1970

COMMONWEALTH[ OF AUSTRALIA

REPORT OF SPECIAL ADVISORY AUTHORITY

UNDER

PART V OF THE TARIFF BOARD ACT

1921 - 1966

ON

ACETONE DERIVATIVES

9th DECEMBER 1970

Price: 25c

ACETONE

DERIVATIVES

The Right Honourable the Minister for Trade and Industry .

The following report is submitted in response to

your reference of 9th November 1970 on the question of

whether it is necessary that urgent action be taken to

protect the Australian industry producing acetone derivatives

in relation to the importation of —

4—Methylpentan-2—ol

2—Methylpentane-2, 4—diol

isoButyl methyl ketone

Diaeetone alcohol

falling within sub—item 29.04.3, 29.04.9, 29.13.2, or

paragraph 38.19.9 in the First Schedule to the Customs

Tariff 1966-1970.

The full terns of the reference are 'set out in

Appendix A attached to this report. The reference arose

following an application.by Shell Chemical (Australia) Pty.

Limited.

Sub—items 29.04.3, 29.04.9 and 29.13.2 and

paragraph 38.19.99 of the Customs Tariff, together with

current operative rates of duty, are shown.in full in

Appendix B. In brief however the goods under reference are

dutiable at the following rates —

2.

ACETONE DERIVATIVES

General Preferential

4-Methylpentan-2-ol, also known

as Methyl Isobutyl Carbinol ( IvIIBC ) 25^^

2-Methylpentane-2, 4 diol, also known

as Hexylene Glycol ( HG ) . 72

isoButyl methyl ketone ( MIBK ) 25%

Diacetone alcohol ( DAA ) 25%

15%

Free

15%%

15%

In general in this report these products are referred to as

MIBC, HG, MIBK and DAA.

The protective duties applicable to MI73C, MIBK and DAA

were the rates recommended for these products by the Tariff

Board in its report of 13th April 1966 on Industrial Chemicals

and Synthetic Resins. These duties were anticipatory duties

as Shell Chemical did not commence the manufacture of these

products until late in 1968. The other product covered by the

reference, HG, is manufactured in the same plant but imports

are subject only to minimum rates of duty. The company made

no submission to the Tariff Board in respect of this product

because at that time it was not appreciated that the

production of HG could be easily included in the plant.

During the course of my inquiry on this subject

discussions were held with representatives of Shell Chemical,

the only Australian manufacturer of the goods under reference.

Discussions were also held with representatives of Mobil Oil

Australia Limited, an importer of MIBK and with representatives

of the Australian Paint Manufacturers' Federation and

3.

ACETONE DERIVATIVES

British Paints Ltd. MIBC, MIRK and BAA are used in the

manufacture of surface coatings and thinners while HG is used

by resin manufacturers in the production of emulsions. The

quantities of MIBI( and DAA used by the paint industry are

substantial.

Shell Chemical cornmeiiced the production of acetone

derivatives in late 1968. In October 1969 the company asked

for protection against dumping and, following investigations,

the Department of Customs and Excise has been taking cash

securities since May 1970. On 15th April 1970 the question

of whether the. four products covered by my reference should

be made subject to dumping duties was referred to the

Tariff Board.

In addition, Shell Chemical sought increased protection

for the industry and claimed that, if it were not given

urgently, consideration would have to be given to the closing

down of the plant. At my inquiry the company asked that

increased duties be imposed on the four products and that

temporary support values be provided in respect of MIBC, MIBK

and DAA. The rates of duty ,including existing rates,and the

support values sought by the company were as follows :-

Product Rate of Duty

General Preferential

MIBC 50% 40

HG 40 30^

MIBK 40 30o

DAA 50% 40

Support Value

1366 per metric ton

$344.88 per metric ton

. 366 per metric ton

4.

ACETONE DERIVATIVES

In making this request the company assured me'that during

the currency of any temporary duties that might be imposed,

it would not raise its prices above the levels shown in its

1.-tawt price lists.

The company claimed that its inability to meet

overseas competition under existing rates of duty had been

brought about by two factors. The first was the substantial

falls in overseas prices in the period in which the company

was building its plant and establishing its connections

with consuming industries. The company claimed that this

problem had been worsened by the. fact that some dumping

into Australia.was taking place but, as stated earlier,

this aspect of the problem is`already the subject of a

Tariff Board inquiry. The second factor responsible for the

company's difficult competitive position was the increases

in costs which had occurred since the Tariff Board inquiry.

A full statement of these increased costs was submitted

to me but the most important item was the heavy increase

in the corupany',s acetone cost. In its original estimates

Shell Chemical had assumed that supplies of acetone would

be obtained from overseas under By-law. The present position

is that acetone is now produced by Monsanto as a co-product

in its cumene plant for the production of phenol. All the

Australian production has to be taken up by local manufacturers

before Shell can obtain a share of the imported acetone li

which is allowed entry under "shortfall By-laws.

ACETONE

DERIVATIVES

The company claimed that its present cost for acetone was

$30 - $40 per ton higher than the expected cost on which

its submission to the Tariff Board had been based. As an

indication. of the effect of this increase it was said that

approximately.1.3 tons of acetone are used for each ton of

product obtained from the derivatives plant.

The application for emergency protection was

opposed by Mobil Oil Australia Limited and the Australian

Paint Manufacturers' Federation. The former was concerned

only with MIBK and stated that the support value requested

Ã¢ÂÂ¢ by the applicant was equivalent to Mobil's present selling

Ã¢ÂÂ¢prices. The Australian Paint Manufacturers' Federation was concerned with the effect which. increased duties could have

on costs to its individual members. As indicated earlier,

however, Shell Chemical has stated that during the currency

of any temporary protection it will not increase prices

above their present levels.

Imports of goods covered by the reference, as

recorded in official statistics, are shown in the following

table. Statistics of imports of MIRK and DAA are shown in

total only as statistics of imports of these two chemicals

according to country of origin are confidential.

6.

ACETONE, DERIVATIVES

. ( Normal Imports Only )

Methyl Isobutyl Carbinol(MIBC)

1967-68 .1968-69 1969-70 -- - 1970-71

gallons gallons gallons ThreaBs

Japan -. 2,.55Q 28, 5010 -

United Kingdom 7,135 322 39,740

Total 7,135 2,874 68,330 --

Hexylene Glycol(HG)

lb lb lb lb

Canada .2,550 2,125 2,975 -

France 17,294 64,800 -Ã¢ÂÂ¢ -

. Japan - 2,510 4,397 3,351

United Kingdom 137,000 222,027 335,735 -

U.S. America 103,669 34,643 16,990 `. 2,905

Total 260,513 326,10 360,097 6,256

isoButyl Methyl Ketone (MIBK)

lb. lb. lb. lb.

Total 2,548,761 1.608,620 2,230,273 426

Diacetone Alcohol (DAA)

Ã¢ÂÂ¢ lb. lb. lb. lb.

Total 1,117,320 571,850 702,719 154,359

7.

ACETONE DERIVATIVES

On the basis of"Australiai demand MIBK is easily the most

important of the four products under reference. Following the entry

of the Australian manufacturer into this industry there, was a

considerable falling off in /imports of MIBK' in 1968-69 but in

1969-70 imports had returned to about 90* of their earlier level.

The import position in regard to MIBC is confused by the fact that

there were substantial. imports under By-law in 1968-69 but none

in 1969-70. The next'most important product is DAA and while imports

showed some increase in 1969-70 over the previous year they were

still well below the level of imports in 1967-68.

Import statistics are available only for 'the first three

months of 1969-70. With the exception of DAA they have been at a

very low level and would indicate that the anti-dumping action

taken by the Department of Customs and Excise since May 1970 has

been effective.

Shell Chemical furnished its production and sales figures

for the goods covered by the reference for the calendar year 1969.

and for the first 'nine months of 1970 - i.e. for"practically the

whole of the period in which it' has been in operation. As there is

only one Australian manufacturer it is not possible to incorporate

these figures in this report without disclosing confidential

information. However after coinparing.imports and Australian

manufacturers sales it is possible to make the following observations:-

g

ACETONE DERIVATIVES

(1) In its first year of manufacture the Australian

manufacturer could obtain only a limited share

of the Australian market for each of the four

products. For practically any industry the

share obtained would have been regarded as small

butt fora capital intensive industry such as this

the share obtained must be considered to be

particularly unsatisfactory.

(2) In the first nine months of the second year of

.operation the Australian manufacturer's share of

the market was still at a low level even though

in one :product it was able to make some progress.

Shell Chemical maintained that it is at a considerable

price disadvantage compared with imports particularly imports

from Japan. It claimed that since the time of its original

application there has been a marked fall in overseas prices

and that, in addition, overseas suppliers were dumping on the

Australian market. The Department of Customs and Excise has

established tentative normal,values for these products from

various sources and since May 1970 has, when appropriate, been

taking cash securities. Shell Chemical, however, claimed that

those tentative normal values which have been published, have been

fixed at too low a level.

9.

ACETONE DERIVATIVES

For the purpose of. calculating the Australian

manufacturer's price disability'I have compared the Australian

manufacturer's present selling price with landed costs of the

imported products based on the tentative normal values as

established by the Department of Customs andExcise. In the

case of one product the Australian manufacturer sells at a

profit but this is more than offset by the losses incurred on

the other three. In regard to imports'I have had access to

the files of the. Department of Customs and Excise and have used

the information from those files to compile representative

landed costs of imports obtained in various forms from various

sources. My calculations showed that the Australian manufacturer

is at a substantial price disadvantage in respect of all four

products.

The conclusions which I have reached as a result of

my inquiry can be sumriiarised as follows

(1). Shell Chemical has invested considerable funds

in the production of the acetone derivatives under

.reference L. -In the period of about two years in which

it .has been in production the company has been

operating at an overall loss.

(2) Despite the fact that it has been selling three of

the products at a loss ( and the fourth at only a

reasonable profit) the overall share of the market

which the company has been able to obtain is well

below the level which I would consider reasonable

for an industry of this nature.

10.

_ACETONE DERIVATIVES

(3) The growth in the Australian demand from 1968-69

to-1969-70 for two of the important products has

been, largely taken by imports.

(4) Since the protective duties now applying to MIBC, MIBK

and DAA were recommended by the Tariff Board in 1966

there have been substantial increases in the Australian

manufacturer's costs of production.

(5) In the same period overseas prices for the. four

products have fallen considerably and, even if

imports are not made at prices lower than the

tentative normal values established by the

Departinent of Customs and Excise, the Australian

industry is at a considerable price disadvantage.

(6) Statistics for the first three months of 1970-71

show that imports have been at a low level. In the

full year, however, the position could chance

particularly with imports of chemicals in bulk

shipments.

In these circumstances I consider that urgent action is necessary to

protect the Australian industry producing acetone derivatives.

Shell Chemical asked that temporary additional protection

be given to the industry by means of additional ad valorem duties

plus temporary support values. A similar method of protection would

be by means of sliding scale duties. However in view of the fact

that anti-dumping measures have been taken by the Department of

Customs and Excise and as the question of dumping is already the

subject of a Tariff Board inquiry, I consider that as a holding action

11.

ACETONE DERIVATIVES

there is no necessity for duties of this type. Protection can

be appropriately provided by simpler types of duty. Having

regard to the different prices at which these products are

available from, different countries I consider that the increased

'protection could most appropriately be given by means of a

specific rather than ad valorem rate of duty.

The comparisonswhich.I have made show'a different

rate of duty could be recommended for each of the four products

under reference. However I do not consider this would be

desirable. HG is by far the least important of the four

products. The combined imports and local production of this

product represent, less than 5 of the total Australian demand

for the four products. I consider that as a temporary holding

action this product need not be taken into consideration and

that the protective needs. of the -industry should'be assessed

on an overall basis on the other three products. After

considering the individual price disadvantage of each of these

'products, the, relative importance of each on the basis of demand

and the company's profit position in respect of each product I

consider that adequate protection would be given to the

industry by means of a temporary additional duty of $70 per.

ton on MIBC, MIIBK and DAA, irrespective of origin.

12.

ACETONE DERIVATIVES

The Minister's reference asks whether urgent action

should be taken to protect the Australian industry against

imports of acetone derivatives falling within sub-item

29.04.3 29..04.9, 29.13.2 or paragraph 38..19..99 of the

Customs Tariff. Paragraph 38.19.99 provides that the rate of

duty payable on goods falling under that paragraph shall be

the same as that applying to the constituent giving the goods

their essential character. There was no evidence at my

inquiry which would cause me to recommend any variation in

this procedure. in the case of acetone derivatives. I propose

to recommend that imports under this paragraph, the essential

character of which is derived from any of the four products

under reference should be subject to the duties applying

to those products.

In reply to the questions raised in the Minister's

reference I advise as follows :-(a) (i) it is necessary that urgent action be taken to

protect the Australian industry producing

acetone derivatives in relation to the

importation of -4-Methylpentan-2-ol

isoButyl methyl ketone

Diacetone alcohol

falling within sub-item 29.04.3, 29.13.2 or paragraph 38.19.99 in the First Schedule

to the Customs Tariff 1966-1970;

13.

ACETONE DERIVATIVES

(ii) it is not necessary that urgent action be taken

to protect that industry in relation to the

importation of -2- Methylpentane -2,4 diol

falling within sub-item 29.04.9 or paragraph

38.19.99 in the First Schedule to the Customs

Tariff 1966-1970 ;

(b) the protection can appropriately be provided as follows

(i) in respect of 4-Methylpentan-2-ol, isoButyi methyl

ketone and Diacetone alcohol falling within sub-item

29.04.3 or 29.13.2 and being goods covered by the

reference - a temporary additional duty of $70

per long ton

(ii) in respect'of 4- Methylpentan-2-ol, isoButyl'methyl

ketone and Diacetone alcohol falling within paragraph

38.19.99 and being goods covered by the reference -the temporary; additional duties which would apply

if the goods were classifiable under sub-item

29.04.3 or 29.13.2 ;

(c) the temporary additional duties should not apply to goods

in direct transit to Australia on 9th November 1970

provided they are entered for home consumption on arrival.

F. A. Meere

SPECIAL ADVISORY AUTHORITY

CANBERRA, AUSTRALIAN CAPITAL TERRITORY 9th DECEMBER 1970

APPENDIX A --

ACETONE DERIVATIVES

Whereas it appears to for Trade and Industry, that ur, protect the Australian industry I, JOHN McEWEN, in pursuance of Section 18A of the Tariff Board the Special Advisory Authority,

me, JOHN McEWEN, Minister of State 'ent action may be necessary to producing acetone derivatives, powers conferred upon me by

Act 1921-1966, do hereby request SIR FRANK MEERE, C.B.E. a

(1) to undertake an inquiry under Section 18B of the aforesaid Act, on-the following questions:

(a) whether it is. necessary that urgent action be taken to protect that industry in relation to the importation of -^

4-Methylpenten -2-01 2-Methylpentane--2, 4-diol LsoButyl methyl ketone Diacetone alcohol

falling within sub-item 29.04.3, 29.04.9, 29.13.2, or paragraph 31.19.99 in the First Schedule to the Customs Tariff 1966-1970; and

(b) if such urgent action is necessary -whether, having regard to the public interest, the protection can appropriately be provided by means of a temporary duty,

or if it cannot be so provided, whether it can appropriately be provided -(i) by means of the temporary restriction of theimportation of these goods; or

(ii) by means of a combination of both a temporary duty and the temporary restriction of the importation of these goods; and

(c)

whether any recommended temporary duty,

temporary restriction of imports or combination of both should apply to goods in direct transit at the date of this reference.; and

(2) to report, in accordance with Section 18D of the . aforesaid Act, on these questions.

J. McEWEN

MINISTER OF STATE FOR TRADE AND INDUSTRY

9th November, 1970.

APPENDIX B

ACETONE DERIVATIVES

OPERATIVE RATES OF DUTY

Customs Tariff 1966 -1970 Ã¢ÂÂ¢ Ttem Goods ate General o Duty Preterential-

29.04 Acyclic alcohols and their halo-genated, sulphonated, nitrated or nitrosated derivatives:

29.04.1 - Methanol N.U.R.

29.04.2 - Propyl alcohols N.U.R.

29.04.3 - Butyl alcohols; ethanediol; n-Butyl n-Butyl 4-methylpentan-2-ol; alcohol alcohol and monohydric primary alcohols and ethan--ethanediol- containing not less than 6 ediol-25%, 15%, and carbon atoms and 90% of 90% of SVD; SVD; Re.. Remainder :mainder - 15% 259 NZ: FreeDUMPING: 4- Methylpentan-2-ol (methyl iso butyl earbinol-29Ã¢ÂÂ¢04.4 - Sorbitol; mannitol N.U.R.29.04.9 - Other 7 ;a FreeDUMPING: 2-M ethylpentane-2,4-diol (hexylene glycol)29.13 Ketones, ketone-alcohols ketone- phenols, ketone-aldehydes ., quinones, quinone-alcohols, quinone- phenols, quinone-aldehydes and other single or complex oxygen-function ketones and quinones, and their halogenated, sulphonated, nitrated or nitrosated derivatives:29.13.21 - isoButyl methyl ketone;diace- 25% 15% tone alcohol; mesityl oxide ;ethyl methyl ketone NZ: FreeDUMPING Ã¢ÂÂ¢ isoButyl methyl ketone Diacetone alcohol

PAGE 2 OF APPENDIX B

Item Goods

to

' General Preferential

38.19 Chemical products and prepara-. tions of the chemical or allied industries (including those consisting

of mixtures of natural products) , being goods not falling within any other item; residual

products of< the chemical or allied industries, being goods .not falling within any other item:

38.19.9 .- Other:

38.19.99 - - Other:

38.19.991 - - -' Put up for retail..

sale

0

The rate

in this column (being a First

Schedule rate) that applies to the con-

stituent that gives the goods their.

essential character, and 90gb of

SVD or TSVD, as the case may be,

if the constitu-ent that gives the goods their

essential character is subject to support duty; or

if higher, 22?X

The rate in this column (being a

first Schedule rate) that applies to

the con-stituent that gives the goods their

essential character, and 90% of

SVD or TSVD, as the case may be,

if the constitu-ent that -gives the

goods their essential character is subject to support duty; or if higher, 10'

PAG

E 3^

Rates

F APPENDIX B

of Duty

MI

General Preferential UI

Ã¢ÂÂ¢,The rate in this column that applies .. to the con-

stituent that gives the goods their

essential character and 90% of SVD or t vas s,

may be, if the con-st.it  uent that gives ,,  the goods

their essential character is , subject to support duty

The rate Ã¢ÂÂin this column that applies to the con-

stituent that gives the goods their

essential character Ã¢ÂÂ¢ and 90% of SVD or

TSVD, as Ã¢ÂÂ¢ o gose

if the con-

stituent that gives the goods. their Ã¢ÂÂ¢ essential

character is subject to support duty,

1 G

1 r

_ t

