C-171/87

1. The case to which this Opinion relates is 3. Canon criticizes the determination of the one of eight actions for annulment brought normal value from two different viewpoints, by Japanese plain paper photocopier the common feature of which is a (hereinafter referred to as 'PPC') manufac­ comparison of the methods followed by the turers against Council Regulation (EEC) Council, the defendant, concerning, first, No 535/87 of 23 February 1987 imposing calculation of the normal value on the basis a definitive anti-dumping duty on imports of of Chapter B, and in particular Article 2(3), plain paper photocopiers originating in (4) and (7) of Council Regulation (EEC) Japan 1 (hereinafter referred to as 'the No 2176/84 of 23 July 1984 on protection definitive regulation' or 'the contested regu­ against dumped or subsidized imports from lation'). countries not members of the European 2 Economic Community (hereinafter referred to as 'the basic regulation'), and, secondly, calculation of the export price on the basis of Article 2(8) of the same regu­ lation. Since Canon makes a further submission concerning the allowances which 2. In other cases, namely C-150/87 Nashua the Council made or should have made v Council [1990] ECR I-719 and C-156/8 7 pursuant to Article 2(9) and (10) of the Gestetner v Council and Commission [1990] same regulation 'for the purpose of a fair ECR I-781, the Court has already dismissed comparison' between those two items, I two actions for the annulment of the same consider that it is not inappropriate to regulation brought by non-Japanese remind the Court, at the outset, that it has 3 companies which, although not manufac­ previously held that those various turing PPCs themselves, supply PPCs manu­ provisions lay down factured by others under their own brand- names. The Court is thus familiar with the factual background and the relevant regu­ lations, so that I shall need to refer to them only to the extent necessary for my reasoning to be followed. As regards the submissions and arguments adduced by the 'three sets of distinct rules, each of which applicant in the present case, Canon Inc. 4 must be complied with separately' (hereinafter referred to as 'Canon'), I shall consider them in the order in which they are 2 — OJ 1984 L 201, p. 1. presented in the Report for the Hearing. 3 — See the judgments of 7 May 1987 in the ball-bearing cases (Cases 240, 255, 256, 258 and 260/84, [1987] ECR 1809, 1861, 1899, 1923 and 1975). * Original language: French. 4 — Sec judgment in Joined Cases 260/85 and 106/86 TEC v 1 — OJ 1987 L 54, p. 12. Council [1988] ECR 5855, paragraph 31.

or the comparable price for the like product exported to any third country or a constructed value 4. Finally, it is apparent from the judgments of 7 May 1987 in the 'ball-bearings' cases (see in particular Case 255/84 Nachi Fujikoshi [1987] ECR 1861, paragraphs 17 'when there are no sales of the like product and 32), on the one hand, that Article 2(9) in the ordinary course of trade on the is intended to define the adjustments which domestic market of the exporting country or may be made to the normal value and the country of origin, or when such sales do not export price after they have been calculated permit a proper comparison' (paragraph (b]. according to the methods specified for that purpose and, on the other, that the allowances granted under Article 2(10)(c) in particular, which are different from such adjustments as may be made under Article 7. Since the applicant maintains in this first 2(3)(b)(ii) or Article 2(8)(b) as regards both submission that the Council constructed the their purpose and the conditions in which export price by reference to dealings they are applied, are made by reference to between Canon and its European subsi­ objective factors relating to particular diaries, whereas it did not determine the features of the markets in question and have normal value on the basis of transactions a varying impact on conditions and terms of between Canon and its Japanese sales sale, thus affecting price comparability. subsidiary, Canon Sales Company (here­ inafter referred to as 'CSC'), it must first be emphasized that in fact the Council did not take the relations between Canon and its European subsidiaries as the basis for deter­ mining the export price. As is clearly apparent from recital 15 in the preamble to 5. 1. Canon claims that by determining the the contested regulation, although the normal value at a level of trade not Council took account of them, it did so comparable to that adopted for construction only to establish that the price charged by of the export price, the institutions infringed the exporter in Japan to its subsidiary in the Article 2(3) of the basic regulation. Community was not a very reliable transfer price and accordingly it was decided to 5 — See judgment in Joined Cases 277/85 and 300/85 Canon v Council [1988] ECR 5731, paragraph 37. construct the export price

at the same time applying to it the adjustments provided for in Article 2(8)(b) of the basic regulation. It therefore constructed the exportprice on the basis of 9. As we have just seen, in the present case the selling prices of Canon's European the normal value and the export price were subsidiaries on the Community market, just both in fact established by reference to the as it determined the normal value on the first sale to an independent buyer. It follows basis of the sales of Canon's Japanese that the applicant's argument that the subsidiary on the Japanese market. normal value thus determined includes certain types of expenditure incurred by CSC which were excluded when the export price was constructed in order to take 8. Finally, since in this first submission the account of the involvement of Canon's applicant alleges that by adopting that European subsidiaries in the sales on the course the Council used, in determining the Community market logically belongs to the normal value, sales which were not submission concerning the comparison 'comparable' or did not permit 'a proper between those two items, as provided for in comparison', as required by Article 2(3)(a) Article 2(9) and (10), to which I shall revert and (b) of the basic regulation, and that in later. those circumstances it should have constructed the normal value on the basis of paragraph (b) instead of using, pursuant to paragraph (a), the prices invoiced by CSC, it must be pointed out that the Court has already rejected a similar argument in its 10. In the context of Article 2(3), the judgment of 5 October 1988, Canon v inclusion of those costs in the normal value Council, cited earlier. The Court stated in is open to criticism only if the Council was that case, in particular, that, in order to wrong to determine the normal value on the establish the normal value, Article 2(3)(a) basis of the prices charged by CSC to inde­ must be used primarily, Article 2(3)(b) being pendent purchasers on the Japanese market. merely subsidiary (paragraph 11). It went on to add that

On the basis of that finding, it concluded and does so under the financial control of Canon, which is its majority shareholder. It thus carries out tasks which are normally the responsibility of an internal sales 'that by taking into consideration the sales department of a manufacturing organ­ subsidiaries' prices it is possible to ensure ization. The Court made that same finding that costs which manifestly form part of the in paragraph 39 of its judgment in Canon, selling price of a product where the sale is cited earlier, a case relating to a regulation made by an internal sales department of the imposing an anti-dumping duty on imports manufacturing organization are not left out of electronic typewriters, that is to say of account where the same selling activity is different products from those involved in carried out by a company which, despite this case. The latter finding provides a being financially controlled by the manu­ sufficient reason for dismissing the facturer, is a legally distinct entity' argument which the applicant endeavours to (paragraph 14). base on the fact that CSC also serves as a sales department for products other than PPCs and for suppliers other than Canon. I should also like to mention that in its 13. In another judgment of the same date, judgment in TEC v Council, cited earlier Joined Cases 260/85 and 106/86 TEC v (paragraph 33), and in its judgment in Sharp Council [1988] ECR 5855, the Court Corporation v Council of the same date formulated the same idea with respect to the (Case 301/85, [1988] ECR 5813, paragraph inclusion of selling costs in the normal 13), the Court expressly stated that the constructed value in the following terms: institutions may, in constructing the normal value, take account of expenses incurred by a subsidiary company selling products other than those to which the anti-dumping inves­ 'there would be discrimination if expenses tigation relates. necessarily included in the selling price of a product when it was sold by a sales department forming part of the manu­ facturer's organization were not included when that product was sold by a company 15. In those circumstances, it must be which, although financially controlled by concluded that the Council was right to

I am aware of the fact that that provision relates to differences in advertising costs according to whether they are incurred on the Japanese market or the Community market and not to the question whether the 17. 2. Most of the foregoing considerations advertising costs should have been deducted apply not only to determination of the from the normal value and/or from the normal value on the basis of Article 2(3)(a) export price. However, it is clear from all but also to construction of that value under the foregoing that the Council was entitled Article 2(3)(b)(ii). The same applies to the to include the costs incurred by CSC in the independence of the methods for calculating normal value. As to whether the advertising the normal value and the export price expenses incurred by Canon's European respectively and the legality of including subsidiaries were properly excluded from SGA expenses incurred by CSC in the export price, that question is not constructing the normal value (see, in that relevant to discussion of the legality of the respect, paragraph 29 of the judgment in construction of the normal value and comes TEC, cited earlier). Therefore, the within the scope of the submission applicant's argument that the Council concerning determination of the export constructed, for Canon's OEM sales and for price. three models sold under its own brand-name, a normal value not comparable with the export price because the first, by contrast with the second, included SGA expenses of the subsidiary, Canon's sales 19. As regards Canon's argument that the department, cannot be upheld. normal value of the three models,

— or when it used as the 'reasonable profit 22. The same finding is valid for model A, margin', within the meaning of Article in respect of which the Council conceded 2(3)(b)(ii), for the construction of that that a normal value was wrongly normal value the average profit constructed, on the basis of the incorrect calculated by reference to all sales of view that it was not sold in sufficient quan­ Canon models made in the ordinary tities on the Japanese market to satisfy the course of trade. 5% rule referred to in recital 8 of both the provisional and definitive regulations. And Canon, for its part, has not denied that that error had only a minimal impact on the dumping margin, of the order of 0.3%, and even took note of that fact without making any comment, so that it must be concluded 20. It should be added that it would have that it has not been established that that been perfectly fair to use the average profit error made any change to the rate of anti­ in the case of models not sold at a loss and dumping duty necessary. 6

not to apply it to the models sold at a loss, particularly since certain sales at a loss were 6 — See, for similar cases in which reductions of the dumping included in the calculation of the average margin did not justify amending the rate fixed with respect profit (see the fourth paragraph of recital 10 to the injury, the judgments of 5 October Í988, Brother V Council, paragraph 24 (Case 25/85, [1988] ECR 5683) of the contested regulation). and TEC V Council, cited above (paragraph 41).

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27. It is also apparent from the Gestetner 25. I can be extremely brief regarding the judgment that the fact that the costs thus submission as to the unlawful determination incurred by Canon Europa relate to an of the export price. In its judgment of activity which takes place before importation 14 March 1990 in Gestetner v Council and is not such as to prevent the application of Commission (Case C-156/87, [1990] ECR Article 2(8)(b). In fact, that provision, I-781), the Court has already expressed its although expressly mentioning only the views concerning a situation in which PPCs allowances necessary to take account of all are sold in the Community through a manu­ the costs incurred between import and resale, facturer's subsidiary, which processes the does not thereby exclude the making of the orders of the clients concerned, invoices necessary adjustments where, for reasons them and receives the payments relating other than those set out there, the export thereto. The Court stated that the Council price must be constructed (paragraph 33 of was right to apply Article 2(8)(b) of the the judgment). basic regulation and therefore to construct the export price on the basis of the price invoiced by the subsidiary to the first inde­ pendent customers, at the same time deducting a reasonable margin for general expenses and profits. 28. Finally, as in the Gestetner case, it has likewise not been shown in the present case that the deductions made to take account of 26. What was decided in the Gestetner case the costs and profits associated with Canon with respect to sales to OEM purchasers Europa's role, namely 5% in the case of (that is to say suppliers of PPCs which do OEM sales and 15% for sales to other inde­ not engage in manufacturing themselves but pendent customers, were excessive. sell under their own brand-name products Accordingly, the submission concerning purchased from others) applies, in the determination of the export price must be present case, not only to Canon's OEM dismissed.

'It is precisely by taking account of the first sale to an independent purchaser that the 'that is to say that the difference on which it normal value at the "ex-factory" level can relies concerns one of the factors listed by be correctly established where there are Article 2(9), but the difference affects price production and sale arrangements of the comparability and lastly, if, as in this case, it kind set up by Canon on the Japanese is a question particularly of differences in market' (paragraph 41). conditions and terms of sale, that those differences bear a direct relationship to the 8 sales under consideration'.

32. Pursuant to Article 2(9) of the basic 7 — See paragraph 95 of the reply. 8 — See in particular paragraph 43 of the judgment in Minebea regulation, the export price and the normal v Council (Case 260/84, [1987] ECR 1975).

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CANON v COUNCIL

It is not therefore sufficient for Canon to packing, transpon, insurance, handling and claim, in general terms, that the institutions ancillary costs'. adopted a restrictive interpretation of the concept of

Canon did not contest that fact, so it must 'differences in conditions and terms of be concluded that the complaint concerning sale ... which bear a direct relationship to the alleged general refusal to make the the sales' necessary adjustments relates not to all the SGA expenses incurred by CSC but only to 9 the general and administrative expenses.

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OPINION OF MR MISCHO — CASE C-171/87

That payment to sales on that domestic market (and are is thus clearly different from ordinary therefore not included in the export price). discounts, such as, for example, discounts for quantity sales, which are expressly mentioned in Article 2(10)(b)(i) of the basic regulation, the grant of which, by reference to the large number of products sold, involves a real reduction in the price of the products. It follows that every trade-in 39. Nor can such a requirement be imposed discount must in principle be included in the on the basis of the finding that CSC normal value as determined in accordance discharges, for other products and/or for with Article 2(3) of the basic regulation, other companies, functions identical to since the value of the traded-in machine those which it carries out in relation to sales represents a part of the price 'actually' paid of Canon PPCs. To the extent to which that or payable by the purchaser of the new is the case, it is sufficient for the costs product. Moreover, the question of its incurred by CSC to be apportioned so that deductibility under Article 2(10)(c) could only the costs relating to sales of Canon not arise if that were not the case. PPCs are included in the normal value.

11 — Paragraph 26 of the judgment in Canon, cited earlier, the manufacturer/seller an additional makes the same point with regard to construction of normal value. advantage separate from the sale of the new

43. Furthermore, Canon does not deny that that is the case but points out that the It follows from the fact that the institutions advantage arising from the higher prices is properly regarded CSC as forming part of entirely reflected in the PPC prices used for the Canon economic entity, and were calculation of the normal value. However, therefore entitled to determine the normal the advantages in question do not give rise value by reference to the first sale to an to higher prices for new PPCs in the independent purchaser, that the transport

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OPINION OF MR MISCHO —CASE C-171/87

46. As regards the expenses incurred by salesmen, namely their travel expenses, car parking fees, insurance for their cars and sales training, they form part of adminis­ 47. I would add that the amount of trative and general expenses for which as a expenses for which an adjustment is general rule, save in 'special circumstances', requested is minimal, so that it would no adjustment is made. Apart from certainly have no significant impact on the mentioning that an adjustment under that dumping margin found in Canon's case or, heading had been granted, on the basis of a fortiori, on the rate of the anti-dumping the same evidence, in the electronic duty imposed. typewriter case, which gave rise to the Canon judgment of 5 October 1988, cited earlier, Canon has not however put forward any evidence to demonstrate the existence of any such 'special circumstance'. Since an adjustment under the heading of adminis­ trative and general expenses would constitute a derogation from a rule laid 48. The submission alleging an incorrect down in wholly general terms, which comparison of the normal value and the moreover allows the institutions a export price must therefore also be far-reaching power of appraisal, it is clear dismissed in its entirety.

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CANON v COUNCIL

D — The injury 51. However, that approach is not the one which must be followed in determining the injury and which the institutions adopted in the present case. Pursuant to Article 4(1) of the basic regulation,

50. The principal weakness of the 'the effect of the dumped or subsidized applicant's arguments lies in the fact that imports shall be assessed in relation to the they are to a considerable extent based on Community production of the like considerations relating to the market shares product. .. '. of Community producers for the various categories of PPCs, extending from the personal photocopier (hereinafter referred to as 'PC') to the copier in segment 5. It is by reference to the finding that in the It is apparent from Article 4(2) that, for the period from 1982 to 1984 the market shares purposes of that examination, various of the complainants increased in each of factors must be taken into account, one of those categories, with the exception of them being the impact which the imports in PPCs in segment 2, of which the only question have had inter alia on the market Community manufacturer, Rank Xerox, shares of the Community industry suspended production between 1983 and concerned. 1985, that Canon reaches the conclusion that the only way available to the institutions of establishing the existence of injury was to merge all the segments and treat photocopiers in all the segments as 'like products' within the meaning of Article 52. It follows from those provisions that it 1 2(12) of the basic regulation. 2 is necessary in the first place to determine the 'Community production of the like 12 — See in particular paragraph 155 of the Reply. product' before considering whether that

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OPINION OF MR MISCHO —CASE C-171/87

'since the like product in the proceeding has been defined to be all photocopiers from personal copiers up to and including machines classified in Dataquest segment 5, it would be inappropriate to analyse 'another product which has characteristics whether a Community producer should be closely resembling those of the product part of Community industry just in terms of under consideration' (see the wording of its production of one model or a limited Article 2(12) of the basic regulation). range of models'.

57. The only question which could have 54. "Was the Council right to adopt such a arisen in this context is whether it was definition of 'like product'? correct to include segment 5 PPCs in the

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CANON V COUNCIL

'personal copiers and high-volume operator-controlled console machines are evidently not like products'. 58. As to the question whether the institutions were entitled to go so far as to evaluate the injury by reference to all Community PPC production, extending from PCs to PPCs in segment 5, it will first But even though all PPCs are not 'like of all be recalled that market shares are products', 'at least' PPCs in adjacent merely one of several economic factors to segments may be regarded as such. That is be taken into consideration in measuring the what the Council confirmed in recital 31 of impact which dumped imports have had on the contested regulation. the relevant industiy in the Community. Moreover, the list of economic factors in Article 4(2)(c) of the basic regulation is merely indicative, so that the institutions are entitled not to include all of them in every case (see to that effect in particular 60. The considerations on which the paragraph 56 of Canon, cited earlier). Council based that conclusion, which are set Finally, the actual impact which imports out in recital 30 of the contested regulation, have had on the economic aspects in appear to me to be perfectly valid and are question constitutes, in turn, only one of the certainly not vitiated by any manifest error. factors to be taken into consideration in In their assessment of the facts, the determining the injury, besides the volume institutions also relied on the work of the and the prices of imports (see to that effect independent market research establishments the judgment of 5 October 1988 in Joined Dataquest and Info-Markt, which shows, on Cases 294/86 and 77/87 Technointorg V the one hand, that there are no clear-cut Commission and Council [1988] ECR 6077, boundaries between the various segments, paragraph 41). It follows, first, that even which overlap on occasion, since certain errors in the assessment of market shares PPCs can be classified in different segments

E — The infringement of essential procedural requirements Canon recognizes by implication that certain segments may develop at the expense of other segments, if only because they remove from those other segments openings 64. I do not consider that the allegation as which they might otherwise have been able to the lack of an adequate statement of to occupy. reasons is substantiated by any of the three arguments put forward by Canon.

62. That applies also to personal photo­ 65. Canon claims in the first place that, in copiers and PPCs in segment 1, so that order to determine the normal value on the Canon has no grounds for maintaining that basis of Article 2(3)(a) of the basic regu­ it created a new market by introducing the lation, the institutions should have expressly PC which it had developed. As the Council determined that the prices used were

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CANON v COUNCIL

Moreover, as the Court has previously held, 68. Moreover, since in cases where an exporter's subsidiary was involved in sales on the Community market, the prices 'The reasons on which a piece of legislation charged to the first independent purchaser is based may appear not only from its own were also used in calculating the export wording but also from the whole body of price, owing to the fact that the prices paid the legal rules governing the field under to the Japanese exporter by its subsidiary in consideration' (see the judgment of the Community were regarded as somewhat 23 February 1978 in Case 92/77 An Board unreliable transfer prices (see recitals 15 and Bainne [1978] ECR 497). 16 of the definitive regulation), an attentive reader could certainly have apprehended the fact that, by using the prices charged to independent purchasers in order to 67. A comparison between, on the one determine normal value, the Council's hand, recitals 5 and 6 of the definitive regu­ intention was to satisfy the requirement of lation, which refers to the corresponding comparability laid down by Article 2(3)(a). recitals in the provisional regulation, and, Canon, in any event, was not misled in that

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OPINION OF MR MISCHO —CASE C-171/87

71. Finally, as regards the statement of the reasons for the refusal to accept certain expenses as being directly related to sales, 73. For the sake of completeness, I would reference need merely be made to recital 26 add that the alleged contradiction

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CANON v COUNCIL

concerning the export price adopted for as the export price within the meaning of Canon's sales to OEMs, raised by the the anti-dumping regulations, was an unre­ applicant at the end of its reply, is based on liable transfer price and that it therefore had a misunderstanding on the part of the to construct the export price on the basis of applicant. Canon claims that it is clear from the price at which the product was first sold recitals 16 and 92 of the contested regu­ to an independent buyer. In that context, lation that, for those sales, the export price the expression 'export prices' used in the was the price charged to OEM customers, second sentence of recital 16 can refer only contrary to what the Council asserted in the to that sale price, which was used for proceedings before the Court, namely that it construction of the export price. It was to had applied Article 2(8)(b) of the basic that sale price that the 'appropriate regulation to all Canon's sales to OEMs in adjustments to take account of the the Community. exponers' subsidiaries' role in those sales' to OEMs were made. As we have seen, in its judgment in Gestetner, supra, the Court also held that it was lawful to apply Anicie 2(8)(b) of the basic regulation to OEM sales.

74. The second sentence of recital 16 of the contested regulation states that

it must also be read in context, namely against the background of the general question whether OEMs could be treated as exporters for which separate dumping margins should have been calculated. That Earlier, both in recital 15 and at the does not therefore in any way prejudice the beginning of recital 16, the Council had manner in which the export price must be explained why and how it applied Article determined in a specific case. Moreover, 2(8)(b) to sales in the Community in which there is nothing to indicate that in the event exporters' subsidiaries were involved. In of the exporters' subsidiaries not having particular, it took the view that the price been involved in sales to OEMs in the charged by the exporter in Japan to its Community, the institutions would not have subsidiary in the Community, which was the adopted 'the price paid by the OEM to the price paid for export and should have served producer concerned' as the export price.

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OPINION OF MR MISCHO —CASE C-171/87

Conclusion

76. Since none of the applicants' submissions can thus be upheld, I propose that the Court dismiss the application as unfounded and order Canon to pay the costs, including those of the interveners.

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