FEDERAL COURT OF AUSTRALIA

LG Electronics Inc v Minister for Justice and Customs [2005] FCA 233

CUSTOMS – dumping investigation – obligation to terminate investigation – no termination decision – investigation concluded.

Customs Act 1901, s 269TDA(1) and (15)

LG ELECTRONICS INC and LG ELECTRONICS AUSTRALIA PTY LTD v MINISTER FOR JUSTICE AND CUSTOMS, CHIEF EXECUTIVE OFFICER OF CUSTOMS and GRAHAM CRUTTENDEN, DELEGATE OF THE CHIEF EXECUTIVE OFFICER OF CUSTOMS

NSD 1441 of 2004

WHITLAM J

11 MARCH 2005

SYDNEY

THE COURT ORDERS THAT:

1. The proceeding is dismissed with costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     On 31 August 2004 the first respondent, the Minister for Justice and Customs (‘the Minister’), decided to publish a dumping duty notice in respect of fully automatic washing machines (not exceeding 12 kg capacity) exported to Australia from the Republic of Korea. In doing so, the Minister revoked the decision he had earlier made on 9 September 2003 not to publish such a notice in respect of those washing machines exported by the first applicant, LG Electronics Inc (‘LGE’). The dumping duty notice was published on 6 September 2004.

2                     The second applicant, LG Electronics Australia Pty Ltd (‘LGEAP’) is a wholly owned subsidiary of LGE and imports washing machines that are the subject of the dumping notice. LGE and LGEAP seek to have the Minister’s decision of 31 August 2004 set aside. They have joined the Chief Executive Office of Customs (‘the CEO’) and two of his delegates, Graham Cruttenden and Greg Weppner, as respondents in this proceeding.

3                     The Minister’s decision of 31 August 2004 followed a review by the Trade Measures Review Officer (‘TMRO’) and the further investigation of certain findings in Trade Measures Report No. 63 dated 31 January 2003. In making that decision, the Minister said that he accepted the findings in Trade Measures Report No. 83 dated 23 August 2004.

4                     Report No. 63 was based on a statement of essential facts published by the CEO on 17 December 2002. This statement identified three Korean manufacturers of the subject washing machines: LGE, Daewoo Electronics Co Inc (‘Daewoo’) and Samsung Electronics (‘Samsung’). Section 6 of the statement dealt with the dumping investigation. Customs described in Section 6.1.2 the adjustments it would make in order to assess normal values for LGE, and in section 6.1.3 it was noted that the dumping margin for LGE’s product was ‘in the range 0% to –10%.’ The comparable ranges were 2% to 10% for Daewoo and 35% to 45% for Samsung. Section 6.5 stated:

‘Section 269TDA(1) of the Act requires the CEO to terminate an investigation, in relation to an exporter, where there has been:

·        no dumping by the exporter; or

·        where there has been some dumping of goods but the dumping margin for the exporter is negligible (de minimus), i.e. where the dumping margin calculated according to s. 269TACB of the Act, expressed as a percentage of the weighted average of export prices, is less that 2%.

The results of Customs’ investigation, as set out above, show that the provisions of s. 269TDA(1) have been satisfied for LGE. Therefore, subject to the Minister’s determination in respect of dumping, Customs will recommend termination of the investigation in respect of LGE.

The provisions of s.269TDA(1) have not been satisfied for Daewoo or Samsung.’

5                     The publication of the statement of essential facts prompted a flurry of submissions from Fisher & Paykel Australia Holdings Pty Ltd (‘F&P’), which had initiated the dumping investigation. Report No. 63 recommended that the Minister impose anti-dumping measures in respect of the subject washing machines and like goods exported from Korea other than by LGE. It was forwarded to the Minister on 31 January 2003 under cover of a briefing note originated by Mr Cruttenden, which stated:

‘Throughout the investigation F&P maintained the view that LGE was its main problem. It is likely therefore to complain that Customs was in error in conclusions about the arms length nature of transactions between LGE and its Australian subsidiary, LGEAP.

F&P is also likely to protest adjustments Customs made to LGE’s domestic prices for physical differences between domestic and export models. Based on its examination of an exported and comparable Korean model, it considers the Australian model would cost more to produce. Customs verified the costs of these machines. The cost to make the Australian model was less that that of the Korean model.’

6                     The antagonists did not wait for the Minister’s decision. F&P, LGE and their respective advisers bombarded the Minister with submissions on various factors, particularly normal value. The Minister sought the advice of the CEO on a submission dated 16 June 2003 from F&P, to which LGE’s solicitors had submitted a response dated 13 August 2003. Both submissions were attached to a briefing note for the Minister prepared by Mr Cruttenden on 28 August 2003. The note stated that Customs had concluded that its finding of no dumping by LGE remained valid. After examining what the authors described as the key issues, they concluded that Customs would not alter its recommendations in Report No. 63. On 9 September 2003 the Minister decided to accept the recommendation in that report. The necessary declaration and notice of his decision were published on 17 September 2003.

7                     On 14 October 2003 F&P applied for a review of the Minister’s decision. The TMRO gave notice that F&P challenged the findings in Report No. 63 in relation to normal value adjustment to the costs between various LGE divisions and adjustments for level of trade and advertising. In addition, notice was also given that F&P challenged the findings concerning the relationship between LGE and LGEAP, price undercutting for LGEAP, the establishment of a non-injurious price (‘NIP’), and the incorrect use of product margins for establishing normal values.

8                     Daewoo also made an application for review on 17 October 2003. The TMRO gave notice that it challenged the findings in Report No. 63 in relation to the establishment of a normal value, dumping margin, export market share, material injury and causal link.

9                     The TMRO reported to the Minister on 1 March 2004. He recommended that two findings challenged by F&P be reinvestigated, those relating to adjustments for components in establishing normal values for LGE and to adjustments for advertising in establishing normal values for LGE and Daewoo. The TMRO also recommended that the determination of NIPs for Daewoo and Samsung be reinvestigated, though on different grounds to those advanced by F&P. On Daewoo’s application, the TMRO recommended the reinvestigation of the finding in Report No. 63 of material injury to the Australian industry and whether dumping had caused material injury to the Australian industry. The Minister accepted these recommendations, and on 29 June 2004 he gave notice that the CEO had been directed to reinvestigate those findings.

10                  On 23 July 2004 the solicitors for LGE and LGEAP sent submissions on the reinvestigation to Mr Weppner. They also sent him a further submission on behalf of LGE on 9 August 2004.

11                  Report No. 83 was sent to the Minister under cover of a briefing note prepared by Mr Weppner on 23 August 2004. It stated:

‘5. Following its reinvestigation, Customs affirms its findings that the Australian industry suffered injury in the period examined. Customs also affirms its finding in relation to the adjustment to Daewoo’s normal values for differences in advertising and sales promotion expenses on the Korean and Australian markets.

6.                 Customs makes the following new findings:

·        in calculating normal values for LGE, adjustments should not be allowed for physical differences between export and domestic models;

·        in calculating normal values for LGE, adjustments should be made for product specific advertising and sales promotion but not for general brand awareness advertising and sales promotion expenses;

·        NIPs should be recalculated according to the Australian industry’s selling prices in 1998/99, a period unaffected by dumping, adjusted by the average level of cost changes experienced by the Australian industry between 1998/99 to 2001/02; and

·        the exportation of washing machines to Australia from Korea, including those exported by LGE, caused material injury to the Australian industry.

7.                 If you agree with Customs’ recommendations and decide to revoke the original notices and substitute new notices, s.269ZZM(4) of the Act requires that you give public notice of your decision.

8.                 The findings to disallow the normal value adjustments for LGE will be contentious, particularly as they mean LGE moves from a position of no dumping to exports being dumped by a margin of 8.5%.

9.                 Customs was legally unable to have regard to any information beyond that which was available at the time of the original report (31 January 2003). In making your original decision to allow certain adjustment for LGE, you had regard to information provided to you by interested parties after Customs completed its report. That information supported Customs’ conclusions.

10.             In making your decision following the reinvestigation it is open to you to again take the additional information into account. However, following the reinvestigation, Customs is of the view that the adjustments could only be allowed after a further detailed verification process involving LGE and possibly its component suppliers. Customs did not verify any information after it completed its report.

11.             At the same time, it is possible that LGE and its subcontractors may have been able to supply further verifiable information in support of the adjustments if this had been possible under the legislation.

12.             The investigation period for the original investigation ended in March 2002. In view of the time that has elapsed it is likely that one or more of the variable factors may have changed. Accordingly, you may wish to initiate a review of dumping measures on washing machines. A review would also provide an opportunity for LGE and its subcontractors to provide further information to Customs in support of adjustments disallowed as a result of the reinvestigation.’

The causal link finding referred to in the final dot point of paragraph 6 of the note was addressed in section 3.7 of Report No. 83, where Customs pointed out that, if its new findings on normal value adjustments were accepted, the volume of dumped washing machines from Korea became significantly larger once the exports of LGE were included. As I have said, the Minister accepted the findings in Report No. 83 when he made the decision that is the subject of the present proceeding. The Minister also requested the CEO to initiate a review of anti-dumping measures applying to washing machines from Korea under Div 5 of Pt XVB of the Customs Act 1901 (‘the Act’). Notice of this review was also published on 6 September 2004.

12                  I turn now to the grounds relied on by the applicants in this proceeding. The initial ground advanced by their counsel was said to involve a jurisdictional point. The argument turns on the effect of s 269TDA(1), which relevantly provides:

‘If:

(a) application is made for a dumping duty notice; and

(b) in an investigation, for the purposes of the application, of an exporter to Australia of goods the subject of the application, the CEO is satisfied that:

(i) there has been no dumping by the exporter of any of those goods; or

(ii) …

the CEO must terminate the investigation so far as it relates to the exporter.’

13                  Counsel for the applicants submit that, in light of the view expressed in the excerpt from the statement of essential facts reproduced at [4] above, the CEO was obliged forthwith to terminate the investigation so far as it related to LGE. This submission echoed a request made by LGE’s solicitors to the CEO on 6 January 2003, which elicited a response from Mr Cruttenden to the effect that the Minister ‘must decide certain matters as a precondition’ to the CEO exercising his power under s 269TDA(1). This position was not accepted by LGE’s solicitors, who continued up until their submission of 23 July 2004 to maintain that the investigation of alleged dumping by their client should have been terminated.

14                  Counsel for the respondents submit that the view expressed in the statement of essential facts does not evince the satisfaction required by s 269TDA(1)(b). They point to the function performed by the statement of essential facts under s 269TDAA(1) and to the obligation of the CEO to have regard to submissions made in response to such a statement in preparing his report under s 269EA of the Act. Accordingly it is submitted such a view must necessarily be only preliminary or tentative. There is a good deal of force in these submissions. However, I think that this ground may be disposed of on the assumption that the view expressed was quite firm at the time the statement was placed on the public record. Moreover, in my opinion, it must be accepted that Mr Cruttenden was under a misapprehension about the role of the Minister in the performance of the CEO’s duties under s 269TDA. (Indeed, I did not understand this last proposition to be contested by counsel for the respondents.)

15                  The use of word the ‘must’ in s 269TDA(1) imposes an obligation upon the CEO, but the duty thus imposed cannot be exercised without the CEO first deciding that an occasion for its exercise has arisen. Section 269TDA(1) is not self-executing. It was not submitted that the CEO made such a decision. Had he done so, he would have had to give notice under s 269TDA(15) informing F&P of its right to have such decision reviewed. (Interestingly, when such a termination decision is revoked on review under s 269ZZT of the Act, the CEO is obliged to publish a statement of essential facts under s 269TDAA, after which the investigation resumes.) Report No. 63 was prepared under s 269TEA after the investigation had concluded. The investigation was never terminated because the CEO never made such a decision. The Act plainly requires that, in order to have operative effect, any satisfaction of the CEO for the purposes of s 269TDA(1) must be made manifest in a decision of which notice is given under s 269TDA(15). Such a notice would also have to meet the requirements of s 269ZI(2). To hold that an investigation may be terminated by a sidewind such as the instant passage in a statement of essential facts would be productive of great unfairness to the applicant for publication of a dumping duty notice and destructive of the elaborate provisions for the consideration of such applications under Pt XVB of the Act. This ground fails.

16                  The next ground relates to the finding that dumping caused material injury to the Australian industry. It will be recalled that the finding on this topic in Report No. 63 was reinvestigated following the successful application for review by Daewoo. Counsel for the applicants submit that the Minister did not take into account the considerations required by s 269TAE(2A) of the Act. They support this submission by references to what is said about loss of market share in Report No. 63. It is true that factor was emphasized in that report. However, the picture changed dramatically once it was found that LGE had also engaged in dumping. Report No. 83 stated:

‘In the report of its original investigation (Trade Measures Report No. 63), Customs concluded that the Australian industry had lost, and Korean exports had significantly gained, market share during the period. Customs concluded the increased exports from Korea were responsible for the majority of Australian industry’s loss of market share. Analysis of Korean exports, which increased fourteen fold from 1997 to mid-2002 (extrapolated), demonstrates that the increase was mainly due to exports from LGE.

Customs concluded that volume related material injury suffered by Australian industry was caused by LGE’s exports from Korea.

Having re-examined the relevant information, Customs finds that dumped exports from Korea by LGE, Daewoo and Samsung caused material injury to the Australian industry in the form of price undercutting, price depression, loss of market share, lower unit profits and under utilisation of capacity.’

17                  I do not need to set out the terms of s 269TAE(2A). ‘Other possible causes of injury’ was a sub-heading in Report No. 63, and it is apparent from the breadth of the conclusion in Report No. 83 that attention was again paid to the range of factors exemplified in s 269TAE(2A). The assessment of material injury is a practical exercise. There is no need to address theoretical factors that were never suggested to have any application to the circumstances of the case. This ground is not made out.

18                  The rubric of irrelevant considerations is invoked to attack all findings touching on an ‘Australian industry in respect of like goods’. Report No. 83 referred to F&P as ‘an Australian manufacturer of washing machines’. The statement of essential facts noted, more accurately, that F&P has a subsidiary that manufactured washing machines in Australia. Report No. 63 referred to F&P as one of two Australian producers. Counsel for the applicants submit that s 269T(4) requires an Australian industry to consist of persons who produce like goods. I accept that, but I do not think the use of the abbreviation ‘F&P’ for the name of the holding company in either Report No. 63 or Report No. 83 shows that the Minister or the CEO misunderstood this requirement. The substance of the findings in relation to industry support and material injury is entirely unaffected by such a verbal nicety, and no analysis of those findings was undertaken to convince me otherwise. This ground of challenge is also unsuccessful.

19                  Finally, the applicants charge the Minister with denying them natural justice because he did not have regard to the submissions made in the interval between 31 January 2003 (when he was given Report No. 63) and 9 September 2003 (when he made the decision not to publish a dumping notice for exports by LGE). Counsel for the applicants accept that the Minister was not obliged to have regard to that material. However, they submit that, in the particular circumstances of this case, there was a legitimate expectation that, if the earlier ‘successful’ submissions were to be ignored, LGE should have been informed and given an opportunity to argue that such submissions be taken into account.

20                  The limited utility of the notion of legitimate expectation in cases of alleged procedural unfairness was recently acknowledged by Kirby J in Applicant NAFF of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 79 ALJR 397 at 409. In the present case it is not suggested that there was a failure to follow any statutory procedure. The requirements of Div 9 of Pt XVB of the Act were scrupulously observed. The Minister’s decision under s 269ZZM(1) was made on the basis of Report No. 83, which was made pursuant to s 269ZZL(3). The further investigation by the CEO under s 269ZZL(2) was necessarily confined by the amendments to the Act that came into force on 4 December 2003. There was no procedural unfairness.

21                  The proceeding will be dismissed with costs.

Associate:

Dated: 11 March 2005