C-240/84

TOYO v COUNCIL

OPINION OF MR ADVOCATE GENERAL MANCINI delivered on 11 December 1986 *

Summary

1. Introduction 1834

2. Legislation applicable 1834

A — Normal value 1835

A — Submissions concerning the legality of the anti-dumping proceeding 1841

B — Submissions relating to the method of calculating the dumping margin 1842

7. Principal charges. Submission relating to the infringement of Article 2 of Regulation No 3017/79 1842

A — Illegality of combining the methods for the calculation of the dumping margin 1843

B — Breach of the principle of symmetry for the purposes of comparing the normal value and the export price 1845

C — Erroneous comparison between products of different quality 1846

With the exception of Minebea, the applicants are well known to the Court. As In 1979 the multilateral trade negotiations the Court will recall, they were involved in in Tokyo culminated in the adoption of a the first anti-dumping proceedings brought new code which the Community legislature before the Court, which the latter decided transposed into Community law by Council in their favour in four judgments delivered Regulation (EEC) No 3017/79 of 20 on 29 March 1979 (Case 113/77 [1979] December 1979 on protection against ECR 1185, Case 119/77 [1979] ECR 1303, dumped or subsidized imports from Case 120/77 [1979] ECR 1337 and Case countries not members of the European 121/77 [1979] ECR 1363). Economic Community (Official Journal 1979, L 339, p. 1). That regulation was repealed by Regulation (EEC) No 2176/84 As in those cases, the dispute this time is of 23 July 1984 (Official Journal 1984 concerned with the proper use of the L 201, p. 1). Regulation No 3017/79 was Community's machinery for commercial however in force when the contested duties protection. However, the relevant legislation were introduced and is therefore the only is different at least in part, whilst the measure relevant to this case. conflict between the parties has grown sharper and their arguments have become more complex. The product and the market are no longer the same. It is no longer the Its cardinal points are well known. traditional large ball-bearings intended for According to Article 2 (2), a product is the iron and steel and motor-car industries considered to have been dumped if its that are involved, but single-row deep- export price to the Community 'is less than grooved radial ball-bearings with an outside [its] normal value [or the normal value] of diameter of up to 30 millimetres (Common the like product' in the country of origin. Customs Tariff heading 84.62), that is to Article 2 (1) provides, however, that for an say small bearings which are used anti-dumping duty to be applied to the increasingly in the electronics and data- product, its entry for consumption in the processing industries, not to mention Community must cause substantial injury to so-called 'high technology'areas such as an industry established there. In those telematics and robotics. circumstances the amount of the duty

imposed may not exceed the dumping In other words, not any internal margin, that is to say the difference between consumption price but — I repeat — only the normal value of the product and its the price actually paid in an ordinary trans­ export price. If, however, a lesser duty action. Why is it necessary to make that would be adequate to remove the injury, the stipulation? The reason is to be found in the duty should be reduced accordingly (Article sixth recital, which states that: 'Sales on the 13 (3)). domestic market... do not ... [always] form a proper basis for determining the existence of dumping'. The transaction may for some reason be concluded at below the cost price of the product concerned (Article 2 (4)) or between parties which are asso­ The normal value and the export price are ciated, for instance between a parent therefore the terms of what may be defined company and a subsidiary, or between as the 'anti-dumping equation'. In order to parties which have a compensatory arrangement (Article 2 (7)). prevent any imprecision in the establishment of either term from altering the dumping margin in a positive or negative sense (that is to say to the detriment of either party), it is necessary to calculate those terms with all possible care. In order to meet that What is the position in such cases? The requirement, the Community legislature has legislature solves the problem by recourse to adopted a number of incisive provisions. In the concept of 'constructed value'. That particular, Regulation No 3017/79 states expression must, however, be clearly that the rules for determining normal value understood. The constructed value is not an (A) and the export price (B) 'should be artificial value but is calculated by reference presented clearly and in sufficient detail'. to specific and ascertainable economic Moreover, for the purpose of ensuring a fair factors. It corresponds to 'the costs in the comparison between those two terms (C), ordinary course of trade, of materials and the regulation sets out the criteria for manufacture, in the country of origin, plus a making the adjustments rendered necessary reasonable margin for overheads and profit' by differences which may exist in the (Article 2 (3) (b) (ii)) or, in the terms of products sold, the conditions of sale and the the Anti-Dumping Code, it is determined 'in level of trade (see the sixth, seventh and the ordinary course of trade' on the basis of eighth recitals in the preamble to the regu­ the 'cost of production in the country of lation). I now propose to examine each of origin plus a reasonable amount for admin­ those sets of provisions in order. istrative, selling and any other costs and for profits' (Article 2 (4)).

B — According to Article 2 (8) (a) the export price is the price 'actually paid or C — At this point,· a question which might payable for the product sold for export to arise is whether the fact that the two figures the Community'. But again if 'there is an are. calculated in different ways prejudices association or a compensatory arrangement the result of the anti-dumping equation. The between the exporter and the importer', the answer is no. price charged to the latter is considered unreliable. In the absence of other reliable points of reference, it is preferred to recon­ struct the export price taking as a basis the first element which is at the disposal of the 1 would recall in the first place that, 'for the supervisory body, namely the price paid by purposes of a fair comparison, the export the consumer on the Community market. price and the normal value shall be on a Article 2 (8) (b) — and Article 2 (5) of the comparable basis as regards physical charac­ Anti-Dumping Code, which is couched in teristics of the product, quantities, and similar terms — provides that 'the export conditions and terms of sale. They shall price may be constructed on the basis of the normally be compared at the same level of price at which the imported product is first trade, preferably at the ex-factory level, and resold to an independent buyer... In such as nearly as possible at the same time' cases ... all costs incurred between (Article 2 (9)). Should a comparison importation and resale, including all duties between those elements prove impossible, and taxes, and ... a reasonable profit 'due allowance shall be made in each case, margin' are to be deducted. on its merits, for differences affecting price comparability'. Clearly, if one party asks for such differences to be taken into account, it will have to justify its request (Article 2 (10)). Let me summarize the results yielded so far by my investigation. On the basis of the GATT rules and the rules of Community law, the normal value and the export price must preferably be determined by reference The stages involved in that process may be to the prices actually charged on the market illustrated by the following analogy: let us in the country of origin. Should that assume that the difference in weight approach be unworkable on account of between two items, A and B, has to be circumstances which are such as to cast measured on a pair of scales. A and B, doubt on the figures thereby obtained, the however, display two peculiarities. First, two sides of the equation may be they are not immediately available, but have

Once constructed, A and B are placed on the scales, but the resulting measurement The rationale for the last rule (that cannot be treated as reliable. The reason is overheads and general expenses may not be that extrinsic factors (specifically, the deducted) is simple.. In order to prevent the quantity or physical characteristics of the absurd equalization of values to which I goods and the conditions and terms of sale) have referred and in order to guarantee the may have altered the weight of the two parties' right to a fair comparison between items. If the measurement is to yield a prices, the legislature allows only those reliable result, account must be taken of differences which 'bear a direct relationship such alterations by adding to the items on to ... sales' of products intended for the the scales suitable makeweights (which I domestic market or for export made in the shall call 'comparative allowances' in order ordinary course of trade to be weighed in to distinguish them from the elements used the balance. Hence that criterion makes it in the construction of A and B). It is clear, possible to exclude from the comparative however, that in adjusting the weight of one allowances the costs incurred by an under­ item or the other, or both, it will not be taking before selling its product on one possible — on pain of rendering equal items market or the other. That is precisely the that are physiologically different — to take case as regards the aforesaid expenses. As a account of all the differences between them. To do so — setting aside my ana­ rule, those expenses relate to the manu­ logy— would be tantamount to reducing facture of the product or to the launching both sides of the equation to the level of the thereof onto the market and are not cost of production of the product plus the therefore closely connected with the sale of overheads incurred in any kind of sale, the product, as required by the provision in whether the product is intended for internal question. consumption or for export, thereby ruling out altogether any possibility of calculating a dumping margin. After the allowances have been made, A and B can finally be weighed in order to determine whether or not the product to which they relate is dumped. That final Once again, however, that effect is stage is also governed by precise rules. prevented by the rules of the regulation. In When selling prices vary, 'the dumping particular, so far as concerns differences in margin may be established on a transaction- the conditions and terms of sale, Article by-transaction basis or by reference to the 2 (10) (c) provides that 'the [comparative] most frequently occurring, representative allowances shall be limited... to those or weighted average prices' (Article

Let us see why. Leaving legal considerations aside for the time being, I would recall that in economic terms the practice of dumping It seems indisputable to me that in a means to bring about price discrimination situation of that kind injury is caused. In between different national markets and that arithmetical terms, however, the differences the purpose of this practice is usually to between export prices in the various States take over new markets by means of the total offset one another with the result that, if or partial elimination of local competitors. such prices were calculable only by However, when the legislature is called reference to the average price, it would be upon to adopt anti-dumping measures, it is impossible to detect dumping and avert the not concerned with the motives of under­ injury. It is precisely in order to avoid such takings which practise discrimination. It is drawbacks that the Community legislature concerned only with the fact that such has laid down that, when internal discrimination gives rise to economic injury, consumption prices or export prices, or and the fact remains that this consequence is both, fluctuate between a minimum and a not always capable of being exposed. maximum level on the market of the country of origin of the product concerned, the export price and the normal value are in practice to be determined by reference to the criterion which, of those set out in For instance, undertaking X, which Article 2 (13) (b)), is most appropriate to occupies a dominant position on a national the situation as regards either side of the market characterized by high prices and by equation. In that respect, reference may be tariff barriers designed to protect that made to the ninth recital in the preamble to market from the influx of cheaper foreign Regulation No 3017/79, which states that goods, decides to take over an economic 'the Community's established practice for area which forms a customs union but is methods of calculation where prices or divided into various States, with the result margins vary [should be] codified'. that different conditions of production and marketing exist within that area (as is precisely the case with the Community). In those circumstances the strategies which may be pursued by X include one which is Finally, Article 2 (13) (c) provides that particularly effective, namely the gradual where dumping margins also vary 'weighted isolation of internal competitors. The goods averages may be established'. exported to sub-market A are sold at a price below the normal value (for instance minus 100), whilst the export price of the same goods bound for sub-markets B, C, D, E 3. I now turn to the facts. A month or so and F is fixed at the normal value and, in at after the Court had given judgment on 29

March 1979 in the cases referred to earlier The regulation further states in paragraph (see section 1), the Federation of European 11 that the 'normal value. . . was Bearing Manufacturers' Associations determined on the basis of the domestic (Febma), which brings together the major prices of those producers exporting to the ball bearing producers in the Community, EEC who provided sufficient evidence and made a complaint to the Commission whose prices were considered to be concerning fresh dumping practices on the representative of the domestic market part of Japanese undertakings on the concerned'. An exception was made, common market in small bearings. The however, in the case or Minebea's exports Commission"s investigation culminated in from Singapore. Here the Commission Decision No 81/406/EEC of 4 June 1981 considered it appropriate to apply the (Official Journal 1981, L 152, p. 44), which method laid down in Article 2 (3) (b) (ii) embodied an agreement on prices concluded of Regulation No 3017/79.

to justify a review of the decision it had of Nachi Fujikoshi, who uses an inde adopted. pendent importer in the Community, the export price was calculated 'on the basis of the prices actually paid or payable for the products sold'. In the case of the other companies, where exports were made to Accordingly an anti-dumping proceeding subsidiary companies instead, the export concerning imports into the Community of price was constructed on the basis of the small bearings originating in Japan and 'prices at which the imported product was Singapore was initiated (Official Journal first resold to an independent buyer, 1983, C 188, p. 8). On the basis of the suitably adjusted to take account of all costs information gathered in the course of its incurred between importation and resale, investigation covering the period from 1 including customs duty, and of a July 1982. to 30 June 1983, the Commission profit.

. . held by the exporting countries 18.30%; Nachi Fujikoshi, 11.88%; and from 17.5 to 27.9%' (paragraph 23). In NTN Toyo Bearing, 18.45%. particular, the market shares of the

most-sold types was estimated at between the collection of the contested duties until 40.1 and 84.5% during the investigation final judgment in the main action. The period. That is not all. In most cases the application was dismissed by order of the importers' prices were lower than those President of the Court made on 7 December required to 'cover the costs of Community 1984 in Case 240/84 R ([1984] ECR producers and provide a reasonable profit' 4093). (paragraph 24).

Minebea also the five Japanese undertakings were given stated that it was using the system of an opportunity to make their views known refunds to reclaim the duty on imports from to the Commission, whereupon they wrote a Singapore. Its application is therefore number of letters to the latter and offered to directed only against the duty on imports of give price undertakings. The Commission small bearings from Japan. Finally, the furnished the applicants with all the Commission and Febma sought, and were necessary information and explanations but, granted in all five cases, leave to intervene together with the Council, decided not to in'support of the Council. accept their offer.

Nachi Fujikoshi, Nippon Seiko KK and NTN Toyo Bearing for the annulment of On the basis of further details which it had Regulation No 2089/84 in its entirety. The gathered, and on a proposal from the Council maintains that the applications Commission, the Council confirmed the submitted are admissible only in so far as levying of anti-dumping duties. Regulation they are directed against that part of the No 2089/84 imposed on the applicants the regulation which applies to each applicant's following definitive rates of duty: Koyo own exports. The applicants have not all Seiko, 4.03%; Minebea, 10.91%; Nachi reacted in the same way.

TOYO v COUNCIL

6. The applications are therefore admissible. With regard to the subject-matter of the As far as the substance is concerned I would complaint, Febma acknowledges that it did point out, first of all, that notwithstanding not formally attribute a given volume of the huge quantity of detailed information imports to any particular exporter. furnished by the applicants, the submissions However, Regulation No 3017/79 did not and arguments relied upon in support of the require it to provide such details. Article 5

OPINION OF MR MANCINI — CASE 240/84

In the light of those findings, I consider that this submission must be rejected. B — Koyo Seiko, Nippon Seiko KK and Minebea (Cases 256, 258 and 260/84) contend that in the course of the contested proceeding the Commission calculated the 7. That brings me to the principal charges. dumping margins by a new method, namely As I said earlier, they may be reduced to on a transaction-by-transaction basis. The four: (a) the definitive anti-dumping duties unilateral adoption of that method, which imposed by Regulation No 2089/84 were had not been communicated to the parties calculated in an unlawful manner (para­ and which took place whilst the earlier graphs 11, 16 and 18 of the preamble to the undertakings based on different methods regulation); (b) no reasons were given for were still in force, was in breach of the prin­ the refusal to accept the applicants' offers to ciples of legitimate expectation, commercial increase their export prices (paragraph 24); certainty and sound administration. (c) during and after the investigation period, Furthermore, no reasons were ever given for those prices were increased by some of the the choice of the new system. applicants on their own initiative, and that

TOYO v COUNCIL

The Council denies those charges. It maintains that Regulation No 3017/79 does A — I propose to begin my examination of not contain any prohibition on combining the first argument by citing once again the methods concerned. The determination Article 2 (13) (b): 'where [internal of the normal value, the export price and consumption and export] prices vary, the the dumping margin are in fact different dumping margin may be established on a operations because they are based on transaction-by-transaction basis or by different data and circumstances. It follows reference to the most frequently occurring, that the methods of calculation are not the representative or weighted average prices'. same. On the assumption that they are The applicants contend — or at least it different, the applicants argue in reply, the seems to me that their reasoning can be fact remains that, since in any event a 'fair reconstructed in this manner — that the comparison' must be ensured, such oper­ Commission calculated the dumping margin ations cannot be regarded as independent. as follows: to begin with it determined the The Council disagrees on the ground that normal value by calculating the weighted the export price and the normal value are average of the internal consumption prices placed on a comparable basis not by means on the basis of all the sales effected in of the method used to calculate them but by Japan. It then compared that figure, on a means of the allowances referred to in transaction-by-transaction basis, with all the Article 2 (10).

OPINION OF MR MANCINI — CASE 240/84

Having said that, it is clear that, where the Admittedly, the exports whose prices were law entrusts the administrative authority in excess of the normal value were not with the task of appraising complex included in the calculation at their true economic matters involving choices of a value. Could it have been otherwise? I do technical nature, the Court must 'limit its not think so. I have already shown that to review ... to verifying whether the relevant' offset against one another prices in excess of procedural rules have been complied with, the normal value and prices below the whether the statement of the reasons for the normal value would mathematically cancel decision is adequate, whether the facts have out any dumping margin, whilst leaving been accurately stated and whether there intact the effects of the injury caused by

TOYO v COUNCIL

. . : (a) [the] volume of In the applicants' view the consequences of dumped . . . imports . . . ; (b) the prices of that difference in treatment are obvious. dumped . . . imports . . . '. In order to They contend that since the more calculate the dumping margin, which forms substantial deductions were made from only the basis of any assessment of injury, the one side of the equation (the export price), Community authorities must therefore take the amount on the other side of the into account only the volume of imports equation grew automatically, and this led to made at dumping prices and not, as the an artificial increase in the dumping margin. applicants maintain, all sales including sales The system is said to be particularly unfair at non-dumping prices. in the case of Nachi Fujikoshi and Nippon Seiko KK, who, as is clear from the answers they gave to questions put to them by the Court, market their products through a In other words the Commission's conduct network of subsidiaries on the Japanese and was more favourable to the exporters' Community markets. However, the same interests than the provision seems to require. also holds true for Minebea.

The sale. Accordingly, it follows from the deductions made by the Commission from principle of a fair comparison that the same the export price were effected — in costs must be deducted from the two sides pursuance, it should be noted, of an obli of the anti-dumping equation. In making gation imposed on it by Article the necessary allowances, the supervisory 2 (8) (b) — for the purposes of the recon- body deducted from the export price all the struction of that value, whilst the deductions expenses incurred by the applicants' which should in the applicants' view have European subsidiaries between the time of been made could have been effected only

for purposes of comparison between the two purpose by Regulation No 3017/79. The sides of the equation. But that was Council was therefore unable to assess those prohibited — and this is the point — by the costs. provision in Article 2 (10) (c) governing C — The third argument is advanced by 'comparative' allowances. Minebea alone. Minebea contends that, in As the Court will remember, such examining the market in small bearings of allowances may be made only in respect' of the kind which it manufactures, the expenses which 'bear a direct relationship to Commission erroneously compared a the sales under consideration'; hence, they product marketed in the Community with a cannot possibly include the costs incurred similar product of inferior quality sold in by the subsidiaries of the three, applicants in Japan. Let me say at once that this marketing the product on the domestic argument is unclear. During the oral

8. In their second and third submissions the To those findings I would add the further applicants complain that the Council and consideration that sales expenses must be the Commission failed to take into account taken into account for the purposes of the the undertakings offered by the applicants construction of the normal value (see Article or the fact that some of them increased their 2 (3) (b) (ii) and Article 2 (4) of the Anti- prices during and after the investigation Dumping Code, which is couched in even period. clearer terms). It would therefore be unrea sonable if the legislature allowed those I propose to begin by considering the expenses to be deducted immediately Commission's refusal to accept the under thereafter by making comparative takings offered by raising the question — allowances. for that is all we can do — whether that refusal was based on sufficient reasons.

. . [to select], in

terms of the interests of the Community', is related to the exporter. In any event, it the most appropriate measures for dealing seems clear to me that, if the applicants' with 'the situation which it has established' argument were to be upheld, it would lead (paragraph 26 of the decision). to the establishment of a permanent system of investigation and, even worse, deprive any attempt to establish the existence of a Accordingly, it was for the Commission dumping margin of any possibility of alone to establish whether in the circum

honoured. Moreover, it is clear that in situ Article 13 (3) of Regulation No 3017/79, ations of this kind the Community must be thereby contravening the principle of able to intervene by taking 'rapid and proportionality. efficient' action (15th recital in the preamble to Regulation No 3017/79) and it is precisely for that reason that, once the I would recall that, according to that existence of dumping and the injury provision, the amount of anti-dumping duty resulting therefrom have been established, must not exceed the dumping margin and the legislature gives priority to the impo must be reduced if a lesser duty would be sition of an anti-dumping duty, subject to adequate to remove the injury.

Con sideration of paragraphs 23 to 34 in the preamble to Regulation No 744/84 and of paragraph 21 in the preamble to the The applicants' third submission is no more contested regulation shows that, in this case, tenable than the others. There is nothing in the extent of the injury and the importance Regulation No 3,017/79 which requires the of the Community interest at stake were Commission or the Council to take account assessed in great detail. In the light of those

OPINION OF MR MANCINI — CASE 240/84

ceeding. In reply, the Council has correctly to the Community industry is determined on stated that fluctuations in the value of the the basis of sales by importers, which are yen were irrelevant for the purpose of expressed in the currency of the importing calculating the amounts in question. Injury Member State.

10. Having regard to the foregoing considerations, I suggest that the Court should dismiss the applications submitted by NTN Toyo Bearing, Nachi Fujikoshi, Koyo Seiko, Nippon Seiko KK and Minebea against the Council of the European Communities. Under Article 69 (2) of the Rules of Procedure, the unsuccessful parties should be ordered to pay the costs, including the costs of the parties who intervened in support of the defendant.