic players in India.

In response to the disclosure. M/s Kesar petroproducts Ltd, have brought the attention of the Authority towards the demand & supply situation in the Indian market coupled with adverse duty structure for phenol users and internal problem of the petitioner. They have further highlighted the issue regarding the current price increase and supply constraint. M/s Ficom organics Ltd, M/s Ficom Organics Ltd, Mumbai, has highlighted the fact that there is an acute shortage of Phenol in the market and Indian Phenol manufacturers are not at all able to fulfill their contractual fulfillments on supply of Phenol. They have also informed of a price hike of more than 70% in a year of the subject goods and have requested that in the interest of the entire Industry, Anti Dumping duty on Phenol be removed with the immediate

Views of the Petitioner:

16. Public interest can not imply consumer interest. Imposition of anti dumping duty would be in public interest asit would help maintaining availability of wider choice to the consumers of subject goods, which is necessary for faircompetition. In fact, Director General (Safeguards) has in particular held that imposition of safeguard duty was in the public interest. When safeguard duty was in the public interest, there is no basis or reasoning to argue thatimposition of anti dumping duty would not be in the public interest.

It would also be relevant to point out that all the arguments on the issue of public interest are unsupportedwith the Rules.

In response to the disclosure, the domestic Industry submits that monopoly means a situation in which aproducer can dictate the price. We reiterate that when there are more than a producer, there can not be monopolyand when a producer is in a position to dictate the price, there can not be a situation of dumping and injury.

Examination by the Authority

17. It has also been argued by some interested parties that HOCL, is the only producer of the subject goods inthe country besides Herdillia which has been taken over by Schenectady and therefore, the present petition hasbeen filed by them to avoid any competition. Further, the total capacity of the petitioner is short of the demand ofPhenol in the country and the size of the plant is too small to cater to total demand of the in this country. It has also been argued that the technology used by the domestic industry is obsolete. Issues have also been raised regarding the poor quality of the goods produced by the domestic industry as well as the methodology adopted forapportionment of fixed costs, depreciation and overheads to the production of Phenol. It has also been stated thatthe prices of exports to India are at the prices prevailing in international market.

The Authority has examined the above issues. The purpose of anti dumping duty is to ensure that any injurycaused to the domestic industry due to dumping is addressed adequately. The fact that there is a single producer of the subject goods in the country (apart from Herdillia which has been taken over by Schenectady) does not, in any way, restrict the right of the domestic producers to claim relief from the Designated Authority against the dumped imports under the Anti Dumping Rules. It has been the accepted position that anti dumping duty is in the nature and form of providing a remedy against the trade distorting practice of dumping. Further, anti dumping duties do not propose to restrict or block imports from any sources and therefore, the issue of the domestic supply being short of the total consumption in the country, has no relevance. Also since alternative sources of supply are available to the Indian industrial users, the apprehension of the petitioner company exercising monopoly position to exploit the customers is misplaced.

Internal problems, long shut down, Low closing stocks and inefficient productions of the Petitioner

Views of M/s Kesar Petroproducts Ltd, and Others

18. Various interested parties have commented upon the fact that internal problems of the petitioner industrycoupled with the long shut down period during the April- May 2001 with low closing stocks were the main reason forthe injury to the domestic Industry and not the dumped imports. Few interested parties have also mentioned aboutthe inefficient nature of the production of the domestic Industry. They have also referred to the fact that low closing stocks during May month prompted the user industries to go in for the imports.

In response to the disclosure, M/s Kesar Petroproducts Ltd, have reiterated its earlier submissions.

Views of the Petitioner

19. The petitioner has submitted that there is a direct correlation between production and sales volume of theproduct by the Indian manufacturer and imports from subject countries. Sales volume of the domestic Industry gotadversely affected with consumers switching over to imports. In March 2001 i.e. juts prior to the period of theinvestigation, there was significant import bookings by the exporters, which landed in April and thereafter. Effect ofthese bookings were felt on the sales volume of the petitioner and consequently upon the production. In April 2001,the production and sales were **** and **** MT and considering the stock level of **** MT as also significant order bookings by the exporters, the domestic Industry decided to take a shutdown in the plant in May 2001. In spite of no production. the domestic industry continue, to meet the requirement and brought the inventory levels to realistic levels of *** MT. In June, July and August, production of the domestic industry was comparatively higher. However, availability of dumped material resulted into significant inventory pile up from *** MT in May to **** MT by August.
This was higher than average monthly sales during that period. In September, the domestic industry restricted itsproduction and made hard efforts to sell its produce at reduced prices. This resulted in higher sales volume andreduction in the inventory levels. The Company, therefore, once again increased its production in October, whichwas almost double than September. However, again due to arrival of significant dumped imports in the market, salesvolume remained sluggish and inventories increased to a level of almost average monthly sales during that period.In November, company again restricted its production. However, it did not help the company in reducing inventoriessignificantly as sales volumes did not pick up. In December 2001, production of the domestic industry wascomparatively higher. Even after reducing selling price and offering material at loss, the company was not able tosell the material resulting into decline in sales volume and higher inventories.

In response to the disclosure, with regards to the low closing stocks, domestic industry submits that thestatement is far away from facts. In all months of the period of investigation, the domestic industry had sufficientstocks to meet the demand of the product. Even at the time of shutdown, the domestic industry had sufficient stocks, which were sufficient to meet sales during the shut down periods.

Examination by the Authority

20. The Authority has verified the records of the company from the data supplied by them and it notes that due tothe dumping of the subject goods from the subject countries, the domestic industry was not able to sell the subject goods resulting into decline in the sales volume and higher inventories.

Issue regarding Current Price Increase and Current Supply constraints

Views of M/s Foseco Ltd and Others

21. It may kindly be noted that plant set up by Mitsui Phenol Singapore Ltd. of 2,00,000 tone capacity is nowbeing used solely for its own captive consumption for manufacturing BPA and they have stopped selling phenoltotally. The sale by this plant in POI was thus a temporary event which should be ignored for deciding the matter.It may also be mentioned that recently there has been a major fire in Albama Plant in Texas, USA of 4 lacsMT capacity, which has affected the supply of phenol in the world market.

Views of the Petitioner:

22. Post period investigation facts have no relevance in the present investigation period. Without prejudice, theparameter can not be seen in isolation. Another factor of equal importance is the prices of associated raw materialsand their impact on the cost of production. It would be worthy to mention here that crude oil prices in postinvestigation period have reached to more than double level. The relevant factor possibly is cost adjusted prices and a minimum period of six months (even though these interested parties have argued that even six months period is too short a period). Petitioner notes that while these interested parties argue that dumping should be seen over a period longer than six months, factors such as present temporary prices over a short period of 1-3 months arearguably sufficient to decide the present investigation.

Other Issues

M/s HOCL, Mumbai

Calculations of Landed Value of imports for determination of injury margin

23. It is found from the preliminary findings that the Designated Authority has included the safeguard duty in forcefor calculation of landed value of imports. The calculation is inconsistent with the practice being followed fordetermination of injury margin

Duty on packed phenol

24. Since the Designated Authority has considered it appropriate to determine separate duty for packed andloose phenol, domestic industry would like to provide information with regard to packing cost involved in case ofpacked phenol. It is requested that such information may kindly be taken into account while calculating non injurious price for packed phenol.

The statement of opposing interested parties that HOCL is the only producer is factually incorrect as it is awell known fact, known to opposing interested parties also that the HOCL is one of the three producers of Phenol inIndia.

The installed capacity of the petitioner is 40000 MT. At the time of making application for safeguard duty, thedomestic industry has draw adjustment plan and accordingly necessary changes have been made. Accordingly,effective capacity of the domestic industry is 49000 MT.

Views expressed by M/s Schenectady Herdillia, Mumbai.

25. Our company has pioneered the manufacture of phenol in India by the synthetic route and have beenmanufacturing this product since 1968. Apart from this, for the last over a decade, we have been manufacturingderivatives of phenol as well. We have been exporting significant quantities of phenol derivatives for which we hadimported phenol duty free. All our imports of phenol during the Investigation period were under DEECScheme/Advance License.

We have already the supported the application made by Hindustan Organic Chemicals Ltd. (HOCL) for levy ofAnti Dumping duty on phenol imported from the subject countries.

The data provided by us is open for verification by the officers of your Honorable Directorate. The dataprovided by us for the investigation period clearly shows that we have suffered injury due to dumping.Since major portion of phenol derivatives manufacture by us is exported, the captive consumption for our ownphenol (for manufacture and sale of derivatives in domestic market) is a very small portion of our domesticproduction.

Our company has no objection for being included as a part of the domestic Industry. Likewise, our companyhas no objection to being excluded from the domestic industry for the purpose of said investigation.

We learn that M/s HOCL are praying for increase in Anti-Dumping Duty on phenol imported in packedcondition. We support this prayer of HOCL.

M/s Merisol S.A South Africa

26. Use of data filed by Merisol at para43 page 37 of the Preliminary Findings, the Hon’ble Designated Authorityhas noted that the ‘the authority has, therefore, taken the port data furnished by Kandla Customs for imports ofsubject goods from EU and all bulk imports from South Africa. It is submitted that Merisol is the only exporter of thisproduct under consideration from South Africa. The data filed by Merisol is true and complete representing all drumand bulk imports from South Africa, thus, it is submitted that the exporters data be accepted as full and completeand all calculations be made on this basis.

The petitioners cite the example of Polyol as a basis for the co-existence of Anti dumping duty and safeguard duties.

However, it is clear from the sequence of events that at the time of discontinuance of safeguard duties, no antidumping duty had come into force.

At the outset, it must be stated that the Hon’ble Designated Authority has erred by relying only on the informationprovided by M/s. HOCL and has ignored the data of M/s. Schenectady Herdillia by ruling them out of being domesticindustry. It may please be noted that M/s HOCL has historically been an inefficient enterprise and basing all theinjury calculations on the HOCL data is causing extreme hardship to the consuming industry.

M/s Mitsui &Co, Singapore

27. In para 35 of the preliminary findings, the information related to cost of production, net sales realization andprofit and loss has been indexed with reference to the year 1998-99. In this connection, we wish to submit that the figures of the period of investigation cannot be compared to 1998-99 as a proper analysis would require that the comparisons are made with the immediately preceding period unless reasons to the contrary are demonstrated.

M/s Atul Ltd, Mumbai

28. We wish to mention here that Atul Limited is a Rs.600 crore turnover company belonging to the Lalbhai grouphaving diversified interests in various fields. Our Agrochemicals division manufacturers wide range of pesticides(herbicides and fungicides) and cater to domestic as well as export market. We are the major end user of phenol inpesticide industry and would severely be affected due to proposed imposition of anti dumping duty on phenol imports.

Authorities have already accepted in para 8 of part D that HCL is another major producer in the country andsupports the petition. We submit that here that in all fairness, the same yardstick should be applied for interpretingvarious provisions of the act and the Authorities should reconsider their exclusion from the investigation.

Imposition of Anti Dumping Duty does not serve public interest:

This would lead to heavy losses and in turn closure of the units.

Retrenchment of labour creating labour unrest/unemployment.

Reduction in export hence loss of valuable foreign exchange to the country.

M/s Foseco

29. We are one of the largest speciality chemical supplier to the Foundry and steel industries, mainly consistingof automotive, general engineering, railways, valves and associated small foundry ancillaries, who are catering tothe auto manufacturers. As you are aware, due to continuous recession and the slack in the economy in the abovementioned foundries (viz. automotive, general engineering, railways, valves) our customers are unable to bear theincrease in the input cost with the result we are forced to absorb the increased cost since we are unable to recover the same from the end users.

High prices of phenol has made the operational cost of the phenol user industry non-viable and same unitsare closing down.

It may be noted that the fluctuation in selling prices of phenol is result of supply and demand of phenol inmarket at a given time and not due to dumping. It can be seen that prices of phenol have since been increased byphenol manufacturers by Rs.4000 pmt and prices of acetone have also been increased by Rs.3500 PMT thoughthere has been no increase in cost of raw materials.

M/s Kesar Petroproducts

30. We are manufacturers of Bisphenol-A (BPA) having rated capacity of 5000 TPA. Our requirement of phenol is0.966 MT per MT of BPA. We also require Acetone (0.303 MT per MT BPA) which is a joint product of phenol. Thus,we are fully dependent on phenol manufacturers of our production programme and have been buying ourrequirements of phenol and acetone from HOC. We have developed strong business relationship with HOC andhave received highly satisfactory service from them in terms of deliveries, product information, terms of payment etc.

It is, however, experienced that price of phenol as well as acetone are very frequently revised upwards undera joint strategy followed by the two phenol manufacturers. For every increase of Rs.1000 in the price of phenol, the manufacturing cost of BPA goes up by Rs.1000 per MT. We are not able to pass on these increases in the cost of production to our customers since BPA is available in the international at a very competitive price and in order toretain our customers we have to absorb such increases which result in our operations becoming unprofitable.

M/s Ficom Organics

31 We were one of the largest manufacturers of Alkyl Phenols in India since 1983 to 1998 and were consuminglarge quantity of phenol from M/s. Hindustan Organics Chemicals Limited, (HOCL), Cochin. However, in the processof globalization, import duties have been reduced drastically from original level of 100% to 30% on Alkyl phenolsthereby opening up the gates of cheaper imports of Alkyl phenols in to India from nearby countries. We could notcompete them as we had no direct/indirect protection and also no control on phenol price as there were only twomanufacturers of phenol.

We have not been able to operate the plant at full capacity as phenol supply from HOCL is erratic.

When Indian manufacturers are not able to meet domestic demand there is no alternative for the consumersof phenol but to import and if anti dumping duty is levied in such a situation, especially manufacturers like us whowill be forced to once again shut their plant due to high cost of their finished goods.

International prices are currently ruling around US $ 750/MT. At such a high price coupled with local customsduty, safeguard duty, special additional duty and storage cost we do not see any justification of still to levy antidumping duty as this will seriously affect the consumers of phenol who will be forced to import due to non-availability from domestic manufacturers. In such a situation dumping of phenol in India is just not possible.

At this juncture, we would also request you to make anti dumping duty applicable on range of Alkyl Phenolsbeing produced in India as we also need equal protection from other countries against cheaper imports.

Govt of Maharastra, Department of Energy

32. A number of representations have been received from manufacturers of downstream products based onphenol in Maharashtra to the effect that imposition of such duties will be extremely harmful to them and many ofthem may have to discontinue or drastically reduced their production since they are already selling their productsbelow cost of production due to international competition.

It is requested that the matter may be viewed very carefully in the longer interest of phenol manufacturers aswell as phenol users which is required in the interest of long term growth of phenol and phenol based industry.

M/s MPCL

33. It may be considered that like the petitioner, the phenol users are also domestic industry which requiresmarket conditions in which it can survive. Thus, a view has to be taken on how to protect the interest of the domestic industry as a whole and not only the interest of the petitioners who have much more financial strength than the downstream small and medium sector users of the petitioners product.

M/s Pragati Chemicals

34. They have pointed out towards high profitability of Phenol plant and also the fact that HOC was an importer ofphenol earlier. They have also pointed out the fact that like the petitioners, phenol users are also domestic industry, which requires market conditions in which it can survive.

Alta Laboratories

35. We are manufacturers of Bulk Drugs & Fine Chemicals mainly Salicyclic Acid & its derivatives and phenol isour basic raw material. Prior to the year 1987 M/s. Herdillia Chemicals Ltd. was the sole manufacturer of phenol andwe had to face all sorts of problems, which are inherent in a monopolistic supplier. With the advent of M/s.Hindustan Organic Chemicals Limited, we were optimistic that the situation would improve, but it was only anillusion.

Like petitioner we are also a domestic industry and we require market conditions in which we can survive. Our mainproduct Aspirin is subject to statutory price control under DPCO and Govt. expects us to sale this drug at reasonable price. Aspirin contributes more than 60% of our sales turnover. Thus, a view has to be taken on how to protect the interest of the domestic industry as a whole and not only the interest of the petitioners.

All India Association of Industries

36. We like to bring to your notice that one of our members has been seriously affected by way of heavy increasein input cost of phenol imported Europe, Singapore and South Africa.

The Speciality chemical is supplied mainly to the Foundry and Steel Industries, mainly consisting ofautomotive, general engineering, railways, valves and associated small industry ancillaries, who are catering to theauto manufacturers.

Hence, for survival of the foundry industry and foundry chemical suppliers, it is requested that the antidumping duty should not be imposed and look forward to your valued response.

European Union

37. In addition, the European Commission would like to draw your attention to what seems to be an incoherentuse of information. When determining whether exports from the EU were below the De Minimis threshold, theDesignated Authority has used data as submitted by the petitioner allegedly due to the incompleteness of publisheddata from the DGCI&S.

The assertion by the DA that ‘the landed value of imports has been found to be significantly lower than thedomestic industry’s net sales realization should led to an even more demanding analysis of all factors causing injury,as determined under Article 3.4 of the WTO AD Agreement Given the above, it is submitted that the current anti dumping investigation must be terminated.

Examination by the Authority regarding Current Price Increase, Current Supply constraints and OtherIssues raised

1. It has been recognized by the Authority consistently that the imposition of anti dumping duty may havesome impact on the prices of the product in the market. However, at the same time, the Authority hasconsistently held that the relative competitiveness of the users would not be affected with imposition ofanti dumping duty. In the long run, Users would have assured supply of material at reasonable prices.

2.There have been arguments that the Indian Producers jointly resort to price increases. In case the IndianProducers increase the prices beyond a certain limits, there would be automatic check on the same byway of imports.

3. The fact that there is a single producer of subject goods in the country and does not, in any way, restrictthe right of domestic producer to claim relief from the Authority against the dumped imports under antidumpingrules. It has been the accepted that anti-dumping duty is in the nature and form of providing aremedy against trade distorted practice of dumping. Further, anti-dumping duties do not propose torestrict or block imports from any sources and, therefore, the issue of domestic supply being short of thetotal consumption in the country, has no relevance. Also, since alternative sources of supply areavailable to the Indian users, the apprehensions of user industry, in this regard, are misplaced.

4. With regards the point raised by various interested parties about domestic industry being an inefficientsupplier of the subject goods, the Authority holds that it has determined injury margin considering theoptimum costs of the production.

C. Normal Value, Export Price and Dumping Margin

Issues relating to the Dumping Margin

Views by M/s Mitsui & Co, Singapore and others.

38. It appears that the dumping margins worked out for various countries are not based on the actual cost data,but is based on constructed cost by the petitioner. There is a wide variation and the data requires proper scrutiny.We support the views expressed by the exporters M/s. Mitsui & Co. and Merisol as covered in the preliminaryfindings.

The Authority has worked out the dumping marking in case MPSL at 28.75% of export price and for Mitsui &Co. at 28.5% of export price. In case of Merisol, South Africa the dumping margin is estimated at 42.24% for bulksales and 36.48% for drum sales. It is however seen in case of European Union the dumping margin is taken as97.72% based on the constructed cost of production as worked out by the petitioner. It is submitted that there cannot be such big difference in the dumping margin in Singapore, South Africa and European Union since themanufacturing process and cost of raw materials will not be so different as to justify such variation.

In response to the disclosure, M/s Kesar Petroproducts Ltd, submits that dumping margin appears to be veryhigh and exporters of Phenol being major players in the world, domestic user would suffer serious injury if AD islevied based on such unrealistic dumping margin. On the issue of methodology of calculation of dumping margin,M/s Merisol,RSA, an exporter has requested the Authority to reconsider the use of best information i.e 6(8) as theexporter had commercial constraints and challenges to part with the information requested. They have concludedthat margin of dumping is inflated and erroneous, factors do not indicate injury, and causal link is not establishedand duty recommended is unjustifiably high. On the Issue of Dumping, M/s Mitsui & Co have highlighted the fact that issue of various appendices pertaining to the exporters questionnaire are not relevant to them as they are a trading company and hence their cost of production details are irrelevant.

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