C-16/90

OPINION OF MR VAN GERVEN — CASE C-16/90

OPINION OF MR ADVOCATE GENERAL VAN GERVEN delivered on 4 June 1991 *

Summary

Page

1. Background 1-5173

2. The Community interest 1-5175

4. The problem of injury 1-5190

4.1. Injury for like products? 1-5190

4.2. Imprecise nature of determination of injury 1-5191

4.3. Imports by German producers 1-5192

4.3.1. Arguments of the parties 1-5193

4.3.2. Assessment of the arguments 1-5195

1. Background 3. In October 1988 the Official Journal of the European Communities published a notice in which the Commission stated that the FEIBP had lodged a fresh complaint alleging that the said undertaking given by the Chinese firm had not been complied 2. The proceedings which gave rise to the with. 4 After examining the official statistics adoption of the regulation at issue orig- available for 1987, the Commission came to inated in an investigation opened by the the conclusion that the level specified in the Commission in 1986 upon a complaint from undertaking had indeed been exceeded and the Fédération Européenne de l'Industrie de proposed to the Council that it revoke its la Brosserie et la Pinceauterie (FEIBP). decision accepting the undertaking. 5 At the According to that complaint, dumping was same time the Commission decided to being practised in respect of imports of reopen the anti-dumping procedure and to certain brushes originating in China. 1 The apply forthwith provisional measures in Commission's investigation led it to the pursuance of Article 10(6) of the basic regu- conclusion that such dumping was indeed lation. 6 In accordance with that provision being practised and that such imports at Commission Regulation (EEC) N o 3052/88 dumping prices had caused injury to the (hereinafter referred to as 'the provisional Community industry in three Member regulation') imposing a provisional ad States (namely Germany, the United valorem anti-dumping duty of 6 9 % of the Kingdom and Ireland, in which roughly net price per piece of the products in 9 0 % of Chinese exports were concentrated). After the termination of the Commission's 2 — Of 9 February 1987 accepting i n undertaking given in 'preliminary investigation', the China connection with the anü-dumptng proceeding concerning imports of paint, distemper, varnisn and similar brushes National Native Produce and Animal originating in the People's Republic of China, and termi- nating the investigation (OJ 1987 L 46, p.45). By-Products Import and Export 3 — See recital 21 to Decision 87/104/EEC. Corporation (hereinafter referred to as 4 — See notice of reopening of an anti-dumping proceeding 'China National') offered an undertaking to concerning imports into the Community of paint, distemper, varnish and similar brushes originating in the limit its exports of brushes to the People's Republic of China (OJ 1988 C 257, p. 5). Community. That undertaking was accepted 5 — Ibid. 6 — That provision gives the Commission, where it has reason to believe that an undertaking has been violated and where 1 — Sec notice of initiation of an anti-dumping proceeding Community interesu call for such intervention, authority concerning imports of paint, distemper, varnish and similar to 'apply . . . anti-dumping . . . duties forthwith on the basis brushes originating in the People's Republic of China (OJ of the facts established before the acceptance of the under- 1986 C 103, p. 2). taking'.

question was published in the Official several respects with higher-ranking rules of Journal of the same date. 7 On 14 November Community law and in particular with 1988 the Council adopted a decision Council Regulation (EEC) N o 2423/88 accepting the Commission proposal to (hereinafter referred to as 'the basic regu- repeal Decision 87/104/EEC and conse- lation'). '° quently revoking acceptance of the under- taking regarding the Chinese firm's exports. 8 Finally on 20 March 1989 the Council confirmed the provisional anti- dumping duty imposed by the Commission The court of reference states that the and by Regulation (EEC) N o 725/89 (hereinafter referred to as 'the definitive arguments put forward by Nolle raise regulation') 9 imposed a definitive anti- doubts as to the validity of the definitive dumping duty of the same amount. regulation, above all as regards the choice of reference country for determination of the normal value. However, it rightly 11 considers itself as not having jurisdiction to declare the regulation invalid and accordingly asks the Court to decide that 4. The validity of the definitive regulation is question. being challenged by the firm Nolle (here- inafter referred to as 'Nolle'), a German importer of paint brushes who, between 21 November 1988 and 14 February 1989, imported into the Community for free 5. As the order for reference also states, circulation three consignments of cleaning Nolle challenges the validity of the and disposable paint brushes originating in definitive regulation mainly on three China. The goods were cleared by the grounds, which I shall consider in turn Hauptzollamt Bremen-Freihafen (Neu- later: the imposition of an anti-dumping städter Hafen office), which demanded a duty is not necessary to safeguard the provisional anti-dumping duty under the Community interest (paragraphs 8 to 12); provisional regulation. After publication of the normal value was wrongly calculated the definitive regulation these amounts were (paragraphs 13 to 32) and imports of the definitively collected by the Hauptzollamt. products concerned into the Community did Nölle's complaint to the Hauptzollamt was not cause material injury to the Community dismissed and Nolle lodged with the court interest (paragraphs 33 to 48). of reference an application for reimburse- ment of the amounts paid, alleging that the definitive regulation was incompatible in

the measure and if necessary have regard reasons on which its decisions are based, also to the arguments and evidence put mentioning the factual and legal elements forward by the Community institutions which provide the legal basis for the during the administrative proceedings. In measure and the considerations which have that respect Nolle, in its written obser- led it to adopt its decision, it is not required vations submitted to the Court, referred to to discuss all the issues of fact and law the 'point of view' (including accompanying raised by every party during the adminis- evidence) which it put to the Commission trative proceedings.' I2 during the administrative proceedings. These documents are in the possession of the Commission and the Council and also appear in the documents provided by the These observations seem to me to apply court of reference, so that they may be equally with regard to the statement of the consulted by the other parties to the main reasons on which acts of the institutions in proceedings. Moreover at the hearing the the field of anti-dumping proceedings are Commission's representative did not raise based. They imply that the extent of the any objection to their use. Where necessary duty to express such reasons does not result I shall make use of them in the following in the first place from the arguments put analysis. forward during the administrative proceedings by the parties concerned by the adoption of the measure in question. It is more appropriate to consider whether the reasons expressed support the operative part of the decision and whether the factual and 7. My second observation concerns Nölle's legal features on which the legal justifi- objections to the statement of the reasons on cation of the decision depends are correctly which the definitive regulation is based. evaluated and appraised. I shall base my Nolle points out that in that regulation the discussion of the definitive regulation on Council did not discuss a number of that principle. arguments and evidence put forward by Nolle during the administrative proceedings, so making it impossible for Nolle to determine the reasoning on which the regu- 2. The Community interest lation at issue was finally based.

'You know that the European Community has initiated an anti-dumping proceeding against the import of Chinese brushes, 9. Nolle states that exports of Chinese paint which has led to the conclusion of an brushes to the Community began towards agreement by which the Chinese have the end of the 1970s to satisfy the growing undertaken to limit their exports. According demand by non-professionals (since paint to that agreement brushes will no longer be brushes manufactured in China are cheap supplied except on the basis of a selective disposable brushes whose price is signifi- distribution scheme to factories traditionally cantly less than that of brushes of European brush producers, by traders in pig bristle.' make for professional use). Originally imports into the Community were entirely in the hands of Community producers of brushes (or of importers connected with them). In the first half of the 1980s, however, a number of independent Nolle submitted in the second place a telex importers (including Nolle) also succeeded of 9 August 1988 from China National, also in obtaining supplies from China and setting sent to an independent importer, in the up an independent import network. following terms: According to Nolle the anti-dumping proceeding was instigated by Community producers to bar the independent importers from the market: in particular they put pressure on China National and persuaded it to limit its exports as a result of which, in addition, the goods were subsequently 'For your information. According to the delivered only to the Community producers. agreement between our head office + Nolle submitted two documents to prove European Manufacturers Federation that this point. Chinese brushes not allowed to export + re-export to other customers but our agent in EEC.

10. Nolle thinks that both these documents, market in the ultimate interest of the which were submitted to the Commission consumer, whilst the system of the anti- during the administrative proceedings, H dumping scheme is intended to protect prove that European producers imposed on European industry (that is, the competitors) Chinese exporters rules according to which against competition (regarded as unfair) independent Community importers from imported products sold below their (including Nolle) were no longer to be normal value. The imposition of an anti- supplied except through Community dumping duty may therefore result, with the producers. Nolle emphasizes that it cannot aim of protecting European industry, in a be in the Community interest to support or price increase and a diminution of global maintain an agreement contrary to the rules competition within the common market. of competition by imposing a restriction on The balancing of these opposing interests is exports followed by anti-dumping duties. a matter for the Commission and the Before adopting such measures the Council which, in assessing whether the Community institutions are bound, on the imposition of an anti-dumping duty is in the other hand, to take account of the whole Community interest, must rely on a twofold existing economic context and not to apply guideline: on the one hand the object of the basic regulation in such a way as to anti-dumping proceedings cannot be to restrict or distort competition within the enforce or encourage practices contrary to common market. 15 the rules of competition, 17 and on the other hand anti-dumping measures and proceedings must be prevented, as far as possible, from having such an effect.

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OPINION OF MR VAN GERVEN —CASE C-16/90

Community institutions were faced with the 3. Calculation of the normal value possibility that the anti-dumping proceeding would be used by Community producers to drive independent importers from the market, as Nolle maintains. 3.1. Recourse to a reference country

I-5178

NOLLE

takings were thenceforth required to i reference country. Before considering its produce and sell for profit and that there arguments I should like to make two was lively competition between Chinese general observations on this point. producers and exporters.

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OPINION OF MR VAN GER VEN —CASE C-16/90

possible alternatives, to try to find a country 3.2.2. Discussion of Nólle's objections to the in which the prices for a like product are choice of Sri Lanka as a reference country formed in circumstances which are as similar as possible to those in the country of export, provided that it is a market economy country. 2 5 In the proceedings in this case only two countries came in for consideration: Sri Lanka (which was chosen by the Commission and the Council at the suggestion of the Community industry which had raised the complaint) and 17. I now come to discuss Nölle's Taiwan (which had been suggested by Nolle arguments relating to the three criteria just but rejected by the Commission and the mentioned, as put forward by Nolle. Council).

I-5180

NOLLE

country). In that case recourse to the Yugoslav market prices had been challenged by the applicant on the ground that the Yugoslav market was too small. 27 In paragraph 31 of the grounds of judgment the Court rejected that argument in the 19. As a second argument tending to show following terms: the inappropriate nature of Sri Lanka as a reference country and, as regards the first argument, the unrepresentative nature of the Sri Lankan market as compared with the Chinese market, Nolle points out that there are in Sri Lanka only two producers manu- facturing brushes of the type to which the investigation related. 31 Furthermore, it appears that one of these two (Harris

the exports in question. It is apparent neither from the file nor from the 29 — See the Commission's observations, point II.2.7. arguments put forward before the Court 30 — This appears to be common ground between the parties. 31 — The Community institutions did not essentially contest that the Yugoslav market was not represen- this. The last paragraph of recital (17) to the definitive tative in the abovementioned sense.' regulation states that in Sri Lanka 'two producers . . . supply approximately 90% of the home

I-5181

OPINION OF MR VAN GERVEN —CASE C-16/90

account. In this case Nolle has supplied Council, previously cited, the Court, by various price comparisons from which it analogy with Case 56/85 Brother v appears that the prices applied for Sri Commission [1988] ECR 5655 fixed the Lankan products are perceptibly higher than minimum level of such comparability at 5 % . those applied by two representative The Brother case related to the calculation producers in the Community — one Italian of the normal value of imports from a and one German. Paradoxically the result is market economy country (in that case that despite the considerable difference in Japan) and the minimum level of compara- wage rates the value of a brush manu- bility related to the comparison between the factured in Sri Lanka is higher than that of domestic Japanese market and exports (from a brush manufactured in Italy or Japan) to the Community.

tends to ensure the representative nature of that market as compared with the exports at issue, that is, with exports to the Community from the non-market economy 21. The fact that the volume of the Sri country. 3 3 In other words that condition is Lankan domestic market amounts to only explained by the need to calculate the 1.25 to 1.6% of Chinese exports to the normal value of exports from the Community and so is considerably less than non-market economy country by recourse the minimum 5 % level does not, however, to a reference country in which a like imply that the Sri Lankan market cannot in any case be representative. It emerges in fact 32 — See paragraph 28 of Nölle's written observations and the from the passage already quoted from the updated calculations submitted at the hearing. 33 — The authentic German text in the Neotype case refers to Neotype judgment that the criterion used in 'die betreffenden Ausfuhren' and the French text to the Brother case constitutes only one of the 'exportations en cause'.

I-5182

NOLLE

stances do in fact exist. Whether they have done so in this case is highly questionable. It is true that the definitive regulation indicates in general that in both China and Sri Lanka the production of flat brushes depends above all on small-scale manual production and that it therefore matters little that the total volume produced in China is larger than that in Sri Lanka 34 but, 22. Nölle's third argument, to which I even when they were questioned on this at should now like to refer, is also such as to the hearing, neither the Commission nor the increase my doubts as to the appropriate Council submitted figures showing that the nature of Sri Lanka as a reference country. percentages of labour costs, capital costs This argument relates to the difference and the cost of raw materials are between Sri Lanka and China as regards comparable for brushes manufactured in access to raw materials. Nolle points out that

The second document is no means related them to other components a fax report of 31 December 199D from the Netherlands of the cost price of the brushes concerned. agent van Ravi stating, also with regard to an order for delivery: 'In view of limited production, Ravi industries is not in a position to offer large quantities 34 — In the fourth paragraph of recital 17 to the definitive regu- 36 — See moreover the fax from Harris referred to in the lation. preceding note.

'even assuming that such a comparative advantage exists, could be properly quan- tified and is not offset by competitive weak- nesses, it is not clear how this would be I do not find that argument convincing reflected in the normal value if the same either. The differences suggested by Nolle conditions obtained in the market-economy concern supplementary costs incurred by the third country, given that prices reflect Sri-Lankan firms owing to the fact that Sri demand as well as costs. Moreover, even if Lanka does not have the raw materials it were possible to obtain an exact necessary for the manufacture of brushes measurement of such advantages or disad- and has to import pig bristle, which comes vantages, any adjustment of costs estab- through Europe. According to Nolle, the lished in a market economy on that basis effect of these differences (as of the other would imply reliance on the costs in a non-market economy, which is precisely 37 — Third paragraph of recital 17 to the definitive regulation.

I-5184

NOLLE

25. The need to take into account in the choice of a reference country the difference in production costs — and in particular

38 — See for example Council Régulation (EEC) N o 407/80 of 18 February 1980 imposing a definitive anti-dumping duty 27. From the foregoing analysis of Nölle's on a certain type of sodium carbonate originating in the arguments it may be seen that the appro- Soviet Union (OJ 1980 L 48, p. 1). In that regulation Austria was chosen as the reference country for calcu- priate nature of Sri Lanka as a reference lating the normal value of sodium carbonate on the ground in particular that, as in the exporting countries, the raw materials were directly available there (see the sixth 39 — See, in application of this principle, the adjustments recital to the regulation). referred to in recital 20 to the definitive regulation.

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O P I N I O N OF MR VAN GERVEN — C A S E C-16/90

28. In a matter such as this, in which the Community institutions have a wide discretion, it is all the more important that the decision adopted shall be subject to a careful review by the Court with regard to observation of essential formalities and the principles of good administration, which The data supplied by Nolle have made it include the duty of care. From the same appear that at least at first sight Taiwan did point of view the Court reviews the question not show the weaknesses mentioned for Sri whether, in accordance with the duty of Lanka. As regards the number of producers care, an authority on which a wide the parties agree in thinking that it is much discretion is conferred has determined with higher for Taiwan than Sri Lanka, even the necessary care the features of fact and of law on which the exercise of its 40 — At the hearing Nolle claimed that during the investigation which preceded Council Decision 87/104/EEC (already cited, note 2), it had already challenged the choice of Sri 41 — That appears in particular from an article from a specialist Lanka and suggested other countries, including Taiwan. periodical quoted at the hearing by both Nolle and the Then immediately after publication of the notice of Commission ('Paint Brushes', which appeared in the reopening of the investigation for the provisional regu- periodical Asian Hardwares in October 1988 attached as lation in October 1988 it concentrated on Sri Lanka. In its Annex 5 to Nölle's observations of 22 November 1988), in written observations of 22 November and 15 December which various Taiwanese distributors (and their sub- 1988, it sent the Commission certain evidence intended to contractors) are described as having a monthly production show the suitability of Taiwan. capacity of 300 000 to 3 000 000 brushes.

Did the institutions comply with that duty in this case? For an answer to that question I must consider the grounds on which they At the hearing Nölle's reply to that was that it had tried to supply to the Commission 42 — Sec ilso my Opinion of 7 March 1989 in Case 70/87 price quotations which actually related to Fediol v Commission [1989] ECR 1797. That case raised the question whether the Community institutions' interpre- wooden-handled brushes.45 Moreover it tation of the concept of 'illicit commercial practices' in Council Regulation (EEC) N o 2641/84 of 17 September refers to an article in a specialist periodical, 1984 on the strengthening of the common commercial which was mentioned at the hearing by both policy with regard in particular to protection against illicit commercial practices (OJ 1989 L 252, p. 1) was subject to Nolle and the Commission,46 to the effect review by the Court. The Court has also confirmed the existence of the duty of care in other fields of Community that wooden-handled paint brushes are also law in which the institutions have powers of administration manufactured in Taiwan even though poly- or management. See for example the judgments in Case C-10/88 Italy v Commission [1990] ECR 1-1229, propylene handles are being used more and paragraph 13 (as regards management of the EAGGF), more because of supply problems. Nolle Case 122/78 Buitoni [1979] ECR 677, and Case 181/84 Man Sugar[]9S5] ECR 2889 (as regards the export licence thinks it was certainly possible to obtain system); Case 64/82 Tradax Graanhandel v Commission [(1984] ECR 1359 (as regards determination of levies); Case 111/63 Lemmerz-Werke v High Authority [1965] 44 — Second paragraph of recital (16) to the definitive regu- ECR 677, 716 and Case 46/85 Manchester Steel v lation. Commission [1986] ECR 2351, paragraphs 11 and 15 (as 45 — Referring to Annexes XIV to XVI to its written obser- regards the ECSC Treaty); Case 417/85 Maurissen v Court vations of 22 November 1988 and Annexes VI and VII to of Auditors [1987] ECR 551, paragraphs 12 and 13, Case its written observations of 15 December 1988, from which 125/80 Anting v Commission [1981] ECR 2539, and Case admittedly it is impossible to deduce clearly whether it is a 105/75 Giuffrida v Council [1976] ECR 1395, paragraphs question of wooden-handled or synthetic-handled brushes. 11 and 17 (as regards the law relating to officials). However, Nolle rightly indicated that during the adminis- 43 — A classical formulation of this principle is to be found in trative proceedings the Commission never objected to the the judgment in Case 191/82 Fediol v Commission [1983] information it had supplied on this subject. ECR 2913, paragraph 30. 46 — Already cited, note 41.

30. I do not think the foregoing arguments (the second of which was put forward at a Therefore we would appreciate if you late stage) are sufficiently well supported to would communicate to us for diy and give a final answer to the question whether professional paint brushes separately or not Taiwan is relevant. T h e definitive (specify flat or round, sizes 3/4", 1", 1'', 2", regulation thus mentions a reason of a 3", 4", thickness, length out, strength, 'procedural nature' for rejecting Taiwan. Recital 16 states: 47 — Third paragraph of recita! 16 to the definitive regulation.

I-5188

NOLLE

Please send us also a detailed cost of production sheet per piece for flat and round paint brushes of the previous mentioned sizes for 1987 and 1988. Tell us also if you import certain of your raw materials or/and if you let them be manu- factured elsewhere. Tell us also the In these circumstances I take the view that percentage of import duty for the imported these requests sent by the Commission to raw materials as well as for paint brushes the two largest Taiwanese producers are (duties and quantitative restrictions). inadequate from the point of view of expla- nations and the time-limit for reply. In the absence of any further explanation they were likely to create confusion in the minds of the firms addressed as to the nature of the investigation (they might even regard them as announcing or preparing for a dumping investigation relating to brushes originating in Taiwan). The absence of such It should be stressed that all information an explanation is all the more serious you deem to be confidential will be treated because the Commission, which is called accordingly. upon to seek the voluntary collaboration of firms from third countries, asked the firms concerned to supply data (invoices, production costs, origin of raw materials, 'prooP that they were selling at a profit) which they might certainly regard as confidential. Even if the firms questioned had not demurred at these objections, the time-limit for reply unilaterally (not to say rudely) imposed on them was so brief as to Please mentioned [sic] information not later discourage them. Finally the Commission than 15 December 1988.'

34. In the first place Nolle maintains that, 32. The foregoing considerations lead me contrary to the requirement laid down in to conclude that the Council has not suffi- Article 4(2)(b) of the basic regulation, ciently justified its decision to choose Sri Chinese brushes and brushes manufactured Lanka as a reference country for deter- in the Community cannot be regarded as mining the normal value of the products 'like products'. For the purposes of the basic subject to the dumping investigation. The regulation 'like product' means: material before the Court does not show sufficiently clearly whether the choice of Sri Lanka, the country suggested as a reference country by the Community producers who had lodged the complaint, was appropriate. ' . . . a product which is identical, i. e., alike The Council's choice of Sri Lanka could be in all respects, to the product under regarded as acceptable only if it could be consideration or, in the absence of such a shown that Taiwan, the country suggested product, another product which has charac- by Nolle, did not offer a real alternative. teristics closely resembling those of the product under consideration'. 49 48 — The fact that the Commission had based the provisional anti-dumping duty on Article 10(6) of the basic regulation and so had given the Council a strict time-limit for adopting the definitive regulation (see Article 11(5) of the basic regulation) cannot justify the Council's attitude. It may be seen from other regulations that in such circum- Nolle points out that the pig bristle incor- stances the Council has taken the trouble to investigate porated in Chinese brushes is of a quality alternative reference countries. See for example Council Regulation (EEC) No 541/91 of 4 March 1991 imposing a inferior to that incorporated in brushes definitive anti-dumping duty on imports of barium chloride originating in the People's Republic of China (OJ 1991 L 60, p. 1), particularly recitals 11 and 12. 49 — Article 2(12) of the basic regulation.

'It was found during the investigation that 92% of the Chinese exports went to five Community countries, Germany, Ireland, The Commission looked at brushes from a the United Kingdom, France and Italy, but number of producers or importers in terms with an overwhelming concentration on the of a variety of factors: the type and weight German, Irish and United Kingdom of bristle, the cooking process, the quality markets. Accordingly the assessment of and preparation of the bristles, the quality injury was centred mainly, though not and shape of handle, the finish of the exclusively, on these three countries.' product, including the ferrule and glue, and the overall strength of the brush. It found no crucial difference between the comparable Chinese and Community products in respect of the purpose for which In that connection Nolle refers to recital 11 they were intended. The Commission found to the definitive regulation, from which it that these were like products . . . ' 5 0 appears that the Commission investigation

50 — Second and third paragraphs of recital 23 to the definitive 51 — Recital 26 to the definitive regulation. regulation. 52 — First paragraph of recital 36 to the definitive regulation.

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OPINION OF MR VAN GERVEN —CASE C-16/90

related only to a number of firms in the information showing that the determination United Kingdom and Germany. It therefore of injury effected in the definitive regulation thinks that the determination of injury was incorrect. relating to the Irish, French and Italian markets was not founded on fact.

4.3. Imports by German producers

I-5192

NOLLE

In the recent judgment in Case C-156/87 the Community industry. 57 According to the Gestetner Holdings v Council and definitive regulation all these factors Commission,54 the Council stated with depressed the general level of prices on the regard to that provision: Community market, leading to a severe fall in the Community producers' market share which led in turn to substantial capacity cuts and the closure of businesses. 58

'Those provisions show that it is for the institutions, in the exercise of their discretion, to determine whether they should exclude from the "Community industry" producers which are . . . them- The Council states in the definitive regu- selves importers of the dumped product. lation 5 9 that in examining the causal link T h e discretion must be exercised on a case- between the effects and the Chinese imports by-case basis, by reference to all the at dumping prices the Commission relevant facts (paragraph 43 of the grounds considered whether other factors might have of judgment). been responsible for the injury to the Community industry. One of these factors might have been the fact that 'the Community producers themselves had bought considerable quantities of Chinese It is therefore established that the brushes from independent importers in institutions have a discretion in this respect, order to sell them at a profit and thus be though that does not prevent that discretion able to finance their own production'. 6 0 from being subject to review by the Court.

40. The institutions came to the conclusion 41. In its written observations and at the that the sale of Chinese products by the hearing, Nolle strenuously contested that German producers was not of such a nature passage in the contested regulation. It called as to explain the injury caused to the attention to two facts which it had already Community industry or, in other words, as pointed out to the Commission during the to break the causal link between the anti- administrative proceedings and the dumping practices and the injury estab- correctness of which was not challenged at lished. In fact the definitive regulation the hearing: first, the fact that in Germany provides : slightly more than two-thirds of brushes imported from China are sold by German producers; and secondly the fact that an important German producer (namely Schaben) even concluded a cooperation agreement with a Chinese firm for the production of brushes in China. Nolle takes the view that in these circumstances it cannot reasonably be claimed that German producers did not themselves take the initiative in importing or that they suffered material injury as a result of the imports effected by the independent importers (including Nolle), who were responsible for only a third of the imports of brushes and 'As regards the sale of Chinese products by who, in 1987, represented in Germany a Community producers themselves, the market volume of some DM 2 300 000 as Commission has established, on the basis of compared with a total volume of some D M the facts available, that the volume of such 150 000 000; in other words their market sales varied appreciably during the period of share was not even 2%. the investigation depending on the Member State and the company concerned. With the exception of a small number of firms which have ceased production, however, Community producers started selling Chinese paintbrushes alongside their own products solely in order to prevent their traditional markets from being taken over by suppliers offering imported goods only. The Commission's finding was that Community producers did not in general import Chinese products of their own volition but did so only in self-defence against unfair competition. Nor did the 42. The question raised by Nolle, as I Commission's investigations reveal any understand it, is whether the Community abuses ; the Community producers resold the institutions could use their discretion under Chinese paintbrushes at a modest mark-up Article 4(5) of the basic regulation in such a at as high a price as the market would bear, way that they could reasonably include in but without excessive profit, and only to the the Community production which had extent necessary to ensure the sale of their suffered injury the producers who were own products'. 61 importing themselves (or through the inter- mediary of traditional importers who were 6) — Last paragraph of recital 30 to the basic regulation. supplying them exclusively) the products

which were the subject of the dumping 44. In the judgments in TEC v Council and practices. In fact such producers, Nolle Silver Seiko v Council62 the Court took the claims, were themselves responsible for the view that where only a few models (in that injury to Community production. case of electronic typewriters), all of them at the lower end of the range, were imported by Community manufacturers to fill gaps which at that time existed in their range of products 63 and where the total volume of such imports was always 'rela- tively low', such imports must be regarded as not having contributed to the injury It appears from the foregoing quotation suffered by the Community industry and from the definitive regulation that the that there was therefore no reason to Council on the other hand thinks that the exclude such manufacturers from the deter- injury recorded is not attributable to the mination of injury.M imports of the Community producers them- selves, in spite of the fact that they sold the imported brushes at a normal profit. The Council refers in this respect to the defensive nature of the imports in question, which were not effected on the producers' own initiative but solely because that was necessary to defend themselves against unfair competition. In the judgment in Gestetner Holdings v Council and Commission,65 the Court approved the Council's decision to include in the Community industry two groups of Community producers who were themselves importing certain models of the products at issue (in that case photocopiers). As regards 4.3.2. Assessment of the arguments the first group the Court based its decision on the Council's finding that the Community producers had themselves attempted to market a full range of photo- copiers but had failed because of the depressed market prices following the imports which had been dumped.66 Moreover in the contested regulation the 43. In this connection I must consider Council had emphasized the very low whether the institutions made a proper use volume of imports by the firms concerned in of their discretion, regard being had to the relation to total imports of all the machines facts before the Court, the Court's case-law and the Council's decision-making practice. 62 — Judgments in Joined Cases 260/85 and 106/86 TEC v Council [1988] ECR 5855 and Joined Cases 273/85 and From the case-law it may be seen that the 107/86 Silver Seiko* Coimci7[1988] ECR 5927. Court's appraisal of this matter is always 63 — Moreover Advocate General Sir Gordon Slynn had closely linked to the specific characteristics observed that the models imported did not compete with the models which the Community importers manufactured and circumstances of the facts of each case themselves (see his Opinion, [1988] ECR 5906). and that the Court applies relatively strict 64 — See paragraph 47 of the judgment in TEC v Council and criteria. The following examples will give an paragraph 39 of the judgment in Silver Seiko v Council 65 — Already cited, note 54. illustration. 66 — See paragraph 47 of the grounds of judgment.

46. As regards the problem of the sale of Chinese products by the Community producers themselves, the regulation now under consideration points out that the volume of such sales varied appreciably 45. It also appears from the institutions' depending on the Member State and the decision-making practice that the assessment company concerned. It does not give actual made is closely linked to the specific figures. As has already become apparent, the circumstances. That emerges from a number Commission's finding that 'Community of decisions in which the Community producers did not in general import Chinese producers who were themselves importing products of their own volition but did so the product dumped were excluded from only in self-defence against unfair compe- Community production.69 That also tition', particularly 'in order to prevent their emerges from the decisions on whether such traditional markets from being taken over by suppliers offering imported goods only'74 67 — See recital 71 to Council Regulation (EEC) N o 535/87 of 23 February 1987 imposing a definitive anti-dumping duty plays a crucial part in the Council's on imports of plain paper photocopiers originaung in decision, in so far as it decided nevertheless Japan (OJ 1987 L 54, p. 12). 68 — See paragraphs 57 and 59 of the grounds of judgment and recitals 61, 64 and 65 to Regulation (EEC) N o 535/87. 70 — Decision of 19 January 1987 accepting undertakings given 69 — See for example Commission Regulation (EEC) N o in connection with imports of binder twine originating in 2812/85 of 7 October 1985 imposing a provisional anti- Brazil and Mexico and terminating the investtgations (OJ dumping duty on imports of electronic typewriters manu- 1987 L 34, p.55). factured by Nakajima All Co. Ltd, originating in japan 71 — See recital 28 to the decision. (OJ 1985 L 266, p. 5), and Commission Decision of 18 72 — Already cited, note 67. February 1985 terminating the anti-dumping proceeding concerning imports of certain footware with fixed 73 — See recital 64 to the decision. ice-skates, originating in Czechoslovakia, Yugoslavia, 74 — See the passage in the definitive reguládon already cited, Romania and Hungary (OJ 1985 L 52, p.48). paragraph 40.

to take into account, for determining the sively supplied by the traditional importers, injury, Community producers selling a practice which began by way of self- Chinese brushes themselves. protection seems to constitute rather an attempt to reserve the German market in imported disposable brushes for the tradi- tional channels of distribution at the expense of the independent importers (such as Nolle) not belonging to the category of traditional importers. I do not say that is the case, but I d o find that there is in this regard a defect in the statement of the If that recital is compared with the factors reasons on which the definitive regulation mentioned by Nolle, and not disputed, was based. according to which the German producers sell two-thirds of the brushes imported into Germany from China, a serious doubt arises as to whether on this point, at least as far as the situation in Germany is concerned, the definitive regulation is sufficiently in accord with the case-law of the Court which I have mentioned (or with the Council's own decision-making practice). Can such large-scale imports, marketed by the 47. The said statement of reasons in the German producers, still be regarded as self- definitive regulation, in relation to the scale protection measures in view of the volume of imports of Chinese brushes marketed by and (regard being had to the growing and the German producers, also raises doubts on persistent demand for disposable brushes) of other points. In fact recital 27 to the the long-term nature of such imports as well definitive regulation states that the 'flood of as of the fact that the products imported dumped imports' depressed the general level were sold 'at as high a price as the market of prices on the Community market and would bear', 7 5 in other words at the highest that, from 1984 to 1988, selling prices were profit, and when it is clear from the figures virtually static (despite the fact that available that these producers dominate the production costs in the Community German market (as regards both brushes for increased). It is not clear whether and to professional use manufactured in the what extent sales of do-it-yourself brushes, Community and imported disposable which had been constantly growing since brushes)? the end of the 1970s and which, in Germany, were mostly sold through the medium of the German producers them- selves, made their own contribution to this price stagnation. T h e same is true of the statement in the second paragraph of recital 27 to the effect that Community producers' 'market share' fell. If that is intended to refer to a fall in sales of brushes manu- factured in the Community against sales of I have the impression that in these circum- brushes manufactured in China, I can stances and by reason in particular of the understand it. But if it refers to the share of fact that the German producers were exclu- the whole market (that is, the share of sales 75 — See the passage in the definitive regulation already cited, of national brushes and imported brushes) paragraph 40. belonging to the German producers, it by

5. Conclusion

49. In consequence my opinion is that (i) the Community institutions have not shown sufficiently that in calculating the normal value they were able to rely on the prices which were charged on the internal market of Sri Lanka; and (ii) as regards the injury caused to an established Community industry the definitive regulation contains an insufficient statement of the reasons upon which it is based. I therefore invite the Court to rule that the definitive regulation is invalid.

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