Trade law – Anti-dumping provisions – Application under sections 17 and 18 of the Countervailing and Anti-Dumping Duties 1993 – Determination of export price for purposes of the imposition of anti-dumping duties
In
Menteri Kewangan & Ors v Diler Demik Celik Endustru Ve Ticaret A.S. Turut Dikenali Sebagai Diler Iron and Steel Co Inc (Civil Appeal No.: 01(f)-8-03/2024 (W)), the Federal Court was faced with an appeal which dealt with the application of sections 17 and 18 of the Countervailing and Anti-Dumping Duties Act 1993 (
“CADDA”). Specifically, the appeal concerned the determination of the export price of the subject merchandise for the purpose of imposition of anti-dumping duties.
Relevant Statutory Provision
The relevant statutory provisions were as follows:-
| (1) |
The export price shall be the price actually paid or payable for the subject merchandise. |
| (2) |
In cases where there is no export price or where it appears that the export price is unreliable because the exporter and the importer or a third party are related, or that there is a compensatory arrangement between the exporter and the importer or a third party, the export price may be constructed on the basis of the price at which the subject merchandise is first resold to an independent buyer, or if the subject merchandise is not resold to an independent buyer, or not resold in the condition imported, on any reasonable basis. |
| (3) |
If the export price is constructed as described in subsection (2), allowance shall be made for all costs incurred between importation and resale. |
|
| (1) |
A fair comparison shall be made between the export price and the normal value. |
| (2) |
The comparison shall be made at the same level of trade, normally at ex-factory level, and in respect of sales made at as nearly as possible the same time and due account shall be taken of other differences that affect price comparability. |
| (3) |
Where the normal value and the export price as established are not on a comparable basis, due allowance, in the form of adjustments, shall be made in each case, on its merits, for differences in factors that are claimed, and demonstrated, to affect prices and price comparability. |
| (4) |
If the determination of the export price under subsection 17(2) affects price comparability, the Government shall establish the normal value at a level of trade equivalent to the level of trade of the constructed export price, or shall make due allowance as provided under this section. |
| (5) |
In a case where the subject merchandise is not imported directly from the country of origin but is exported from an intermediate country, the price at which the subject merchandise is sold from the exporting country to Malaysia shall be compared with the comparable price in the exporting country. |
| (6) |
Notwithstanding subsection (5), comparison may be made with the price in the country of origin if-
| (a) |
the subject merchandise is merely transhipped through the exporting country; |
| (b) |
the subject merchandise is not produced in the exporting country; or |
| (c) |
there is no comparable price for the subject merchandise in the exporting country. |
|
| (7) |
Where an exporter or importer claims for an adjustment under subsection (3), it shall prove that its claim is justified. |
| (8) |
The Government shall indicate to the parties in question the information that is necessary to ensure a fair comparison. |
|
Material Background Facts
The Respondent, a company incorporated in Turkey, had engaged a related trading company to export Steel Reinforcing Bar (
“Rebar”) into Malaysia.
Following from this, the Malaysian Steel Association, on behalf of the domestic industry, submitted an anti-dumping petition, pursuant to sections 4 and 20 of CADDA, to request the initiation of an anti-dumping investigation on Rebar that originated or had been exported from, among others, Turkey. This resulted in an investigation carried out by the 2
nd Appellant which concluded in a finding by the 2
nd Appellant that the dumping of Rebar originating or had been exported from Turkey had resulted in material injury to the domestic market. Conseuqently, the 1
st Appellant imposed anti-dumping duties at the rate of 3.62% against Rebar that originated or had been exported from, among others, Turkey.
Aggrieved, the Respondent commenced judicial review proceedings, alleging, among others, that the dumping margin had been erroneously calculated to be at the rate of 3.62% when:-
| (i) |
In arriving at the export price, the investigating authority had used the internal pricing between the Respondent and intermediary and not the price actually paid for the Rebar based on the sales transactions with Malaysian importers; and |
| (ii) |
The investing authority had refused to make proper adjustments which affects price comparability when the investigating authority refused to offset the effect of duty drawback in the Dumping Margin calculation. |
The Courts Below
The High Court dismissed the application for judicial review on the basis that:-
| (i) |
The determination of the export price was in accordance with Section 17(1) CADDA as it had been based on the invoices as proof of the sales transaction between the Respondent and the intermediary; and |
| (ii) |
The fact that the Respondent and the intermediary were related trading companies were irrelevant to the determination of the export price in accordance with Section 17(1) CADDA. Therefore, there was no requirement for the export price to be construed in accordance with Sections 17(2) read together with 17(3) of CADDA as the issue of unreliability of export price did not arise. |
However, the Court of Appeal reversed the High Court’s decision finding that:-
| (i) |
The determination of the export price should have been the price under Section 17(2) CADDA whereby when the subject merchandise is first resold to an independent buyer and in particular the export price by the intermediary to the Malaysia party, a Section 17(3) CADDA allowance shall be made for all costs incurred between importation and resale; |
| (ii) |
Instead of following this formula, the Appellants had calculated based on the value of the sale between the Respondent and the intermediary, before subsequently adding in the relevant cost factor. This was not a statutorily provided method and did not take into account the profit element from a resale by the intermediary to Malaysian entities; and |
| (iii) |
The duty drawback should be allowed under Section 18 CADDA as there is sufficient basis for the Respondent to say that the import duties for raw materials was imposed on them with respect to the product sold in the domestic market. |
Proceedings At The Federal Court
The Respondent was not represented and did not appear during the hearing of the appeal. This was despite the Respondent being informed of the hearing date and given the opportunity to conduct the hearing via Zoom. The hearing proceeded in the absence of the Respondent.
There were 3 questions of law argued before the Federal Court:-
| (i) |
Whether Section 17 CADDA must be read with section 18 CADDA to ensure fair comparison between export price and normal value which is normally at ex-factory level (“Question 1”); |
| (ii) |
Whether Subsections 17(2) and 17(3) CADDA are applicable for the determination of export price when the export price had been determined based on Subsection 17(1) CADDA and no issue arises that there is no export price or that it appears that the export price is unreliable (“Question 2”); and |
| (iii) |
Whether in making a price comparison pursuant to Section 18 CADDA and Regulation 32 of the Countervailing and Anti-Dumping Duties Regulations 1994 (“CADDR”) between the export price and normal value, adjustment had to be made even though no cost was borne by the Respondent in the domestic market with respect to duty drawback (“Question 5”). |
Questions 1 and 2
These Questions dealt with the fundamental issue as to whether Sections 17 and 18 of CADDA must be read together to ensure fair comparison between export price and normal value which is normally at ex-factory level.
The Federal Court found that while the Respondent and the intermediary were related trading companies, the use of the sales transaction between them to establish the export price was nevertheless reasonable. These was for the following reasons:-
| (i) |
First, Subsection 17(2) CADDA would not automatically apply merely because the Respondent and the intermediary are related trading companies. Instead, the investigating authority must consider the evidence and determine whether the export price is reliable notwithstanding the relationship between the two parties to the transaction; |
| (ii) |
Second, notwithstanding that the Respondent was the parent company of the intermediary, there were no grounds adduced to show that the effect of the relationship was one which caused the parties concerned to behave different from non-related parties. This couple with the fact that the sales transactions between the Respondent and the intermediary were substantiated with invoices was sufficient to satisfy the Court that the export price based on the sales transaction was reliable; |
| (iii) |
Consequently, Subsections 17(2) and 17(3) CADDA cannot be applicable to construct the export price in the present situation as the export price based on the sales transaction between the Respondent and intermediary is reliable; and |
| (iv) |
Furthermore, Sections 17 and 18 CADDA must be read together to ensure a true and fair comparison between the export price and normal value, made at the same level of trade, which is normally at ex-factory level, and in respect of sales made at as nearly as possible the same time. |
Question 5
Question 5 dealt with the issue of whether in making a price comparison pursuant to Section 18 CADDA and Regulation 32 of the CADDR between the export price and normal value, whether adjustment had to be made even though no cost was borne by the Respondent in the domestic market with respect to duty drawback.
The Federal Court first set out the following guidelines on the interpretation of Section 18(3) CADDA:-
| (i) |
It mandates that due allowance shall be made for any difference between normal value and export price which is demonstrated to affect prices and price comparability; |
| (ii) |
It places an obligation on interested parties to make substantiated requests for due allowance to demonstrate that there is a difference affecting prices and price comparability. Such parties must demonstrate that due allowance should have been made with respect to a difference that was demonstrated to affect price comparability between the normal value and the export price, and that the investigating authority failed to make the adjustment; and |
| (iii) |
The comparison actually made must satisfy the fundamental requirement of subsection 18(1) CADDA that it be a fair comparison, in which due allowance is made for differences demonstrated to affect prices and price comparability. |
Applying the above principles, the Federal Court held that Subsection 18(3) CADDA places not only the obligation to ensure a fair comparison on the investigating authority, but also an obligation on the Respondent to make substantiated requests for due allowance demonstrating that there is a difference affecting prices and price comparability. The Respondent must also demonstrate that due allowance should have been made with respect to a difference that was demonstrated to affect price comparability between the normal value and the export price.
In the present case, the Federal Court found that there was no demonstration as to how such a difference as claimed affects the prices and price comparability. Accordingly, the Respondent failed to discharge the burden of substantiating, as constructively, as possible, the request for adjustment.
Conclusion
Premised on the above, the Federal Court answered Question 1 in the affirmative, and Questions 2 and 5 in the negative.
Case Note by Nimalan Devaraja (Partner) of the Dispute Resolution Practice of Skrine.
This Case Note was first published in Highlights from the Appellate Courts (No 18/2025) and has been reproduced with permission of the Malaysian Bar’s Publications Committee. Nimalan is a member of the Publications Committee.