C-172/87

MITA v COUNCIL

OPINION OF MR ADVOCATE GENERAL MISCHO delivered on 13 December 1990 *

Mr President, lodge in the present case. Gestetner in turn Members of the Court, has intervened in the present case in support of Mita and, in its observations, relies largely on those which it submitted in Case C-156/87, which it treats as incorporated in those lodged in the present case, merely adding a number of additional remarks.

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1. The submission alleging incorrect margin to sales under the manufacturers' construction of the normal value of the PPCs own brand-names'. sold to OEMs

The adjustment thus made to the profit 4. In its first submission, the applicant margin is therefore deemed to cover claims essentially that in order to determine differences not only of profits but also of the normal value for the purpose of making costs. a comparison with Mita's export sales to OEMs, the institutions only partly took into account the fundamental differences between Mita's export sales to OEMs and Mita's sales on the domestic market. In its 6. The question remains whether the level view, the institutions correctly took account of the adjustment made by the institutions of the lower level of profit which manufac­ was sufficient to take account of all those turers achieve on sales to OEMs but differences. In that regard, it must be noted wrongly failed also to take account of the in the first place that the Court confirmed in lower costs which they incur in respect of its judgment of 5 October 1988, TEC v such sales. Council, at paragraph 33 (Joined Cases 260/85 and 106/86, [1988] ECR 5855), that

5. However, as the Court confirmed in paragraph 33 of its judgment in Nashua, cited earlier, 'Article 2(3)(b)(ii) [of the basic regu­ 3 lation ], according to which a "reasonable amount" for SGA expenses [that is, selling, general and administrative expenses] must 'it is apparent from the documents before be included in the constructed normal value, the Court that the institutions took into allows the Community institutions a margin consideration the difference between the of discretion in evaluating that amount'. costs and profits associated with sales to OEMs and the equivalent figures for other sales'.

those figures, as the Council did not fail to point out, besides being

Furthermore, in its judgments in the elec­ tronic typewriter cases of 5 October 1988, and in particular in paragraph 18 of the 'based on its [Mita's] arbitrary allocation of judgment in Case 250/85 Brother v Council costs elements between OEM and [1988] ECR 5683, the Court pointed out own-brand sales' (see paragraph 10 of the that defence),

'according to the scheme of Regulation related only to sales on the Community No 2176/84, the purpose of constructing market and not to those on the Japanese the normal value is to determine the selling market. It is true that Mita could not give price of a product as it would be if that data for OEM sales of PPCs on that market product were sold in its country of origin or since there were no sales of that kind on ' in the exporting country that market. It is also true that the normal value for OEM sales was constructed precisely for that reason and that in general Article 2(3)(b) of Regulation No 2176/84 is applicable precisely and it concluded that

'when there are no sales of the like product in the ordinary course of trade on the 'consequently, it is the expenses relating to domestic market of the exporting country or sales on the domestic market which must be country of origin'. taken into account'.

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'it must also be emphasized that, although in the case of models sold in sufficient quantities on the domestic market it has Moreover, the institutions did not require been possible to calculate the real price, Mita to produce non-existent information whereas in the case of models that are but simply refused to take account of infor­ exclusively exported the normal value had mation which they did not consider to be constructed, the failure to take into relevant. consideration for the latter the same costs as those included in the real price of the models sold on the domestic market would lead to an unjustified difference in the 9. In my opinion no counter-argument can treatment of manufacturers exporting elec­ be derived from the fact that Article tronic typewriters according to whether they 2(3)(b)(ii) refers, at the end, to 'available are sold exclusively abroad or in their own information', since that part of the provision country as well'. relates to the element to be added to the costs in respect of profit. As far as profit is concerned, it is also worthwhile asking whether the absence of any OEM sales on Even if the situation referred to there is not the Japanese market is not in fact a clear exactly the same as that in the present case, indication that manufacturers are not in which no OEM sales of PPCs have taken interested in selling to OEMs on that place on the domestic market (see in market and thereby sacrificing a part of the particular recitals 8 and 11 of the contested profits which they can achieve by selling regulation), the Court's observation never­ under their own brand-names. On the theless indicates the need to take into Community market, by contrast, they may account, in constructing the normal value of have an interest in giving up a part of their a given model, the costs relating to the profits in order to gain access to the domestic market, even if that model is not pre-existing network of OEMs. The possi­ sold there but is exported. bility cannot therefore be ruled out that if there had in fact been OEM sales on the Japanese domestic market, they would have been at a profit very close to that achieved 8. Mita's reference to a recent judgment of by Mita on sales under its own brand-name. the United States Court of International Trade to the effect that it is unreasonable for an authority to require the production of information which it knows to be 10. Having regard to the foregoing non-existent likewise cannot have any considerations, it cannot therefore be impact on the present case. In the first place concluded that Mita has proved that by it has been held that adding a margin of 5% to Mita's production costs (including SGA expenses), the Council included in the constructed

normal value for the (hypothetical) sales to allowed is not the same for all the exporters OEMs an amount for SGA expenses and but is equivalent to the difference between profit which is not 'reasonable' within the the real profit margin achieved by the meaning of Article 2(3)(b)(ii) of the basic exporter concerned on domestic sales under regulation. its own brand-name and the flat-rate uniform profit margin of 5% used for construction in respect of all domestic sales to OEM buyers, overlooks, on the one hand, the fact that the adjustment is also 11. In those circumstances, I consider that deemed to cover the differences in costs and there is no need to verify whether the that it is wholly possible, if not probable, Council's contention, which appears in that the exporters, which receive high paragraph 9 of its rejoinder and is profits, bear lower costs and, on the other, supported by a reference to the dot-matrix that in the exercise of the discretion which printer market, that the institutions enjoy, in the absence of any actual information, in evaluating the costs and profits to be included in the constructed normal value, they could reasonably adopt 'the real profit margin for OEM sales in for that purpose one and the same profit Japan generally tends to be considerably level. I would add that it is apparent both 5 higher than 5%' from the previous decisions of the Court and from Article 2(3)(b)(ii) of the basic regulation, in its present version, that is to say as it appears in Regulation (EEC) No 2423 of 11 July 1988, 6 which has is correct. Furthermore, it does not seem to replaced Regulation No 2176/84, that the me that Mita has any grounds for calculation of the costs and profits for a complaining since even if it were found to given manufacturer or exporter may also be be correct and if, therefore, the adjustment carried out by reference to the costs made by the institutions covered only the incurred and the profits earned by other differences in costs, that could not weaken manufacturers or exporters on the domestic its position. In fact, the differences in costs market of the country of origin or the to which Mita refers in paragraphs 47 and exporting country. In that hypothesis too, 49 of the confidential version of its reply are situations such as that to which Mita objects alone substantially greater than the are likely to arise, since exporters whose adjustment made, so that, even if they costs and profits are normally very high should have been taken into account, they receive a greater benefit than those whose would still be more than sufficient to show costs and profits are lower from the tailing that the level of the contested adjustment into consideration, for the construction of was insufficient. the normal value, of the costs and profits of other exporters. However, that has not

'the price paid by purchasers to Mita Europe is not the same as the price invoiced to Mita Japan by Mita Europe' (paragraph 13. Finally, for the sake of completeness, I 27). would point out that in its written obser­ vations (paragraph 30 et seq.) Gestetner, the intervener, claims that, if it were assumed that the normal value for OEM sales had 15. With respect to sales to OEM been determined correctly, an adjustment importers, Mita claims essentially that the would have had to be made under Article Council correctly determined the export 2(9) and (10) of the basic regulation in price in accordance with Article 2(8)(a) of order to ensure a 'proper comparison' the basic regulation but improperly between that value and the export price. deducted from it a theoretical 'agent's However, the same argument has already commission' of 5% to take account of Mita been rejected by the Court in paragraphs 36 Europe's role, since the provision in to 40 of the judgment in Gestetner cited question provides no legal basis for such a earlier. deduction. In Gestetner, supra, the Court pointed out that the Council did not determine the export price for sales to Gestetner on the basis of Article 2(8)(a) but that because of Mita Europe's involvement 2. The allegedly incorrect determination of in the sales to Gestetner it had the export price of the PPCs sold to inde- pendent importers

'decided to construct the export price on the basis of the price invoiced by Mita Europe to Gestetner by making the allowances for 14. This second submission has two limbs, which Regulation No 2176/84 provides, depending on whether the sales concerned that is to say by deducting from that price a are to OEMs or to other independent reasonable margin for overheads and profit, importers. In both cases the role of Mita estimated at 5%'. Europe, a wholly owned subsidiary of Mita, with its registered office in Amsterdam, is at the centre of the dispute. In its judgment in Gestetner, supra, the Court stated that In fact, the Council did the same for all export sales to OEMs.

'to construct the export price on the basis of even though the final part of Article 2(8)(b) the price paid by the first independent mentions only the adjustments necessary to purchaser, adjusting that price to reflect the take account of the costs incurred between costs and the profits inherent in the role importation and resale. The Court stated played by Mita Europe' (paragraph 34). that

'the allowances referred to are those inherent in the construction of an export The Court had previously dismissed most of price in the commonest cases of an asso­ the arguments relied on in this case too by ciation or a compensatory arrangement Mita. Thus, in particular it held that it is between the exporter and the importer or a apparent from Article 2(8)(b) of the basic third party' regulation that

and that

'the export price must be constructed when, 'that does not mean that Article 2(8)(b) for whatever reason, the price actually paid precludes the making of the necessary or payable for the product sold for export allowances when the export price must be to the Community is unreliable' (paragraph constructed for other reasons' (paragraph 30) 33).

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'although not officially importing the product assumes, nevertheless, the functions 20. As regards the argument that, by thus typical of an importing subsidiary* (see the applying Article 2(8)(b) of the basic regu­ third paragraph of recital 15 of the lation to export sales to independent contested regulation), importers, whether or not OEMs, the institutions deducted profits twice, it has no real basis. Only one adjustment for profit was made and it related to the price paid by the independent importers to Mita Europe and not to the price paid to the independent importers by their customers. The fact that and therefore bears expenses which reduce the export price does not include the profit the amount actually received by the exporter made by the independent importers on sales and thus must be deducted from the price to their customers in the Community market paid by the first independent purchaser is merely the consequence of the fact that it when the latter is used as a basis for corresponds to the price paid or payable for construction of the export price. I would the product sold by way of export to the even say that that reasoning is applicable a Community and not the price paid or fortiori to those cases since, although payable on the Community market. Gestetner takes delivery of Mita products in Japan itself and makes its own arrangements for their export to Japan, that is not true of the other OEM customers to which the products are delivered FOB Japan and particularly not of the other independent importers whose products actually pass physically through Mita Europe's customs 21. Finally, Mita's reference to Commission warehouse in the Netherlands. Decision 2247/87/ECSC of 28 July 1987 imposing an anti-dumping duty on certain sheets and plates of iron or steel originating 7 in Mexico does not seem to me to be

relevant. It is true that the Commission to say one other than the one in which the acknowledges in that decision that manufacturer is established, but that it did not take a position on the matter. In the third sentence of recital 10, in fact, it 'where a subsidiary of a producer estab­ pointed out that lished in the same country performs functions identical to those of a fully-integrated export sales department, it would be normal 'the question of whether in this case the to regard it as part of the same economic subsidiary is or is not treated as a fully inte­ ' entity (see recital 10). grated export sales department is at any rate without decisive influence on the rate of duty to be applied'. In the present case, however, the subsidiary in question, Mita Europe, does not fulfil functions identical to those of an export That is the reason which prompted the sales department but those typical of an Commission to adopt, for the export price, importing subsidiary. Furthermore, it is not the prices actually paid or payable to the correct either to assert that the Commission subsidiary in question. It seems to me to be recognized in that decision that in such significant that when it reproduced that circumstances the export price should be recital, in paragraph 39 of its reply, Mita determined on the basis of Article 2(8)(a) of failed to cite that passage. the basic regulation, even if the subsidiary is established in a non-member country, or, a fortiori, to deduce that that should also be 22. Finally, as Mita has not contested the the case if it is established in the level of the adjustment made to take Community. It is clear from the further account of Mita Europe's role in its sales to considerations put forward by the independent importers, and since neither the Commission that it did indeed consider documents before the Court nor the oral whether that should be the case not only arguments presented to it have shown the when the subsidiary is established 'in the adjustment to have been excessive, it follows same country' as the manufacturer but also from all the foregoing that the second when it is situated in a third country, that is submission likewise cannot be upheld.