Ministry of Commerce
Notification
New-Delhi, the 31^st March 2003

Subject: Anti-Dumping investigations concerning imports of ‘X-ray Baggage Inspection Multi Energy System’ (XBIS) from the European Union.……Preliminary Findings

No.14/12/2002- 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:

i) The Designated Authority (hereinafter referred to as Authority), under the above Rules, received a written petition from, alleging dumping of ‘X-ray Baggage Inspection Multi Energy System’ (XBIS) from the European Union.

ii) The preliminary scrutiny of the application revealed certain deficiencies, which were subsequently rectified by the petitioner. The petition was thereafter considered as properly documented.

iii) The Authority on the basis of sufficient evidence submitted by the petitioner decided to initiate investigations against alleged dumping of imports of of ‘X-ray Baggage Inspection Multi Energy System’ (XBIS) from the European Union.

iv) The Authority notified the Delegation of the European Commission about the receipt of dumping allegation before proceeding to initiate investigations in accordance with sub-rule 5(5) of the Rules.

v)  The Authority issued a Public Notice dated 15^th April 2002 published in the Gazette of India Extraordinary initiating anti-dumping investigations concerning imports of XBIS classified under customs sub-heading no. 90.22.19 of the Customs Tariff Act, 1975 and the ITC classification is 90.22.1901, originating in or exported from the European Union.

vi) The Authority forwarded a copy of the Public Notice to the known exporter (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.

vii) The Authority forwarded a copy of the Public Notice to the known importers (whose details were made available by the petitioner) of XBIS and advised them to make their views known in writing within forty days from the date of the letter.

viii) Request was made to the Central Board of Excise and Customs (CBEC) to arrange details of imports of XBIS.

ix) The Authority provided copies of the non-confidential Petition to the known exporters in accordance with Rule 6(3) supra.

x) The Authority sent a questionnaire, to elicit relevant information to the following known exporter in the EU in accordance with Rule 6(4);

xi) A questionnaire was sent to the following known importers/users of XBIS calling for necessary information in accordance with Rule 6(4);

Airport Authority of India,

(National Airport Division)
Rajiv Gandhi Bhawan,
Safdarjung Airport,
New Delhi

GE Capital,

90A, Sector-18,
Udyog Vihar,
Gurgaon

Indian Airlines,

Reservation Office Building,
2^nd Floor, Safdarjung Airport,
New-Delhi

Directorate of Preventive Operations,

Customs & Central Excise,
Lok Nayak Bhavan,
New Delhi

Jet Airways (India) Pvt. Ltd.,

3^rd Floor, SM Centre,
Andheri-Kurla Road,
Mumbai

VSNL,
Lokmanya Videsh Sanchar Bhavan,
Opp. Kirti College, Prahadevi
Mumbai

  Department of Post,

Dak Bhawan,
Parliament Street,
New Delhi

A response to the questionnaire was filed by the Airports Authority of India.

xii) 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.

xiii) 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 M/s ECIL -Rapiscan and their supporting manufacturer M/s ECIL so as to ascertain if anti-dumping duty lower than the dumping margin would be sufficient to remove injury to the domestic industry.

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

xv) A public hearing was conducted by the Designated Authority on 1/7/2002 which was attended by all interested parties;

xvi) The Authority conducted verification visits in the premises of M/s ECIL and the various terminals of the Airports Authority of India;

xvii) Investigations were carried out for the period is 1^st April, 2001 to 31^st December, 2001 (9 months).

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

M/s ECIL –Rapiscan Limited is a joint venture between Electronic Corporation of India Ltd. (ECIL) a Government of India Public Sector Undertaking at Hyderabad and Opto Sensor Inc. (Rapiscan) USA. Rapiscan supplies the requisite technology and the final product is manufactured by ECIL. The joint venture was formed on 3/1/1995 under the Companies Act, 1956.

ECIL is the only manufacturer of the subject goods in India. ECIL does not import any of the subject goods and is not related to the exporter or importer of the alleged dumped article.

The product under consideration in the present investigation is ‘X-ray Baggage Inspection Multi Energy System’ (XBIS) which is manufactured by the domestic industry in four models. The petition is against alleged dumping of two models viz., (1) 60cms x 40cms and (2) 90cms x 75cms. It is used for detection of explosives, firearms, narcotics and contra band at port of importation, security agencies and airports. XBIS provides quick and easy scanning of the baggage against the above named items which would otherwise be time consuming and inconvenient. There is no substitute available to XBIS.

In the application the size (Tunnel Dimension, width x height) has been given as follows:

1. 60 cms x 40 cms
2. 90 cms x 75 cms
3. 120 cms x 80 cms
4. 150 cms x 165 cms

An XBIS systems consists of the following major components/parts:-

1. X-ray generator
2. Diode Array PCBs with diode detectors
3. Computer with requisites software and add on cards
4. Tunnel with conveyor mechanism through which baggage passes through
5. Image processing software with display and control key board.

Further, there is a main control PCB to control the belt movement. The multi energy system (MES) used in the XBIS machines distinguishes between materials according to their atomic weight and displays them in different colour. The technology, the software and the components remain the same irrespective of the tunnel size of the XBIS machines. The tunnel size depends upon the size of the baggage to be X-rayed.

All the models of XBIS have similar components or parts and are technically the same. They function on the same principle. There is no difference in production methodology. Different models have different tunnel sizes. The tunnel sizes of various models manufactured by ECIL during the POI are given below:

Further, minor variations in tunnel sizes between one producer and another are observed for equivalent models. Therefore, the users normally indicate a range of tunnel sizes in notices inviting tenders so that a number of manufacturers and models could participate and compete for the order. For instance, in the recently floated tender, Airports Authority of India indicated the tunnel size as follows:

It is also a practice among various producers to give different model numbers or model names even if the tunnel sizes vary marginally. Therefore, all models of XBIS machines should be treated as like articles for the purposes of this investigations.

During the period of investigations only two models of the XBIS machine were imported into the country. However, the petition is in no way restricted to these models alone. If the investigation is restricted only to those two models, there will be no protection to the domestic industry. Therefore, it is necessary to cover all models of XBIS under this investigation. For this purpose, it is submitted that the different models of XBIS shall be categorised into the following broad categories based on tunnel sizes.

In the petition, the petitioner had indicated four different tunnel sizes. Instead of fixed tunnel sizes, the Authority may kindly impose anti dumping duty on the above mentioned four ranges of tunnel sizes so that the models with slightly different tunnel sizes do not go out of the ambit of anti dumping duty.

(d) The comparable models of ECIL – Rapiscan and Heimann which are alleged to be dumped are as follows:

(e) The major user is the Airport Authority of India. (National Airport Division), Rajiv Gandhi Bhavan, Safdarjang Airport, New Delhi – 110003. There is no association of the users of the subject goods as given in the petition.

(f) For Indian Airport, Bureau of Civil Aviation (BCAS) lays on the standards for security application. They are derived mainly from ICAO standards followed by member countries.

(g) The product is alleged to have been dumped by M/s Heimann System GmbH, Wiesbaden, Germany. M/s Heimann Canada, (marketing office), obtained the order which is under dumping allegation. The supply is being done by M/s Heimann Germany.

(h) The global tender by the Airport Authority of India for supply of 39 numbers colour X-Ray Baggage Inspection Systems at various Airports in India is dated 9/3/2000 and the revised price bid is dated 9/4/2001. The same has been accepted by the Airports Authority vide Order No. 3/3/2000 – AR- II (EQ) dated 20/4/2001 and 23/4/2001.

(i) Other countries which bid for global tenders floated in India are USA and Malaysia. Among the other countries only M/s Opto Sensor (M) Sdn. Bhd., Malaysia (a sister company of ECIL-Rapiscan Ltd.,) supplied the machines against the order placed by ECIL-Rapiscan Ltd., who had obtained the order against global tender floated by AAI, International Division dt 10/8/98 for 35nos of XBIS supplied in 1999-2000.

3. (A) Importers views

9. Airports Authority of India

1. The Airports Authority of India has submitted a response to the importers questionnaire as an importer/consumer of the subject goods. The AAI was requested by the Authority vide letter dated 2^nd July 2002 to furnish a non-confidential summary of their response to the importers questionnaire. The Aai intimated vide letter dated 11^th July 2002 that their reply to the importers questionnaire was confidential.
2. The AAI have clarified certain preliminary facts. The Airports Authority of India (AAI) is a body corporate constituted under the Airports Authority of India Act, 1994. The AAI is responsible to provide security equipment at international/domestic airports for frisking passengers hand and registered baggage. The specifications for such type of equipment are drawn for latest technology available world wide and finalised in consultation with the Commissioner, Bureau of Civil Aviation Security (BCAS). Thereafter, global tenders are invited by the AAI and the procurement of equipment is made as per the tender norms and application procedures.
3. M/s ECIL Rapiscan Ltd., Secunderabad had itself priorly supplied imported XBIS to the AAI during 1999 and 2000 as manufactured by M/s Opto Sensors, Malaysia against global tendering and imported into India. With reference to the prior requirements of the AAI during the period 1999 and 2000, ECIL Rapiscan did not supply the equipment as manufactured by it in India. In the relevant global tenders as invited by the AAI also, M/s ECIL Rapiscan Ltd. offered both indigenous as well as imported equipment, which tender as submitted by it and on being evaluated was, however, found not acceptable.
4. AAI submits herewith the comparative statement of the respective bills submitted by the short -listed tenderers including M/s ECIL Rapiscan Ltd. which will show that it was not the lowest as compared to the other bidders. The relevant tender document is also submitted herewith.
5. M/s ECIL Rapiscan Ltd. has stated that XBIS as quoted by M/s Heimann System Inc., Canada, to Brazil Govt. Postal Service is a different model being model 6040d against the Model 6040I supplied to AAI in India and there is difference of modified model too. So the rates for the different Models may not be comparable and may not stand the test of comparison or the comparative prices.
6. M/s Heimann System Inc., is a reputed manufacturer whose product is being used at International/Domestic airports worldwide and the rates quoted by them vary from country to country depending on the specifications, quantity, after sales service required infrastructure availabe for product support in the country and other terms and conditions stipulated by purchaser in the NIT.
7. Injury and Causal Link: It is submitted that there is no good or sufficient evidence that the imports of the product under consideration have cause material injury to the domestic industry. Here, it may also be submitted that AAI has not been provided a copy of the petition filed by M/s ECIL Rapiscan Ltd. so as to enable AAI to submit its response or commence to it as may be relevant or required.
8. Purchases are made by inviting global tenders are publlishing Notice Inviting Tender (NIT) /Global Tenders in various leading News papers. Tenders are called by two bid systems: (I) Technical Bid (ii) Commercial Bid. Duly constituted committee consisting of officers from various disciplines open technical bids in presence of representatives of firms/companies . The technical bids are evaluated by a technical committee duly constituted by Competent Authority. The evaluation of bids is done as per specification stipulated, in the NIT and recommendations are made to Competent Authority (CA). On acceptance of report by CA, the firms/companies who qualify technical requirement are called during commercial bid opening by a committee of officers constituted from different disciplines. Comparative statement of commercial bids are prepared by concerned department and put up with recommendations on lowest offer basis of financial concurrence and approval of the Competent Authority for award of work. Thereafter supply order/award of work is concluded on successful bidder. In case of security-related equipment used at hypersensitive/sensitive airports, clearance from Ministry of Civil Aviation is obtained for procurement of product of certain countries keeping in view the security concerns.
9. Comparison of prices of Heimann Systems, Germany, ECIL Rapiscan and Perkin Elmer in the tender floated by AAI during the period of investigations as submitted by AAI is given below:-

The prices offered by M/s Heimann Systems are approx ***% less than that offered by the petitioner for 6040 and ***% less for 9075 than that of the petitioner.

2. Directorate of Preventive Operations, Khan Market, New Delhi

1. This Directorate has furnished information on XBIS purchased from M/s ECIL/M/s ECIL-Rapiscan from 1989 onwards which have been deployed in various field formations.
2. Since 1999, the operational XBIS have been brought under the Comprehensive Centralised Annual Maintenance Contracts with M/s ECIL Rapiscan as per the direction of the Ministry. The maintenance services provided by M/s ECIL Rapiscan have been by and large satisfactory except certain problems in some cases which are being amicably settled.

III GE Capital

1. We have imported 3 X-Ray systems, since post September 11 there was a requirement by our security team keeping in mind the safety and security for our Mailroom and other related activities to detect:

• Explosives (esp. plastic which do not show up in metal detector checks)
• Weapons being smuggled in or
• Toxic biological or chemical materials

2. We had procured them from M/s Heimann since they offered us the most competitive rates.

1. We have no other interest in the matter since it was a onetime activity for us.

2. Exporters Views

1. M/s Heimann Systems GmbH has furnished a response to the exporters questionnaire and furnished a non-confidential summary thereof.
2. All orders result from consultations with customers, either directly by Heimann's sales force, through enquiries from customers, or pursuant to international tenders. Heimann's sales process then follows the procedures laid down in the Quality Management Handbook according to ISO 9001 certification.
3. The procedures take into account different specifications, environmental conditions, standard versus special equipment, export regulations, financial terms and conditions and delivery terms and conditions.
4. The investigation into highly sophisticated products such as XBIS creates substantial problems

1. ECIL Rapiscan Ltd. is related to and under control of OSI Systems Inc. as 51% of the shares are held by OSI Systems Inc. ECIL Rapiscan Ltd. (ECR) is not a domestic manufacturer/producer in India and hence do not have any right to file the petition. ECIL sources major components and technology from OSI Systems Inc./Rapiscan.
2. The manufacturing activity in India is carried out by ECIL and not by ECR.
3. Historically, ECIL Rapiscan Ltd has maintained a virtual monopoly on the sale of XBIS on the Indian market. As a result, price levels of XBIS machines in India were above the levels prevailing elsewhere in the world. At present, the market in India for XBIS is composed of two segments: (1) the closed market reserved solely for the petitioner, including sales to the police and military; (2) the non reserved market in which other suppliers have very recently been given limited access through international tenders.
4. ECIL Rapiscan Ltd is not eligible for anti dumping protection because it lacks standing under Indian law. ECIL is the only manufacturer of XBIS in India.
5. ECIL Rapiscan Ltd is related to exporters of the like product. Rapiscan exports technology and XBIS kits to India for final assembly by ECIL and may also export completely, assembled XBIS machines.
6. ECIL Rapiscan Ltd is related to importers of the like product.
7. This investigation was initiated based on a prima facie finding of dumping based exclusively on an alleged price quoted by Heimann in the course of a tender in Brazil in late 2001.The machine actually sold pursuant to the tender was a 6030di an entirely different model from the 6040d alleged in the petition. This model not only has a different tunnel size than the model under investigation, but also contains a number of enhanced technical features specifically requested by the Brazilian customer. If the machine sold pursuant to the Brazilian tender had been a model 6040d, the compariability to the model under investigation, 6040I would necessitate numerous adjustments.
8. Injury - The media reported in October 2001, following the loss of the AAI tender, that the petitioner projected a sales target of USD 9.2 million for the 2001-02 financial year, compared to USD 5.3 million in the previous year. The petitioner appears entirely inconsistent with the petitioners public statements regarding its sales projections and profitability. Capacity and employment do not indicate any material injury. The petitioner has provided no information on price under cutting. Any allegation, if true could not be sustained because such undercutting would be entirely attributable to the existance of monopoly prices in India. The prices at which Heimann sold XBIS in India were entirely consistent with the prices in competitive markets around the world. A single lost sale is insufficient to support a claim of material injury.

1. Customers preferred Heimann's machines to the petitioners because of superior quality and consequent lower security risks. The petitioner has described the tender process as follows: ' These tenders are evaluated under a two-tier system. The first evaluation is a technical evaluation and the second is financial/commercial evaluation. In all the technical evaluations, the product offered by the domestic industry has been considered at par with the product offered by other exporters'.

In fact, the petitioner statement either supports the termination of the investigation or emphasis the inaccurate and /or misleading nature of the petitioner submission. The magnitude with which Heimann's performance exceeded ECIL Rapiscan, is evidenced in the reports summary of the evaluation

Type of X-ray BIS	Expl	Knife	Wpn	IED
ECIL Rapiscan Ltd	26.60%	40.00%	66.70%	59.20%
Heimann System	90.50%	86.70%	93.30%	95.60%
Perkin Elmer	Nil	53.30%	80.00%	81.50%

2. The petitioner lacks standing to seek a remedy.
3. The petitioner has failed to provide any documentary evidence to support its assertion regarding the domestic contents of its machines.

B. Airports Authority of India: Written submissions:

1. The basis of petition is the supply of the systems by Heimann Systems GmbH. Wiesbaden, Germany to AAI pursuant to an order dt 23 April 2001 (AAI's response Annx 'B' at p. ***-***) on Heimann System Inc., Quebec, Canada for 28 Nos. Model 6040i at Unit Rate of US $*** and 11 Nos. Model 9075 Hi Trax at Unit Rate of US $*** (exclusive of Customs duties and other taxes) and a repeat order dt 3 Oct 2001 (Annx 'D' at p. ***) on Heimann Systems (Asia Pacific) Pte Ltd., Singapore for 14 Nos. Model 6040I and 5 Nos. Model 9075 Hi Tax. (Invoices and Bills of Lading and related documents are furnished at p. ***-*** and p. ***-***).
2. It may be stated that AAI has thereafter issued a Global Tender notice on 27 May 2002 inviting item rate tenders for the supply of XBIS machines at various Airports in India and which is due to being submitted upto and to be opened on 19 July 2002.
3. In the Initiation Notificiation it is stated that the petitioner has claimed normal value in EU (Germany) on the basis of M/s Heimann prices as quoted to Brazil Government Postal Service in the international tender of the Brazil Postal Services for requistion of X-Ray equipment dated 10/2001 for model 6040d which is the same model as 6040I with minor modification for the customer and and 9075. Heimann quotation is for model 6040d which is not the model supplied to AAI. Specifications and main features and characteristics of the particular model 6040d as quoted or supplied to Brazil Government Postal Services are not furnished or made available to AAI nor Heimann's pricing and related conditions of sale so as to know or ascertain if it is a 'like article' and Heimann price as quoted for model 6040d is or could be 'normal value' in relation to the model as supplied to AAI.
4. Heimann has stated that the machine actually sold pursuant to tender to Brazil Postal Services was entirely different and the fact that the tender involved the sale of model 6030di to Brazil means that comparability to the 6040I under investigation in India is virtually impossible without a significant number of complex adjustments.
5. The purpose of an invitation to tender is to obtain from the contractor a firm offered capable of acceptance and hence of conversion into a binding contract. A tender is an offered, it is something that which invites an is communicated to notified acceptance. There is no obligation on the employer to accept the lowest or any tender.
6. Global tender call invites international competitive bids and does lead to competition and result in price reductions or reduced profit -margins and it also enables the buyer to get the best person and best quotation. There is no question of unfair competition or unethical trade practice. The goods exported to India are buyer-specific and related to specific orders placed pursuant to the tender. It is not intended to dump the goods in or placed goods on the market of the country of import in surplus or large quantities as unrelated to the actual demand and requirement for it.
7. In response to the relevant global tender call ECIL Rapiscan Ltd. had submitted its tender as offering the indigenous machine and the imported machine as on behalf of its principal Opto Sensors (M) Sdn. Bhd. of Malaysia (a subsidiary of OSI). The comparative statement of revised commercial with submitted by various tenderers and as opened on 16^th April, 2001 is given.
8. Prior to it, ECIL Rapiscan Ltd. has secured an order dated 12^th May, 1999 as placed on it by AAI pursuant to an earlier tender for supply of 27 Nos. model RAP 520 at unit rate of USD ***and 8 Nos. model RAP 526A at unit rate of USD ***/- which were exported to India as supplied by Opto Sensors (M) of Malaysia.
9. AAI placed a repeat order dated 7^th February, 2002 on ECIL Rapiscan Ltd. for supply of 5 Nos. model RAP 520 and 4 Nos. model RAP 526A which were also exported to India as supplied by Opto Sensors (M) of Malaysia.
10. In 1998 ECIL Rapiscan Ltd. had secured an order dated 27^th October, 1998 as placed on it by AAI for the supply of 5 Nos. model ECR 520 at unit rate of Rs. ***/- and one No model ECR 526A at unit rate of Rs. ***/-.
11. By virtue of OSI having ownership of or controlling voting power related to 51% equity shares and the covenants and conditions contained in joint venture agreement ECIL Rapiscan Ltd. is virtually an affiliated company or subsidiary of OSI and directly controlled by OSI both in relation to its management and business operations.
12. ECIL has not filed any application as domestic industry and, in any case, ECIL Rapiscan Ltd. is, firstly, itself an importer of the subject goods into India or supplier of imported goods in India and secondly, is related to OSI being the exporter of goods to India and having supplied the goods to AAI through OSI's subsidiary Opto Sensors (M) of Malaysia.
13. The levy of any anti dumping duty on the goods under consideration will eliminate the competition and prevent AAI from having access to available sources of supply.
14. On the date of the hearing held on 1/7/2002, it was observed that the AAI should clarify the difference between the models M/s Heimann Systems supplied to Brasil Postal Services 6040d and the model that was supplied to AAI 6040I and also the price difference. Hence, the Designated Authority may kindly furnish the said documents viz., the journal de Brasilia and its English translation publishing model of XBIS sold by M/s Heimann Systems to Brasil Postal Services with its pricing which are necessary to make submissions.

1. It is stated by Jet Airways that it had placed an order on Heimann Systems GmbH for procurement of 5 Nos. X-ray machines Model 6040I for carrying out secondary security checks at Mumbai Airport based on technical evaluation of the equipment provided by various manufactures and the evaluation team found that performance of Heimann System was superior to the other contenders i.e. EC IL Rapiscan Ltd. and Perkin Elmer, USA.
2. In the relevant Jet Airways Evaluation Report para 6(g) it is stated that: Out of the three machines tested, the performance of Heimann System was found to be the best in:

• Detection of Explosives
• Detection of Dummy weapons
• Detection of Knives
• Detection of IEDs
• Level of X-ray Penetration

3. AAI will rely on the submission of Jet Airways and the Evaluation Report submitted by it.

(C) Jet Airways (India) Pvt. Ltd.

1. Our Association with M/s Heimann Systems Ltd. stems from the fact that we have placed an order for procurement of 05 X-ray machines (HISCAN 60401) from the said company for carrying our secondary security checks at Mumbai Airport.
2. The said order on M/s Heimann Systems was placed based on technical evaluation of the equipment provided by various manufacturers in the Indian market i.e. M/s ECIL Rapiscan, M/s Heimann Systems Ltd. and M/s Perkin Elmer, USA. This evaluation was carried out by a committee comprising of three experts in the related security field. While two members were coopted from Jet Airways the trial team was headed by an expert on various X-Ray BIS, whose services were made available by the Commissioner of Security (CA).
3. The evaluation team found that performance of M/s Heimann Systems was superior to the other contenders i.e. M/s ECIL Rapiscan and M/s Perkin Elmer. Based on the above, the order was placed on M/s Heimann Systems. Pertinent to mention, that our decision was pre-dominantly based on the performance of the equipment in the Indian environment and not cost factor. A copy of the said evaluation report is enclosed. In the circumstances, we request you to kindly drop further proceedings in the matter.

D. Delegation of the European Commission: Written submissions

1. On the basis of the information available, the European Commission believes that the petition is not sufficiently substantiated and does not contain the required evidence to initiate an investigation.
2. The Designated Authority has failed to meet its procedural obligations, resulting in serious prejudice to European exporter's ability to defend itself, even at this early stage in the proceeding. These procedural deficiencies include: (1) failing to respond to the European exporter's timely request for an extension to submit its reply to the questionnaire; (2) according confidential treatment to documents that are clearly not of a confidential nature, such as newspaper excerpts; and (3) delaying access to the public file.
3. Furthermore, The Designated Authority determined that there was a prima facie case of dumping based exclusively on the petitioner's allegation relating to a sale in Brazil. This allegation however relates to a different product than was actually sold by the European exporter in Brazil and the initiation of the investigation is in violation of Article 5.2 (iii) of the WTO Anti-Dumping Agreement.
4. It should be noted that the petitioner is the single producer in India and that the imposition of anti-dumping duties will have significant competition effects that should be taken into account. In addition, in relation to the alleged injury, questions have to be raised regarding the economic efficiency of the petitioner since it is benefiting already from extremely high customs duty. Under these circumstances, any injury alleged by the petitioner is surely not caused by imports.
5. The European Commission is of the view that there is no sufficient evidence to grant the continuation of this investigation.

1. The present investigation was initiated based on prima facie evidence of dumping, injury and causal link.
2. The last date for responding to the Initiation Notification was 27^th May 2002. Vide letter dated 15^th May 2002, M/s Heimann Systems GmbH requested the Authority for an extension of the deadline to the questionnaire since a significant amount of information and data relating to sales and costs were required to be given. Due to a significant number of public holidays in Germany during May 2002 and the absence of key personnel, Heimann was experiencing delays in accessing relevant information and data necessary to respond to the questionnaire. In view of the said reasons, Heimann requested for an extension till June 14 2002 which was granted by the Authority. The additional time thus granted by the Authority was therefore an extension of 18 days.
3. The Authority is not aware of the nature of documents which were accorded confidential treatment. The Public File was kept open for inspection by all interested parties since the initiation of the investigations.
4. The Designated Authority determined that there was a prima facie case of dumping based on a sale in Brazil by M/s Heimann. This allegation related to the product under consideration, i.e., X-Ray Baggage Inspection Systems. The models sold in Brazil may however have been different from those sold by the exporter in India. As stated in the Initiation Notification, "M/s Heimann’s pricing in Brazil is accepted by the Authority for determination of normal value for purpose of initiation." The price to Brazil Postal Authority is the prima facie evidence available to demonstrate dumping. The burden of proof shifted to M/s Heimann Systems when it responded to the exporters questionnaire by providing details of their sale prices of like articles in European Union to enable the Authority to determine the dumping margin. The petition submitted was duly substantiated with evidence in respect of dumping, injury and causal link.

1. These inspection systems are normally bought under a tender system. The Airport Authority of India is a major consumer of these systems. In addition, Departments like Customs, Police, Museums, TTD, security agencies, etc. purchase these machines for their use. The specification of the is clearly indicated in the tender documents by the buyer. The exporter as well as the domestic industry quote against such tenders. These tenders are evaluated under a two-tier system. The first evaluation is a technical evaluation and the second is financial/commercial evaluation. In all the technical evaluations, the product offered by the domestic industry has been considered at par with the product offered by other exporters. This demonstrates, beyond doubt, the fact that the article produced domestically is the same as the article under investigation for being dumped.
2. During the oral hearing, the representatives of AAI as also the Department of Customs categorically stated that the XBIS offered by the domestic producer are like articles to those offered by the exporters. In view of the above, there is no issue with regard to the product under consideration and like article.
3. Standing of the domestic industry - it is pertinent to note that the term 'domestic industry' has not been defined to mean that the like article has to be produced solely or exclusively by the producer. The law recognises the fact that a domestic producer may produce a like goods either by himself or may get it manufactured either wholly or in part. The concept of supporting manufacturers or manufacture on job work basis is very well known and recognised in law. In this case, ECIL Rapiscan Ltd. is engaged in the manufacture, marketing, sale, after-sale service, etc. of the XBIS systems. Of all these activities, presently it is getting the systems manufactured by ECIL on job work basis. Article 2.4 of the joint venture agreement clearly indicates that the general business purposes of the company, inter alia, shall be to arrange for the manufacture, assembly and testing the product in India. Article 7.1 dealing with manufacture of products very clearly provides that ECIL has agreed to manufacture the product for and on behalf of ECIL Rapiscan Ltd. The said article further enables ECIL to sub-contract sub- assemblies of the products to other manufactures. Thus, the concept of manufacture or domestic producers does not contemplate that the entire manufacture or production should be carried on by the person making the application. The said article further recognises the fact that ECIL which manufactures the product for and on behalf of the joint venture company will not sell the product to any person or entity other than the joint venture company. As a measure of abundant caution, the petitioner has already placed on record the express support through the application by ECIL.
4. ECIL Rapiscan Ltd.is an Indian company, formed and registered under the Companies Act, 1956. It is not a foreign company. It is immaterial as to whether the whole or a majority of the shares are held by a foreign company. So long as the manufacturing operations are undertaken in India by a company registered in India, it will be treated as a domestic producer.
5. ECIL Rapiscan Ltd. is not related to the exporter of the like product. In fact, the like product is not at all imported into India. The like product is manufactured, assembled and tested in India. Some of the components and parts are imported from Malaysia. If we consider the final value of the manufactured products, including the value added by ECIL during the manufacturing process, the ratio of imported components to the total value will not be more than 50%. Further, the imports are effected from Malaysia and not from EU. As has been settled by the Hon.ble Cegat in Sterlite Industries Ltd. vs. Designated Authority, only the import of the like article from the countries under investigation may disqualify a domestic producer from being a part of the domestic industry. This is not the case here.
6. ECIL Rapiscan Ltd. or ECIL do not import the complete machines. Hence, ECIL Rapiscan Ltd. cannot be said to be related to importers of like articles which are Government agencies like Airport Authority of India, Indian Airlines, Customs Departments, etc.
7. The parts and components imported for the manufacture of XBIS are assessed by the customs not as a baggage system but as parts and components. ECIL procured other components indigenously and adds value resulting in the manufacture of the baggage system. On the system so manufactured and sold to ECIL Rapiscan Ltd., ECIL pays excise duty. This itself clearly shows that the activity undertaken by the job worker amounts to manufacture. Hence, the import of parts and components cannot be treated as import of the finish system itself. In view of all the above, all the submissions of Heimann System on the standing issues deserve to be discarded.
8. Unlike other industrial products, these are products which are procured mainly under the tendering system. The baggage system are not like commodities that are manufactured according to normal production duties which are then sold. These are manufactured, according to the specifications indicated in the tender, after the order is obtained. The loss of a single tender for a substantial number of system is the indicator of injury to the domestic industry in such cases. To illustrate, AAI had invited a tender for purchase of 220 numbers of these baggage systems which is estimated to meet the requirement of AAI for a period of about 2 - 3 years. If this order is lost because of the dumped price, then the entire market is lost for a period of 2-3 years.

1. It is true that the objective of global tendering is to ensure procurement of the best equipment at most competitive price. The issue is regarding 'most competitive price'. The said price should be a 'fair price' and not 'dumped price'.
2. Heimann is the exporter who had quoted to the Brazilian Authority and quoted to AAI. They have the full knowledge of the product offered to these Authorities and the differences, if any. We rely on the decision of the Hon'ble Supreme Court in Designated Authority vs. Haldor Topsoe. In this case, Haldor Topsoe did not make available the information about export prices of their catalysts to third countries. Haldor Topsoe insisted that the normal value should be determined on the basis of cost of production plus profit. The Hon'ble Supreme Court rejected this contention and held that Haldor Topsoe was in the best position to make available information regarding their sale price to third countries. Withholding of this information disqualify them from seeking relief before the Designated Authoirty. Applying the ratio of the above decision, Heimann is in the best position to highlight to the Authority the product offered to the Brazilian Postal Authority and to the AAI, the differences between the two, the adjustments that are required to be made in order to make the two comparable etc. We submit that the price to Brazil Authority is the prima facie evidence available to demonstrate dumping. Once Heimann cooperates, the burden of proof shifts to the exporter who should provide details of their sale prices of like articles in European Union to enable the Authority to determine the dumping margin. It is only in the absence of any sales of the like product in EU that the export price to third countries becomes relevant. The non confidential version of their response is blank. In fact they should be treated as non cooperative on this account alone, as has been done by the Designated Authority in other cases.
3. The allegation that the case was filed exclusively for competitive reasons is incorrect. The investigation is to provide a level playing field and to restore fair competition and not to kill competition. The submission is that there is no question of unfair competition in a global tender is incorrect. Even in global tenders, dumping takes place.
4. In regard to injury we reiterate the submissions contained in paras 23 to 25 of a written submissions dated 15^th July, 2002. The submissions regarding the supply of the systems in 1999 have no relevance for the purpose of investigations. Similarly, the reference to the various clauses of the joint venture agreement have no relevance to the investigations and in any case have been dealt with extensively by us in a written submissions. The submissions that levy of anti dumping duty will eliminate competition is again incorrect. Anti dumping duty is only to restore fair competition and no eliminate competition.
5. It is seen from the submission of Jet Airways that performance of the equipment and cost factor are the two factors that had gone into the selection of the particular system. We are concerned here with the price factor which is the determinant factor in the anti dumping investigation. Jet Airways have not indicated the price at which they have procured the system. In the absence of this crucial information, the submission of Jet Airways should be rejected. The other observations are general in character and do not in any way support to the request for dropping their proceedings.
6. Jet Airways have enclosed an evaluation report. This evaluation report was made by their own team and cannot be considered as laying down norms for evaluating X-Ray Baggage Inspection Systems. The evaluation was conducted at different places. The test parameters were not intimated in advance. The recording of the observations was done by the team and was not endorsed by the suppliers. Be that as it may, the crucial factor is the price, about which information has not been given.

1. The submissions made by the petitioner,exporter 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.

D. PRODUCT UNDER INVESTIGATION

6. The product under investigation in the present case is ‘X-ray Baggage Inspection Multi Energy System’ (XBIS). It is used for detection of explosives, firearms, narcotics and contra band at port of importation, security agencies and airports. There is no substitute available to XBIS. The petition is against alleged dumping of two models viz., Heimann Models HS6040i and HS9075i and four ranges of size (tunnel dimension) width x height as given below:-

Width	Height
(a) 600 to 700 mm	400 to 550 mm
(b) 700 to 1000 mm	550 to 850 mm
(c) 1000 to 1200 mm	800 to 1200 mm
(d) 1200 mm and above	1200 mm and above

‘X-ray Baggage Inspection Multi Energy System’ (XBIS) is classified under Customs sub-heading no. 90.22.19 of the Customs Tariff Act, 1975 and the ITC classification is 90.22.1901. The classification is however indicative only and in no way binding on the scope of the present investigations.

E. LIKE ARTICLES

7.The petitioner has claimed that technically Indian manufactured products are more superior to the imported products and are adapted for local environment and handling. The comparable models of ECIL – Rapiscan and Heimann which are alleged to be dumped are as follows:

Heimann Model	Comparable ECIL –Rapiscan Model	Size (tunnel dimension) width x height approx.
HS6040 i	ECR520	60cm x 40cm
HS9075 i	ECR526A/B	90cm x 75cm

In the absence of any arguments on like article by any interested party, goods produced by the petitioner are being treated as Like Articles to the goods imported from the subject country within the meaning of the Rules.

For the purpose of initiation, the petitioner had claimed normal value in European Union (Germany) on the basis of M/s Heimann Systems GmbH prices as quoted to the Brazil Government Postal Service in the International Tender of the Brazil Postal Services for the acquisition of X-Ray equipments for model 6040d (which is claimed to be the same model as 6040i with minor modification for the customer by the petitioner) and 9075. As evidence of dumping M/s Heimann’s pricing in Brazil as published in The Journal De Brasilia and its English translation were enclosed in the petition. M/s Heimann’s pricing in Brazil was accepted by the Authority for prima facie determination of normal value for purpose of initiation. As per the request of the AAI, M/s Heimann’s pricing in Brazil as published in The Journal De Brasilia and its English translation were treated as 'non-confidential' by the petitioner and placed in the public file.

Confidential submissions were thereafter made by M/s Heimann Systems vide their letter dated 13^th July 2002 wherein they have submitted details of the differences in the models supplied to Brazil and to Airports Authority of India. M/s Heimann Systems was requested by the Authority vide letter dated 19^th August 2002 to treat the submissions as non-confidential so that they could be placed in the public file for eliciting the views of interested parties. The Authority notes that no response in this regard was received from M/s Heimann Systems.

The Authority however notes that the issue in the present investigations, is that of comparison between the models produced and sold by the petitioner with those exported to India from the EU, as given in the exporter's response. The Like Article is therefore the comparable models manufactured by the petitioner of XBIS 6075i and 9075, which have been sold in the domestic market in EU and imported by Airports Authority of India during the period of investigations. The Authority notes that M/s Heimann in their confidential response to the exporters questionnaire have not furnished details of the technical specifications of the product sold to India i.e., 6040i and 9075. However, no interested party has stated that the models exported to India are not like articles to those manufactured by the domestic industry.

The petitioner has stated that the users normally indicate a range of tunnel sizes in notices inviting tenders so that a number of manufacturers and models could participate and compete for the order. It is also a practice among various producers to give different model numbers or model names even if the tunnel sizes vary marginally. Therefore, all models of XBIS machines should be treated as like articles for the purpose of this investigation.

The Authority notes that for Indian Airports, Bureau of Civil Aviation (BCAS) lays down the standards for security applications. They are derived mainly from ICAO standards followed by member countries. In the tender invited by the AAI during the period of investigations, two models of XBIS were involved i.e., 6040i and 9075. The Authority notes that there is a tender process involved in the purchase of the subject goods and therefore the technical specifications as laid down are required to be complied with by potential suppliers. The technical specifications of the subject goods and the purchase procedure through tender do not indicate ease of product substitutability by users; in this case the major user being the Airports Authority of India. The AAI in its submissions has indicated that with the change in the dimensions of the machine there is difference in detection circuitry and added specifications (such as input motorised conveyor and output chute) and increased tunnel size, software for TIP facility and input and output roller facility contribute to higher cost. The Authority notes therefore that there are technical differences on account of differences in value added features and penetration and resolution differences between various models. The difference in price is on account of differences in built-in value added features depending on the requirement of each system/tunnel range. The difference in the price of 6040 and 9075 models which are the subject matter of the present investigation is USD *** or Rs ***/. This difference is not only account of tunnel size but on account of difference in zoom facility (upto 16x for Heimann Systems) and (upto 8x for ECIL). The present investigation is therefore restricted to the two models of XBIS i.e., 6040i and 9075 which were imported during the period of investigations of corresponding tunnel sizes indicated in Para D for the purpose of these preliminary findings.

In order to establish that XBIS produced by the domestic industry is a Like Article to that exported from EU, 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 XBIS produced by the domestic industry has characteristics closely resembling the imported material and is substitutable by XBIS imported from the subject territory both commercially and technically. XBIS produced by the domestic industry has been treated as Like Article to the product exported from EU within the meaning of Rule 2(d).

8. The petition has been filed by M/s ECIL –Rapiscan Limited, Secunderabad, which is a joint venture between Electronic Corporation of India Ltd. (ECIL) Hyderabad, a Government of India Public Sector Undertaking and Opto Sensor Inc. (Rapiscan) USA.,. M/s Opto Sensors Inc. (OSI), California, USA and Electronics Corporation of India Ltd. (ECIL) entered into a joint venture agreement to inter alia organise a limited liability joint stock corporation under the laws of India to manufacture, assemble, test, market, sell and service single and multi- energy X-ray Baggage Inspection Systems, explosive detectors, walk through metal detectors and related security products. The general business purposes of the company ECIL –Rapiscan Limited as given in Article 2 of the joint venture agreement is to : (i) arrange for the manufacture, assembly and testing of the products ( as defined above) in India, (ii) market and sell the product throughout the Territory (iii) service the products sold throughout the Territory, and (iv) engage in such other activities as may be incidental or necessary to the foregoing.

The petition has been filed by ECIL Rapiscan Ltd. (ECR). Under the joint venture agreement, ECR is required to provide ECIL with the components necessary for ECIL to manufacture the products. ECR is also required to test, market, sell and service the product. Therefore, the petitioner gets the machines manufactured from ECIL and the entire production of XBIS by ECIL is for and on behalf of ECR. ECIL is the only manufacturer of the subject goods in India and has supported the present petition.

Rule 2 of the Anti - Dumping Rules defines domestic industry as follows:-

"domestic industry" means the domestic producers as a whole engaged in the manufacture of the like article and any activity connected therewith or those whose collective output of the said article constitutes a major proportion of the total domestic production of that article except when such producers are related to the exporters or importers of the alleged dumped article or are themselves importers thereof in which case such producers may be deemed not to form part of domestic industry."

As stated above, ECR is required to arrange for the manufacture of the subject goods by providing ECIL with the components necessary for ECIL to manufacture the products. ECR is also required to test, market, sell and service the product. The entire production of XBIS by ECIL is for and on behalf of ECR. The Authority also notes that M/s ECIL Rapiscan/M/s ECIL are not related to the exporters or importers of the alleged dumped article and are themselves not importers thereof.

The Authority notes therefore that the petitioner constitutes "domestic industry" and has the required standing to file the present petition under the Rules.

8. DUMPING

9.The Authority sent questionnaires to the known exporter from the subject territory in terms of section 9 A (1). M/s Heimann Systems furnished a response to the exporters questionnaire.

(i) NORMAL VALUE

The exporter has stated that the data for sales in the home market is provided for Germany and for all other sales in the EU. This distinction is critical because sales in Germany are for machines that have different characteristics and value-added items and services to the machines sold elsewhere in the EU. The exporter has not given the Factory cost and profit of domestic sales as per Appendix 9.

Grade 6040 - The Authority notes that the selling price in Germany is E*** and the selling price in Europe is E***. No discounts/commissions have been paid. The Authority has considered the selling price to EU to ensure a fair comparison between sales to India and sales in the home market.

The manufactured price is stated to be E*** and the selling price E***. The charges after ex-factory are on account of packing E***; and inland freight E***. Overseas freight and insurance are included in freight. No break-up has been provided on these accounts. After considering the adjustments on the aforesaid the total cost comes to E***.

The price variations after manufacture are (i) 2 year service support which includes all parts, labour and help line which is ***% of contract at E ***; (ii) 2 year warranty at ***% E***; (iii) *** week delivery (cost to stock and material holding )@***%- E***; (iv) 24 emergency repair contract calculated at ***% of contract - E***; adjustment on account of variation in specification E ***. The total adjustment cost on account of price variation is E ***.

The ex-factory normal value level is therefore considered to be E*** for the purpose of these provisional findings and subject to verification.

The Authority notes that details of the contract on the basis of which these adjustments have been claimed have not been made available. Details/information on the variation in specification are also not available. These adjustments are therefore considered for the purpose of these provisional findings and subject to verification.

Grade 9075- The Authority notes that the selling price in Germany is E*** and the selling price in Europe is E***. No discounts/commissions have been paid. The Authority has considered the selling price to EU to ensure a fair comparison between sales to India and sales in the home market.

The manufactured price is stated to be E*** and the selling price E***. The charges after ex-factory are on account of packing E***; and inland freight E***. Overseas freight and insurance are included in freight. No break-up has been provided on these accounts. After considering the adjustments on the aforesaid the total cost comes to E***.

The price variations after manufacture are (i) 2 year service support which includes all parts, labour and help line which is ***% of contract at E ***; (ii) 2 year warranty at ***% E***; (iii) *** week delivery (cost to stock and material holding) at ***%- E***; (iv) 24 emergency repair contract calculated at ***% of contract - E***; adjustment on account of variation in specification E ***. The total adjustment cost on account of price variation is E ***.

The ex-factory normal value is therefore considered to be E *** for the purpose of these provisional findings and subject to verification.

The Authority notes that details of the contract on the basis of which these adjustments have been claimed have not been made available,. Details/information on the variation in specification are also not available. These adjustments are therefore considered for the purpose of these provisional findings and subject to verification.

(a) Grade 6040- The exporter has sold 42 units to AAI and 3 units to GE Capital of Grade 6040. The factory cost of exports as stated in Appendix 8 is USD *** or E ***. The contract price to AAI is E***. After ***% sales commission (E ***) the sales price comes to E ***. The selling price to GE is E***. After ***% sales commission (E ***) the sales price comes to E***. The average price of AAI and GE before commission is E *** and after commission is E***.

Grade 6040 AAI- The manufactured price is stated to be E*** and the selling price E***. The ex-factory cost is E***.

Grade 6040 GE- The manufactured price is stated to be E*** and the selling price E***. The ex-factory cost is E***.

As the adjustments on account of overseas freight and for 2 year warranty vary for sales of this model to AAI and GE, the Authority has considered the weighted average ex-factory price for 6040 which is E*** for the purpose of this preliminary findings and subject to verification.

(b) Grade 9075 - 16 units of this grade have been sold to AAI. Price adjustments for this grade have been given in Appendix 4. The factory cost of exports as per Appendix 8 has not been given. The export price for 9075 is stated to be E***. After sales commission of ***% the selling price comes to E ***. The adjustments include packing cost at E***, inland freight at E*** before fob and overseas freight at E***. The total cost on account of the above comes to E***.

The adjustments for fair comparison include (I) 2 year warranty at ***% or E***; (ii) specification variation -E***; (iii) others - E***.

The exporter has not elaborated on the costs which have been included under 'others'. After considering the above costs excluding 'others', the ex-factory export price comes to E*** for Grade 9075 purposes of this preliminary findings and subject to verification.

(iii) Dumping margin

10.The dumping margins are as follows:-

The Authority notes that the margin of dumping and quantum of imports from the subject territory 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.

1. Quantum of Imports

Quantity (nos.)

Countries	1999-2000		2000-01		POI
	Qty	Value	Qty	Value	Qty	Value
Total imports	38	***	26	***	61	***
EU	31	***	13	***	61	***
Others	7	***	13	***	0	0

For the purpose of analysing the volume of imports the import data published by DGCIS was considered for the years 1999-2000 and 2000-01. Information based on market intelligence was used for the period of investigation. The imports during the period of investigation based on market intelligence was corroborated by non-confidential submissions of M/s Heimann Systems also.

The increase in the dumped imports of XBIS was from 13 units during the year 2000-2001 to 61units during the POI, registering an increase of over 369%. The dumped imports therefore registered significant increase in absolute terms. During the POI, 12000% of the imports into India were dumped imports whereas during 2000-01, only 50% of the imports were dumped imports. This shows that dumped imports have completely wiped out competition from other sources.

1. Production and Capacity Utilisation

The production capacity, actual production and capacity utilisation of the petitioners declined significantly as shown in the table below : -

Petitioners	1999-2000	2000-01	POI
Installed Capacity (no. of units)	100	100	100
Production (no. of units)	18	56	18
Capacity Utilisation %	18%	56%	18%

2. Sales and Market Share

	1999-2000	2000-01	POI
Sales (no. of units) of petitioner	63	60	25
Demand	101	86	86
Share of dumped imports %	30.69%	15.11%	70.93%
Share of petitioner %	62%	70%	29%

The domestic sales volume of the petitioner declined significantly from 63 units in 2000-01 to a mere 25 units in the POI.

3. Price undercutting and price depression

Rs/lacs

	Sales realisation of domestic industry for comparable models	Landed Price of Imports EU		Price undercutting
				Amount	%
ECR 520	***	6040	***	***	41.34%
ECR 526A	***	9075	***	***	39.27%

As shown in the table above, dumped imports undercut the prices of the domestic industry severely by 41.34% in one model and by 39.27% in another model. In the face of such severe price undercutting, the domestic industry was faced with two options i.e., either to match the low prices of dumped imports and retain volume of business or maintain/increase prices but lose volume of business. Since the domestic industry had suffered huge loss in the previous year it could not afford further losses. Therefore the domestic industry kept prices at break-even levels and in the process lost 57% of the total volume of business.

1. Profitability:-

The domestic industry had made a loss of Rs *** lacs (***%) on a turnover of Rs *** lacs during 2000-01. It earned a profit of Rs *** lacs (***%) on a turnover of Rs *** lacs during the POI. The price increase was just sufficient to break-even. Thus the profitability changed from minus 7% to plus 2.6%. For earning this marginal profit of 2.6% the industry lost 57% volume of business.

Rs (lacs)

f. Actual and potential decline in sales

As stated earlier, the domestic sales volume came down from 58 units in 2000-01 to a mere 25 units during POI. Thus, there was a significant decline in sales volumes.

g. Profits

The domestic industry had made a loss of Rs. *** lacs (***%) on a turnover of Rs. ***lacs during 2000-01, it earned a profit of Rs. *** lacs (2.6%) on a turnover of Rs. ***lacs during POI. Thus, the profitability changed from minus 7% to plus 2.6%. For earning this marginal profit of 2.6%, the industry has lost 57% volume of business.

h. Output

The output of the domestic industry was 56 units during 2000-01. It came down to a mere 18 units during POI. The decline was a staggering 68% during POI.

i. Return on investments or utilisation of capacity

With the existing manpower and other resources at its command, the domestic industry could produce upto 100 units in a year. They have produced only 18 units during POI. The capacity utilisation is a paltry 18%, if they could increase the capacity utilisation, their return on investment will also increase. As of now, due to low capacity utilisation, the return on investment is also very low.

j. Factors affecting domestic prices

The market for XBIS Systems in the world is highly competitive. Globally, there are only two competitive products - one is from Rapiscan and the other from M/s Heimann. M/s Heimann has been quoting rock bottom prices in the tenders floated by various customers in India. The domestic industry is required either to quote still lower prices or lose the sales volume. Unfortunately, the domestic industry is not in a position to reduce the prices to the ridiculous levels quoted by M/s. Heimann. Therefore, it is losing sales volumes quite significantly. There are no other factors that affect domestic prices to a significant extent.

k. Magnitude of the margin of dumping

The dumping margin projected in the petition shows 393% for one model and 535% for another model. Therefore, the magnitude of the margin of dumping is astronomically high and has caused severe injury to the domestic industry.

l. Cash Flow

The sales revenue of the domestic industry in the year 2000-01 was Rs. 15.17 crores. It came down to Rs. 6.45 crores during POI. Such a significant fall in sales revenue has obviously affected the cash flow of the domestic industry.

n. Employment

There is no reduction in the manpower employed by the domestic industry. However, they are being forced to sit idle for want of orders.

o. Wages

Being units in the public sector and joint sector, wages are not dependent on the volume of business or profits. Therefore, it is not relevant for the determination of injury.

p. Growth

The market for XBIS is poised to grow significantly in the existing security-conscious environment. The risk perception of various public and private authorities have undergone tremendous change after various civilian casualties and threat to civilian and other targets. Therefore, there is a huge potential for growth. Yet there are no signs of vitality in the sole domestic producing unit. The sales volumes of the domestic producer has fallen due to dumped imports. It is necessary to protect the domestic industry against unfair price competition from the EU or else India may have to depend only on imports for meeting the requirements of essential security related equipment.

q. Ability to raise investments

This is not a very capital intensive industry. What is required is substantial working capital and not fixed capital. Therefore, this parameter is not relevant for this industry.

K. CONCLUSION ON INJURY

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

1. the quantum of imports from the subject territory have increased in absolute terms;
2. the market share of the petitioner has gone down while that of imports has increased;
3. the petitioners have lost significant sales volumes;
4. imports have undercut the prices of the domestic industry.

L. CAUSAL LINK

12. The Authority holds that the material injury to the domestic industry has been caused by imports from the European Union which has been the only supplier of XBIS to India during the period of investigations. The dumped imports increased from 13 units to 61 units causing the domestic industry output to fall from 56 units to 18 units. Thus the volume effect of dumped imports is clearly established. In examining the price effect, the Authority notes that import prices from the subject territory have undercut the prices of the domestic product and the domestic industry has lost significant sales volumes due to dumped imports. The material injury to the domestic industry was therefore caused by the dumped imports from the subject territory.

13. 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.

14. 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 XBIS. Imposition of anti-dumping measures would not restrict imports from the subject countries in any way, and therefore would not affect the availability of the product to the consumers.

15. 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 XBIS in India for the domestic industry, by considering the optimum cost of production at optimum level of capacity utilisation for the domestic industry.

16. The petitioner has requested for an ad valorem rate determined for model 6040 to be applied to all models falling within this tunnel range. Similarly, they have requested for the ad valorem rate determined for model 9075 to be applied for all models falling within this tunnel range. They have requested for a weighted average rate of the first two ranges in respect of the remaining two ranges of tunnel sizes. For reasons cited in Para E, since the present investigation is restricted to the two models of XBIS i.e., 6040i and 9075 which were imported during the period of investigations of corresponding tunnel sizes indicated in Para D, the Authority has not considered the application of an ad valorem rate for the purpose of these preliminary findings.

17. A copy of the judgement by the Hon'ble High Court of Delhi in C.W.P. No. 6615/2002 filed by M/s ECIL Rapiscan Ltd. vs. Union of India and another and C.W.P. No. 7240/2002 filed by Rapiscan Security Products (USA) Inc. vs the Union of India and Ors. was provided to the Authority on behalf of M/s Heimann Systems (Asia Pacific) Pte. Ltd.

In the CWP, M/s ECIL Rapiscan Ltd. had challenged the rejection of its bid for supply of 220 colour XBIS X-Ray Baggage Inspection Systems and award of contract in favour of M/s Heimann Systems (Asia Pacific) Pte Ltd., Singapore. The Hon'ble High Court has noted that the Airport Authority of India issued Notice Inviting Tender (NIT) published on 20^th November, 2001 for the supply of 145 colour XBIS. However, this was cancelled on 6^th March, 2002. Thereafter, another NIT dated 7^th June, 2002 was published for supply of 220 colour XBIS. The Hon'ble Court has noted that after the events of 11^th September, 2001 (attack on twin towers of WTC, New York) and attack on Parliament on 13^th December, 2001, the Ministry of Civil Aviation sent a communication to the Chairman of AAI and stated that keeping the quantum jump in the perception of level of threat to Aviation Sector the present process of global NIT was required to be quashed and the technical parameters reviewed at the level of Member (Ops). AAI and COSCA, BCAS and then AAI may go in for fresh open global NIT. The Bureau of Civil Aviation Security (BCAS) discussed and finalised the revised specifications for XBIS in a meeting where M/s ECIL Rapiscan was also present. As the Government of India finalised revised specifications on the basis of the recommendations in the aforesaid meeting, earlier NIT was cancelled and fresh published 7^th June, 2002. The Hon'ble Court has noted that the revised specifications were to the knowledge of petitioners, same were even finalised in the meeting wherein representatives of the petitioners deliberated.

The Hon'ble Court has noted that the tenders were to be submitted in two parts, viz. technical bid and financial bid. Technical bids were to be opened and evaluated in the first instance. Financial bids of only those bidders were required to be opened who qualified in technical evaluation.

It has been mentioned in the judgement that ED (Tech) had also constituted a committee of three officers of the rank of GM, Addl. GM and Assistant G.M. respectively for scrutinising the documents/clarifications submitted by the tenderers which clarifications were obtained after the initial evaluation done from 30^th July to 1^st August, 2002. This committee submitted its report on 20^th August, 2002 of all three categories of Systems, namely, hand baggage (category A), Registered baggage (Category B) and Cargo (category C). In respect of hand baggage machine offered by the petitioners this committee remarked:-

"X-Ray machine for hand baggage (Category A)

Four firms offered this category of machine.

9. The machines offered by M/s Heimann and M/s Control Screening meet all the NIT requirements;

(ii) The machines offered by M/s ECIL Rapiscan meets all NIT requirements except the following:

1. Penetration of Steel is below the specified requirement of "more than 25 mm thickness" as mentioned against S.No. 5.
2. Does not fully meet NIT requirement of ISO 9001 certification (S.No. 21).
3. Regarding the requirement of alarm generation in case of failure of machine to penetrate a particular item (S.No. 16), through the firm has claimed compliance yet there is no specific mention in the tender document/brochure about any audible/visual alarm to alert the operation except that the particular area shall be shown in black colour.

3. The machine offered by M/s Rapiscan complies with the NIT requirements, however, the observation made regarding alarm generation at para ii © above in respect of ECIL Rapiscan machine is applicable here also."

The Hon'ble Court has noted that para 29 of the judgement that "On our direction, respondent No. 2 (AAI) had produced the records for our perusal. These records show that as per the committee report, following salient points were observed:

1. While M/s Heimann Systems could pass single wire resolution up to 40 SWG against NIT requirement of 38 SWG all other three machines failed to meet the specifications.
2. NIT specifications for penetration is greater than 25 mm M/s. Heimann Systems could pass this test up to 28 mm penetration while other three makes could not show penetration of 25 mm steel.
3. For detection of explosives M/s Control Screening does not have ADX facility.
4. Threat Image Projection (TIP) facility is not available on line in M/s ECIL Rapiscan, M/s Rapiscan and M/s Control Screening equipments whereas the facility is available in the machine of M/s Heimann Systems.
5. In case of M/s Control Screening colour discrimination for various objects is not clearly visible.
6. Feedback/report is not available with M/s Control Screening equipment."

The Hon'ble High Court has stated that as per petitioners own showing their systems could penetrate up to 25mm steel which obviously means not 'greater than 25mm thickness steel'. Therefore when AAI found that systems offered by M/s Heimann Systems (Asia Pacific) Pte. Ltd. to be better than that of petitioners and placed orders on M/s Heimann for supply of such system this action cannot be faulted with. The Hon'ble Court has noted that no specific allegations of malafides are made in the writ petitions. It is not alleged that any person had interest in favouring M/s Heimann Systems or had any animus qua petitioners. Contract was awarded to M/s Heimann who was the only party left in the fray that too at much higher rates. The Hon'ble Court concluded that the writ petitions were without any merit and dismissed them.

The Authority has noted the aforesaid contents of the judgement of the Hon'ble High Court of Delhi for the purpose of these preliminary findings.

N. LANDED VALUE

18. The landed value of imports is determined on the basis of export price of XBIS 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) XBIS described under para 6 originating in or exported from EU has been exported to India below normal value, resulting in dumping;

(b) the domestic industry has suffered material injury;

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

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. 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 XBIS of the models/categories of tunnel sizes indicated in the table below, originating in or exported from EU, falling under customs sub-heading no. 90.22.19 of the Customs Tariff Act, 1975 and the ITC classification is 90.22.1901.,, pending final determination. The anti-dumping duty recommended shall not cover the XBIS with the following technical parameters :-

1. XBIS machines having steel penetration greater than 25mm thickness;
2. XBIS machines having audio and visual alarm in case of failure of machines to penetrate a particular item;
3. XBIS machines having Threat Image Protection (TIP) facility without the requirement of rebooting;
4. XBIS machines having the capability of passing the single wire resolution test of 38 SWG and above.

The anti-dumping duty shall be the amount mentioned in Col.3.

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.