Page 312 - MANUAL OF SOP

Manual of OP for Trade Remedy Investigations

11.7.19. The purpose of determining the price undercutting is to assess whether
such dumped imports are undercutting the sales price of the DI. The undercutting
is a pricing strategy in which a product is set at a low price with the intention to
drive the competitors/DI out of the market or to create barriers to entry for potential
new competitors.

11.7.20. The presence of positive undercutting indicates towards a situation where
import prices are below the net sale price of the DI and the DI will be eventually
made to sell their products at less than the normal selling price, indicating a direct
adverse impact. The negative undercutting indicates that the net sales price of DI
is less than the import price. However, this could be due to the market compulsion
of DI to hold on to the market share. In such a case, the impact of dumped imports
will be seen in the reduction in profits or increase in losses of DI because sale prices
have been forced to be kept low.

11.7.21. It might be necessary to take into consideration several factors, as
mentioned below, in order to ensure proper determination of price undercutting:

(i) In case of wide variations in the periodic cost of production due to fluctuation
in raw material, it may be appropriate to determine price undercutting by
undertaking the monthly or quarterly analysis; and

(ii) It is possible that the DI may allege that there are other factors affecting
prices of the DI or imports. If any such factor has been brought to the notice
of the Authority, the same should be adequately considered/addressed.

11.7.22. As far as the price analysis is concerned, typically, the company may not
transfer captive consumption at arm's length price, and therefore, the price and
the profitability of captive consumption may be distorted. For this reason, the
profitability of captive consumption is normally ignored.

11.7.23. Price underselling is calculated by comparing the landed value of the
subject imports with the Non-Injurious Price (NIP) as determined by the Authority
for the DI. The purpose of determining Price underselling is to assess the injury
caused to the DI due to the low priced products in the market resulting in the
inability of the DI to realize the fair price which is the Non-Injurious Price for the
DI.A positive underselling indicates that the imported goods are being sold at a
price which is below the fair price (NIP) at which the domestically produced goods
should at least be sold. A positive underselling will not allow the DI to grow/develop
or sustain in the long run.

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