CESTAT sets aside anti-dumping duty on MEG imports due to flawed injury assessment by designated authority

CESTAT NEW DELHI set aside anti-dumping duty notification dated 27.10.2022 on MEG imports from Kuwait, Saudi Arabia and USA. Court found designated authority's injury assessment flawed as it selectively relied on marginal profit improvement during investigation period compared to 2019-20 while ignoring significantly lower profits compared to 2017-18 and 2018-19 levels. Despite acknowledging dumped imports increased substantially since 2019-20 at prices below raw material costs, the selective examination defeated injury assessment purpose. Matter remitted to designated authority for re-examination with opportunity for all parties to submit written submissions before issuing final findings.

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

Summary:

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

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

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

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

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

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

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

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