PCN as a tool for fair comparison


   Praveen Khandelwal, Executive Partner

Nishtha Gupta Business Analyst

Product Control Number or PCN is a methodology laid down to compare identical types of product under consideration (PUC) in any trade remedial investigation. The objective of developing this method is to allow fair comparison for dumping and injury margin calculations. It is referred to as product control number or PCN by Indian and European authorities, the Brazilian authority uses the term, ‘CODIP’ and the US and Taiwanese authorities use the term ‘CONNUM’. However, while the name and approach of the system may be different, the purpose of determining PCN is the same that is, fair comparison between the normal value and the export price.

Purpose of determining PCN

Article 2.4 of the Anti-Dumping Agreement states that there should be fair comparison

between the export price and normal value at the same level of trade and in respect of sales made at possibly the same time. To ensure such fair comparison, any factors which may affect the price comparability, including differences in terms of sales, taxation, levels of trade, quantities, physical characteristics, and any other differences which might affect the price comparability should be taken into consideration. An issue arises in cases where the product basket sold in the domestic market differs than that exported to the importing country. Thus, in investigations where various product types exist within the product under consideration that may affect the price comparability, PCN is developed so that the comparison of normal value and export price can be done on an apple-to-apple basis and dumping margin and injury margin can determined.

For instance, assuming that in a particular investigation, the product under consideration is wooden tables. Such tables may be sold in various forms, such as dining tables, study tables, corner tables and dresser tables. If in such a case, a producer has predominantly sold dining tables in its domestic market but exported predominantly dresser tables, a simple comparison of average prices may show dumping where none existed. Similarly, in an opposite situation where the producer exported a higher priced product but sold cheaper product domestically, it may appear that there is no dumping, where it existed. The same is illustrated numerically.

Particulars Domestic Quantity Exported Quantity
Quantity Price Quantity Price
Dining table 100 1,00,000 50 1,00,000
Study table 40 15,000 50 15,000
Corner table 70 5,000 40 5,000
Dresser table 50 20,000 70 20,000
Total 260 45,962 210 35,000

It would be seen that there is actually no dumping by the producer in the above example, as each product type has been sold at the same price in domestic and export market. However, if the comparison is made on an average basis, it would give the impression of significant dumping by the producer. In the above example, the PCN will now facilitate a fair comparison of normal value and export price as the domestic goods are being compared to the imported goods with the same characteristics. It would ensure that comparison is made between comparable product types, to arrive at the real margin of dumping. Same principle would apply to injury margin as well.

How is PCN determined

In India, the PCN is proposed either in the petition itself or post initiation by any interested party. The proposed PCN is shared by the Authority with other parties for their comments. If needed, the Authority may hold a meeting or hearing of all interested parties to discuss and deliberate regarding the appropriate PCN methodology. Finally, after analysing all the comments filed by various parties, the Authority finalises the PCN and notifies it to all the parties. Each party is thereafter required to file its costing and pricing data based on such PCN methodology.

Does PCN determine the scope of product under consideration

Often the terms “product under consideration” and “product control number” are confused with one another. However, the two concepts are vastly different. While the

product scope defines the product that would be ultimately subjected to duty, the PCN is only devised for comparison of costs and prices within the product scope. Inclusion or exclusion of a particular product type in the PCN does not change the scope of product under consideration.

Therefore, even if a product is not specifically mentioned in the PCN, it may nevertheless be included in the scope of product under consideration, if it otherwise satisfies the definition of such product scope. However, a product falling outside the product scope cannot be subject to levy, even if it is included in PCN.

Flexibility in defining PCN

PCN is usually determined having regard to the differences in costs and prices of the various product types falling within the scope of product under consideration. Investigating authorities enjoy a degree of flexibility in defining the appropriate PCN. As a result, the PCN methodology determined by different authorities for the same product may be very different.

For instance, various jurisdictions, including India, European Union, Taiwan and Gulf Cooperation Council (GCC)have conducted investigations regarding imports of vitrified tiles. However, each authority prescribed a different methodology for fair comparison, as below.

Parameter India European Union Taiwan GCC
Size Y Y Y Y
Thickness Y Y Y N
Glazing Y N Y Y
Polishing Y Y N Y
Water absorption N Y N Y
Rectified / unrectified N N N Y
Coloured tile body N Y N N
Shape N N Y N
Weight N N Y N
High depth N Y N N
Quality standard N Y N N

While the factors considered by different jurisdictions may differ depending on the need of the investigation, the goal is the same, that of apple-to-apple comparison. Therefore, the PCN methodology is an essential tool in ensuring a fair comparison in any investigation. In the absence of appropriate determination of PCN, the margins determined would be grossly misleading.