Lien Hwa Industrial Corporation and 37 other Enterprises

Case:

Key Words:

wheat, shared shipping

Reference:

Fair Trade Commission Decision of September 2, 2009 (the 930th Commissioners' Meeting), Disposition Kung Lian Tzu No. 098005

Industry:

Grain Mill Products Manufacturing (0862)

Relevant Laws:

Article 7, 14 and 15 of the Fair Trade Law

Summary:

1. Currently there have been two approved concerted action applications in effective for shared shipping of wheat procurement. One of the two approvals was Disposition Kung Lian Tzu No. 095005 dated September 7, 2006 granting Lien Hwa Industrial Corporation (hereinafter referred to as Lien Hwa) and 37 other enterprises the approval of extension valid through September 30, 2009. This application was later joined by Guo-Cheng Flour Co., Ltd. and 2 other enterprises making a total of 41 applicant-enterprises. The other approved application was Disposition Kung Lian Tzu No. 096004 dated September 6, 2007 granting Lien Hwa and 6 other enterprises to independently establish a group for shared shipping of wheat procurement. This application was later joined by 18 other enterprises making a total of 25 applicant-enterprises. The concerted application in question was filed due to the fact that the approval granted in the former application was expiring.

2. Findings of FTC after investigation: Since there is no domestic production of wheat, the industry in question relies entirely on imported wheat for raw materials. In the international trade, wheat is considered bulk grain. As a result, the procurement quantity and the ship size can affect the costs of the raw material procurement. In 2008, dry-bulk shipping rates increased drastically. As a result, most of the wheat was transported via return cargos. However, this was only a temporary phenomenon. Regularly, dry-bulk shipping rates are lower than cargos. Especially with the convenient automatic maneuver, using shared dry-bulk ships to transport wheat is the main method of supply transportation. Shared shipping allows the enterprises to lower their costs and in turn benefit the consumers. The enterprises may also comply with the agricultural and economic policies of the government to maintain the stability of food supply and demand and benefit the overall economy and public interest. As a result, the FTC granted its approval for the extension in accordance with Article 15(2) of the Fair Trade Law and Article 25 of the Enforcement Rules to the Fair Trade Law.

3. Grounds for approval:
   (1) Article 14(1) of the Fair Trade Law provides that "no enterprise shall have any concerted action; unless the concerted action that meets one of the following requirements is beneficial to the economy as a whole and in the public interest, and the application with the central competent authority for such concerted action has been approved : …5. joint acts in regards to the importation of foreign goods for the purpose of strengthening trade…" Article 15 of the same law further provides that "the central competent authority may attach conditions or require undertakings in the approval it grants pursuant to the provisions of the preceding article. The approval shall specify a time limit not exceeding three years. The enterprises involved may, with justification, file a written application for an extension thereof with the Central Competent Authority within three months prior to the expiration of such period; provided, however, that the term of each extension shall not exceed three years." The materials to be submitted for the extension application are provided in Article 25(1) of the Enforcement Rules to the Fair Trade Law.
   (2) By extending the approval of shared shipping of wheat procurement, the applicants may reduce the import costs, storage loss, burden of capital backlog and interests, and procurement risks. The extension would therefore benefit the overall economy and public interest in compliance with Articles 14(1)(v) and 15(2) of the Fair Trade Law and should be granted. The extension will be valid through September 30, 2012. However, to avoid the applicants from exploiting this approval in terms of the applicants' internal and external transactions and to convenience the FTC supervision, the FTC also required additional undertakings. The applicants were required to submit a quarterly execution report of this concerted action in writing to the FTC with regard to each importer's registered procurement quantity, actual procurement quantity, procurement loading date, loading port name, date when the ship arrives the loading port, date when the ship departs from the loading port, date when the ship arrives our domestic port, procurement price, each importer's quantity of monthly import, processing, sales, and stocks. In addition, the applicants may not exploit this approval and engage in other concerted actions, such as controlling the total procurement quantity and distributing quotas, or prevent any applicant from freely deciding its procurement quantity, or prohibit any applicant from self procuring and importing wheat, or refuse other enterprises to participate in this concerted procurement without a justifiable ground. Moreover, a report shall be made to the FTC for any changes in the applicants of this concerted action. The applicants shall not exploit their market position obtained through this approval and make improper decisions on, maintain, or alter the prices, impede the fair competition of other enterprises, or engage in other behaviors in violation of the Fair Trade Law.

Appendix:
Lien Hwa Industrial Corporation's Uniform Invoice Number: 11996904
Chiao Thai Hsing Enterprise Co. Ltd.'s Uniform Invoice Number: 24085909
Kou Feng Industrial Co., Ltd.'s Uniform Invoice Number: 33280208
Guo-Cheng Flour Co., Ltd.'s Uniform Invoice Number: 28513939
Hsin-Sheng Industry Co., Ltd.'s Uniform Invoice Number: 43350006
Tai-Yi Flour Mill Co., Ltd.'s Uniform Invoice Number: 43252602
First Flour MFG. Co., Ltd.'s Uniform Invoice Number: 43271636
Hsin Chu Flour Mill Co., Ltd.'s Uniform Invoice Number: 47040572
Hsin-Cheng-Hsin Flour Mill Co., Ltd.'s Uniform Invoice Number: 47111386
Ta Fong Flour Mill Co., Ltd.'s Uniform Invoice Number: 51073906
Tanyang Industrial Co., Ltd.'s Uniform Invoice Number: 55370408
Tung Yang Business Co., Ltd.'s Uniform Invoice Number: 51401008
Formosa Oilseed Processing Co., Ltd.'s Uniform Invoice Number: 22102298
Top Food Industry Corporation's Uniform Invoice Number: 80677145
Kuo Hsing Flour Mill Co., Ltd.'s Uniform Invoice Number: 57145006
Hong-Hsing Flour Mill Co., Ltd.'s Uniform Invoice Number: 22822640
Thai-Ho Flour Mill Co., Ltd.'s Uniform Invoice Number: 56210400
Ta Chia Flour Milling Co., Ltd.'s Uniform Invoice Number: 56009003
Chia Fha Enterprise Co., Ltd.'s Uniform Invoice Number: 56186014
Ching-Tai-Cheng Flour Mill Co., Ltd.'s Uniform Invoice Number: 56144401
Shun-Fa Flour Mill Co., Ltd.'s Uniform Invoice Number: 58497909
Tung-Rong Flour Mill Co., Ltd.'s Uniform Invoice Number: 59607524
Tung-Sheng Produce Industrial Co., Ltd.'s Uniform Invoice Number: 66290655
Fong-Mong Enterprise Co., Ltd.'s Uniform Invoice Number: 69261633
Uni-President Enterprises Corporation's Uniform Invoice Number: 73251209
Tai Cheng Flour Mill Co., Ltd.'s Uniform Invoice Number: 75424509
Kimlan Foods Co., Ltd.'s Uniform Invoice Number: 43008609
President Kikkoman Inc.'s Uniform Invoice Number: 23527408
Wei Chuan Foods Corp.'s Uniform Invoice Number: 11347802
Wan Ja Shan Bewery Co.'s Uniform Invoice Number: 35426782
Ve Wong Corporation's Uniform Invoice Number: 07067309
Gua Ching Chyuan Co., Ltd.'s Uniform Invoice Number: 23004247
Weitai Co., Ltd.'s Uniform Invoice Number: 35187282
Hsin Fu Cheng Food Corp.'s Uniform Invoice Number: 23868622
Wuan Chuang Food Industry Co., Ltd.'s Uniform Invoice Number: 64860217
Chuang-Yuan Soy Sauce Co., Ltd.'s Uniform Invoice Number: 22238160
Yi-Hsiang Foods Co., Ltd.'s Uniform Invoice Number: 86632928

Summarized by Lai, Shu-Ching; supervised by Yang, Chia-Hui