GC, 8th chamber, December 9, 2009, No T-1/07

THE GENERAL COURT (Eighth Chamber),

Legal context

1 Article 1(2) and (4) of Council Regulation (EC) No 384-96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community (OJ 1996 L 56, p. 1), as amended, ('the basic regulation'), provides:

'A product is to be considered as being dumped if its export price to the Community is less than a comparable price for the like product, in the ordinary course of trade, as established for the exporting country.

...

4. For the purpose of this Regulation, the term "like product" shall be interpreted to mean a product which is identical, that is to say, alike in all respects, to the product under consideration, or in the absence of such a product, another product which although not like in all respects, has characteristics closely resembling those of the product under consideration.'

2 The first subparagraph of Article 2(1) of the basic regulation provides that '[t]he normal value shall normally be based on the prices paid or payable, in the ordinary course of trade, by independent customers in the exporting country'.

3 As regards market economy status, Article 2(7)(b) of the basic regulation provides:

'In anti-dumping investigations concerning imports from ... the People's Republic of China..., normal value will be determined in accordance with paragraphs 1 to 6, if it is shown, on the basis of properly substantiated claims by one or more producers subject to the investigation ... that market economy conditions prevail for this producer or producers in respect of the manufacture and sale of the like product concerned. When this is not the case, the rules set out under subparagraph (a) shall apply.'

4 According to Article 2(7)(c) of the basic regulation:

'A claim under [Article 2(7)] ... (b) must be made in writing and contain sufficient evidence that the producer operates under market economy conditions, that is if:

- decisions of firms regarding prices, costs and inputs, including for instance raw materials, cost of technology and labour, output, sales and investment, are made in response to market signals reflecting supply and demand, and without significant State interference in this regard, and costs of major inputs substantially reflect market values,

- firms have one clear set of basic accounting records which are independently audited in line with international accounting standards and are applied for all purposes,

- the production costs and financial situation of firms are not subject to significant distortions carried over from the former non-market economy system, in particular in relation to depreciation of assets, other write-offs, barter trade and payment via compensation of debts,

- the firms concerned are subject to bankruptcy and property laws which guarantee legal certainty and stability for the operation of firms, and

- exchange rate conversions are carried out at the market rate.'

5 Article 9(5) of the basic regulation provides:

'5. An anti-dumping duty shall be imposed in the appropriate amounts in each case, on a non-discriminatory basis on imports of a product from all sources found to be dumped and causing injury, except as to imports from those sources from which undertakings under the terms of this Regulation have been accepted. The Regulation imposing the duty shall specify the duty for each supplier or, if that is impracticable, and in general where Article 2(7)(a) applies, the supplying country concerned.

Where Article 2(7)(a) applies, an individual duty shall, however, be specified for the exporters which can demonstrate, on the basis of properly substantiated claims that:

(a) in the case of wholly or partly foreign owned firms or joint ventures, exporters are free to repatriate capital and profits;

(b) export prices and quantities, and conditions and terms of sale are freely determined;

(c) the majority of the shares belong to private persons. State officials appearing on the board of Directors or holding key management positions shall either be in the minority or it must be demonstrated that the company is none the less sufficiently independent from State interference;

(d) exchange rate conversions are carried out at the market rate; and

(e) State interference is not such as to permit circumvention of measures if individual exporters are given different rates of duty.'

6 As regards the Community interest in the imposition of anti-dumping measures, Article 21(1) of the basic regulation provides:

'A determination as to whether the Community interest calls for intervention shall be based on an appreciation of all the various interests taken as a whole, including the interests of the domestic industry and users and consumers; and a determination pursuant to this Article shall only be made where all parties have been given the opportunity to make their views known pursuant to paragraph 2. In such an examination, the need to eliminate the trade distorting effects of injurious dumping and to restore effective competition shall be given special consideration. Measures, as determined on the basis of the dumping and injury found, may not be applied where the authorities, on the basis of all the information submitted, can clearly conclude that it is not in the Community interest to apply such measures.'

Background to the dispute and the contested regulation

7 The applicants, Apache Footwear Ltd and Apache II Footwear Ltd (Qingxin), are footwear producing and exporting companies established in China.

8 Imports of footwear from China falling within certain categories of the combined nomenclature were subject to quotas which lapsed on 1 January 2005.

9 Following a complaint lodged on 30 May 2005 by the Confédération européenne de l'industrie de la chaussure (CEC), the Commission of the European Communities initiated an anti-dumping proceeding concerning imports of certain footwear with uppers of leather originating in China and Vietnam. The notice of initiation of that proceeding was published in the Official Journal of the European Union of 7 July 2005 (OJ 2005 L 166, p. 14) ('the notice of initiation').

10 In view of the large number of parties involved, it was envisaged, at point 5.1(a) of the notice of initiation, to apply sampling, in accordance with Article 17 of the basic regulation. Furthermore, at point 5.1(b) of the notice of initiation, the Commission stated that, in order to obtain the information it deemed necessary for its investigation, it would send questionnaires to, inter alia, the sampled Chinese and Vietnamese exporting producers and to the authorities of the exporting countries concerned.

11 The applicants contacted the Commission and on 25 July 2005 provided it with the information required by points 5.1(a)(i) and 5.1(e) of the notice of initiation in order to form part of the sample of exporting producers which the Commission proposed to establish pursuant to Article 17 of the basic regulation and in order to be granted market economy status or, failing that, to be given individual treatment ('the MES/IT claim').

12 The applicants were chosen to form part of the sample of Chinese exporting producers and were invited to respond to the Commission's questionnaire by no later than 12 September 2005. They submitted their response to that questionnaire on that date.

13 The Commission carried out on-the-spot verification visits at the applicants' premises and at the premises of Apache Footwear Ltd Bahamas (Hong Kong) between 28 September and 7 October 2005.

14 By letter of 9 November 2005, the applicants submitted their comments on various issues raised during the on-the-spot verifications and provided some clarification on those issues.

15 By fax of 12 December 2005, the Commission informed the applicants of its preliminary findings concerning their MES/IT claim.

16 As regards the first applicant ('Apache'), the Commission considered that it did not meet the first, second and third criteria laid down in Article 2(7)(c) of the basic regulation (see paragraph 4 above).

17 As regards the first criterion, concerning decisions of firms, the Commission observed that between 2001 and 2003 Apache granted significant interest-free loans to two of its shareholders, [confidential](1) and [confidential], which held [confidential] respectively of its shares and belonged to Apache employees and to inhabitants of the village of Pingsha respectively. In order to be granted the loans in question, those shareholders had only to indicate that they 'needed to borrow money' and their applications were systematically approved by the general manager of Apache without restrictions, repayment conditions or guarantees. In market economy conditions, an undertaking would have sought to make a profit by granting interest-bearing loans. Apache did not provide any satisfactory explanation for its policy, although that practice was in breach of the object set out in its articles of association, which made no provision for the grant of interest-free loans [confidential]. In those circumstances, the Commission concluded that, in spite of having a minority shareholding, those shareholders exercised disproportionate influence on Apache's decisions, in view, inter alia, of the fact that [confidential], the shareholder with [confidential]% of Apache's capital, never obtained such loans. Apache did not rely on any circumstance to rebut the conclusion that its decisions were not taken in response to market signals and without significant State interference. Furthermore, in February 2004 Apache decided to distribute dividends for the financial years 2001 and 2002 but used only [confidential]. Nor did Apache prove that its majority shareholder, [confidential], was free to 'repatriate' its 2001 and 2002 dividends.

18 In the context of the first criterion, the Commission also referred to Apache's human resources policy, observing that recruitment of new employees required prior approval by the regional labour administration, which defines the approach of the recruiting policy.

19 As regards decisions on sales, the Commission emphasised, in the context of the examination of the same criterion, that, in accordance with its articles of association, Apache has to export more than [confidential]% of its production, while less than [confidential]% is to be sold on the domestic market. In view of the Chinese authorities' power to approve the articles of association, the Commission concluded that such restrictions were binding and Apache had failed to explain their rationale.

20 As regards the second criterion, concerning the basic accounting records, the Commission observed that Apache [confidential]. In light of the importance of [confidential] in ensuring the transparency of accounts, the Commission concluded that Apache's accounts were not consistent with international accounting standards [confidential].

21 As regards the third criterion, concerning production costs, the Commission observed, in particular, that according to the joint venture contract between Apache and [confidential] the latter was to provide energy to the former. However, it cannot be excluded that that provision creates an advantage for Apache which improves its financial situation. Last, as regards land use, the Commission observed that Apache had concluded leases with [confidential] and [confidential] which provided for a rent significantly lower than that agreed with other persons. The Commission considered that that circumstance, which might be attributable to the [confidential], constituted a significant distortion having its origin in the former non-market economy system.

22 As regards the second applicant ('Apache II'), the Commission considered that it did not satisfy the first and third criteria laid down in Article 2(7)(c) of the basic regulation.

23 As concerns the first criterion, the Commission observed that Apache II was required by its articles of association to export [confidential]. In light of the powers to approve articles of association which are vested in the Chinese authorities, which alone are competent to issue a business licence, the Commission concluded that such restrictions were binding.

24 As for the third criterion, the Commission emphasised that Apache II had concluded a co-operation agreement with [confidential]. Under that agreement, Apache II was entitled to use land for a period of [confidential] years at a rent significantly below market price. Since the procedure did not reveal that [confidential] was acting on the basis of the criteria of a private operator and not [confidential], the Commission concluded that the beneficial conditions granted to Apache II concerning the use of the land constituted a significant distortion having its origin in the former non-market economy system.

25 The applicants submitted their comments on the Commission's findings by fax of 19 December 2005. They disputed all of the Commission's findings concerning the criteria which were considered not to have been satisfied.

26 In particular, Apache set out the circumstances which, it claims, show, first, that [confidential] was not controlled by the State; second, that the labour costs were determined free of any State interference; third, that the grant of loans to the two shareholders was consistent with Chinese law and with Apache's articles of association; fourth, that the choice as to the destination of its production had been made freely by its shareholders; fifth, that it kept its bank statements relating to the dividends disbursed; and, sixth, that its production costs relating to energy supply and land rental were consistent with market prices.

27 Apache II, for its part, referred to Apache's response and emphasised, first, that under Articles 43 and 44 of the Rules for the implementation of the law of the People's Republic of China on foreign-capital enterprises it was free to determine the destination of its production; second, that [confidential] was not linked to the Chinese authorities; and, third, that the prices at which it rented land corresponded to market prices.

28 By fax of 23 February 2006, the Commission informed the applicants that it adhered to its initial findings, although it withdrew the objections concerning the supply of energy to Apache (see paragraph 21 above).

29 By letter of 24 February 2006, the Commission informed the applicants that it intended to exclude Special Technology Athletic Footwear ('STAF') from the definition of the product concerned and invited them to express their views in that regard. By letter of 16 March 2006, the applicants expressed their agreement with the Commission's approach.

30 On 23 March 2006, the Commission adopted Regulation (EC) No 553-2006 imposing a provisional anti-dumping duty on imports of certain footwear with uppers of leather originating in the People's Republic of China and Vietnam (OJ 2006 L 98, p. 3) ('the provisional regulation').

31 According to recital 9 in the preamble to the provisional regulation, the investigation of dumping and injury covered the period from 1 April 2004 to 31 March 2005. The examination of trends relevant for the assessment of injury covered the period from 1 January 2001 to 31 March 2005.

32 In light of the need to establish a normal value for the products of the Chinese and Vietnamese exporting producers which could not be granted market economy status ('MES'), a verification to establish normal value on the basis of data from an analogue country, in this case the Federative Republic of Brazil, took place at the premises of three Brazilian companies (recital 8 in the preamble to the provisional regulation).

33 As regards the product concerned, it follows from recitals 10, 11, 40 and 41 in the preamble to the provisional regulation that it covered essentially sandals, boots, urban footwear and city shoes, all manufactured with uppers of leather or composition leather. It follows, moreover, from recitals 12 to 31 in the preamble to the provisional regulation that the Commission excluded STAF from the definition of the product concerned and that it included children's shoes, pending further investigation and consideration at the definitive stage of the procedure.

34 As regards the like product, the Commission concluded, at recital 46 in the preamble to the provisional regulation, that the product concerned and the footwear with uppers of leather manufactured and sold domestically in China and Vietnam as well as footwear with uppers of leather produced and sold in the Community by the Community industry were similar as far as their basic physical and technical characteristics and uses were concerned, and that they were perceived by users as being interchangeable. Therefore, according to recital 52 in the preamble to the provisional regulation, all types of footwear with uppers of leather or composition leather produced and sold in the countries concerned and in Brazil and those produced and sold by the Community industry on the Community market were those exported from the countries concerned to the Community.

35 It is apparent from recital 57 in the preamble to the provisional regulation that, for the purpose of determining dumping, the Commission applied sampling. To that end, it selected a sample consisting of 12 Chinese exporting producers representing more than 20% of the volume of Chinese exports to the Community. According to recital 8(c) in the preamble to the provisional regulation, the applicants are the first and second companies on the list of sampled Chinese exporting producers.

36 According to recital 69 in the preamble to the provisional regulation, the applicants were refused MES on the ground that they did not satisfy some of the criteria set out in Article 2(7)(c) of the basic regulation (see paragraphs 16 and 22 above).

37 As regards the individual treatment claim, the Commission observed, at recital 94 in the preamble to the provisional regulation, that the obligation for an undertaking to export all or a significant part of its production also meant that it did not satisfy the criterion set out at Article 9(5)(b) of the basic regulation (see paragraph 5 above).

38 As regards the Community interest necessary for the imposition of provisional duties and, more particularly, the consumer interest, the Commission observed, at recital 251 in the preamble to the provisional regulation, that children's shoes have to be replaced three to four times more often than other shoes, which significantly increases the negative effects for consumers of the imposition of a provisional duty. Any benefits that might be obtained by preventing injury would therefore be outweighed by the potentially negative effect that the imposition of duties would have on consumers. In those circumstances, the Commission decided to exclude children's shoes from the scope of the provisional anti-dumping measures (recital 252 to the provisional regulation).

39 By letter of 7 April 2006, the Commission sent the applicants, pursuant to Article 20(1) of the basic regulation, an interim disclosure document on the details underlying the essential facts and considerations on the basis of which the anti-dumping duties had been imposed. The Commission invited the applicants to submit any comments which they might have on those documents by 8 May 2006.

40 By letter of 8 May 2006, the applicants submitted their comments on the interim disclosure document. They concentrated on the Commission's assessments of MES, individual treatment ('IT') and the dumping and injury margins.

41 By letter of 7 July 2006, the Commission sent the applicants, pursuant to Article 20(2) to (4) of the basic regulation, a final disclosure document on the essential facts and considerations underlying the proposal to impose definitive anti-dumping duties. As regards the applicants' MES claims, the Commission ultimately considered that Apache did not meet the first three criteria laid down in Article 2(7)(c) of the basic regulation, while Apache II did not meet the third criterion (see paragraph 24 above). As regards the applicants' IT claims, the Commission observed that the restrictions on Apache's sales policy (see paragraph 37 above) led it to take the view that Apache did not satisfy the criterion set out in Article 9(5)(b) of the basic regulation. Since, according to the Commission, acceptance of a claim such as an MES/IT claim presupposes that all the linked companies established in the exporting State and producing or exporting the product concerned must satisfy all the criteria set out in the basic regulation in that regard, Apache II's MES/IT claim could not be accepted because Apache's MES/IT claim could not be accepted. In any event, the Commission stated that the applicants' export prices had been used in order to determine the export price to be applied to footwear originating in China.

42 By letter of 17 July 2006, the applicants submitted their comments on the final disclosure document. They again commented on the Commission's assessments of MES, IT and the dumping and injury margins. They also produced a number of documents relating to the amendment of their articles of association, their accounts and their land use rights.

43 By letter of 6 October 2006, the Commission informed the applicants of the adoption of Council Regulation (EC) No 1472-2006 of 5 October 2006 imposing a definitive anti-dumping duty and collecting definitely the provisional duty imposed on imports of certain footwear with uppers of leather originating in the People's Republic of China and Vietnam (OJ 2006 L 275, p. 1) ('the contested regulation'). The Commission also informed the applicants of its refusal to take into account the documents which they had submitted in the annexes to their letter of 17 July 2006, because they had been produced out of time, and of its final decision not to grant them MES or IT.

44 By the contested regulation, the Council of the European Union imposed a definitive anti-dumping duty on imports of footwear with uppers of leather or composition leather, excluding sports footwear, STAF, slippers and other indoor footwear and footwear with a protective toecap, originating in China and falling within a number of combined nomenclature codes (Article 1 of the contested regulation). The rate of the definitive anti-dumping duty applicable, before duty, to the net free-at-Community-frontier price was established, for footwear produced by the applicants, at 16.5%. Pursuant to Article 3 of the contested regulation, that regulation was to stay in force for a period of two years.

45 According to recital 77 in the preamble to the contested regulation, the submission, by two Chinese exporting producers, of amended articles of association, no longer containing sales restrictions, was made too late to be taken into consideration. There was no longer sufficient time for verification in accordance with Article 16(1) of the basic regulation. In any event, those restrictions were not the only reason why those companies had been refused MES.

46 Thus, the conclusion reached in the provisional regulation concerning the grant of MES to the applicants was confirmed at recital 78 in the preamble to the contested regulation.

47 As regards the IT claim, the Council confirmed, at recital 83 in the preamble to the contested regulation, the negative conclusion which the Commission had reached at recital 94 in the preamble to the provisional regulation (see paragraph 37 above).

48 As regards the Community interest, particularly with respect to the inclusion of children's shoes within the scope of the definitive anti-dumping measures, the Council carried out a fresh analysis in light of the arguments submitted by the Community industry. That analysis led it to adopt a different approach from that taken by the Commission regarding the provisional measures (see paragraph 38 above).

49 In that regard, according to recital 257 to the contested regulation, children's shoes must be included in the definition of the product concerned (see paragraph 33 above), that is to say that all types of the product concerned should be regarded as forming one single product, and that therefore in principle anti-dumping measures should apply to them in their entirety. In addition, according to that recital, the average import prices of children's shoes were in general, according to Eurostat (Statistical Office of the European Communities) statistics, substantially lower (by more than 33%) than the import prices of adults' shoes. Consequently, the impact of an ad valorem anti-dumping duty on children's shoes would be proportionally lower, particularly since definitive findings lead overall to lower definitive duty levels than the measures at the provisional stage. In addition, the Council considered, in the same recital, that consumers were unlikely to bear the full brunt of any measures and emphasised that consumers' organisations had not commented, which suggested that the impact of the measures was effectively not a real concern for their members.

50 In those circumstances, the Council concluded that the imposition of definitive measures on the product concerned, including children's shoes, was not against the overall interest of consumers.

Procedure and forms of order sought by the parties

51 By application lodged at the Registry of the Court on 2 January 2007, the applicants brought the present action.

52 By document lodged at the Court Registry on 2 April 2007, the Commission sought leave to intervene in the present case in support of the form of order sought by the Council. By letter of 4 October 2007, the Commission informed the Court that it waived the right to lodge a statement in intervention, but that it would take part in the hearing.

53 By document lodged at the Court Registry on 5 April 2007, CEC sought leave to intervene in the present case in support of the form of order sought by the Council.

54 By document lodged at the Court Registry on 13 April 2007, the Provincia di Ascoli Piceno (Italy), the Comune di Monte Urano (Italy), BA.LA. di Lanciotti Vittorio & C. Sas and 16 other Italian footwear-producing companies whose names are listed in the Annex sought leave to intervene in the present case in support of the form of order sought by the Council.

55 In their observations on those applications for leave to intervene, the applicants requested that a number of details in the file be treated as confidential.

56 By order of 12 September 2007, the President of the Second Chamber of the Court granted the applications for leave to intervene lodged by the Commission, CEC, BA.LA. di Lanciotti Vittorio & C. and the other 16 Italian footwear-producing companies ('the Italian producers'). However, the applications of the Provincia di Ascoli Piceno and the Comune di Monte Urano were dismissed.

57 As the composition of the Chambers of the Court had been altered, the Judge-Rapporteur was assigned to the Eighth Chamber, to which the present case was therefore assigned.

58 By application lodged at the Registry of the Court of Justice on 4 October 2007, the Provincia di Ascoli Piceno and the Comune di Monte Urano lodged an appeal under the first paragraph of Article 57 of the Statute of the Court of Justice, seeking to have the order of 12 September 2007 set aside in so far as it dismissed their applications to intervene. By order of 25 January 2008 in Case C-464-07 P(I) Provincia di Ascoli Piceno and Comune di Monte Urano v Council and Others, not published in the ECR, the President of the Court of Justice dismissed that appeal.

59 CEC and the Italian producers lodged their statements in intervention on 23 October 2007. Given that those interveners did not object to the applications for confidential treatment made by the applicants, the details in the file to which those applications related were regarded as confidential.

60 Upon hearing the report of the Judge-Rapporteur, the Court decided to open the oral procedure.

61 The parties presented oral argument and replied to the questions put by the Court at the hearing on 18 February 2009.

62 The applicants claim that the Court should:

- annul the contested regulation in so far as it concerns them;

- order the Council to pay the costs;

- order the interveners to bear their own costs.

63 The Council contends that the Court should:

- dismiss the action as inadmissible or as unfounded;

- order the applicants to pay the costs.

64 The Commission contends that the Court should dismiss the action.

65 CEC and the Italian producers contend that the Court should:

- dismiss the action;

- order the applicants to pay the costs.

Law

66 In support of their action, the applicants raise three pleas in law, alleging, respectively:

- breach of Article 2(7)(c) of the basic regulation and breach of the obligation to state reasons;

- breach of the obligation to exercise due diligence and of the principle of sound administration, and a manifest error of assessment; and

- breach of Article 21 of the basic regulation and of the obligation to state reasons, and a manifest error of assessment.

The first plea: breach of Article 2(7)(c) of the basic regulation and breach of the obligation to state reasons

Arguments of the parties

67 The applicants claim that the Commission's assessment with respect to the grant of MES is based mainly on mere assumptions, accompanied by imprecise statements concerning the alleged insufficiency of the evidence submitted to it, which is tantamount to asking the applicants to prove a negative as regards a range of aspects. In that regard, the applicants dispute the Council's arguments that the plea is inadmissible and submit that, notwithstanding the margin of assessment which the institutions enjoy with respect to trade defence measures, their actions are subject to review by the Community judicature by reference to rules which require that they examine the evidence before them carefully and impartially, respect the rights of defence of the persons concerned and state the reasons on which their decisions are based.

68 The applicants submit that the Council did not examine whether they were subject to significant State interference, which it is required to do under the rule laid down in Article 2(7)(c) of the basic regulation. In that regard, the applicants refer to the wording of Article 2(7)(b) of the basic regulation, which states that normal value may be determined in accordance with the rules applicable to market economy countries where 'market economy conditions prevail' for producers claiming MES.

69 It follows that the legislature recognised the existence of a number of degrees between State interference and market economy. Accordingly, Article 2(7)(c) of the basic regulation does not preclude any interaction between the State and economic operators but only interaction that significantly impacts on business decisions. That must be assessed on a case-by-case basis. In carrying out their assessment, the Community institutions are required to act carefully and impartially. In the present case, however, the Commission failed to discharge that obligation.

70 In particular, as regards the loans made by Apache to two of its shareholders and the distribution of the associated profits (see paragraph 17 above), the Commission failed to take account of the fact that, unlike [confidential] and [confidential], which do not belong to the Apache group, [confidential] did not wish to distribute its profits, but wished to reinvest them, which is by no means abnormal. That explains why Mornington did not receive a distribution of the dividends, unlike [confidential] and [confidential]. As regards [confidential], the Commission never considered that it was controlled by the State. As regards [confidential], which appoints only one of Apache's six directors, the applicants emphasise, first of all, that it is not controlled by the State but belongs to individuals and, next, that the terms on which it was granted loans is only one among a number of factors to be taken into account for the purposes of assessing whether there is significant State influence. Since, as regards the analysis of the interaction between the State and the economic operators in the present case, the result reached by the Commission was not obvious, the Commission ought to have carried out a more thorough investigation.

71 The applicants further contend that, according to the wording of Article 2(7)(b) of the basic regulation, the criteria set out at subparagraph (c) of that provision must be satisfied 'in respect of the manufacture and sale of the like product concerned'. In fact, the loans granted to Apache's minority shareholders do not relate to the manufacture or sale of the like product concerned.

72 As regards the Commission's findings concerning the use of immovable assets relating to Apache, the applicants claim that if the Commission had taken account of two lease agreements submitted to it during the administrative procedure in the context of the applicants' MES/IT claim, it would have concluded that Apache paid rent equivalent to, or indeed higher than, that paid by other companies established in the same province.

73 The matters set out above, and the considerations put forward by the Commission with respect to the use of land by Apache II (see paragraph 24 above), show that the Commission failed to determine whether there was 'significant State interference' within the meaning of Article 2(7)(c) of the basic regulation. The Commission confined itself to comparing its findings with the situation of a 'market economy' company, a concept which is not defined in the basic regulation but which should correspond with the 'standard' behaviour of an economic entity in 'ideal' market economy conditions. Therefore, if a company fails to pass that 'benchmark test', the only logical conclusion, according to the Commission, is that it does not satisfy the criteria laid down in Article 2(7)(c) of the basic regulation.

74 In so doing, the Commission applied to its examination of the applicants' request a different standard from that laid down in the basic regulation. That approach, which renders the word 'significant' meaningless, leaves the company concerned only with the possibility of meeting or not meeting that abstract benchmark and does not correspond with the test intended to evaluate significant State interference in the sectors specified in that regulation. The Commission's approach has the effect that, in practice, the companies concerned must prove that they have no contact whatsoever with the State authorities, since they must demonstrate that they are not linked with those authorities, on the basis of the criteria defined by the Commission. That is particularly true with respect to Apache II, whose application was rejected on the sole ground that it failed to meet one of the five criteria laid down in Article 2(7)(c) of the basic regulation.

75 Furthermore, as regards land use by Apache II, the Commission's analysis concerning [confidential] (see paragraph 24 above) is based on hypothetical and superficial elements, such as the inclusion of the word '[confidential]' in its company name, which do not preclude that company from operating according to market economy criteria. The comparison with the rent paid by Apache fails to take account of the fundamental differences concerning each lease, such as the characteristics of the land and its location, which affect prices.

76 The flaws in the Commission's analysis of the existence of 'significant State interference' also constitute a failure to state the reasons on which the contested regulation is based.

77 The Council submits that the present plea should be rejected as inadmissible on the ground that it fails to meet the requirements of precision laid down by Article 44(1)(c) of the Rules of Procedure of the Court. Furthermore, the Council, supported by the Commission, CEC and the Italian producers disputes the merits of the applicant's arguments.

Findings of the Court

78 As regards the plea of inadmissibility raised by the Council, it must be pointed out that, by their first two pleas, the applicants dispute all the assessments on the basis of which the institutions refused to grant them MES. In those circumstances, the Council is in a position to understand the omissions complained of and the Court may assess the validity of the applicants' arguments. Consequently, the plea of inadmissibility raised by the Council must be rejected.

79 As regards the merits of the first plea, it must be borne in mind, first, that the Commission considered that Apache did not meet the first three criteria laid down in Article 2(7)(c) of the basic regulation.

80 According to the Commission, Apache did not meet the first criterion on the following grounds:

- it granted interest-free loans to two of its shareholders, one of which represents the local authorities;

- recruitment of new employees required prior approval by the regional labour administration, which determines the recruiting policy;

- its articles of association provided that more than [confidential]% of its production had to be exported and less than [confidential]% was to be sold on the domestic market (see paragraphs 17 to 19 and 41 above).

81 As regards the second criterion, the Commission concluded that Apache's accounts were not consistent with international standards (see paragraphs 20 and 41 above).

82 So far as concerns the third criterion, the Commission considered that the stipulation of a significantly low rent between Apache and two landlord entities constituted a significant distortion whose origin lay in the former non-market economy system (see paragraphs 21 and 41 above).

83 The Commission refused to grant Apache II MES on the ground that it was entitled to use land for a period of 50 years under a co-operation agreement with [confidential], which stipulated a rent significantly below market price (see paragraphs 24 and 41 above).

84 Secondly, the criteria laid down in Article 2(7)(c) of the basic regulation are cumulative in nature, with the result that, should a producer fail to fulfil one of those criteria, its application for MES must be rejected (see, to that effect, Case T-35-01 Shanghai Teraoka Electronic v Council [2004] ECR II-3663, paragraph 54).

85 Thirdly, it is important to point out that the applicants, which are linked companies belonging to the same group, do not call in question the institutions' approach that the grant of MES to one of them requires that all the linked companies fulfil the criteria laid down in Article 2(7)(c) of the basic regulation.

86 Fourthly, it must be pointed out that, in the context of their first plea, the applicants dispute the findings set out in the first indent of paragraph 80 above and in paragraphs 82 and 83 above, while those set out in the second and third indents of paragraph 80 above and in paragraphs 81 and 83 above are in essence disputed in the context of the second plea.

87 It follows from paragraphs 84 to 86 above that if the Court rejects the applicants' claims concerning one of the grounds which led the Commission to refuse to grant MES to either of them, the first two pleas must be rejected in their entirety. Furthermore, the applicants have not asked the Court to consider the institutions' assessment of their IT claim.

88 It is necessary to examine, first, the applicants' heads of claim relating to the institutions' assessment of the third criterion laid down in Article 2(7)(c) of the basic regulation (see paragraph 82 above).

89 In that regard, the applicants state, in the application, that if the Commission had taken into account two documents which they submitted in their observations of 19 December 2005 (see paragraphs 15, 21 and 25 above) and have submitted to the Court as an Annex to the application, it should have concluded that the rent paid by Apache for land use is similar, or even higher, than the rent paid by other companies in the region.

90 According to the English translation of those documents and the explanations provided by the applicants in their fax of 19 December 2005 and in the reply, they are two land rental contracts concluded between [confidential] and two other bodies.

91 In that regard, it must be pointed out that the rental contracts stipulating the rents in question have no evidential value as they were also concluded by [confidential] and, consequently, cannot form a basis for calling the Commission's assessment in question. In the absence of more specific information on the market price, the fact that [confidential] let land to other bodies at rents which were allegedly the same, or even lower, than those paid by Apache does not establish that Apache pays a rent at the market price.

92 As regards the links between [confidential] and the State authorities, it must be stated that, in its fax of 12 December 2005, the Commission pointed out that, according to its verification, [confidential] was represented on Apache's Board of Directors by the Pingsha Communist Party Committee, that is to say by the State authorities. That assessment is based on minutes of a meeting of 9 September 2004, according to which the Communist Party Branch of Pingsha decided on the replacement of a member of [confidential]'s Board of Directors and that person was also appointed as [confidential]'s representative on Apache's Board of Directors.

93 In view of the contents of the minutes of that meeting, it must be held that the Commission correctly established that there was a link between [confidential] and the Chinese authorities. Furthermore, the applicants have neither disputed nor otherwise commented on the implications of those minutes in the written pleadings which they have lodged at the Court.

94 Moreover, it must be pointed out that the Commission correctly took the view, in its fax of 12 December 2005, that land rental at prices lower than the market price improved the financial situation of the company concerned by reducing its production costs, a factor which is likely to affect the data relating to the calculation of normal value. Consequently, having regard to the links between [confidential] and the Chinese authorities (see paragraphs 92 and 93 above), the Commission could reasonably conclude than the third criterion laid down in Article 2(7)(c) of the basic regulation had not been satisfied.

95 It follows that the applicants' arguments in that regard must be rejected.

96 Furthermore, the head of claim alleging breach of the obligation to state reasons must also be rejected, on the ground that, in the contested regulation, the Council expressly confirms the findings and conclusion contained in the provisional regulation, in particular those contained in recitals 69 to 77 in the preamble to that regulation (recitals 77 and 78 in the preamble to the contested regulation). In that regard, as was pointed out in paragraph 36 above, it is apparent from recital 69 in the preamble to the provisional regulation that the applicants were refused MES on the ground that they did not satisfy some of the criteria set out in Article 2(7)(c) of the basic regulation. What is more, the statement of reasons for the contested regulation must be appraised having regard, in particular, to the information disclosed to the applicants and to the observations which they have made during the administrative procedure (see, to that effect, Joined Cases T-33-98 and T-34-98 Petrotub and Republica v Council [1999] ECR II-3837, paragraph 107). The reasons which led the Commission to take the view that the third criterion for the grant of MES had not been satisfied were clearly stated in its communications.

97 In those circumstances, there is no need to examine either the other heads of claim raised by the applicants in the first plea or those raised in the second plea, alleging breach of the obligation to exercise due diligence and of the principle of sound administration and a manifest error of assessment (see paragraphs 84 to 86 above).

The third plea: breach of Article 21 of the basic regulation and of the obligation to state reasons, and a manifest error of assessment

Arguments of the parties

98 The applicants claim that the institutions are required to set out the elements of fact and of law that justify their assessments of the Community interest required for the application of anti-dumping measures.

99 In the applicants' submission, the Council's decision to include children's shoes in the scope of the definitive anti-dumping measures (see paragraph 49 above) constitutes a breach of Article 21 of the basic regulation (see paragraph 5 above), fails to state the reasons on which it is based and is vitiated by a manifest error of assessment.

100 In that regard, the applicants maintain that under Article 21 of the basic regulation the institutions may decide not to apply the anti-dumping measures to certain categories of the product concerned where that is in the interest of the Community. The Commission's previous practice confirms that assessment.

101 Consequently, in taking the view that Article 21 of the basic regulation does not give the institutions that possibility, the Council erred in its interpretation of that provision. The Council also vitiated the contested regulation by failing to state its reasons in that regard.

102 As a subsidiary point, the applicants observe that the reasoning set out at recital 257 in the preamble to the contested regulation is not sufficient to satisfy the requirements of Article 253 EC, since the Council merely stated that in principle anti-dumping measures should be applied to the totality of the product concerned.

103 Furthermore, although the Commission stated at recital 252 in the preamble to the provisional regulation that the inclusion of children's shoes in the scope of the anti-dumping measures would be examined in depth before any imposition of definitive measures, the Council failed to carry out such an examination. The Council merely stated that the import prices of children's shoes were substantially lower than the prices of adults' footwear, which, according to the Council, reduced the financial impact of the definitive measures on consumers.

104 That assessment does not refute the conclusion that families with young children must replace their children's shoes more frequently than other consumers. That circumstance offsets the fact that children's shoes are generally less expensive than adults' footwear. In addition, the anti-dumping duty is the same irrespective of the type of footwear concerned. The reversal of the conclusion arrived at by the Commission in that regard at the provisional stage therefore required a more thorough analysis than that carried out by the Council.

105 Furthermore, the Council is incorrect in considering that the lack of reaction from consumer groups, which is a normal phenomenon, means that the proposed anti-dumping measures have no economic impact. The institutions are required to take account of all the relevant information, provided that it is representative and reliable, irrespective of whether that information was brought to their knowledge according to the procedure laid down in Article 21 of the basic regulation.

106 If, therefore, in spite of the lack of comment from consumer organisations, the Commission considered that the consumer interest required that children's shoes be excluded from the scope of the provisional measures, the Council made a manifest error of assessment by arriving at the opposite conclusion on the basis of the same facts.

107 The Council, supported by the Commission, the CEC and the Italian producers, disputes the applicants' arguments.

Findings of the Court

108 It must be pointed out that the head of claim alleging an absence of reasons or a failure to state adequate reasons is based on an incorrect premiss in so far as the applicants submit that the Council decided to apply a definitive duty also to children's footwear on the sole grounds that that kind of footwear was part of the like product and that considerations relating to the Community interest made it impossible to exclude the application of that duty.

109 On the contrary, as is apparent from recital 257 in the preamble to the contested regulation (see paragraph 49 above), the Council based its assessment on the imposition of a definitive duty on children's footwear, first, on the price of that type of shoe, which is lower than that of adults' footwear, and, secondly, on the unlikelihood of consumers bearing the full brunt of any measures. The Council concluded that, in those circumstances, there was no Community interest which clearly required that type of footwear to be excluded from definitive anti-dumping duty. The argument that the institutions' previous practice proves that it is possible not to apply a definitive duty to certain products which are part of the product concerned is therefore ineffective.

110 Accordingly, the Council stated the specific reasons underpinning its assessment of the Community interest in the imposition of a definitive duty on children's footwear, with the result that the contested regulation does not infringe Article 253 EC in that regard or conflict with the previous practice relied on by the applicants.

111 As for the Council's assessment of the merits, it must be pointed out, first, that, as regards the assessment of the Community interest for the purposes of the imposition of anti-dumping duties, Article 21 of the basic regulation grants the institutions a discretion as to the methods for analysing and weighting the various interests represented by concerned parties who have submitted comments in that regard.

112 In those circumstances, review by the Community Courts relates to whether the relevant procedural rules have been complied with, whether the facts on which the disputed conclusion is based have been accurately stated and whether there has been a manifest error of appraisal or a misuse of powers (Case C-16-90 Nölle [1991] ECR I-5163, paragraph 12; Case C-26-96 Rotexchemie [1997] ECR I-2817, paragraph 11; and Case T-413-03 Shandong Reipu Biochemicals [2006] ECR II-2243, paragraph 62).

113 Furthermore, it is apparent from the second and third sentences of Article 21 of the basic regulation that, where the other conditions for the imposition of an anti-dumping duty, namely dumping, injury and a causal link, have been fulfilled, the institutions may refrain from applying duties only where they can clearly conclude that that action is not in the Community interest.

114 The applicants' arguments set out in paragraphs 103 to 106 above challenging the Council's assessment of the merits do not show that the Council made a manifest error in finding that the circumstances set out in paragraph 109 above did not establish that there is a Community interest warranting the exclusion of that type of footwear from duty.

115 Even if the fact that children need new shoes more frequently than adults were to offset the advantage derived from their shoes being less expensive than adults' shoes, it is not capable of establishing that the Community interest required children's footwear to be excluded from duty. Although it is true that such a factor reduces the extent of that advantage inherent in children's shoes, the applicants have still not shown that it affects the position of consumers to the point of rendering the adoption of definitive measures contrary to the Community interest.

116 The argument that the Council made a manifest error of assessment by adopting a different approach from that of the Commission, even though consumer organisations had not submitted comments to it, cannot be upheld either. In that regard, it is sufficient to point out that the fact that the Council assessed the lack of reaction from consumer organisations differently does not, on its own, show that there was a manifest error, since that institution based its assessment on the considerations set out in paragraph 109 above.

117 It follows that the third plea must be rejected and that the action must, accordingly, be dismissed in its entirety.

Costs

118 Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. As the applicants have been unsuccessful, they must be ordered to pay the costs, in accordance with the form of order sought by the Council.

119 In accordance with Article 87(4) of the Rules of Procedure, the Commission, CEC and the Italian producers must bear their own costs.

On those grounds,

THE GENERAL COURT (Eighth Chamber)

hereby:

1. Dismisses the action;

2. Orders Apache Footwear Ltd and Apache II Footwear Ltd (Qingxin) to bear their own costs as well as those incurred by the Council of the European Union;

3. Orders the European Commission, the Confédération européenne de l'industrie de la chaussure (CEC), BA.LA. di Lanciotti Vittorio & C. Sas and the 16 other interveners the names of which are listed in the Annex to bear their own costs.