To be published in the Gazette of India Extraordinary

Ministry of  Commerce & Industry
(Department of Comemrce)

DIRECTORATE GENERAL OF ANTI_DUMPING AND ALLIED DUTIES

Notification

New-Delhi, the 7th September, 2001

Subject: Anti-Dumping investigations concerning imports of Trimethoprim (TMP) from China… Preliminary Findings.

35/1/2001-DGAD – Having regard to the Customs Tariff Act 1975 and the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury ), Rules 1995, thereof:

  1. PROCEDURE:
  1. The procedure given below has been followed with regard to the investigations:
  1. The Designated Authority (hereinafter referred to as Authority), under the above Rules, received a written petition from M/s. Alpha Drugs India Ltd., Patiala, and M/s Inventaa Chemicals Ltd., Hyderabad, alleging dumping of Trimethoprim (TMP) originating in or exported from China.
  2. The preliminary scrutiny of the application revealed certain deficiencies, which were subsequently rectified by the petitioner. The petition was thereafter considered as properly documented.
  3. The Authority on the basis of sufficient evidence submitted by the petitioner decided to initiate investigations against alleged dumping of imports of TMP originating in or exported from China. The Authority notified the Embassy of the subject country about the receipt of dumping allegation before proceeding to initiate investigations in accordance with sub-rule 5(5) of the Rules.
  4. The Authority issued a Public Notice dated 23rd July 2001, published in the Gazette of India Extraordinary initiating anti-dumping investigations concerning imports of TMP classified under customs sub-heading no. 293359.02, of Chapter 29 of the Customs Tariff Act, 1975, originating in or exported from China.
  5. The Authority forwarded a copy of the Public Notice to the known exporters (whose details were made available by the petitioner) and industry associations and gave them an opportunity to make their views known in writing within forty days from the date of the letter.
  6. The Authority forwarded a copy of the Public Notice to the known importers (whose details were made available by the petitioner) of TMP and advised them to make their views known in writing within forty days from the date of the letter.
  7. Request was made to the Central Board of Excise and Customs (CBEC) to arrange details of imports of TMP.
  8. The Authority provided copies of the non-confidential Petition to the known exporters and the Embassy of the subject country in accordance with Rule 6(3) supra.
  9. The Authority sent a questionnaire, to elicit relevant information to the following known exporters in China, in accordance with Rule 6(4);

x) A questionnaire was sent to the following known importers of TMP in calling for necessary information in accordance with Rule 6(4);

ix) The Authority made available the non-confidential version of the evidence presented by various interested parties in the form of a public file kept open for inspection by the interested parties.

xii) Cost investigations were conducted to work out optimum cost of production and cost to make and sell the subject goods in India on the basis of Generally Accepted Accounting Principles (GAAP) on the information furnished by the petitioner so as to ascertain if anti-dumping duty lower than the dumping margin would be sufficient to remove injury to the domestic industry.

xiii) *** In this notification represents information furnished by an interested party on confidential basis and so considered by the Authority under the Rules.

xiv) Investigations were carried out for the period 1st April 1999 to 31st March 2000 ( 12 months).

B. PETITIONERS VIEWS

2. The petitioner has raised the following major issues in their petition and in their subsequent submissions:

i) Trimethoprim (TMP) is an organic chemical. It is a bulk anti-bacterial pharmaceutical ingredient directly used in formulations. Formulation of TMP is used in the combination of Sulphamethoxazole.TMP goes along with the combination of Sulphamethoxazole in 1:5 ratio by weight. There is no viable substitute for Trimethoprim.

ii) The chemical formula of TMP is as under:
    5-(3,4,5-Trimethoxy Benzyl) Pyrimidine-2,4-Diamine (C1H1N4 O3).

The production of TMP involves four stages, which are, addition, condensation, cyclisation and purification.

iii) TMP is classified under a dedicated customs sub-heading. However, import of TMP is being cleared under a host of other customs sub-headings also.

iv) Chinese producers are exporting TMP to the Indian market for quite sometime. The exporters started reducing their prices recently, which has caused material injury to the domestic industry. It is a well known fact that manufacturers in China cannot export their goods directly. There are a number of large, medium and small trading houses who hold valid export licences. TMP is therefore, largely exported by traders in China.

v) More significant than the volume of imports is the price effect of imports. The exporters from China have reduced the prices significantly, as may be seen from the following table and graph:

Year

Export price

August 1996

972

Jan.1997

913

May 1997

901

June 1997

896

July 1997

874

December 1997

834

August, 1999

619

Oct. 1999

500

Nov. 1999

450

Dec. 1999

450

1999-2000 (12 months-POI)

481

Source-Nov-Dec’99, Chemical Weekly & Maharishi Visveshvariya Industrial Research & Development Centre (MVIRDC periodical, World Trade Centre, Mumbai). For POI-DGCIS.

vi) There are four producers of TMP in India, two of whom have jointly filed this petition. The third producer M/s IPCA Laboratories Ltd., has supported this petition. The fourth producer M/s Zora Pharma is a major importer of TMP and should be excluded from the scope of the domestic industry.

vii) China and India are the two largest producers of TMP in the world. Both India and China are exporting this essential bulk drug to a number of countries. The fact that China is dumping TMP is evident from the sheer fact that the export price of TMP from India to other countries is significantly higher than the prices at which it is being exported to India by China.

viii) There is no known significant difference in TMP produced by the Indian industry and exported from China which can have an impact on price. TMP produced by the Indian industry and imported from China is comparable in terms of characteristics such as physical and chemical characteristics, manufacturing process and technology, functions and uses, product specifications, pricing, distribution and marketing and tariff classification of the goods. The two are technically and commercially substitutable.

ix) China is a major exporter of TMP to India. The share of imports from China in imports of TMP in India is predominant since 1996-97 and the same has been almost constant. The exporters from China are exporting the material at significantly dumped prices, far below the selling prices of the domestic industry.

x) The capacity utilization of the petitioners have been dropping on account of drop in sales.

C. VIEWS OF IMPORTERS, EXPORTERS AND OTHER INTERESTED PARTIES

3. Importers views

The known importers did not respond to the Authority’s request for information as per the prescribed questionnaire.

4. Exporters Views

The following known exporters in China did not respond to the Authority’s request for information as per the prescribed questionnaire.

D. EXAMINATION OF THE ISSUES RAISED

5. The submissions made by the petitioner and importers to the extent they are relevant under the Rules and have a bearing upon the case, have been examined and dealt with at appropriate places hereunder.

E. PRODUCT UNDER INVESTIGATION

6. The product under consideration in the present investigation is Trimethoprim (TMP) which is an organic chemical. It is a bulk anti-bacterial pharmaceutical ingredient directly used in formulations. Formulation of TMP is used in the combination of Sulphamethoxazole. TMP goes along with the combination of Sulphamethoxazole in 1:5 ratio by weight. There is no viable substitute for Trimethoprim. The chemical formula of TMP is as under:

5-(3,4,5-Trimethoxy Benzyl) Pyrimidine-2,4-Diamine (C1H1N4 O3).

The production of TMP involves four stages, which are, addition, condensation, cyclisation and purification.

TMP is classified under dedicated customs sub-heading no. 293359.02, of Chapter 29 of the Customs Tariff Act, 1975.

F. LIKE ARTICLES

7. 7.Trimethoprim (TMP) is an organic chemical. It is a bulk anti-bacterial pharmaceutical ingredient directly used in formulations. It is used particularly for treatment of urinary infections besides general prescription. Formulation of TMP is used in the combination of Sulphamethoxazole. There is however no significant difference in terms of process, equipment or technology for the production of Trimethoprim.

In order to establish that TMP produced by the domestic industry is a Like Article to that exported from China, characteristics such as technical specifications, manufacturing process, functions and uses and tariff classification have been considered by the Authority.

The Authority also finds that there is no argument disputing that TMP produced by the domestic industry has characteristics closely resembling the imported material and is substitutable by TMP imported from the subject country both commercially and technically. TMP produced by the domestic industry has been treated as Like Article to the product exported from China, within the meaning of Rule 2(d).

G.DOMESTIC INDUSTRY

8.The petition has been filed by M/s. Alpha Drugs India Ltd., Patiala, and M/s Inventaa Chemicals Ltd., Hyderabad, alleging dumping of Trimethoprim (TMP) originating in or exported from China. The Ministry of Chemicals and Fertilisers have informed the Authority that the list of manufacturers and their production (in MT) during 1996-97, 97-98 and 98-99 as per available data is as indicated below:-

Sl.No. Name of the Company Installed
Capacity 		96-97 97-98 98-99
1. Burroughs Wellcome N.A. 78.65 92.35 3.60
2. German Remedies N.A. 3.28 0.56 NA
3. IPCA N.A. 19.02 NA NA
4. SOL Pharma N.A. 11.93 NA NA
5. Inventa Chemicals N.A. 115.94 138.12 280.17
6. Alpha Drugs Ltd. N.A. 140.91 134.61 201.26

(NA-not available).

Production details for the period of investigation have not been enclosed. However, judging from the pattern of production as given above, the petitioners accounted for a major proportion of the production of TMP in 1998-99.

The petitioners have stated that the production of TMP by various producers in 1999-2000 has been as under:-

Producer 1999-2000
Petitioners  
Alpha Drugs Ltd. 214.14 Mt
Inventaa Chemicals 225 Mt
Sub total 439.14
Share 80.31%
Supporter  
IPCA Labs 32.60 Mt
Petitioner & Supporter – Total 471.74
Share 86.28%
Others  
Zora Pharma 75 Mt
Total Indian Production 546.74

The petitioners alone account for 80.31% of the total production in the POI and 86.28% of the production in combination with their supporter M/s IPCA Labs as per production data submitted in the petition.

The Authorities notes that the petitioners therefore constitute "domestic industry" and have the required standing to file the present petition under the Rules.

H. DUMPING

9.The Authority sent questionnaires to the known exporters from the subject country in terms of section 9 A (1). However, the exporters did not respond with the information called for. Therefore there are no claims made by the exporters with regard to Normal Value and Export Price. The Authority has therefore been constrained to rely upon constructed price and best available information with regard to Normal Value and Export Price respectively.

I. EXAMINATION OF NORMAL VALUE AND EXPORT PRICE BASED ON CONSTRUCTED VALUE AND ON AVAILABLE INFORMATION WITH THE AUTHORITY

(i) NORMAL VALUE

10.The Authority observes that the exporters from China have not responded to the questionnaire in the prescribed format and have not furnished information relating to normal value, export price, and dumping margin. The Authority therefore considers the exporters to be non-cooperative and has proceeded on best available information.

The petitioners have requested that the normal value in China be accepted on the basis of constructed cost of production of Trimethoprim. In the circumstances the Authority has been constrained to determine the constructed cost.

The normal value in China is therefore considered to be USD *** /kg or Rs ***/kg at an average exchange rate during POI of 1USD=Rs 43.03.

(ii) Export Price

11.The cif price as per the information available with the Authority is determined at Rs***/kg. The ex-factory export price has been determined after taking USD***/kg as ocean freight (based on petitioner’s experience), ***% as marine insurance charges, commission @***% for the agent in China, ***% as packing costs and ***% of fob value for port handling and port charges as per the Indian experience. However, commission @***% for the Indian indenting agent and transportation costs @ ***% likely to be incurred by the producers in China to their sea ports, as claimed by the petitioners are not allowed by the Authority for want of documentary evidence and lack of evidence based on petitioners exports, respectively.

After adjustments on these accounts the ex- factory fob export price is estimated to be Rs ***/kg or USD ***/kg at an average exchange rate of Rs 43.03=1USD.

(iii) Dumping margin

12. Considering the constructed normal value at USD ***/kg and the ex-works export price at USD ***/kg, the dumping margin determined by the Authority comes to USD ***/kg (which is 89.08% of export price).

J. INJURY

The Authority notes that the margin of dumping and quantum of imports from the subject country are more than the limits prescribed in Rule 11 Supra.

For the examination of the impact of imports on the domestic industry in India, the Authority has considered such further indices having a bearing on the state of the industry as production, capacity utilisation, quantum of sales, stock, profitability, net sales realisation, the magnitude and margin of dumping etc. in accordance wire Annexure II (iv) of the rules supra.

(a)     Quantum of Imports

Quantity (kg.)

  1997-98 (as per DGCIS) 1998-99 (as per secondary source) 1999-2000 –POI (as per DGCIS)
Total imports 1576 1575 38,925
China 1576 1575 38,775
Other countries --- --- 150 (Switzerland)

It is seen that the quantum of total imports have gone up significantly during the period of investigation.

The quantum of imports from China have also gone up significantly. Imports in 97-98 and 98-99 were exclusively from China. The share of China in total imports was 100%, 100% and 99.6% in 1997-98, 1998-99 and 1999-2000 (POI) respectively.

(b)     Production and Capacity Utilisation

The production capacity, actual production and capacity utilisation of the petitioners was as follows: -

Petitioners Year Installed
Capacity (MT)		 Production
(MT)		 Capacity Utilisation %
Alpha Drugs 1997-98 240 134.62 56.09
Inventaa   300 300 100
Total   540 434.62 80.4
Alpha 1998-99 240 200.75 83.64
Inventaa   300 282 94
Total   540 482.75 89.4
Alpha 1999-2000 240 214.14 89.22
Inventaa   300 225 75
Total   540 439.14 81.32

Production and capacity utilisation of domestic industry has declined in the period of investigations. One of the petitioners has added significant capacities and should the trend of prices from China remain the same, the company would be forced to hold its additional capacities.

(c) Sales and Market Share

The quantum of sales (MT) by the petitioners were as follows:-

Petitioner 1997-98 1998-99 1999-2000(POI)
Alpha 102.73 160.37 171.35
Inventaa 162 207 176
Total 264.73 367.37 347.35

It is observed that the demand of TMP was 2,66,306kg, 3,68,945kg and 3,86,275 kg in 97-98, 98-99 and 1999-2000 (POI) respectively. The share of dumped imports in total demand was 0.59%, 0.42% and 10.03% in 97-98, 98-99 and 99-2000 (POI) respectively. The share of the petitioner was 99.40%, 99.57% and 89.92% in 97-98, 98-99 and 99-2000 respectively.

The sale of TMP below cost of production resulted in heavy loss of profit to the petitioner. The cost of production (per kg) and selling prices (per kg) of each of the petitioner companies were as follows:-

Petitioners 1996-97 97-98 98-99 99-2000
Alpha        
COP *** *** *** ***
Selling Price *** *** *** ***
Inventaa        
COP *** *** *** ***
Selling Price *** *** *** ***

Unit selling prices have therefore showed a declining trend.

(d)    Closing Stocks

It is observed that the closing stocks of the petitioner went up in 97-98 over 96-97. They declined in 98-99 and 99-2000 from the level of closing stocks in 97-98. Alpha Drugs accounted for 61.26% of closing stocks in the POI, while Inventaa accounted for 38.73%.

Closing Stocks (MT) 96-97 97-98 98-99 99-2000
Alpha Drugs 20.59 24.49 20.74 15.91
Inventaa 1.88 3.57 5.97 10.06
Total 22.47 28.06 26.71 25.97

(e)    Price undercutting and price depression

The petitioner has stated that the selling prices of the domestic industry have declined by about 35%. The present prices are insufficient to recover the full costs and are significantly below the notified prices by the Government of India under the Drug Price Control Order (DPCO). The prices are below not only the DPCO but also the cost of production, resulting in severe financial losses to the domestic industry. Further, the imports from the subject country are significantly undercutting the prices of the domestic industry as the landed price of the imported material is below the selling price of the domestic industry as illustrated in the table below:-

Rs/kg

Year

 Sales Realisation (wt. ave) Landed Price of Imports

1997-98

***

1172

1998-99

***

1174

1999-2000 (12 months-POI)

***

675

(f) Profitability:-

The domestic industry has been forced to reduce its selling prices below its cost of production, resulting in substantial financial losses. The injury to the domestic industry is evident from the per unit profit/loss made by the industry from sales in the domestic markets, as shown below:-

Rs/kg 97-98 98-99 99-2000
Alpha Drugs      
COP *** *** ***
Selling Price *** *** ***
P/L (***) (***) (***)
Inventaa      
COP *** *** ***
Selling Price *** *** ***
P/L *** *** (***)

K. CONCLUSION ON INJURY

13. In view of the foregoing it is observed that:-

  1. the quantum of imports from the subject country have increased in absolute terms;
  2. the market share of the petitioners have gone down while that of imports has increased;
  3. the capacity utilisation of the petitioners have gone down ;
  4. the petitioners have been forced to sell at prices below their non-injurious price resulting in losses;
  5. imports are undercutting the prices of the domestic industry;
  6. the domestic industry is left with substantial closing stocks.

L CAUSAL LINK

14. The Authority holds that the material injury to the domestic industry has been caused by imports from the subject country. China is the main exporter of Trimethoprim to India and there has been a tremendous increase in import volumes from China in the period of investigation. As already noted, China accounts for almost the entire volume of imports prior to and in the POI. Export prices from the subject country have been declining significantly from 1997-98 onwards reaching an all time low in the POI. The sharp reduction in the export price resulted in steep reduction in the landed price followed by reduction in sales realisation of the petitioners. The increase in the market share of imports from China resulted in the decline in the market share of the petitioner and undercut the prices of the domestic product forcing the domestic industry to sell below its non-injurious price which resultantly, the domestic industry was unable to recover. The material injury to the domestic industry was therefore caused by the dumped imports from the subject country.

M. INDIAN INDUSTRY’S INTEREST & OTHER ISSUES

15. The purpose of anti-dumping duties, in general, is to eliminate dumping which is causing injury to the domestic industry and to re-establish a situation of open and fair competition in the Indian market, which is in the general interest of the country.

16. It is recognised that the imposition of anti-dumping duties might affect the price levels of the products manufactured using the subject goods and consequently might have some influence on relative competitiveness of these products. However, fair competition in the Indian market will not be reduced by the anti-dumping measures, particularly if the levy of the anti-dumping duty is restricted to an amount necessary to redress the injury to the domestic industry. On the contrary, imposition of anti-dumping measures would remove the unfair advantages gained by dumping practices, would prevent the decline of the domestic industry and help maintain availability of wider choice to the consumers of TMP. Imposition of anti-dumping measures would not restrict imports from the subject country in any way, and therefore would not affect the availability of the product to the consumers.

17. To ascertain the extent of anti-dumping duty necessary to remove the injury to the domestic industry, the Authority relied upon reasonable selling price of TMP in India for the domestic industry, by considering the optimum cost of production at optimum level of capacity utilisation for the domestic industry.

N. LANDED VALUE

18. The landed value of imports is determined on the basis of export price of TMP determined as detailed above in the para relating to dumping, after adding the prevailing level of customs duties and one per cent landing charges.

O. CONCLUSIONS

19. It is seen after considering the foregoing that:

(a) Trimethoprim (TMP) described under para 6 originating in or exported from China has been exported to India below normal value, resulting in dumping;

(b) the domestic industry has suffered injury;

(c)injury has been caused by imports from the subject country.

20. It was decided to recommend the amount of anti-dumping duty equal to the margin of dumping or less, which if levied, would remove the injury to the domestic industry. The landed price of imports was also compared with the non-injurious price of the domestic industry, determined for the period of investigation. Accordingly, it is proposed that provisional anti-dumping duties be imposed, from the date of notification to be issued in this regard by the Central Government, on Trimethoprim (TMP) originating in or exported from China falling under customs sub-heading no. 293359.02, of Chapter 29 of the Customs Tariff Act, pending final determination. The anti-dumping duty shall be the amount mentioned in Col.3.

Country

1.

 Name of the producer/exporter

2.

 Amount of Duty

3. (USD/kg)
CHINA All producers/exporters 4.42

21. Landed value of imports for the purpose shall be the assessable value as determined by Customs under the Customs Act, 1962 and all duties of customs except duties levied under Sections 3, 3A, 8B, 9 and 9A of the Customs Tariff Act, 1975.

P. FURTHER PROCEDURE

22. The following procedure would be followed subsequent to notifying the preliminary findings:

  1. The Authority invites comments on these findings from all interested parties and the same would be considered in the final findings;
  2. Exporters, importers, petitioner and other interested parties known to be concerned are being addressed separately by the Authority, who may make known their views, within forty days of the despatch of this notification. Any other interested party may also make known its views within forty days from the date of publication of these findings.
  3. The Authority would provide opportunity to all interested parties for oral submissions.
  4. The Authority would disclose essential facts before announcing the final findings.

 

L.V.SAPTHARISHI
DESIGNATED AUTHORITY

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