Changshu Longte Grinding Ball Co., Ltd v Parliamentary Secretary to the Minister for Industry, Innovation and Science

LEGISLATIVE CONTEXT 7 The legislative context was set out by the learned primary judge from J[15] to [25]. It can be summarised to the extent necessary for the appeal as follows.

The Commissioner and applications for dumping notices 8 Division 2 of Pt XVB of the Customs Act 1901 (Cth) is entitled "Consideration of anti-dumping matters by the Commissioner". It sets out the requirements for making an application for the publication of a dumping duty notice and the procedures to be followed and the matters to be considered by the Commissioner of the Anti-Dumping Commission (the second respondent) in conducting investigations into goods covered by such an application, for the purpose of making a report to the Minister: s 269TBA. 9 Section 269TB(1) provides: (1) Where: (a) a consignment of goods: (i) has been imported into Australia; (ii) is likely to be imported into Australia; or (iii) may be imported into Australia, being like goods to goods to which subparagraph (i) or (ii) applies; (b) there is, or may be established, an Australian industry producing like goods; and (c) a person believes that there are, or may be, reasonable grounds for the publication of a dumping duty notice or a countervailing duty notice in respect of the goods in the consignment; that person may, by application in writing lodged with the Commissioner, request that the Minister publish that notice in respect of the goods in the consignment. 10 The Commissioner must examine the application: s 269TC. If the Commissioner does not reject the application under ss 269TC(1) or (2), the Commissioner must give public notice of various matters, including the identity of the applicant, particulars of goods the subject of the application and the countries of export known to be involved: s 269TC(4)(a)-(ba). The notice must also set a date for initiation of the investigation, which should be the date or estimated date of publication of the notice: s 269TC(4)(bc). The notice must indicate that a report will be made to the Minister on the basis of the examination of exportations to Australia of goods the subject of the application during a period specified in the notice, referred to as the "investigation period": s 269TC(4)(bf). 11 Section 269TDAA requires the Commissioner to place on the public record a statement of essential facts (SEF) within a certain time after the date of initiation of the investigation. The SEF contains the facts on which the Commissioner proposes to base a recommendation to the Minister in respect of the application for a dumping duty notice to be published. The Commissioner must have regard to any submissions concerning publication of the notice in formulating the SEF: s 269TDAA(2)(a)(ii). 12 The Commissioner must then give a report to the Minister in respect of the goods the subject of the application which makes recommendations, including whether a dumping duty notice should be published: s 269TEA.

The Minister's consideration and decisions to publish a dumping notice 13 Division 3 of Part XVB of the Customs Act is entitled "Consideration of anti-dumping matters by the Minister". It may be summarised for present purposes as follows. 14 Section 269TLA requires the Minister to decide whether to publish a dumping duty notice within a certain time after receiving a report from the Commissioner. The Minister may publish a dumping notice under s 269TG if certain conditions are satisfied. That section provides: 269TG Dumping duties (1) Subject to section 269TN, where the Minister is satisfied, as to any goods that have been exported to Australia, that: (a) the amount of the export price of the goods is less than the amount of the normal value of those goods; and (b) because of that: (i) material injury to an Australian industry producing like goods has been or is being caused or is threatened, or the establishment of an Australian industry producing like goods has been or may be materially hindered; or (ii) in a case where security has been taken under section 42 in respect of any interim duty that may become payable on the goods under section 8 of the Dumping Duty Act - material injury to an Australian industry producing like goods would or might have been caused if the security had not been taken; the Minister may, by public notice, declare that section 8 of that Act applies: (c) to the goods in respect of which the Minister is so satisfied; and (d) to like goods that were exported to Australia after the Commissioner made a preliminary affirmative determination under section 269TD in respect of the goods referred to in paragraph (c) but before the publication of that notice. (2) Where the Minister is satisfied, as to goods of any kind, that: (a) the amount of the export price of like goods that have already been exported to Australia is less than the amount of the normal value of those goods, and the amount of the export price of like goods that may be exported to Australia in the future may be less than the normal value of the goods; and (b) because of that, material injury to an Australian industry producing like goods has been or is being caused or is threatened, or the establishment of an Australian industry producing like goods has been or may be materially hindered; the Minister may, by public notice (whether or not he or she has made, or proposes to make, a declaration under subsection (1) in respect of like goods that have been exported to Australia), declare that section 8 of the Dumping Duty Act applies to like goods that are exported to Australia after the date of publication of the notice or such later date as is specified in the notice. 15 As can be seen, the first central issue for determination by the Minister in considering whether to publish a notice under ss 269TG(1) and (2) is whether the "export price" of goods was less than the "normal value" of goods: ss 269TG(1)(a) and (2)(a). 16 The second central issue is whether, because of that, there has been "material injury" to an Australian industry producing "like goods" or the establishment of such an industry has been or might be "materially hindered": ss 269TG(1)(b) and (2)(b).

Working out whether dumping has occurred 17 As is described in more detail below, the question whether dumping has occurred involves comparing the "export price" with the "normal value" of "like goods" (see ss 269TAB, 269TAC and 269T for respective definitions) during the "investigation period": s 269TACB of the Customs Act. Section 269TACB(1) provides: (1) If: (a) application is made for a dumping duty notice; and (b) export prices in respect of goods the subject of the application exported to Australia during the investigation period have been established in accordance with section 269TAB; and (c) corresponding normal values in respect of like goods during that period have been established in accordance with section 269TAC; the Minister must determine, by comparison of those export prices with those normal values, whether dumping has occurred. 18 Section 269TAB identifies how the "export price" is determined. 19 Section 269TAC, around which this appeal predominantly revolves, identifies how the "normal value" of goods is determined. This includes, in summary and relevantly for present purposes: (1) that the normal value is the price payable for like goods sold for home consumption in the country of export (here, the PRC), in the ordinary course of trade, in sale transactions that are made at arm's length: s 269TAC(1); (2) however - if the Minister is satisfied that the normal value cannot be ascertained under s 269TAC(1) because a "situation in the market" of the country of export is such that sales in that market are not suitable for use in determining a price under s 269TAC(1) - the normal value is (with one exception) the sum of the amounts the Minister determines to be the cost of production, the selling, general and administrative costs (SG&A) and the profit on that sale: s 269TAC(2)(a)(ii) and s 269TAC(2)(c). 20 These provisions are the subject of more detailed discussion below.

Review of certain decisions of the Minister by the Review Panel and Minister's decision 21 The Review Panel is established by Div 8 of Pt XVB of the Customs Act. Division 9 of Pt XVB deals with the Review Panel's review of certain decisions made by the Minister or Commissioner. Section 269ZZA(1)(a) provides that a decision by the Minister to publish a dumping duty notice under s 269TG(1) or (2) is a decision that is reviewable by the Review Panel. Interested parties are entitled to make submissions to the Review Panel in relation to a reviewable decision in accordance with s 269ZZJ and the Review Panel is obliged to have regard to submissions validly made: s 269ZZK(4). 22 On completion of its review, the Review Panel has to make a recommendation to the Minister. Section 269ZZK provides that the Review Panel is to make its recommendation in the form of a report as to whether the Minister should affirm the reviewable decision or revoke the reviewable decision and substitute a specified new decision. The Minister must then make a decision whether to affirm the reviewable decision or revoke the reviewable decision and substitute a new decision: s 269ZZM. 23 In the judicial review proceedings, the appellant sought to quash or set aside: (1) 'ADRF Report 47: Grinding Balls exported from the People's Republic of China' issued by the Review Panel under s 269ZZK; and (2) the Minister's decision dated 18 May 2017 made under s 269ZZM, following receipt of Report 47.

FACTUAL CONTEXT 24 The applications for dumping duty notices resulted in an investigation by the Australian Customs and Border Protection Service. After Customs produced its report setting out its findings and recommendations, the Commissioner published a notice on 17 November 2015 announcing an investigation into the export of grinding balls from the PRC. 25 On 21 April 2016, the Commissioner published an SEF and invited submissions on it. 26 The Commissioner considered and addressed the received submissions (including submissions from the appellant) in 'Report No. 316: Alleged Dumping and Subsidisation of Grinding Balls Exported from the People's Republic of China' (Report 316), which was provided to the Minister on 6 June 2016. Report 316 concluded that grinding balls had been exported from the PRC at dumped and subsidised prices and recommended dumping duties be imposed on the appellant, amongst others. 27 Report 316 concluded that there was a 'market situation' in the PRC. In substance, the situation was that the plans, policies and taxation regime of the Government of China had the effect of distorting (lowering) the prices of production inputs, including raw materials, to make grinding balls. In substance, the 'market situation' resulted in the cost of grinding bar being artificially depressed in the PRC. The existence of a 'market situation' was not at issue on the appeal. 28 Report 316 and the parties proceeded on the basis that the cost to manufacturers of producing grinding balls for sale fall within three categories: (1) the cost of raw materials - the main raw material used in the present case was grinding bar, which was considered to account for 80-90% of the cost of making grinding balls; (2) conversion costs - the steel billet was converted to grinding bar which, in turn, was converted to grinding balls; and (3) SG&A costs. 29 The methodology adopted by Report 316 started with determining a benchmark price for grinding bar for the actual costs of production. This was explained in the following way at [5.7] of Report 316: The Commission's benchmark for grinding bar costs consists of the following: i. a monthly Latin American export billet price in FOB terms; and ii. noting the Latin American billet is grade ASTM A36/A36-08, the billet prices were uplifted using independently sourced ferroalloy prices to provide a matrix of billet grades reasonably reflecting the chemical composition of each exported grinding ball grade; and iii. where available, the exporter's actual cost of converting steel billet to grinding bar was used to uplift the alloyed billet price to an alloyed grinding bar price. Where the exporter's actual cost of converting billet to grinding bar was not available (where grinding bar was purchased rather than produced from billet by the exporter) the alloyed billet price was uplifted by a conversion factor based on an average of the conversion costs of the cooperating exporters to determine an alloyed grinding bar cost. The Commission considers that the Latin American export billet prices at FOB level published by McGraw Hill Financial Services (Platts), forms an independent and reliable basis for the steel billet input component. 30 The Commissioner compared the "competitive grinding bar benchmark" (benchmark price) so determined with the costs reported in the Chinese exporters' records. This indicated that the costs so reported had been significantly influenced (reduced) by the 'market situation' and did not reasonably reflect competitive market costs. 31 Report 316 described how, after adjusting the grinding bar costs to reflect the benchmark price for actual costs of production, it determined the "normal value" for each exporter in the following way: • The competitive grinding bar benchmark was uplifted by each cooperating exporters' actual cost to convert grinding bar to grinding balls, to determine the cost to make (CTM) of each grade of each exporter's grinding balls; • The CTM was uplifted by each exporter's actual selling, general and administrative (SG&A) expenses to determine a CTMS for each grade of each exporter's grinding balls; and • CTMS was uplifted based on each exporter's profit on those domestic sales which met the original ordinary course of trade (OCOT) test (based on the exporter's unadjusted records). 32 As to who were "cooperative exporters", Report 316 explained: Subsection 269T(1) provides that, in relation to a dumping investigation, an exporter is a 'cooperative exporter' where the exporter's exports were examined as part of the investigation and the exporter was not an 'uncooperative exporter'. At the commencement of the investigation, the Commission contacted all known exporters of the goods and each identified supplier of the goods within the relevant tariff subheadings for grinding balls as identified in the ABF's import database and invited them to complete an exporter questionnaire. 33 The appellant was a cooperative exporter. 34 In substance, Report 316 determined the "normal value" by: (1) determining a "competitive grinding bar benchmark" from: (a) the Latin American export billet price (FOB) uplifted to reflect the correct grade revealed by the chemical composition of the relevant exported grinding balls, described in some of the material as a "ferroalloy uplift"; and (b) the exporter's actual cost of converting steel billet into grinding bar; (2) uplifting the benchmark cost of grinding bar (determined under (1)) by the actual cost to convert grinding bar to grinding balls in order to determine the cost to make (CTM) the grinding balls; (3) uplifting the CTM grinding balls (determined under (2)) by actual SG&A expenses to determine the cost to make and sell (CTMS); and (4) uplifting the CTMS based on the exporter's profit on those domestic sales which met the ordinary course of trade test. 35 As noted earlier, the appellant had made submissions in response to the SEF. One submission attacked the way in which the SEF identified the "actual cost" of converting steel billet into grinding bar (step 1(b) above). It was submitted (emphasis in original): SEF 316 applied a "conversion factor" for the purpose of calculating a grinding bar benchmark cost from the Commission's steel billet benchmark costs. The conversion factor is said to be "the exporter's actual cost of converting steel billet to grinding bar". However, in applying that conversion factor, rather than adding the weighted average per unit amount of actual conversion cost to the per unit steel billet costs, the calculation formula applies Longte's conversion cost as a percentage rate to the benchmark billet cost instead. The effect of this approach is that Longte's actual amount of conversion costs was also inflated/uplifted. 36 A second submission attacked the manner in which the SEF dealt with SG&A costs at step 3 above. In essence, rather than using actual costs, the SEF used a percentage. The submission was (emphasis in original): … Longte notes that so far as SG&A costs are concerned, SEF 316 accepts that "Longte's actual verified SG&A costs" should be used in the construction of normal value. However this was not done in the margin calculation spreadsheet pertaining to SEF 316. The problem is that the margin calculation spreadsheet uses the uplifted CTM as the denominator for the purpose of working out SG&A and the CTMS, rather than using Longte's actual SG&A costs. Essentially, due to this incorrect calculation, Longte's SG&A costs have been inflated by the same percentage as the uplift to its CTM using the grinding bar benchmark. 37 A third submission attacked the manner in which the SEF had determined profit at step 4. It was submitted that, if the Commissioner was to substitute an uplifted cost of production for the purposes of s 269TAC(2)(c), the same uplifted cost of production should be used for the determination of profit, rather than deriving a figure for profit based on actual costs associated with domestic sales in the ordinary course of trade. 38 Report 316 accepted the first two submissions but rejected the third. 39 As noted earlier, on 6 June 2016, the Commissioner provided Report 316 to the Minister, recommending that dumping duties be imposed on the appellant. 40 The Minister published a notice dated 1 September 2016 pursuant to ss 269TG(1) and (2) of the Customs Act. The notice accepted the findings and recommendations in Report 316 and imposed interim dumping duties on several companies, including the appellant: Anti-Dumping Notice No 2016/90. The notice was to the effect that s 8 of the Customs Tariff (Anti-Dumping) Act 1975 (Cth) (Dumping Duty Act) applied to the export of "ferrous grinding balls, whether or not containing alloys, cast or forged, with diameters in the range 22 mm to 170 mm inclusive" from the PRC, such that dumping duty was payable. 41 In October 2016, the appellant and others applied to the Review Panel (the third respondent) for review of the Minister's decision. 42 On 22 December 2016, the Review Panel asked the Commissioner, under s 269ZZL of the Customs Act to reinvestigate various findings made in Report 316. On 15 March 2017, the Commissioner provided the Review Panel with a report of his findings in response to that request for reinvestigation (Reinvestigation Report 388). 43 On 18 April 2017, the Review Panel provided Report 47 to the Minister. The Review Panel affirmed the Commissioner's approach in Report 316. It recommended to the Minister that he affirm his original decision to impose dumping duties. 44 On 18 May 2017, the Minister published a notice accepting the findings and recommendations in Report 47 and affirming the earlier decision to impose dumping duties. This decision was made under s 269ZZM(4) of the Customs Act. This decision resulted in the appellant's export of grinding balls to Australia being subject to payment of dumping duties pursuant to s 8 of the Dumping Duty Act.

THE PRIMARY JUDGMENT 45 As mentioned, there were seven grounds of review put to the primary judge. Each was rejected. It is unnecessary to recount each of the grounds or the reasons they were rejected. They can be found at Changshu Longte Grinding Ball Co., Ltd v Parliamentary Secretary to the Minister for Industry, Innovation and Science (No 2) [2018] FCA 1135. 46 There are three aspects of the primary judge's reasons which were contended to reveal error on appeal. The relevant reasoning of the primary judge is set out when dealing with each ground below.

Ground 1 47 Ground 1 of the appeal was that the primary judge erred in concluding at J[91] to [95] that it was not unlawful to use: (a) "substituted costs" for the purposes of working out the amount determined to be the cost of production of the goods exported to Australia: s 269TAC(2)(c)(i) and s 269TAC(5A) of the Customs Act; and (b) "actual costs" for the purposes of working out the amount of the profit on the domestic sale of those goods: s 269TAC(2)(c)(ii) and s 269TAAD(5) of the Customs Act. 48 The primary judge at J[91] to [95] stated: [91] I reject Longte's claims that it was a reviewable error to have a "hybrid application" of actual costs and substituted costs. Where a market situation exists, normal value is constructed under s 269TAC(2)(c) by adding together the following two elements: (a) the amount determined to be the cost of production of the goods exported to Australia in the country of export (which amount is determined in accordance with any relevant method prescribed in the Regulation as required by s 269TAC(5A)) or, alternatively, from data from other countries where s 43 of the Regulation does not apply, as approved in Steelforce Full Court; and (b) the amounts determined to be the administrative, selling and general costs as well as profit, on the assumption that the goods, instead of being exported, had been sold for home consumption in the ordinary course of trade in the country of export. [92] Both these elements are arrived at by independent processes and there is no illogicality in using different bodies of data for the two processes. The calculation of profit for the purposes of s 269TAC(2)(c)(ii) is a separate exercise from a calculation of the cost of production for the purposes of s 269TAC(2)(c)(i). Having regard to that distinction, it is not unlawful to use substituted costs for the purposes of one calculation but not the other. I see nothing in the legislative regime which prevents that approach. I also accept the respondents' submission that adoption of the approach urged by Longte would defeat the purpose of s 269TAC(2) which is intended to be applied where there is a market situation and the methodology in s 269TAC(1) cannot be applied, as the respondents' aide memoire revealed (see [75] above). Longte's approach does not make sense when it is applied against the background of a finding that a market situation exists. [93] Although it can make a difference whether the calculation of an amount of profit is made using dollar amounts or a percentage figure (see [76] above), I accept the respondents' submission that the choice is a matter for judgment by the decision-maker in arriving at a sensible outcome which is not inconsistent with the legislative regime. It was not irrational or unreasonable for the Commissioner and the Review Panel to adopt the methodology they used, where there was a finding of a market situation. Section 269TAC(2)(c)(ii) permits a method of calculation to be used which overcomes the market situation and produces a price which is unaffected by that market situation. [94] As the respondents acknowledged, there may be a "lack of symmetry" in a case where costs of production have been determined in a different way for the purpose of s 269TAC(2)(c)(i) when s 45(2) of the Regulation requires the profit on hypothetical sales to be worked out by using data relating to production and sale of like goods by the exporter in the country of export. This, however, is a direct consequence of the terms of the Regulation. There is nothing in the legislative regime to prevent Longte's actual cost of production data being used for the purposes of calculating profit under s 45, notwithstanding that that data had not been used in the different process of calculating cost of production. [95] Nor is there any reviewable error in the Commissioner's use of unadjusted records of production costs to work out, in the course of applying s 45, which of Longte's domestic sales of like goods were sales in the ordinary course of trade. This approach is consistent with the language and purpose of s 269TAAD and s 43 of the Regulation does not prevent that approach. 49 The "export price" and the "normal value" of goods are critical to a determination of whether dumping duty will be imposed. Subsection 8(2)(b) of the Dumping Duty Act allows a dumping duty to be imposed if the "export price" of goods brought into Australia is less than their "normal value". It provides: There is imposed, and there must be collected and paid, on goods: … (b) in relation to which the amount of the export price is less than the amount of the normal value; a special duty of Customs, to be known as dumping duty, calculated in accordance with subsection (6). 50 As we have noted at [17] above, s 269TACB of the Customs Act requires the Minister, in the circumstances prescribed in the section, to determine "whether dumping has occurred" by comparing the "export price" with the "normal value". Section 269TACB(1) provides: (1) If: (a) application is made for a dumping duty notice; and (b) export prices in respect of goods the subject of the application exported to Australia during the investigation period have been established in accordance with section 269TAB; and (c) corresponding normal values in respect of like goods during that period have been established in accordance with section 269TAC; the Minister must determine, by comparison of those export prices with those normal values, whether dumping has occurred. 51 As we have also noted at [19] above, the meaning of "normal value" is supplied by s 269TAC. Subsection (1) of s 269TAC provides: Subject to this section, for the purposes of this Part, the normal value of any goods exported to Australia is the price paid or payable for like goods sold in the ordinary course of trade for home consumption in the country of export in sales that are arms length transactions by the exporter or, if like goods are not so sold by the exporter, by other sellers of like goods. 52 The method described in subs (1) was referred to by the primary judge, uncontroversially, as the "primary method for calculating the normal value of goods": J[29]. 53 Subsection (2) of s 269TAC provides: Subject to this section, where the Minister: (a) is satisfied that: (i) because of the absence, or low volume, of sales of like goods in the market of the country of export that would be relevant for the purpose of determining a price under subsection (1); or (ii) because the situation in the market of the country of export is such that sales in that market are not suitable for use in determining a price under subsection (1); the normal value of goods exported to Australia cannot be ascertained under subsection (1); or (b) is satisfied, in a case where like goods are not sold in the ordinary course of trade for home consumption in the country of export in sales that are arms length transactions by the exporter, that it is not practicable to obtain, within a reasonable time, information in relation to sales by other sellers of like goods that would be relevant for the purpose of determining a price under subsection (1); the normal value of the goods for the purposes of this Part is: (c) except where paragraph (d) applies, the sum of: (i) such amount as the Minister determines to be the cost of production or manufacture of the goods in the country of export; and (ii) on the assumption that the goods, instead of being exported, had been sold for home consumption in the ordinary course of trade in the country of export - such amounts as the Minister determines would be the administrative, selling and general costs associated with the sale and the profit on that sale; or (d) if the Minister directs that this paragraph applies - the price determined by the Minister to be the price paid or payable for like goods sold in the ordinary course of trade in arms length transactions for exportation from the country of export to a third country determined by the Minister to be an appropriate third country, other than any amount determined by the Minister to be a reimbursement of the kind referred to in subsection 269TAA(1A) in respect of any such transactions. 54 Subsection (2) can only operate if the Minister has reached at least one of the three states of satisfaction identified in paras (a) and (b) of subs (2). Paragraph (a) identifies two states of satisfaction. In this case, the Minister reached the state of satisfaction identified in s 269TAC(2)(a)(ii): the Minister was satisfied that there was a "situation in the [Chinese] market … such that sales in that market are not suitable for use in determining a price under subsection (1)". 55 Given that a state of satisfaction was reached under s 269TAC(2)(a)(ii), "the normal value of the goods" was the value worked out under para (c) of s 269TAC(2), unless para (d) applied. Paragraph (d) did not apply because the Minister did not direct that it apply. It was not contended that this gave rise to any error. 56 Ground 1 of the appeal concerns the correct construction of para (c) of s 269TAC(2). Paragraph (c) provides that the "normal value of the goods" exported to Australia is the "sum of" three things: (1) The first, in s 269TAC(2)(c)(i), is "such amount as the Minister determines to be the cost of production or manufacture of the goods in the country of export". For simplicity, this may be referred to as the 'cost of production'. This cost is determined by reference to s 43(2) of the Customs (International Obligations) Regulation 2015 (Cth) (Regulations) - see: s 269TAC(5A)(a). In the present case, the Minister determined this amount by substituting for the actual cost an amount determined by reference to a benchmark. It was considered that this 'substituted amount' better reflected what the market cost would have been if the 'market situation' had not existed. The raw material would have cost more if it were not in effect subsidised by the policies and the tax regime of the Chinese Government. (2) The second, in s 269TAC(2)(c)(ii), is calculated on a hypothetical basis, namely "on the assumption that the goods, instead of being exported, had been sold for home consumption in the ordinary course of trade in the country of export". It is "such amounts as the Minister determines would be the administrative, selling and general costs associated with the sale". The SG&A costs are determined by reference to s 44 of the Regulations - see: s 269TAC(5A)(b). (3) The third, also in s 269TAC(2)(c)(ii), is calculated on the same hypothetical basis as the second; namely "on the assumption that the goods, instead of being exported, had been sold for home consumption in the ordinary course of trade in the country of export". It is the profit on that sale. The profit is determined by reference to s 45 of the Regulations - see: s 269TAC(5B). 57 Section 45 of the Regulations includes, at subs (2): The Minister must, if reasonably practicable, work out the amount by using data relating to the production and sale of like goods by the exporter or producer of the goods in the ordinary course of trade. 58 Sections 43 and 44 of the Regulations are in "Division 1 - Ordinary course of trade" and s 45 is in "Division 2 - Normal value of goods". 59 At the core of the appellant's complaint, in respect of ground 1, is that the Minister used a substituted cost of production for s 269TAC(2)(c)(i), but did not use that substituted cost when determining the profit under s 269TAC(2)(c)(ii). The appellant argued that, as a matter of construction of the Customs Act and the Regulations, the Minister was required to use the same cost of production when determining profit under s 269TAC(2)(c)(ii) as had been used for s 269TAC(2)(c)(i). 60 The appellant's argument was that, if the Minister substituted a higher production cost in light of his view that there was a 'market situation', the statutory scheme necessarily required the Minister to use that higher production cost in the calculation of profit, with the result that the profit would necessarily be lower because it would be calculated by reference to the substituted higher cost of production. 61 If the profit is calculated in this way, then the whole of the adjustment to cost of production, made by the Minister to offset a 'market situation', might be negated in the calculation of profit. This can be illustrated in the following way: Actual Adjust for 'market situation' Production Cost 1 5 Selling Cost 5 5 Profit 4 0 (if required to use adjusted cost of production) SALE PRICE 10 10

62 This would obviously defeat the effect of making an adjustment to the cost of production under s 269TAC(2)(c)(i). 63 There is no reason why the statutory scheme should be understood as requiring the profit under s 269TAC(2)(c)(ii) to be determined on the basis that the profit which would have arisen had the goods been sold in the ordinary course of trade in the country of export must be affected by the assumed increase in cost of production. It may be accepted that profit will almost invariably be affected by an increase in production costs. The extent of the impact will depend on a variety of matters. However, the statute does not evince an intention that the profit must be determined on the basis of the 'substituted cost', if any, used under s 269TAC(2)(c)(i). Rather, if reasonably practicable, it requires a determination of what the profit would have been if the goods had been sold in the ordinary course of trade in the country of export, in accordance with s 45(2) of the Regulations. It would be permissible to determine that profit by taking into account the fact that actual sales and actual profit were made in circumstances where there was a 'market situation'. It would be logical to conclude, depending on the particular facts, that the actual profit would have been less if the cost of production was higher. However, the statutory scheme does not require the decision-maker to determine the assumed profit under s 269TAC(2)(c)(ii) by using the cost of production determined under s 269TAC(2)(c)(i). 64 The appellant submitted that s 45(2) of the Regulations required the cost of production determined under s 269TAC(2)(c)(i) to be used for the purpose of determining the profit for the purpose of s 269TAC(2)(c)(ii). This was because, so it was submitted, the Regulations referred to the ordinary course of trade (OCOT), which required reference to s 269TAAD, which in turn required the cost of production to be determined by s 43 of the Regulations. That submission should not be accepted. 65 As noted above, s 45(2) of the Regulations provides: The Minister must, if reasonably practicable, work out the amount by using data relating to the production and sale of like goods by the exporter or producer of the goods in the ordinary course of trade. 66 Subsection 269TAC(2)(c) is evidently directed to determining what the value of goods would have been if, amongst other things: (a) the goods had been sold for home consumption; and (b) the cost of production was unaffected by any 'market situation'. This determination involves a calculation which uses inputs that are necessarily affected by assumptions and is, in that sense, hypothetical. 67 Subsection 45(2) of the Regulations, in referring to "data relating to the production and sale of like goods by the exporter or producer of the goods in the ordinary course of trade", requires the calculation of profit to focus on available data, and consideration to be given to actual profit, where reasonably practicable. 68 The reference to OCOT in both s 269TAC(2)(c)(ii) of the Customs Act and s 45(2) of the Regulations does not require the profit to be determined by using the cost of production determined under s 269TAC(2)(c)(i). 69 If that had been intended, it would have been simple enough for s 269TAC(2)(c)(ii) or s 45(2) to have stated, expressly, that the calculation of profit should occur on that assumption. 70 The appellant submitted that its preferred approach does not necessarily lead to the profit calculation being adjusted in a way which neutralises the whole of the adjustment to the cost of production such that the sale price remains the same (as in the example in [61]). The appellant submitted by way of example that if the cost of production is adjusted (to reflect the determination under s 269TAC(2)(c)(i)), some sales may become unprofitable. Such sales, it was submitted, would not be in the OCOT and therefore would not be taken into account in determining the profit. 71 Be this as it may, it does not detract from the proposition that, whilst it would be permissible to determine the profit by taking into account the fact that actual sales and actual profit were made in circumstances where there was a 'market situation', the provisions do not require the decision-maker to adopt the cost of production determined under s 269TAC(2)(c)(i) when determining the profit under s 269TAC(2)(c)(ii). 72 There is nothing to prevent the profit under s 269TAC(2)(c)(ii) from being determined taking into account that, if the 'market situation' had not existed and the cost of production was therefore higher, the profit might have been less. In the present case, there was evidence which the primary judge accepted to the effect that this will not necessarily always be the case. That conclusion was not challenged on appeal. However, at the risk of repetition, the statute does not require the profit determination under s 269TAC(2)(c)(ii) to be made on the basis of the cost of production as determined under s 269TAC(2)(c)(i). 73 Accordingly, Ground 1 must fail.

Ground 2 74 Ground 2 of the appeal was that the primary judge erred in concluding at J[96] that the use of a profit margin expressed as a percentage satisfied the requirement in s 269TAC(2)(c) of the Customs Act that the normal value of the goods in question be calculated as the sum of three amounts including, relevantly, the amount of profit on the sale of the goods, to be determined in accordance with s 45 of the Regulations. 75 The primary judge stated at J[96]: I do not accept Longte's submission that the use of a profit margin expressed as a percentage was contrary to s 45(2) of the Regulation because it said that this did not involve working out "an amount" as being the profit on the sale of goods, as required by s 45(1). According to the Macquarie Dictionary, the primary meaning of the word "amount" is "quantity or extent". Viewed in context, I see no legal reason why a percentage figure cannot be used as part of the methodology in arriving at an amount of profit. As the Review Panel correctly observed in Report 47, "the process by which [the Commissioner] determined an amount of profit involved ascertaining a profit ratio as a preliminary step, then applying that ratio to the substituted cost of production to arrive at an amount of profit". No reviewable error has been established with this methodology. 76 This ground of appeal must be rejected. The "normal value" was necessarily calculated as an amount in dollar terms; it had to be in order for the dumping duty to be imposed. 77 The "normal value" was reached by adding together the three inputs required by s 269TAC(2)(c). There was no legal error arising from the fact that, in determining the dollar amount, a percentage profit margin was used to determine the amount of the profit. It may be that there were reasons why the profit should have been calculated in some other way. However, those are matters of merit to be determined by the relevant decision-maker on the basis of the particular facts and evidence. It was not legally erroneous to reach a conclusion about the profit by employing a profit margin expressed as a percentage. 78 Although there was some debate about whether this was covered by the notice of appeal, the appellant also contended that it was erroneous to derive a percentage profit margin from a calculation using actual costs and then to apply that profit margin to a calculation which substituted higher costs. It was said, correctly, that this methodology assumed that profit would increase proportionately with an increase in production costs. 79 The primary judge rejected an argument that the Minister's decision was, because of this, unreasonable or illogical: J[97] - J[104]. The rejection of that case was not the subject of appeal. 80 The methodology adopted by the Minister was not prohibited by the statutory scheme. That is, it was permissible and not erroneous to determine the amount of profit by using a methodology which used a percentage figure to arrive at the amount of profit. Whether such a methodology had merit in its application to the facts is not a matter for this Court.

Ground 3 81 Ground 3 of the appeal was that the primary judge erred in concluding at J[84] to [89] that: (a) in deciding whether to determine the amount of the costs of production in the country of export using foreign pricing information, the Minister was not required to consider any comparative advantages or disadvantages that the producers in the country of export had over the producers from whose activities the foreign pricing information has been collected; and (b) in any event, the Commissioner had considered and determined adjustments for such advantages and disadvantages. 82 There was no dispute that the Minister was permitted to use foreign pricing information in order to determine the cost of production. The dispute was whether the Minister was bound to consider, and had considered as mandatory relevant considerations, the comparative advantages and disadvantages of domestic producers which might be seen as probative of the question whether an adjustment should be made to the foreign pricing information. The appellant's position was that the Minister was required to consider any comparative advantages and disadvantages relevant to the different markets (Latin America and the PRC) irrespective of any issue on the subject being raised by an interested party, and that he had not done so. The appellant contended that, whilst the Minister had considered arguments of particular exporters as to why the benchmark should be adjusted in its application to their particular circumstances, the Minister had not considered whether the benchmark should be adjusted to reflect the different markets. 83 The appellant ran its case on the basis that the Minister failed to consider at all "any comparative advantages or disadvantages that the producers in the country of export have over the producers from whose activities the foreign pricing information has been collected", rather than on the basis that there was a particular advantage or disadvantage which was not, but had to be taken into account as a mandatory relevant consideration. 84 The argument revolved around paragraphs [118] and [124] of the decision of Perram J in Steelforce Trading Pty Ltd v Parliamentary Secretary to the Minister for Industry, Innovation and Science [2018] FCAFC 20 (Perram, Pagone and Bromwich JJ). In that case, the appellant had relevantly raised two contentions: (1) first, s 269TAC(2)(c)(i) required determination of the cost of production and this did not permit the use of prices paid in other countries; and (2) secondly, if - contrary to the first contention - foreign pricing information could be used under s 269TAC(2)(c)(i), then the words "cost of production … in the country of export" required that the comparative advantages enjoyed by local manufacturers be brought to account by adjusting the benchmark. 85 Perram J (with whose conclusion Pagone and Bromwich JJ agreed) rejected the first contention and held that s 269TAC(2)(c)(i) did not prevent the use of foreign pricing information: at [116]. So long as the exercise undertaken was in substance the calculation of the cost of production in the relevant country (also the PRC in that case), the provision was not offended. His Honour stated at [116]: … There may be circumstances where it is impossible to determine a cost of production using local pricing. For example, it may simply not be available. So long as the task being performed, however, remains in fact the determination of the cost of production in the country of origin it is not necessarily objectionable that foreign pricing information is being used. 86 His Honour also noted at [116] that the Appellate Body of the World Trade Organization in Appellate Body Report, European Union - Anti-Dumping Measures on Biodiesel from Argentina, WTO Doc WT/DS473/AB/R (6 October 2016) "reached the same conclusion about the corresponding provisions in the Anti-Dumping Agreement: see Art 2 of the Anti-Dumping Agreement and the Biodiesel decision at 6.73". 87 As to the second contention, Perram J stated at [118]: The words 'cost of production…in the country of export' in s 269TAC(2)(c)(i) direct attention to the determination of an amount. The amount must have two qualities. It must be for production of the goods and it must be assessed on the basis that the goods have been produced in the country of export. Where a decision is made to seek to determine this amount using foreign pricing information it is necessary for the Commissioner to take into consideration any comparative advantages or disadvantages that the producers in the country of export have over the producers from whose activities the foreign pricing information has been collected. This is an implication from s 269TAC(2)(c)(i) itself and it means that when foreign pricing information is used to determine a normal price under s 269TAC(2)(c)(i) then the comparative advantages (and disadvantages) enjoyed by domestic producers are mandatory relevant considerations in the sense that expression is used in Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24 at 39-41. 88 His Honour then described this as the "weak form" of the appellant's argument. He explained that there was no doubt that the Commissioner had closely considered the issue of comparative advantage. His Honour said at [119]: … [The Commissioner] accepted that [comparative advantage] was a matter that needed to be examined. He accepted that it was likely that the Chinese producers of HRC probably did enjoy some comparative advantages over their Korean, Malaysian and Taiwanese rivals. But he concluded that he could not distinguish the effects of those comparative advantages from the advantage domestic HRC producers also enjoyed in the form of subsidised steel. Because of that he decided he would not adjust the benchmark for the comparative advantages of the Chinese producers of HRC essentially on the basis that such an enterprise was not possible. This process of reasoning does not involve a failure to take account of a mandatory relevant consideration: 'neither does a decision-maker fail to take into account a relevant matter which, after appropriate consideration, it has decided should be given no weight' (Commissioner of Taxation v Primary Health Care Limited [2017] FCAFC 131 at [21]). 89 His Honour noted that the appellant in the case before him needed to establish, in order to succeed, that it was mandatory to make the adjustment. His Honour said at [120]: … [T]he Appellants require a stronger form of the argument in which comparative advantage is more than just a mandatory relevant consideration. The Appellants must go so far as to submit that it is mandatory in determining the cost of production in the country of export in cases involving foreign pricing information to do so actually adjusting for comparative advantages. Another way of putting this is to say that where comparative advantage is apposite (as it was here), a failure to assess it results in a determination of an amount which, however useful, is not 'the cost of production … in the country of export'. 90 At [123], his Honour referred to a passage in Biodiesel at 6.73, which stated (Perram J's emphasis): Indeed, Article 2.2 of the Anti-Dumping Agreement and Article VI:1(b)(ii) of the GATT 1994 make clear that the determination is of the "cost of production […] in the country of origin". Thus, whatever the information that it uses, an investigating authority has to ensure that such information is used to arrive at the "cost of production in the country of origin". Compliance with this obligation may require the investigating authority to adapt the information that it collects. It is in this sense that we understand the Panel to have stated that Article 2.2 of the Anti-Dumping Agreement and Article VI: 1(b)(ii) of the GATT 1994 "require that the costs of production established by the authority reflect conditions prevailing in the country of origin." 91 And at [124], his Honour stated: I do not read the Appellate Body as saying that adaption of the foreign pricing information is mandatory. The word it used was 'may'. This connotes to my mind that in some cases adaption may not be necessary. I would accept that the passage at 6.73 requires an investigating body to consider the topic of adjustment and this accords with my own view that adjustment in cases involving foreign price information is a mandatory relevant consideration. But further than this I do not think it goes. 92 All members of the Court in Steelforce rejected the ground of appeal (ground 5) to which these passages of Perram J's reasons related. However, neither Pagone J nor Bromwich J adopted or endorsed Perram J's reasoning on ground 5. Justice Pagone dealt with ground 5 by adopting part of the reasoning of the primary judge (Robertson J): at [135]. His Honour did not address the scope of any duty to consider adjustments. Justice Bromwich reasoned that the Commissioner was not required to discount the benchmark data for comparative advantage if the possibility of doing so was considered and evaluated but not able to be given effect: at [137(5)]. 93 The analysis we prefer is as follows: (1) Section 269TAC(2)(c) only becomes relevant once the Minister has reached a state of satisfaction: (a) under s 269TAC(2)(a), that the "normal value" of goods exported to Australia could not be ascertained under s 269TAC(1) because: (i) of the absence, or low volume, of sales of like goods in the market of the country of export that would be relevant for the purpose of determining a price under subsection (1); or (ii) the situation in the market of the country of export is such that sales in that market are not suitable for use in determining a price under subsection (1); or (b) under s 269TAC(2)(b), that - in a case where like goods are not sold in the ordinary course of trade for home consumption in the country of export in sales that are arm's length transactions by the exporter - it is not practicable to obtain, within a reasonable time, information in relation to sales by other sellers of like goods that would be relevant for the purpose of determining a price under s 269TAC(1). (2) If the Minister reaches one of the three states of satisfaction referred to in ss 269TAC(2)(a) and (b), then the "normal value" is what the Minister determines it to be in accordance with s 269TAC(2)(c), unless the Minister directs that s 269TAC(2)(d) applies. (3) In determining the "normal value" in accordance with s 269TAC(2)(c), para (i) requires the decision-maker to determine "the cost of production or manufacture of the goods in the country of export". It is plain from the foregoing statutory context (and it was uncontroversial between the parties) that foreign pricing information might be relevant to the task of determining the "cost of production … in the country of export". The "cost of production or manufacture of the goods in the country of export" is one of three integers which must be ascertained in determining the "normal value" of the relevant goods. The other two integers are 'SG&A costs' and 'profit' (defined above). (4) Section 269TAC(2)(c)(i) requires the decision-maker to undertake the statutory task of determining the "cost of production … in the country of export" and the decision-maker must undertake that task in a way authorised by the statute. In that respect: (a) If a decision-maker uses pricing information from some other country or market to determine the cost of production in the country of export without: (i) turning his or her mind to the question whether that foreign pricing information was relevant and appropriate to a determination of the "the cost of production … in the country of export"; or (ii) giving genuine consideration (as to which see Carrascalao v Minister for Immigration and Border Protection (2017) 252 FCR 352 at [31] to [34]) to that issue, then the decision-maker might be shown not to have undertaken the task contemplated by the statute or to have done it an unauthorised way. (b) Whether there was, and the extent of any, consideration of: (i) comparative advantages and disadvantages that producers in the country of export have vis-à-vis those producers in respect of whom the foreign pricing information was derived; (ii) whether some adjustment of the foreign pricing information might be appropriate for the information better to inform the cost of production in the country of export, will inform - together with all the other particular facts and circumstances of the case - the answer as to whether the decision-maker carried out the statutory task and did so in an authorised way. (c) The judicial review applicant bears the onus of establishing a failure to perform the statutory task or that the task was performed in a way which was not authorised. (d) On the facts of this case, the task required by s 269TAC(2)(c)(i) would not have been performed if the Minister had not given any or genuine consideration to whether the Latin American benchmark was appropriate to determining the cost of production in the PRC or whether it could be improved by some adjustment. The statutory task of determining the "cost of production … in" the PRC would not have been performed if the decision-maker simply used pricing information from Latin America without turning his mind to the relevance and appropriateness of that pricing information to the Chinese market. As explained below, the Minister did this, and did so in a manner which was not shown to be unauthorised. (5) As to the question of mandatory relevant considerations: (a) Comparative advantages and disadvantages generally, or the question whether an adjustment should be made to the selected benchmark, are not mandatory relevant considerations in the sense described in Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24. Even if they were, the Minister in fact took those matters into account. (b) It necessarily follows from the previous conclusion (about comparative advantages and disadvantages generally) that specific advantages and disadvantages (whether or not raised by any interested party) are also not mandatory relevant considerations. Such an implication does not arise naturally from the statutory language or its object, scope and purpose, and is expressed at too great a level of particularity - cf: Foster v Minister for Customs and Justice (2000) 200 CLR 442 at [22] to [23] (Gleeson CJ and McHugh J). Even if the general subject matter of advantages and disadvantages had been a mandatory relevant consideration (and we prefer the view that it was not), it is one thing for a statute to imply that regard must be had to a particular subject matter; it is quite another for it to imply that regard must be had to all matters which fall within that subject matter. (6) It is possible that there may be a case in which foreign pricing information is used where a specific comparative advantage or disadvantage is so obvious and material to the statutory task raised by s 269TAC(2)(c)(i) that a failure to consider it, or whether an adjustment should therefore be made, despite neither matter specifically being raised by any interested party, would: (a) be legally unreasonable in the sense of giving rise to an arbitrary or capricious decision; or (b) result in error because the Minister did not sufficiently undertake the task entrusted to him by the statute. 94 Attention was given in making the relevant decisions to whether the Latin American benchmark was probative of the production costs in China and the conclusion was reached that it was. Report 316 included: 5.7 Benchmark for grinding bar costs … The Commission considers that the Latin American export billet prices at FOB level published by McGraw Hill Financial Services (Platts), forms an independent and reliable basis for the steel billet input component. World Steel Association's statistics shows that in excess of 63 million tonnes of crude steel was produced in the Latin American region in 2014. The Latin America region includes two of the top 13 countries, Brazil and Mexico, based on crude steel production volumes. Consequently, the Commission considers that the Latin America region has sufficient volume to reflect competitive market conditions. In addition, the Commission notes there are significant reserves of iron ore within the Latin America region which are mined and exported in large volumes. Of the iron ore exported from Central and Southern America, over half was directed to China, and the amount directed to China was greater than the amount consumed regionally. The Commission considers that this reflects a consistent cost point for a significant raw material that is included in the cost of steel billet. Based on the depth of the market, and the geographic distance from China minimising the potential distortions of GOC influenced billet prices impacting on the Latin American billet export prices, the Commission considers that the Latin American export billet prices in FOB terms represent the best available information for competitive market costs of steel billets. This is consistent with the Commission's approach in the most recently completed steel investigations INV 300 and 301. The Commission notes that the Latin American billet is of grade ASTM A36/A36-08. Monthly ferroalloy prices for the investigation period were obtained from Metal Bulletin. The total cost of ferroalloys applied to the steel billet was determined using a model developed by the Australian industry that allowed the Commission to replicate the chemical composition of each grade of exported grinding ball using the most cost effective combination of ferroalloys. 95 Report 47 stated at [45] (footnotes omitted, emphasis added): The task of the Minister under Regulation 43 is to determine the costs of production, in China, of the goods under consideration in the Investigation. That task was carried out in the context that the Commission had determined that: (a) there was a market situation in relation to domestic sales of grinding balls; and (b) the producers' records did not reflect competitive market costs. In determining the cost of production in China under Regulation 43, the Minister is entitled to take into account evidence about the cost of production in other places. The use of evidence about costs of production in other jurisdictions is consistent with the approach taken under s 269TAC(2)(d) of the Act. The use of information about the costs of production in countries other than China is also consistent with the remarks of the Appellate Body in EU-Biodiesel at 6.73 which contemplates the use of "out of country" evidence. The Commission took steps to adjust the benchmark so that it reflected conditions in China. In effect, the Commission used the Benchmark (and other information) to ascertain what competitive market costs for grinding bar would have been but for the market situation. 96 An example of the Minister's consideration of whether the benchmark should be adjusted is provided in Report 316. One exporter submitted (footnote omitted): … [T]he steel billet used to manufacture grinding balls was mostly produced in-house on a net cost basis, whereas the monthly Latin American export billet price in FOB terms contains a reasonable profit of the billet and necessary cost to move the goods from factory to port. Xingcheng argued that an adjustment for profit and transport is needed to bring the billet price used by the Commission to a net cost at factory level. 97 The Minister stated in Report 316: In relation to the claim that the Latin American billet benchmark needs to be adjusted to reflect a level of profit contained therein, the Commission notes that such an adjustment was only made possible in INV 300 and INV 301 based on the average verified level of profit achieved by the cooperating Chinese exporters on their own sales of steel billet. The Commission does not have similar information in relation to the sales of billet used in grinding balls. In the absence of that information, and noting the widely reported weakness in global steel markets, the Commission considers it unreasonable to assume that a profit is necessary and has not adjusted the Latin American billet price for a profit component. Similarly, the Commission does not have in its possession the inland transport costs required to transport steel billet from the factory to the port of shipment in relation to the Latin American billet. On this basis, the Commission considers it reasonable to leave the Latin American steel billet benchmark unadjusted for inland transportation, noting that no upward adjustment has been made to reflect the fact that the Chinese manufacturers of grinding balls would incur inland transportation costs moving the billet from its place of manufacture to the place of manufacture of grinding balls. 98 It was submitted that these examples reflected consideration of whether the benchmark should be adjusted to reflect the position of specific exporters, rather than the comparative advantages and disadvantages of the different markets. However, whilst it is true that Report 316 did address the question of whether the benchmark should be adjusted in the context of submissions made by specific interested parties, the better reading of the report is that the Minister considered whether an adjustment to the benchmark was appropriate to better reflect the circumstances in the Chinese market. This is particularly apparent, for example, in the two paragraphs extracted immediately above. 99 To the extent the appellant raised specific issues, they were considered. Thus, Report 47 stated at [47] (footnote omitted): [The appellant] argued that, if a foreign benchmark was to be used, then a South American benchmark was inappropriate because it did not relate to what it described as the largest and most competitive steel market in the world (ie the South East Asian market). In the Report the Commission indicated that it had selected the South American benchmark because the South American market was a substantial market, including two of the top 13 iron and steel countries based on crude steel production, and that the balance of export and domestic consumption meant that the Benchmark represented a consistent cost point. The geographic distance from China minimized the effect on the Benchmark of the distortions which the Commission found existed in the Chinese market. This is a reasonable approach. 100 Ground 3 was advanced on the basis that there was a complete failure to consider comparative advantages and disadvantages between the relevant markets or whether an adjustment was appropriate. 101 The Minister considered whether the foreign pricing information was relevant and appropriate to determining the "cost of production … in the country of export" and considered whether it could be improved, having regard to the comparative advantages and disadvantages, through an adjustment. Ground 3 is not made out.

CONCLUSION 102 The appeal should be dismissed with costs. I certify that the preceding one hundred and two (102) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Yates, Moshinsky and Thawley.