Ministry of Commerce did not take into account credible overseas studies detailing levels of state subsidy for Chinese steel production when declining requests for countervailing duties on imported steel. The High Court ordered a reconsideration.
Commerce made material errors in determining the extent to which Chinese steel producers benefit from being state controlled and state funded, Justice Mallon ruled on a review filed by NZ Steel.
Australian-listed company Bluescope owns NZ Steel. It has operations in seventeen countries worldwide. Bluescope was surprised to learn a 2017 Commerce investigation concluded that any subsidy on Chinese steel exported to New Zealand was slight. No anti-dumping duties would be imposed. Reversing the analogy beloved of economists describing how surprising events can upset preconceived views, Bluescope said Commerce’s decision was the equivalent of saying Chinese steel producers qualified as white swans when the rest of the world had seen only black swans.
Commerce staff investigated Chinese steel imports after a complaint was laid by NZ Steel in 2016. Its Glenbrook plant is the sole New Zealand producer of galvanised steel coil. Equivalent steel product is imported, predominately from Taiwan, Japan, South Korea and China. NZ Steel said China had 22 per cent of the import market by volume in 2015. It alleged Chinese suppliers were undercutting prices with the sale of subsidised steel, causing material injury to its business. Having to meet Chinese prices meant profitability, return on capital and ability to raise capital were prejudiced, it claimed.
The High Court was told Commerce received a very limited response to questions posed to Chinese authorities. The government of China expressed ‘concern’ that an investigation had been initiated on the basis of ‘insufficient and unsubstantiated information’ before providing little more than a general denial the state subsidies were provided.
Justice Mallon said Commerce was in error by rejecting evidence of Chinese state subsidies identified by earlier Australian and US investigations. Commerce presumed, incorrectly, these overseas findings were not based on first-hand evidence. In fact, investigators had relied on data provided directly from Chinese suppliers and had made verification visits to China. A US study assessed the level of subsidy at 38.99% arising from a raft of below market charges for loans, land use, electricity and raw materials, coupled with subsidies in the form of export credits.
NZ Steel Ltd v. Commerce & Consumer Affairs – High Court (18.09.18)
18.182