Response by Kumho and Lombard Tyres to the High Court Judgment on the termination of the Anti-Dumping investigation

RESPONSE BY KUMHO AND LOMBARD TYRES TO THE HIGH COURT JUDGMENT ON THE TERMINATION OF THE ANTI-DUMPING INVESTIGATION

1.            BACKGROUND

During 2005, the SATMC (South African Tyre Manufacturers) which represents Goodyear, Continental, Bridgestone/Firestone and Dunlop, lodged a complaint with ITAC (International Trade Administration Commission of South Africa.

The complaint lodged by the SATMC was for an Investigation into the alleged dumping of tyres originating in or imported from the People’s Republic of China (PRC).

The investigation was initiated through Notice No. 1913 in Government Gazette No. 28150 on 28 October 2005. The investigation period for dumping is from 1 January 2004 to 31 March 2005. The injury investigation involves evaluation of data for the period 1 January 2002 to 31 March 2005.

On 26 July 2006 ITAC presented  Report No. 182: INVESTIGATION INTO THE ALLEGED DUMPING OF TYRES ORIGINATING IN OR IMPORTED FROM THE PEOPLE'S REPUBLIC OF CHINA: PRELIMINARY DETERMINATION. In this report an INTERIM DUTY was imposed by ITAC on certain importers of tyres from the People`s Republic of China. The finding of the Commission was:

“The Commission made a preliminary determination that

• The subject products originating in or imported from the PRC and exported by Aeolus, Triangle, GITI and Shandong Chengshan were not being dumped onto the SACU market but that the subject products originating in or imported from the PRC and exported by the other manufacturers or exporters were being dumped onto the SACU market;

• the SACU industry suffered material injury and;

• there was a causal link between the dumping of the subject products and the material injury.

The Commission therefore decided to request the Commissioner for South African Revenue Service to impose provisional payments for 26 weeks on tyres, classifiable under tariff subheading 4011.10,4011.20.15 and 4011.20.25 in the following amounts:

PRC Amount of duty

All exporters (excluding Aeolus, Triangle, Giti and Shandong Chengshan)

Passenger           16.9%

Light truck           3%

Heavy truck        22.3%

These provisional payments should be the amount required to prevent further injury being experienced by the SACU industry as a result of further imports of tyres from other exporters at prices that constitute dumping during the course of the investigation before the Commission makes its final determination.”

ITAC then proceeded to verify the information supplied by all manufacturers and importers who co-operated with the investigation. These importers and manufacturers were:

Manufacturers:

(a) Triangle Tyre

(b) Shandong Chengshan Tyre

(c) GITI Tire

(d) Aeolus Tyre

(e) Shandong Linglong Tyre

(f) Kenda Tyre

(g) Nanjing Kumho

Importers:

(a) Continental Worldwide Development (Pty) Ltd

(b) Tubestone

(c) Malas Car Sales and Spares

(d) Whalinger

(e) A1 Wheel and Tyre

(f) Top Trailers

(g) Lombard Tyres

(g) Prideshelf 1116 CC

(h) Natric Motors

On 12 February 2007, ITAC released their final report:

Report No. 210: INVESTIGATION INTO THE ALLEGED DUMPING OF TYRES ORIGINATING IN OR IMPORTED FROM THE PEOPLE'S REPUBLIC OF CHINA: FINAL DETERMINATION

The main findings of ITAC were:

“7.1 Dumping

After considering the comments by interested parties, the Commission made a final determination that the subject product is not being dumped by Aeolus, Triangle and Shandong Chengshan in respect of heavy commercial tyres, by Triangle, Giti, Shandong Chengshan, Kenda and Kumho in respect of passenger tyres and by Triangle, Shandong Chengshan, Kenda and Kumho in respect of light truck tyres, but is being dumped by other exporters onto the SACU market.

7.2 Material injury

The Commission made a final determination that the Applicant suffered material injury in the form of price undercutting, price depression, price suppression, decrease in sales value, decrease in profit, decrease in market share, decrease in return on investment, decrease in cash flow, increase in inventories, decrease in production employment, lack of growth, decrease in sales volumes and decrease in output and capacity utilization.

7.3 Causal link

The Commission found that there are other factors that sufficiently detracted from the causal link between the alleged dumping and the injury experienced that would warrant not recommending the imposition of final anti-dumping duties and to terminate the investigation.”

As a result of the recommendation by ITAC, the Minister of Trade and Industry terminated the investigation. This meant that the interim duties paid by the importers were also terminated.

During 2007, the SATMC decided to approach the High Court with an Application to Review the decision of the Minister to terminate the Anti-dumping investigation.

This decision by the Minister is what is referred to as an Administrative decision. The law makes provision for a party who is not happy with an administrative decision, to have that decision being reviewed by a High Court.

The SATMC Application was mainly against The Minister, ITAC and all the importers and exporters who participated in the investigation (19 in total).

The basis of the SATMC application was that:

1.            ITAC did not do the investigation correctly; and

2.            The Minister’s decision to terminate the decision was also not correct.

On 18 June 2010 the North Gauteng High Court delivered judgment in this Application. Its findings were in essence the following:

a.            It will not interfere with the calculations of ITAC through which the margin of dumping was determined;

b.            The final determination by ITAC set out in Report 210; dated 12 February 2007 (That there was no dumping) was set aside;

c.             The recommendation of ITAC to the Minister of Trade and Industry to terminate the investigation was also set aside;

d.            The decision of the Minister to accept the recommendation of ITAC to terminate the investigation was also set aside.

The Court instructed ITAC to finalize its investigation within 4 (four) months. In these 4 months

ITAC has to determine the following:

a.            “Whether in the light of the prima facie evidence of government interference in the People`s Republic of China (PRC) there are valid reasons for a finding that the interference does not lead to unduly low prices”;

b.            “If that conclusion is reached it will have to apply third country prices or another logical method will have to be devised to adjust the PRC prices to free market prices.”

2.            THE CURRENT SITUATION

A lot has been said in the press by the SATMC about the so-called “victory” and with reference to an article in the Star on 21 June 2010, “Tyre dumping hits the skids”. In this article, comments were made by Dr. Ettienne Human of the SATMC:

“Etienne Human, the chief executive of SATMC, said that the latest judgment would level the playing fields between the local manufacturers and other tyre sellers.”

Ill-considered and un-qualified statements like these create the impression that there has been an un-level playing field, alternatively that some punitive measures will be implemented against importers, or as he refers to them: “other tyre sellers”.

One must bear in mind that the legal process has not yet been exhausted by the parties involved in this matter. ITAC and The Minister of Trade and Industry have the right to appeal the decision of the High Court. They may direct their appeal to the Supreme Court of Appeal, and then also or alternatively, to the Constitutional Court. When one considers the issues involved here, and the implications for the functioning and credibility of ITAC, as well as international trade relations and the autonomy of the executive (Minister), an appeal will no doubt follow. In fact, the grounds for an appeal have been identified and an application for leave to appeal to the  Supreme Court of Appeal will be lodged by the legal team of ITAC and the Minister.

So, what will happen in the meantime? It must be understood that the status quo will remain as is, until such time as the legal process has been exhausted by all parties involved. No punitive measures of any sort (such as interim dumping duties etc.)can be implemented against any of the importers of tyres from the People`s Republic of China, or the manufacturers as cited in the application.

The SATMC`s celebrations are, with respect, premature.

3.            THE POSITION OF KUMHO TYRES IN SOUTH AFRICA

KUMHO TYRES is a South Korean tyre manufacturer with its Head Office in Seoul, South Korea. The only reason why they have been implicated in the Anti-dumping investigation, is because of their manufacturing plants in the People`s Republic of China. The plant in NANJING in particular was cited because of tyres exported to South Africa.

LOMBARD TYRES (PTY) LTD has the sole import- and distribution rights for passenger- and light truck tyres in Southern Africa. As an importer, certain lines (sizes) of tyres were (and still are) imported from KUMHO TYRES NANJING by LOMBARD TYRES (PTY) LTD. The bulk of the imported KUMHO TYRES are however imported from Korea.

The plant of KUMHO TYRES in NANJING, as well as in other centers in the People`s Republic of China are under the direct control and management of KUMHO TYRES, KOREA. The same stringent measures in respect of quality in the manufacturing process, as well as research and development are applied throughout.

All KUMHO TYRES imported by LOMBARD TYRES (PTY) LTD whether imported from Korea, Vietnam or the People`s Republic of China are homologated by the National Regulator for Compulsory Specifications (NRCS). This organization previously resorted under the SABS. All tyres imported carry the required “E” mark, and inspections are conducted on a regular basis by NRCS inspectors.

As a result, ill-advised and generalised statements made in the press by the SATMC, and in particular dr. Ettienne Human is unfortunate. I refer to an article in the BEELD newspaper, dated 5 April 2009 with the heading: “Vervaardigers frons oor goedkoop bande”. In this article dr. Human was quoted as having said:

 “Gebrekkige regulering vererger die probleem, want Suid-Afrikaanse bandvervaardigers moet voldoen aan die standaarde wat deur die Suid-Afrikaanse Buro vir Standaarde neergelê en deurlopend gemonitor word. Ingevoerde bande word egter glad nie aan enige standaardvereistes of toetse onderwerp nie, sê Human.”

This is clearly incorrect and should be qualified. Human, however goes further and allege that imported tyres are sold for less than half the price of local brands, and the lifetime or life cycle of imported tyes are a lot shorter:

“Van die gestorte bande word maklik teen die helfte van die prys van plaaslik vervaardigde bande verkoop, maar die leeftyd van die ingevoerde bande is aansienlik korter,” sê Human.

Once again a very general and un-qualified statement made that clearly creates the perception to the public at large that ALL imported tyres are cheap and inferior. One has to question the bona fides of Human and the SATMC when one has to take into consideration that at the time when these and other statements were made, an investigation was concluded by ITAC and that the finding then was that there was NO dumping?

However, we do not intend to get involved in a mudslinging contest with the SATMC. Our main concern is placing the factually correct situation on record. 

We want to unequivocally state that ALL KUMHO TYRES imported by LOMBARD TYRES (PTY) LTD are of the highest quality and conform to the strict requirements of the NRCS. KUMHO TYRES is a premium product that is certainly not being “dumped” in the South African market. It is sold at a premium price, in many instances above or equal to the price of local brands. Because we at LOMBARD TYRES believe that our product compares favourably, and in some instances are superior to some of the local brands.

KUMHO TYRES is recognized throughout the world for its technology and innovation. This has led to the product being accepted as OE (Original Equipment) fitted to: Hyundai, Kia, Chevrolet, Daihatsu, Chrysler, Tata, SsangYong and Mercedes-Benz. With OE fitment on VW and Ford in Europe.

The position of KUMHO TYRES in South Africa will not be influenced by the High Court judgment referred to here above. It will have no negative effect on our supply or pricing.

We will follow with interest the further legal developments in this matter. And at the risk of pre-empting the result, we believe that the final determination will be in favour of ITAC and the Minister of Trade and Industry.