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Anti-dumping Actions against Imported A4 Copy Paper and other Paper
Products
Michael Priestley
Economics, Commerce and Industrial Relations Group
27 February 2001
Introduction
Anti-dumping measures against the import of A4 copy paper and other communication
papers have been in place since February 1994. They constitute the largest
single group of trade measures imposed against any Australian imports.
They have also been subject to administrative and judicial review at various
times. In 1999-2000, the market for A4 copy paper was worth over $400
million. A4 copy paper is manufactured in Victoria at PaperlinX's Maryvale
mill, which employs 478 people.
This Research Note examines two new anti-dumping applications by PaperlinX,
the sole producer of A4 copy paper, and an anti-dumping application by
Moore Business Systems, a local manufacturer of continuous computer paper
(CCP) concerning the alleged dumping of imported A4 copy paper and CCP
from Indonesia. The final Customs reports into both investigations are
with the Minister for a decision and it seems unlikely that any measures
will be imposed against the imports from Indonesia, given that dumping
margins were small and the volume of dumped imports was negligible.
The Research Note also examines the takeover of Spicers, an importer
of competing paper products, by PaperlinX and its implications for competition
in the paper industry.
A4 Copy Paper from Indonesia
Following an anti-dumping action in 1993 by Australia Paper Pty Ltd,
an Amcor subsidiary (later renamed PaperlinX), anti-dumping measures were
imposed against imports of A4 copy paper from various countries, including
Indonesia. Tjiwi Kimia was the sole Indonesian supplier at the time of
the anti-dumping action and it gave an undertaking to supply A4 copy paper
at or above certain export prices.
Despite these measures, imports of A4 copy paper from Indonesia rose
60 per cent between 1993 and 1999. Although the Australian market for
A4 copy paper increased by 50 per cent, PaperlinX's share fell from 60
per cent to just over half the market. Indonesian imports held close to
40 per cent of the market, compared to 20 per cent in 1996. By 1999, they
accounted for 75 per cent of all A4 copy paper imported into Australia,
compared to 35 per cent in 1993. In the same period, imports sourced from
other countries were replaced by imports from other Indonesia suppliers
and the volume of imports from Tjiwi Kimia doubled.
In December 1999, Customs began an investigation into imports from Indonesia
(excluding Tjiwi Kimia) after an anti-dumping application by PaperlinX.
A second investigation was initiated after PaperlinX lodged a separate
application against Tjiwi Kimia soon after the Federal Court set aside
the price undertaking from Tjiwi Kimia. In July 2000, with the two investigations
merged, Customs released a draft report or Statement of Essential Facts
relating to both investigations.
The five major Indonesian suppliers of copy paper accounted for 99 per
cent of exports of A4 copy paper to Australia from Indonesia. With the
exception of imports from Kertas Leces and Riau Paper, imports from Pindo
Deli, Tjiwi Kimia and Indah Kiat were not dumped. Although the imports
were priced well below PaperlinX's prices for copy paper, the volume of
dumped imports was small, representing just over 2 per cent of all imports
and 0.5 per cent of the Australian market.
Dumping margins were also small, ranging from about 3 to 10 per cent
for certain types of coloured copy paper only through to 8 per cent for
standard grade copy paper.
Although the market for A4 copy paper had grown steadily by 8 per cent
per year, PaperlinX's sales did not increase in a growing market. It suffered
a consequent fall in profits, increased stock levels and reduced cash
flow. Customs, however, was not 'satisfied that dumping has caused the
material injury suffered by PaperlinX ... and that future exports are
likely to be dumped to the extent of causing material injury to PaperlinX
in the near future'.(1)
It noted that 1995 was a peak period in the industry's cycle and although
prices and profits declined, the level of profitability of PaperlinX's
A4 copy paper for 1998 and 1999 was higher than other paper segments of
Amcor and four times the average profitability of the manufacturing sector.
Continuous Computer Paper (CCP) from Indonesia
On 6 April 2000, Customs initiated an anti-dumping investigation into
CCP imported from Indonesia. The investigation was the result of an anti-dumping
application by Moore Business Systems Australia, which until 1998 was
a subsidiary of the Moore Corporation Canada.(2) CCP is produced
by Moores at its Wodonga 2 plant, which employs 300 people. Although
Moores has a dominant position in the market, sales of CCP declined by
35 per cent from 1995 to 1999.
In its application, Moores claimed that it experienced injury beginning
in the September quarter of 1996, lost sales, a decline in market share
and profitability, reduced workforce and price undercutting as a result
of the alleged dumping. It identified Tjiwi Kimia as the sole supplier
of imported CCP. Tjiwi Kimia's sales to the Australian market are made
to paper merchants, such as Spicers and Commonwealth Paper through a subsidiary
company, Asia Pulp & Paper (Australia) Pty Ltd.
On 25 July 2000, Customs issued a Statement of Essential Facts, which
found that exports to Australia from Indonesia increased significantly
in 1999. Dumping margins were very small (0.3 and 0.9 per cent) only for
some types of imports, but imports of other narrow and wider grades of
CCP were not dumped. In relation to Moores' claim of injury, Customs confirmed
a fall in market share and profitability from its CCP business, some price
depression and a 30 per cent fall in production its Wodonga 2 plant, compared
with production in 1998, but it was not satisfied that 'the dumping has
caused material injury to Moores'.(3)
PaperlinX Acquisition of Spicers
Late last year PaperlinX launched a takeover bid for Spicers Paper Ltd.
It already had a 42 per cent majority interest in Spicers, which it acquired
as a result of the Amcor demerger in April 2000. The scrip-for-scrip offer
valued Spicers at more than $500 million and drew the attention of the
Australian Competition and Consumer Commission (ACCC) because
of the potential impact on competition in the industry.
Sales by PaperlinX and importers are made through merchants, such as
Spicers, Edwards Dunlop Paper (a PaperlinX business), Dalton Fine Paper
and Commonwealth Paper, a division of the Spicers Paper group. Spicers
supplies over 50 per cent of the copy paper sold by merchants. It is also
a major supplier of imported CCP to wholesalers and stationers. The ACCC
ruled that the proposed takeover of Spicers would likely breach s. 50
of the Trades Practices Act 1974 by 'substantially lessening competition
in the market for the supply of fine paper by merchants'. Although PaperlinX
had agreed to divest its Edwards Dunlop business, the ACCC was not satisfied
that the undertaking sufficiently addressed the industry's competition
concerns.
At the end of January, PaperlinX was able to secure full ownership of
Spicers, with 90 per cent of Spicers' shareholders agreeing to accept
the scrip-for-scrip offer. Final approval by the ACCC was conditional
upon PaperlinX's agreement to divest its Commonwealth Paper business and
to a process for assessing the merits of future anti-dumping applications.
Conclusions
Despite the inability of PaperlinX and Moores to prove a casual link
between the material injury to their businesses and the alleged dumping,
neither industry will be affected to any large degree by their failure
to have measures imposed against the competing Indonesian imports.
PaperlinX's successful acquisition of Spicers will create an expanded
fine paper distribution network and deliver substantial efficiency returns
to PaperlinX, which will earn about $90 million from the forced sale of
its merchant paper businesses.(4)
In the case of Moores, although it recorded overall losses for sales
of CCP, its results have improved each quarter since the second quarter
of 1998. Its CCP business accounts for about 10 per cent of total sales
and profit and profitability levels have not deteriorated. As Customs
noted, two factors that have contributed to a decline in the market for
CCP, are changes in technology and the shift in consumer preference away
from continuous paper to cut-size paper.
- Australian Customs Service, Statement of Essential Facts, A4 Copy
Paper from Indonesia, SEF No. 22, 4 July 2000, paragraph 8.4.
- On 31 December 1998, it sold its Australian business to a consortium,
which included the existing local management.
- Australian Customs Service, Statement of Essential Facts, Continuous
Computer Paper from Indonesia, SEF No. 27, 25 July 2000, paragraph
8.3.
- Its Edward Dunlop business and Commonwealth Paper are valued at between
$70 and $90 million and $8 and $9 million respectively.
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