CJEC, 5th chamber, May 7, 1987, No 260-84

The court (fifth chamber)

1 By an application lodged at the court registry on 6 november 1984, minebea company limited, tokyo, japan, (hereinafter referred to as "minebea ") brought an action before the court for a declaration that council regulation no 2089-84 of 19 july 1984 imposing a definitive anti-dumping duty on imports of ball-bearings with a greatest external diameter of not more than 30*mm originating in japan and singapore (official journal 1984, l 193, p. 1) is void. The applicant seeks a declaration that the regulation is void only in so far as it applies to ball-bearings imported by the applicant from japan.

2 Reference is made to the report for the hearing for the relevant regulations, the facts of the case and the submissions and arguments of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the court.

3 The applicant makes various submissions which, in the light of the various arguments put forward, must be arranged as follows:

(a) Several submissions concerning the unlawfulness of the method used for calculating the dumping margin; in that regard the applicant makes the following complaints:

(I) Different methods were used for calculating the normal value and the export price;

(II) The transaction-by-transaction method used to calculate the export price was inequitable;

(III) The statement of reasons for choosing that method was inadequate;

(IV) The new method was adopted in breach of the principle of legitimate expectation;

(V) The dumping margin was established by comparing prices of non-comparable products;

(VI) The adjustments made to the normal value and the export price were not the same.

(b) Submission that the refusal to take account of the price undertakings offered was unlawful.

I - Submissions based on the unlawfulness of the method used for calculating the dumping margin

4 In order to understand the scope of the submissions and arguments put forward by the applicant in this connection, it must be recalled first that under article 2*(2) and (3)*(a) of council regulation no 3017-79 a product is considered to have been dumped if its export price to the community is less than the normal value of the like product, that is to say the price paid in the ordinary course of trade for the like product intended for consumption in the exporting country. Article 2*(13)*(a) of the regulation states that the dumping margin means "the amount by which the normal value exceeds the export price ".

5 It follows from those provisions that the export price and the normal value constitute the terms of the comparison enabling the dumping margin to be established. Article 2*(13)*(b) of regulation no 3017-79 provides that, "where prices vary, the dumping margin may be established on a transaction-by-transaction basis or by reference to the most frequently occurring, representative or weighted average prices", and according to article 2*(13)*(c), "where dumping margins vary, weighted averages may be established ".

6 It is clear from paragraph 11 of the preamble to the contested regulation that in this case the normal value was calculated on the basis of a weighted average of the prices paid on the domestic market. As is stated in paragraph 16 of the preamble, the export price was calculated according to a transaction-by-transaction method. It is clear from the documents before the court that under that method export prices above the normal value were taken into account after being artificially reduced to the level of the normal value and a weighted average was determined of all the export prices established, whether they were below normal value or equal to normal value. The dumping margin was then determined by comparing the normal value calculated according to the weighted average method and the export price calculated according to the transaction-by-transaction method.

A - Submission concerning the difference in the methods used for calculating the normal value and the export price

7 The applicant claims that the choice of different methods for calculating the normal value and the export price is not justified in law. It considers that the possibility of choosing between the various methods of calculating the dumping margin specified in article 2*(13) of regulation no 3017-79 must be reconciled with the basic principle laid down in article 2*(9) of the regulation, which requires that the normal value and the export price should be calculated according to the same methods so that a fair comparison may be made.

8 It must be stated firstly that the procedure for calculating the normal value is laid down in article 2*(3) to (7) of regulation no 3017-79, and the procedure for calculating the export price is laid down in article 2*(8) thereof. Those provisions separately specify several different methods for calculating each of the terms of the comparison.

9 The fact that the methods of calculation which may be used are independent is confirmed by the aforesaid provisions of article 2*(13) (b) and (c) of regulation no 3017-79, which merely state the various possibilities for calculating the dumping margin without imposing any requirement that the methods chosen for calculating the normal value and the export price should be similar or identical.

10 Secondly, it should be pointed out that article 2*(9) of regulation no 3017-79 provides as follows:

"for the purposes of a fair comparison, the export price and the normal value shall be on a comparable basis as regards physical characteristics of the product, quantities, and conditions and terms of sale."

11 It is clear from that provision firstly that it is intended to define the adjustments which may be made to the normal value and the export price after they have been calculated according to the methods specified for that purpose and, secondly, that the adjustments provided for relate exclusively, as is stated in the eighth recital in the preamble to regulation no 3017-79, to differences found to exist as between the domestic market and the export market in the physical characteristics and quantities of products, in conditions and terms of sale, and in the level of trade.

12 Contrary to what the applicant maintains, it follows that article 2*(9) of the regulation does not require the normal value and the export price to be calculated according to the same method.

13 Consequently, this submission must be rejected.

B - Submission that the transaction-by-transaction method used to calculate the export price is inequitable

14 The applicant claims that the weighted average method is the only means of establishing the representative price on a market such as the export market in small ball-bearings since that market is characterized by appreciable differences both in the size of transactions and in the prices charged for apparently similar transactions. It considers that the choice of the transaction-by-transaction method is intended to protect a community industry as yet undeveloped, by inevitably leading to the establishment of a larger dumping margin, and conflicts with the objective of the anti-dumping rules, which are intended solely to remedy the injurious effects of unfair export pricing.

15 It should be noted that the choice between the different methods of calculation specified in article 2*(13)*(b) of regulation no 3017-79 requires an appraisal of complex economic situations. The court must therefore, as it has held in particular in its judgment of 11 july 1985 in case 42-84 remia and others v commission ((1985)) ecr 2545, limit its review of such an appraisal to verifying whether the relevant procedural rules have been complied with, whether the facts on which the choice is based have been accurately stated and whether there has been a manifest error of appraisal or a misuse of powers.

16 The line of argument put forward by the applicant is tantamount to alleging that the institutions made a manifestly incorrect appraisal of the facts by adopting a method of assessing the dumping margin which does not take account of the particular characteristics of the export market and gives rise to an inequitable result.

17 Such a line of argument cannot be accepted. It must be stated firstly that, contrary to what the applicant maintains, the transaction-by-transaction method applied by the commission allows account to be taken of the particular characteristics of the export market with respect to differences in the size of transactions and the level of prices. Indeed that method also involves the establishment of a weighted average of export prices. It differs from the so-called "weighted average method" in so far as prices above the normal value are artifically reduced to the level of the normal value.

18 Thus the application of the transaction-by-transaction method does not take account solely of sales at dumping prices. On the contrary, it takes account of all export sales, including those at prices above the normal value, which are reduced to the level of the normal value. The sales in question are then integrated in the calculation of the weighted average of all the prices charged on the export market.

19 Secondly, it should be stressed that the freedom to choose one of the methods specified in article 2*(13)*(b) of regulation no 3017-79 is specifically intended to ensure the application of the method most appropriate to the purpose of the anti-dumping proceeding. Articles 2*(1) and 4*(1) of that regulation provide that the purpose of such a proceeding is to eliminate the injury or threat of injury caused by dumping to an established community industry.

20 The transaction-by-transaction method is the only method capable of dealing with certain manœuvres in which dumping is disguised by charging different prices, some above the normal value and some below it. The application of the weighted average method in such a situation would not meet the purpose of the anti-dumping proceeding, since that method would in essence mask sales at dumping prices by those at what are known as "negative" dumping prices, and would thus in no way eliminate the injury suffered by the community industry concerned.

21 It must therefore be accepted that the commission did not in this case commit any manifest error in its appraisal of the facts by applying the transaction-by-transaction method in order to calculate the dumping margin; this submission must therefore be rejected.

C - Submission that the statement of the reasons for choosing the transaction-by-transaction method is inadequate

22 The applicant considers that the reasons set out in paragraph 18 of the preamble to the contested regulation are inadequate in so far as it is not explained why the export price was not determined on the basis of an average of the prices established, as it had been in the past.

23 As the court has consistently held, in particular in its judgment of 26 june 1986 in case 203-85 nicolet instrument v hauptzollamt frankfurt-am-main ((1986)) ecr 2049, the statement of reasons required by article 190 of the treaty must disclose in a clear and unequivocal fashion the reasoning followed by the community authority which adopted the measure in question in such a way as to make the persons concerned aware of the reasons for the measure and thus enable them to defend their rights, and to enable the court to exercise its supervisory jurisdiction.

24 That requirement was satisfied in this case by the reasons set out in paragraph 18 of the preamble to the contested regulation, from which it is clear in particular that the change of method at issue was decided upon in order to eliminate the injury to the community ball-bearings industry which subsisted as a result of the application of the methods of calculation used previously, which permitted dumping to be compensated for by "negative" dumping.

25 The submission that the statement of reasons is inadequate must therefore be rejected.

D - Submission concerning the conditions in which the new transaction - by-transaction method was adopted

26 The applicant claims that the principle of legitimate expectation required that adequate advance notice of a change in the method of calculating the export price should be given so that traders might reorganize their commercial practices in order to comply with the community requirements. The sudden change is even more unacceptable since it introduces new rules with retroactive effect.

27 In the first place it should be recalled that, under article 2*(13)*(b) of regulation no 3017-79, the transaction-by-transaction method is one of the methods which may be adopted by the institutions in order to calculate the dumping margin where, as in this case, prices vary. The applicant has not adduced any evidence to show that this new method was adopted with retroactive effect.

28 Secondly, as the court held in its judgment of 28 october 1982 in case 52-81 faust v commission ((1982)) ecr 3745, where the institutions enjoy a margin of discretion in the choice of the means needed to achieve their policies, traders cannot claim to have a legitimate expectation that the means originally chosen will be maintained, since these may be altered by the institutions in the exercise of their powers.

29 This submission must therefore be rejected.

E - submission that prices of non-comparable products were compared

30 The applicant claims that the principle laid down in article 2*(9) of regulation no 3017-79 was not observed in so far as the types of ball-bearings chosen for purposes of comparison were not comparable, in spite of having an identical designation, namely ssl-940-zz. The comparison made between the export price and the normal value for the purpose of establishing the dumping margin was thus distorted and the dumping margin was overestimated by 4.72 %.

31 The applicant explains that the exported ball-bearing is made of stainless steel and its precision is at level abec 9 (super ultra-precision grade), whereas the ball-bearing of the same designation sold in japan is made of chrome steel and its precision is only at level abec 5 (high-precision grade). It claims that these technical differences reflect differences in the use of the ball-bearings concerned.

32 It must be noted that under article 2*(10) of regulation no 3017-79, if the export price and the normal value are not on a comparable basis, in particular in respect of the physical characteristics of the product, allowance must be made for differences affecting price comparability. It is for the party claiming such an allowance to prove that its claim is justified.

33 It is clear from the documents before the court and from the oral evidence presented at the hearing that the council made adjustments to allow for the differences referred to above. The applicant has not adduced evidence to show that those adjustments were insufficient to re-establish price comparability.

34 This submission must therefore be rejected.

F - Submission that the adjustments made to the normal value and the export price were not the same

35 The applicant claims that in breach of article 2*(9) of regulation no 3017-79 the normal value and the export price were not established on a comparable basis, since the adjustments made to them were not the same.

36 It points out that when the export price was constructed allowances were made for "all costs incurred between importation and resale", whereas for the normal value only costs connected with the conditions and terms of sale were taken into account. This resulted in a disparity of treatment which led to the overestimation of the normal value and hence the dumping margin. That situation is all the more inequitable since minebea' s european and japanese subsidiaries are in an identical position vis-a-vis minebea, whose registered office is in singapore. In order to avoid that result, it would have been necessary either not to take into account all the costs in establishing the export price or to make allowances under article 2*(10) enabling the normal value to be calculated on the same basis.

37 It should be stressed firstly that, under article 2*(8)*(b) of regulation no 3017-79, the export price is established according to a constructed value where the price agreed for export is unreliable. That is the case in particular where, as here, the transactions are effected by parties which are associated or connected by a compensatory arrangement. The export price is then constructed on the basis of the price at which the imported product is first resold to an independent buyer or on any reasonable basis. In such a case, allowance is made for "all costs incurred between importation and resale ".

38 It is therefore a correct application of regulation no 3017-79 to deduct all the expenses incurred by minebea' s european subsidiaries for the purpose of constructing the export prices.

39 It is true that article 2*(10) of regulation no 3017-79 provides that, if the export price and the normal value are not on a comparable basis in respect of the factors mentioned in article 2*(9), due allowance is to be made for differences which affect price comparability. That applies in particular to differences in conditions and terms of sale. In that regard, article 2*(10)*(c) provides as follows:

"allowances shall be limited, in general, to those differences which bear a direct relationship to the sales under consideration and include, for example, differences in duties and indirect taxation, credit terms, guarantees, warranties, technical assistance, servicing, commissions or salaries paid to salesmen, packing, transport,... Allowances generally will not be made for differences in overheads and general expenses, including research and development costs, or advertising...".

40 On the basis of that provision minebea claims that the general expenses incurred by its japanese subsidiary should also have been deducted from the normal value.

41 In that regard it should be noted that the allowances made under article 2*(10)*(c) of regulation no 3017-79 are different, as regards both their purpose and the conditions in which they are applied, from the allowances made in the construction of the export price.

42 Whereas the latter allowances are intended to determine the export price which corresponds to normal trading conditions, the allowances made under article 2*(10) are intended to rectify the export price or the normal value already calculated pursuant to the rules laid down in article 2*(3) to and (8). The allowances provided for by article 2*(10) are made by reference to objective factors enumerated in particular in subparagraph (c) thereof; these factors correspond to the particular features of each market (domestic and export) and have a varying impact on conditions and terms of sale, thus affecting price comparability.

43 Moreover, whereas adjustments required for the purpose of constructing the export price are made automatically by the community institutions pursuant to the provisions of article 2*(8) of regulation no 3017-79, the adjustments provided for by article 2*(10) may also be made on a claim by an interested party. A party making such a claim must prove that its claim is justified, that is to say that the difference on which it relies concerns one of the factors listed by article 2*(9), that the difference affects price comparability and lastly, if, as in this case, it is a question particularly of differences in conditions and terms of sale, that those differences bear a direct relationship to the sales under consideration.

44 In this case it does not appear, either from the documents before the court or from the oral evidence presented at the hearing, that minebea has succeeded in showing that its claim for adjustments under article 2*(10)*(c) of regulation no 3017-79 satisfied the conditions required by those provisions.

45 Indeed it is clear from minebea' s own assertions that the expenses which it claims should have been deducted from the normal value are general expenses. Article 2*(10) provides that allowances will "generally" not be made in respect of such expenses, and the applicant has not established the existence of any special circumstance capable of justifying an exception to that general rule.

46 The submission regarding the adjustments made to the normal value and the export prices must therefore be rejected.

II - Submission that the refusal to take account of the price undertakings offered was unlawful

47 The applicant claims that the principle of proportionality requires administrative agencies to take measures in such a way that the aims pursued may be attained with the smallest possible sacrifices by the undertakings affected. Thus the institutions may refuse undertakings offered only when they are clearly unacceptable.

48 It must first be stressed that no provision of regulation no 3017-79 compels the institutions to accept price undertakings which are offered. On the contrary, it is clear from article 10 thereof that it is for the institutions, in the exercise of their discretionary power, to determine whether such undertakings are acceptable. Minebea has not shown that the reasons for refusing the undertakings offered set out in paragraph 24 of the preamble to the contested regulation (and amplified by the council in its written submissions) exceeded the margin of discretion conferred upon the institutions.

49 In particular, the applicant has not refuted the council' s claim that it excluded certain sales from immediate price increases, it did not offer to adjust its prices speedily and it did not contemplate a single resale price for all the markets of the community.

50 The final submission put forward by minebea must therefore be rejected. Consequently, the application must be dismissed in its entirety.

Costs

51 Under article 69*(2) of the rules of procedure, the unsuccessful party is to be ordered to pay the costs. As the applicant has failed in its submissions, it must be ordered to pay the costs.

On those grounds,

The court (fifth chamber)

Hereby:

(1) Dismisses the application;

(2) Orders the applicant to pay the costs, including those incurred by the interveners.