C-178/87

1. The submissions made by Minolta Camera Co. Ltd (hereinafter referred to as 2. I shall give details of the various 'Minolta') alleging illegality of Council submissions and arguments only to the Regulation (EEC) No 535/87 of extent necessary for my reasoning to be 23 February 1987 imposing a definitive followed and for the rest I refer to the anti-dumping duty on imports of plain Report for the Hearing. paper photocopiers originating in Japan 1 (hereinafter referred to as 'the contested regulation' or 'the definitive regulation') are in some respects different or indeed new by comparison with those relied on by the other Japanese manufacturers of plain paper photocopiers (hereinafter referred to as A — Determination of normal value 'PPCs') in their respective applications. There are, on the one hand, submissions concerning miscalculation of the dumping margin and unreasonableness of the margin of profit included in the constructed normal value, which only Minolta has put forward. 3. 1. In its first submission Minolta claims On the other hand, there is the submission that by including the SGA expenses of its concerning the Council's refusal to make, sales subsidiaries in Japan in the constructed when comparing the normal value and the normal value, the Council did not make a export price, certain adjustments to take valid comparison between the normal value account of differences in conditions of sale, and the export price since it did not a submission which, although based on compare them at the same level of trade. It arguments similar to those already put maintains in particular that the Council thus forward in other cases, concerns types of included in the constructed normal value expenses which differ to some extent. expenses corresponding to a stage beyond Finally there are the submissions based on the ex- factory stage, which in its view, is the inclusion of selling, administrative and the stage at which the export price was other general expenses of the sales subsi­ calculated. Minolta considers that procedure diaries (hereinafter referred to as 'SGA to be contrary to Articles 2(3)(b)(ii) and expenses') and the amount of certain 2(9) of the basic regulation 2 and to the discounts (known as trade-in discounts) 2 — Council Regulation (EEC) No 2176/84 of 23 July 1984 on protection against dumped or subsidized imports from * Original language: French. countries not members of the European Economic 1 — OJ 1987 L 54, p. 12. Community (OJ 1984 L 201, p. 1).

In addition, Minolta relied inter alia on the 'the comparison must therefore be between terms 'comparable price' in Article 2(3 )(a) the figures arrived at in that way, subject to and (b)(i) in support of its view that Article the allowances and discounts expressly 2(3)(b)(ii) requires the comparison between provided for in Article 2(9) and (10)'. the export price and the normal value to be a proper comparison. 4

5. In the present case, the normal value and the export price were both established on the basis of the first sale to an independent 6. It should also be noted that in its purchaser. The normal value was judgment of the same date in TEC v constructed not only on the basis of the Council (Joined Cases 260/85 and 106/86, costs incurred by Minolta but also on the [1988] ECR 5855), the Court also applied to construction of the normal value on the 3 — The Anti-dumping Code, entitled Agreement on implemen­ basis of Article 2(3)(b)(ii) the theory of the tation of Anicle VI of the General Agreement on Tariffs 'single economic entit /, which seeks to and Trade, was approved on behalf of the European Economic Community by Council Decision 80/271/EEC make certain that costs which are manifestly of 10 December 1979 concerning the conclusion of the Multilateral Agreements resulting from the 1973-79 trade negotiations (OJ 1980 L 71, pp. 1 and 90). 4 — See paragraphs 4.2 and 4.26 of the application.

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7. It is apparent inter alia from paragraph 30 of the TEC judgment that where production and sale activities are divided within a group formed by companies which 9. I confess that at first sight one might be are legally distinct but are economically tempted to share the doubts and queries linked — the kind of arrangement also set raised by the applicant. It would be easy to up by Minolta — that classify as 'ex-factory', as the Court did, the stage of sales to the first independent purchaser, specifically in the concern to ensure that economic reality prevails over legal fabrications. One might even take the view that in constructing the normal value 'it is precisely by taking account of the first by including in it all the SGA expenses sale to an independent purchaser that the involved in the sale to the first independent normal value at the "ex-factory' level can be purchaser and by taking as a basis the price correctly established'. paid by the first independent purchaser in order to construct the export price, the same level of trade is taken as the reference point on both occasions. However, it must be stated that by treating differently in each As the applicant itself does not deny that the case the costs incurred by the subsidiaries, export price, as constructed, corresponds to that is to say by adding to them the the "ex factor/ level, it must inevitably be production costs when constructing the concluded that by proceeding as it did the normal value and deducting them from the Council likewise did not infringe Article 2(9) price paid by the first independent purchaser of the basic regulation which provides that when constructing the export price, the 'they [the export price and the normal stage of the first sale to an independent value] shall normally be compared at the purchaser is, in the first place, the same level of trade, preferably at the conclusion of the operation but, in the ex-factory level'. second, the starting point.

Moreover, in paragraph 37 of its judgment in Canon v Council, above, it inferred from the independence, thus demonstrated, of the methods of calculating the normal value and the export price that 'in order to effect a fair comparison ... the two prices shall be compared at the same level of trade, normally at the ex-factory level ... '.

'the validity of the comparison provided for 5 — Joined Cases 21 to 24/72 International Fruit Company v in Article 2(9) cannot ... be conditional on Produktschap voor Groenten en Fruit [1972] ECR 1219.

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It is therefore pointless to in the price paid by the purchaser to the compare, as Minolta did, the actual prices seller. On the one hand, that provision, charged by its Japanese subsidiaries to inde which was reproduced in the first pendent clients in Japan with the actual subparagraph of Article 2(10) of the basic prices charged by its European subsidiaries regulation, is not intended to define what to independent customers in the Community 'level of trade' must be taken to mean but since, by definition, the normal value, which relates in general to the allowances which corresponds to the normal price paid to the should be made to take account of manufacturer on the domestic market, differences of all kinds affecting price includes all the costs (and profits) involved

market. 22).

16. As regards, finally, the arguments based on misuse of power and breach of the principle of the protection of legitimate 18. It should be noted first that Minolta expectations, the principle of proportionality does not challenge the actual figures used as and the principle of equality, I consider that a basis for calculating the average profit they cannot be disassociated from those margin of 14.6%, but puts forward a considered earlier. They are all based on the number of arguments to show that the premise that, by including the SGA expenses calculation method adopted by the Council of Minolta's sales subsidiaries in the inevitably led to determination of a profit constructed normal value, the Council made which was neither 'reasonable' nor 'normal'. a comparison not in conformity with the requirements of the basic regulation, GATT and the Anti-dumping Code. In the same way as the submissions alleging infringement of those provisions, they must therefore be dismissed. 19. In the first place, Minolta objects to the exclusion of sales at a loss from calculation of the average profit. In its view, since the Council concludes that 'a profit is normally realized on sales of products of the same 17. 2. The applicant's second submission general category on the domestic market of relates to the inclusion in the normal value the country of origin' (the words used in the constructed for its models of a profit margin penultimate sentence of Article 2(3)(b)(ii) of of 14.6% which is not 'reasonable' or is the basic regulation) despite the fact that higher than the 'normal profit' within the some of them are sold at a loss, the 'normal meaning of Article 2(3)(b)(ii) of the basic profit' to be included in the constructed regulation. value must not exceed the profit normally

21. In the second place, even though the Council's finding that all the methods of 22. Moreover, the Council is right to determining normal value enumerated in the emphasize that all the methods provided final subparagraph of Article 2(4) of the for, which are alternative to each other, basic regulation, to which the Council may should be applied so as to make it possible have recourse where there are sales at a to arrive at values which are more or less loss, display the common feature of being similar, since the object in all cases is to based on sales, values or prices which establish a normal value as close as possible include or may include a profit, is not to the sale price of a product which would sufficient to show what that profit must be be charged if the product in question were if the Council chooses the method of sold in the country of origin or the

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exporting country in the ordinary course of example shows clearly that Article trade. The first of those methods, based on 2(3)(b)(ii) certainly does not preclude, for the purposes of determining the 'reasonable margin of profit' or 'normal profit' to be included in the constructed value, account being taken only of sales at a price higher than the cost of production. 'the remaining sales on the domestic market made at a price which is not less than the cost of production',

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and concluded that normal value could be constructed only on the basis of a hypothetical profit, there would be a risk of discrimination against the other manufacturers whose profit margin on the models which they sell in Japan is used 'there is nothing in Article 2(3)(b)(ii) of in constructing the normal value of their Regulation No 2176/84 to preclude the other models'. view that the profit margin adopted by the institutions could, in the context of their power of appraisal, be regarded as a reasonable margin' (paragraph 13). The same reasoning may be applied to cases where construction of the normal value is resorted to because certain products are sold at a price lower than the cost of production: 25. Admittedly, the objection might be whilst the Council may validly apply to raised that the foregoing indicates at most companies which sell only some of their that the Council could have applied to models at a loss on the domestic market the Minolta's sales at a loss the 'profit normally margin of profit realized on their 'other realized' or realized 'in the ordinary course sales' (or an average margin of profit based of trade' by other companies, but does not on all their sales at an average price in make it possible to determine what those 7 excess of the cost of production), it must concepts mean and in particular does not also be able to apply that same margin of give a direct answer to the question profit to other companies all of whose sales whether, if the other companies in question have been at a loss (or whose sales were at had also made sales at a loss, a profit an average price lower than the cost of margin taking account only of their sales at production). If that were not the case, to a profit would constitute a 'normal' profit paraphrase the judgments of the Court to within the meaning of Article 2(3)(b)(ii) of which I have just referred, the basic regulation or whether, in such a case, only their profit margin achieved 'in the ordinary course of trade' could be applied to all Minolta's models.

the profits to be included in the constructed 30. In the first place, the Council did not value are to be calculated by reference to do what Minolta, by reference to those the 'profitable sales' of like products, examples, criticizes it for. It did not adopt whether made by the same manufacturer or profits of 10% or 60% for models 1 and 2 by others. of companies B or C or, therefore, a profit of 35% for the three models of company A. Likewise, according to the method which it actually used, it arrived at the same profit of 10% for the two companies Alpha and Beta, even though one of them had sold certain models at a loss. What is more, it is apparent from the foregoing considerations that the Council could lawfully have done 28. In view of the foregoing, the maxim what, on the basis of those examples, 'the greater power includes the lesser' may Minolta criticizes it for doing. Since Article be applied to the present case: in so far as 2(4) of the basic regulation expressly the Council could validly have applied to provides for determination of the normal the Minolta models sold at prices lower value than the cost of production the margin of profit actually realized by other manufac­ turers on their sales of similar or different models, it was without doubt entitled to apply to them an average margin of profit taking account not only of sales by other manufacturers at prices higher than the cost of production but also of their sales at a 'on the basis of the remaining sales on the loss, particularly since, in Minolta's case, domestic market made at a price which is the Council did not apply the average not less than the cost of production', margin of only one other producer, which could have been the highest margin found, but, as we have seen, it applied an overall average of all the individual averages determined (see the penultimate paragraph of recital 10 of the contested regulation). It cannot therefore be claimed that the calcu­ lation method followed by the Council led the Council could have applied to models 1 to the determination of a profit margin for and 2 of companies B and C and to the Minolta which is not 'reasonable' or is models of Beta sold at a loss the profit higher than the 'normal profit' within the achieved by those companies on their meaning of Article 2(3)(b)(ii) of the basic models sold at a price higher than the cost regulation. of production. Moreover, since the Court recognized in particular in its judgments of 5 October 1988 in Sharp Corporation, TEC and Canon, cited earlier, that the profit margin achieved by the producers or by the same producer on other models of a similar product may be adopted under Article 2(3)(b)(ii) of the basic regulation, the 29. The two theoretical examples given by Council could have proceeded in the same the applicant are not such as to undermine way if it had opted, as Minolta did, for the that conclusion. constructed value.

I consider, in fact, that the Council is not required to appraise the fulfilment of that condition by reference to a period seems to me to be wholly irrelevant in the exceeding the period of the anti-dumping context of determination of the average investigation which, pursuant to Article profit margin of Japanese producers to be 7(1 )(c) of the basic regulation, included in the normal value. Moreover, the statement made in the second paragraph of recital 10 of the contested regulation that 'this approach [followed in calculating profits in order to determine normal value] 'shall normally cover a period of not less is entirely consistent with that adopted for than six months immediately prior to the injury calculations relating to the initiation of the proceeding' Community industry' relates not to the manner in which sales at a loss are treated but to the question whether the profits should be calculated by reference only to PPCs or by reference to all the activities of and which, in the case of the present exporters in the photocopying sector. proceedings, cover the period from January to July 1985 inclusive (see recital 5 of the 9 provisional regulation. I would also point out that that interpretation corresponds to the interpretation provided for in the new 10 basic regulation, according to which sales 32. As regards the other arguments put at a loss forward by Minolta regarding the manner in which the Council determined the profit to be included in the normal value, it need merely be stated that there is nothing to support them in the legislation. To require the 'reasonable' or 'normal' profit to be 'may be considered as not having been made determined by reference to the profit in the ordinary course of trade if they: realized throughout the period of existence 9 — Commission Regulation (EEC) No 2640/86 of 21 August of the PPCs in question, in order to take 1986 imposing a provisional anti-dumping duty on imports account of variations in their profitability of plain paper photocopiers originating in Japan (OJ 1986 L 239, p. 5). with the passage of time, seems to me to go 10 — Council Regulation (EEC) No 2423/88 of 11 July 1988 beyond the purport of Article 2(4) of the (OJ 1988 L 209, p. 1).

34. As regards, finally, the inclusion of the 1 profit made on 1the Japanese sales subsi­ diaries in the 'reasonable' profit margin, I Similarly, to require the 'reasonable' or need only point out that it is apparent from 'normal' profit to be determined by paragraph 17 of the judgment in Joined reference to the sales of all models, Cases 273/85 and 107/86 Silver Seiko, cited including those sold at a loss, on the ground earlier, that where there is a 'single that manufacturers are obliged to offer their economic entity , 'the institutions are not customers a complete range of models, required to choose the profit margin of the including therefore unprofitable models, manufacturer rather than of its sales disregards the very wording of Article 2(4) subsidiary and that they may lawfully adopt of the basic regulation which deals with the the combined profit margins of the two treatment of sales at a loss without any companies. reference to the reasons which prompted manufacturers to make such sales.

35. The argument that the profit included in the normal value is unreasonable must therefore be rejected in its entirety.

33. Minolta also claims that even if the Council could have taken account, when determining the 'reasonable' margin of 36. 3. The applicant's third submission is profit, only of the profit on the (generally) that the Council wrongly included in the profitable models (quod non), it should SGA expenses included in the constructed nevertheless have done so by taking account normal value an amount corresponding to of the turnover of all sales, including the value of certain discounts granted by unprofitable sales. However, as the Council Minolta's Japanese sales subsidiaries to their rightly pointed out customers.

such. It is clear from the notes taken by The institutions thus certainly had evidence Minolta's lawyers at the verification meeting as to the existence of discounts granted to held by Commission officials at Minolta's take account of trade-ins of old machines. offices in February 1986 that, in any event, the applicant's representatives acknowledged in particular that 38. In its reply, moreover, Minolta concen­ trated its observations on the legal issues relating to the treatment of those discounts in the anti-dumping investigation (see paragraph R6.2). Its reason for so doing is that it thought that it perceived in the Council's defence express confirmation of a factor which in its view, from the outset, militated against classification of the 'when users buy new, dealers take old ones, discounts in question as trade-in payments Minolta gives subsidy to dealers' (see page and, therefore, inclusion of them in the 11 of those notes, Annex IV B to the normal value, namely that it 'never received application). or sought to receive the machines which were handed in' (see paragraph 111 of the defence). However, as we have already seen in my opinion in Case 175/87 Matsushita v Council, that finding and the fact that the discount at issue was granted to dealers irrespective of whether they had actually agreed a trade-in with their customers or whether a trade-in had actually taken place (see paragraphs 6.27 of the application and R6.1 of the reply) are not sufficient to Moreover in a letter addressed to the disprove that it was intended to enable them Commission in July 1986 (Annex II to the to make discounts and withdraw used PPCs defence), Minolta's lawyers, although from the market or that the — undisputed stating that in their view the discounts in — absence of a second-hand market in question 'are not really trade-in discounts' Japan, resulting therefrom, conferred on affirm, by way of explanation for their Minolta the same advantages as those being so termed in the past, that they were enjoyed by the other manufacturers, which are described at the end of the second paragraph of recital 13 of the contested regulation. As regards the finding that the discounts in question are granted on the basis of a uniform scale and do not therefore vary from one transaction to another, that does not show that the grant thereof is unconnected with the fact that a transaction involving a trade-in took place, but rather tends to confirm that it is 'designed to assist MJS's dealers to sell new intended to secure for Minolta advantages PPC machines and at the same time pay which, as in this case, are not connected their customers something for their old with the recovery or resale value of the machines'. traded in machines.

43. As regards the expenses relating to salesmen's vans, it should be noted that B — The comparison according to Minolta itself

41. In its fourth submission, Minolta claims 'the vehicle costs were principally freight that, in breach of Article 2(10)(c) of the costs as one of the main uses of the vehicles basic regulation, the Council refused to was for the delivery of PPC machines to the make appropriate allowances in respect of applicant's customers', the normal value to take account of certain types of expenses which, nevertheless, bore 'a direct relationship to the sales under consideration'. but that

12 — It is to be noted in Regulation (EEC) No 2+23/88 of 11 July 1988 (OJ 1988 L 209, p. 1), which is the basic regu­ lation at present in force, salaries paid to salesmen are expressly defined as those paid to personnel wholly engaged in direct selling activities. In the first recital in the 42. As regards the exclusion of the salaries right hand column of page 3 of the relevant Official of 'sales leaders' from the allowance made in Journal, the new regulation also states for reasons of clarity, ... no allowance should be made for general respect of salesmen's salaries, I consider that selling expenses since such expenses are not directly the Council was entitled to consider that no related to the sales under consideration with the exception of salesmen's salaries which should not be treated such direct relationship existed, since the differently to commissions paid.

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46. The submission concerning the 44. As regards the remaining third, it was Council's refusal to deduct certain considered to relate to salesmen's ordinary allowances from the normal value under travel costs and therefore as falling under Article 2(10)(c) of the basic regulation is the heading of overheads, for which thus likewise unfounded. 'allowances generally will not be made' and which, normally, are not directly linked to the sales under consideration, since they are incurred whether or not a sale is made (see, C — Calculation of the dumping margin in that regard, in particular paragraph 19 of my Opinion in Case C-174/ 8 7 Ricoh v Council, and paragraph 46 in my Opinion in Case C-171/87 Canon v Council). Since the applicant expressly agrees to the appor­ 47. Since Minolta is the only applicant to tionment of two-thirds to one-third thus have alleged that the dumping margin was made (see paragraph R7.7 of the reply), it unlawfully calculated, I should remind the follows from the foregoing that the Council Court that pursuant to Article 2(13)(b) of did not commit any error by granting an the basic regulation allowance only for part of the expenses arising from the use of vans. For the same reasons, it was also entitled to refuse to grant an allowance for all the salesmen's 'where prices vary, the dumping margin may travel costs incurred for travel by train, taxi be established on a transaction-by-trans­ or aeroplane. action basis or by reference to the most frequently occurring, representative or weighted average prices'.

45. As regards, finally, the costs of ware­ housing, transport, insurance and credit

52. Furthermore, Minolta's argument 50. Minolta infers from the latter passage implies that among the calculation methods that only the existence of special circum­ indicated, there is one which would take stances could render the transaction- precedence over the others, and would, so by-trans action method the 'most appro­ to speak, set a standard so that the others priate' for calculating the export price where could only be applied exceptionally. the normal value has been calculated However, that is not the case, so much so according to the weighted average method. that the Court was able to rely, in In that regard, it seeks to rely on the paragraph 33 of the judgment cited earlier, following paragraph of the judgment just on the simple fact that cited, according to which

'the transaction-by-transaction method is 'the transaction-by-transaction method is one of the methods which may be adopted the only method capable of dealing with by the institutions in order to calculate the certain manoeuvres in which dumping is dumping margin where ... prices vary',

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and conclude that the principles of the choice of 'the most appropriate' method of protection of legitimate expectations and of calculating the dumping margin and the legal certainty do not preclude a change in purpose of the procedure for imposing an the calculation method, even without notice anti-dumping duty which, according to being given.

54. That interpretation seems to me to be 'would ... in no way eliminate the injury supported by the second part of paragraph suffered by the Community industry 25 of the judgment in which the Court concerned' (see the end of paragraph 25 of compares the contested method with the the Nippon Seiko judgment). weighted average method which, 'in such a situation', that is to say where the export prices are sometimes higher and sometimes lower than the normal value, 56. It follows from that conclusion that there can likewise be no question of any infringement of the principle audi alteram 'would in essence mask sales at dumping partem in such circumstances: in so far as prices by those at what are known as the Council was entitled to apply the trans­ "negative" dumping prices'. action-by-transaction method even in the absence of intentional manoeuvres to disguise dumping, it was not obliged to give the applicant an opportunity to present its 55. It may also be based on the specific link observations on such evidence as it might which the Court established between the have at its disposal in that connection.

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