WORLD TRADE  
ORGANIZATION  G/ADP/AHG/W/179 
22 September 2008 
 (08-4419) 
Committee on Anti-Dumping Practices 
Working Group on Implementation Original:   English 
 
 
 
ARTICLE 3.2 – HOW DO MEMBERS DETERMINE WHETHER THERE HAS BEEN 
SIGNIFICANT PRICE UNDERCUTTING BY DUMPED IMPORTS? 
 
Communication from New Zealand  
 
  The following communication, dated 18 September 2008, is being circulated at the request of the Delegation of New Zealand.    
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INTRODUCTION 
 This paper explains how New Zealand undertak es its price undercutting analysis to determine 
whether or not dumped goods have significantly unde rcut the price of the like goods produced by the 
domestic industry.  Price undercutting occurs when  the imported goods are presented for sale within a 
market at a price lower than the domestically produced goods, hence undercutting the price that the 
domestic manufacturer can obtain for like goods.     The New Zealand methodology involves estab lishing the domestic industry's actual selling 
price and finding out the price at which the domes tic industry could sell like goods in the absence of 
dumped imports (a non-injurious price) and then comparing those prices with the price of imported goods (a comparison price) at the level of trade at which they first compete in the domestic market.   
 
NEW ZEALAND'S LEGAL PROVISIONS ON PRICE UNDERCUTTING 
 The Dumping and Countervailing Duties Act 1988 (DCVDA) at section 8(2)(b) states that:   
 
 (1) …  
(2) Without limiting the generality of subsection(1) of this section, and 
without limiting the matters that the [Chief Executive] may consider, the 
[Chief Executive] shall have re gard to the following matters:   
  (a)…   (b) The extent to which the prices of the dumped or subsidised 
goods represent significant price undercutting in relation to prices in New 
Zealand (at the relevant level of tr ade) for like goods of New Zealand 
producers: 
 
(c) – (f)… 
 G/ADP/AHG/W/179 
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   (3) … 
  This section of the DCVDA reflects the simila r provision in Article 3.2 of the Anti-Dumping 
Agreement.    LEVEL OF TRADE 
 Price undercutting occurs when the imported goods  are presented for sale within a market at a 
price lower than the domestically produced goods, hence undercutting the price that the domestic 
manufacturer can obtain for like goods.  In order to assess price undercutting, prices of the imported 
and domestically produced good must be compared at the same level of trade to ensure that the 
existence and extent of any price undercutting is correctly assessed.  This point may be an ex-factory 
versus ex-wharf comparison which could mean that a price effect is not necessarily caused by the selling price of an importer because the domestic i ndustry can be injured by the importer's purchase 
price, regardless of the importers' ability or desire  to purchase from a local manufacturer.  Below is a 
diagram that illustrates this point:   
 
 Figure 1 
 
  
  Figure 2 
 
 
Domestic Border – Ex Wharf 
 
 
 
     
 
           Figure 3 
 
 
  Ex-Factory  
 
  
 
     
 Overseas Manufacturer 
Importer/Sole Distributor  
 
Resellers  
End Users Importer 
Resellers 
End Users Overseas Manufacturer Overseas Distributo r 
Domestic Produce r
Distributors
Reselle rs
End Users G/ADP/AHG/W/179 
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   Figure 1 illustrates that a reseller or end-user  would be forced to purchase through the sole 
distributor bringing that distribution chain into the price undercutting decision.  The relevant level of 
trade is therefore likely to be the importer's ex-sto re price and the domestic industry's ex-factory price 
as the decision faced by a reseller or end-user is purchasing from either the importer or the domestic industry.   
 
 In Figure, 2 the importer is merely acting as an  importer/distributor and a buyer could decide 
to by-pass that arrangement and purchase direct from the overseas manufacturer.  The relevant level of trade is therefore more likely to be the importer's ex-wharf purchase price and the domestic industry's ex-factory price as resellers or end-user s can purchase either directly from the overseas 
manufacturer or from the domestic industry.   
 
IMPORT COMPARISON PRICES 
 Once the level of trade at which the imports will first compete with the domestic product 
(e.g. ex-wharf, into store or ex-store) has been establ ished then a "comparison price" is calculated.  For 
an ex-wharf price this would mean adding the cost of the goods plus overseas freight and insurance, 
port charges, customs duty and any other clearance ch arges.  If the calculation was to be done at the 
into store cost then the additional costs from wharf to store would be included and if at an ex-store 
level amounts for selling and administration costs and profit might be included.   
  The object is to calculate the price at whic h the imported product can be sold on the domestic 
market at the relevant level of trade so that amount can be compared with the domestic industry's 
actual and non-injurious prices.    
DOMESTIC INDUSTRY'S COMPARISON PRICES
1 
Actual Selling Prices 
 
 The domestic industry's actual selling prices would normally be their average selling prices net of discounts and rebates over a period as close as possible to the period of investigation for 
dumping to ensure that the comparison is made for prices established over as near as possible the same period.  Where there are different models of the goods under investigati on which sell at different 
prices, average prices would normally be established for each model for comparison with the 
equivalent imported products.  It may be necessary to  make adjustments to prices to ensure a fair 
comparison, e.g. for differences in physical char acteristics between the domestically produced goods 
and the imported goods and differences in credit term s between those offered by the domestic industry 
and those offered by importers.    NON-INJURIOUS SELLING PRICE (NIP) 
 Where there is evidence that dumped imports have caused price suppression and/or price 
depression it is important to establish non-injurious selling prices (NIPs) for the domestic industry's 
like goods to establish the extent to which price undercutting would occur in the absence of dumped 
imports.  There are various ways of establishing such a price but the preferred methodologies of the 
New Zealand administration are:   
 
• A price prior to when dumping occurred in the market;   
                                                     
 
1 Where there is more than one manufacturer making up the domestic industry, actual selling prices and 
NIPs would normally be establis hed for each manufacturer and a pri ce comparison carried out for each 
manufacturer.  In addition, where possible the domestic industry's prices would be combined on a weighted 
average basis and a price comparison made fo r the domestic industry as a whole.   G/ADP/AHG/W/179 
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• Cost to make and sell, plus profit (Target Prices);  or 
 
• An import parity price based on the lowest undumped price from any source.   
  No single methodology is preferred over anot her as each case is fact dependant and each 
methodology has its own set of problems.   
 
Pre Dumping Price 
 
 If using a price prior to when the dumping occurred, that price could be several years old and therefore not provide an appropriate comparison becau se of the time lag.  It may be possible to adjust 
such a price as a last resort, but it is not recomme nded as such a calculation would have to be based 
on the pre-dumping level of profitability adjusted  for inflation and with allowance made for 
efficiencies and one-off costs or any other changes that had taken place in the market and the economy.    Cost + Profit (Target Prices) 
 
 This methodology involves establishing the cost  of production and selling, administration and 
general costs over a period as close as possible to the period of investigation for dumping and adding to it a profit margin that the domestic industry coul d achieve in the absence of dumped imports.  Care 
should be taken when using this methodology as th ere may be undumped goods in the market from a 
third country not involved in the case.  Those goods may set a ceiling price that may represent the 
maximum price that the domestic industry can achieve (see below – Import Parity Prices).     Establishing a profit that the industry could achieve in the absence of dumped goods is a 
difficult exercise.  It may be based on the profit margin achieved by the industry in a period not 
affected by dumped imports but c onsideration would need to be give n to the length of time that has 
elapsed since this profit margin was achieved and the likelihood of achieving this margin again given 
changes that have taken place in the market and the economy generally since then.  Another option 
may be the average profit achieved by the industry in a wider market segment that includes the like 
goods or a profit based on the industry's expected return on sales may suffice.   
 
Import Parity Price 
 
 The basis of this approach is that competition from prices of undumped imports will set a price limit for what the domestic producer can achie ve for its product.  An import parity approach 
bases the NIP on the lowest undumped price of the product available or potentially available in the 
New Zealand market.  Where there are no imports fr om countries other than those under investigation, 
an undumped price can be constructed from the norma l values of the product under investigation with 
adjustments made to build those values up to an undum ped price at the relevant level of trade.  Even 
where there are imports from other countries ther e can be difficulties in obtaining prices as this 
information is not normally collected during an inv estigation and there is little incentive for importers 
from other countries to provide it.   
 
THE IMPACT OF NEW ZEALAND'S FTA WITH AUSTRALIA 
 The majority of New Zealand's trade is conducted with Australia and the New Zealand 
investigating authority has to bear in mind th at trade under the Austra lia New Zealand Closer 
Economic Relations Trade Agreement (ANZCERTA) when  dealing with an import parity situation.  
No action can be taken against "dumped" goods from  either country by the other country, hence, if  G/ADP/AHG/W/179 
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  goods of Australian origin are in the market compe ting with domestic goods then that price generally 
sets the import parity price whether those imports ar e technically dumped or not.  As no action can be 
taken against those imports the price they achieve in  the domestic market is the price that the domestic 
producer can reasonably expect to receive.    
 As an aside, New Zealand would be interested in the opinions of other Members in how they 
would deal with this situation and in particular:    
• Would you base a parity price on the imports from a trading partner against whom no action 
can be taken if they are dumped or would you car ve those imports out and strike a parity price 
at the next highest undumped price from another source?   
 
• If you strike the NIP at the level that the Aust ralian imports compete in the domestic market 
this could, in effect, be artificially low if  those goods are dumped. Would you take any 
dumping margin on those goods into account when setting a NIP?   
 
• If no dumping margin is taken into account in this  situation the effect could be to allow a 
company from a third country to "dump" down to  an artificially low price level.  This could 
see those imports causing additional injury to the domestic producer  by way of several injury 
factors such as volume effects, loss of sales, mark et share, profit etc. and not being able to 
have action taken against them as the sales are being made to meet the artificially low NIP set by the trading partner's goods.  What would other members do in such a situation?   
 
CALCULATION OF A PRICE UNDERCUTTING MARGIN 
 The following flowchart illustrates the steps taken in establishing a price undercutting margin 
(See Over):    
 
 Establish  the relevant level of trade at which the 
price undercutting comparison will be made 
(e.g. ex-wharf/ex-store) 
Calculate  the comparison price at the appropriate 
level of trade for the imported product 
Calculate  actual and non-injurio us prices for the 
domestic producer's goods 
Compare  the two prices to establish the amount of 
price undercutting G/ADP/AHG/W/179 
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  SUMMARY 
 Establishing the amount of price undercutting is  an important component when looking at the 
price effects being caused by dumped imports in an injury determination.  Care must be taken, 
however, to establish the correct level of trade at which to do the comparison and to ensure that sales 
are made under the same terms and conditions.  It is important that such issues are given serious 
consideration early in the investigation process so th at questionnaires to the various interested parties 
can ask for the appropriate information that need s to be obtained to conduct a price undercutting 
examination.     
 
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