Opinion of the Advocate-General
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Mr President,
Members of the Court,
1 . By five separate applications lodged in October and November 1984 under the second paragraph of Article 173 of the EEC Treaty, the following Japanese companies : NTN Toyo Bearing ( Case 240/84 ), Nachi Fujikoshi ( Case 255/84 ), Koyo Seiko ( Case 256/84 ), Nippon Seiko KK ( Case 258/84 ) and Minebea ( Case 260/84 ), are seeking the annulment of Council Regulation ( EEC ) No 2089/84 of 19 July 1984 imposing a definitive anti-dumping duty on imports of certain ball-bearings originating in Japan and Singapore ( Official Journal 1984, L 193, p . 1 ).
With the exception of Minebea, the applicants are well known to the Court . As the Court will recall, they were involved in the first anti-dumping proceedings brought before the Court, which the latter decided in their favour in four judgments delivered on 29 March 1979 ( Case 113/77 (( 1979 )) ECR 1185, Case 119/77 (( 1979 )) ECR 1303, Case 120/77 (( 1979 )) ECR 1337 and Case 121/77 (( 1979 )) ECR 1363 ).
As in those cases, the dispute this time is concerned with the proper use of the Community' s machinery for commercial protection . However, the relevant legislation is different at least in part, whilst the conflict between the parties has grown sharper and their arguments have become more complex . The product and the market are no longer the same . It is no longer the traditional large ball-bearings intended for the iron and steel and motor-car industries that are involved, but single-row deep-grooved radial ball-bearings with an outside diameter of up to 30 millimetres ( Common Customs Tariff heading 84.62 ), that is to say small bearings which are used increasingly in the electronics and data processing industries, not to mention so-called "high technology" areas such as telematics and robotics .
2 . Against that background, I propose to begin by considering the salient features of the legislation applicable in the proceedings now before the Court . As is well known, the Community' s anti-dumping legislation is based on Article VI of the General Agreement on Tariffs and Trade ( GATT ) and on the provisions laid down for its application ( known as the "Anti-Dumping Code "). The principle on which that international system of rules is based is that "dumping, by which products of one country are introduced into the commerce of another country at less than the normal value of the products, is to be condemned if it causes or threatens material injury to an established industry" of that other country ( Article VI ( 1 )*).
In 1979 the multilateral trade negotiations in Tokyo culminated in the adoption of a new code which the Community legislature transposed into Community law by Council Regulation ( EEC ) No 3017/79 of 20 December 1979 on protection against dumped or subsidized imports from countries not members of the European Economic Community ( Official Journal 1979, L 339, p . 1 ). That regulation was repealed by Regulation ( EEC ) No 2176/84 of 23 July 1984 ( Official Journal 1984 No L 201, p . 1 ). Regulation No 3017/79 was however in force when the contested duties were introduced and is therefore the only measure relevant to this case .
Its cardinal points are well known . According to Article 2*(2 ), a product is considered to have been dumped if its export price to the Community "is less than (( its )) normal value (( or the normal value )) of the like product" in the country of origin . Article 2*(1 ) provides, however, that for an anti-dumping duty to be applied to the product, its entry for consumption in the Community must cause substantial injury to an industry established there . In those circumstances the amount of the duty imposed may not exceed the dumping margin, that is to say the difference between the normal value of the product and its export price . If, however, a lesser duty would be adequate to remove the injury, the duty should be reduced accordingly ( Article 13*(3 )*).
The normal value and the export price are therefore the terms of what may be defined as the "anti-dumping equation ". In order to prevent any imprecision in the establishment of either term from altering the dumping margin in a positive or negative sense ( that is to say to the detriment of either party ), it is necessary to calculate those terms with all possible care . In order to meet that requirement, the Community legislature has adopted a number of incisive provisions . In particular, Regulation No 3017/79 states that the rules for determining normal value ( A ) and the export price ( B ) "should be presented clearly and in sufficient detail ". Moreover, for the purpose of ensuring a fair comparison between those two terms ( C ), the regulation sets out the criteria for making the adjustments rendered necessary by differences which may exist in the products sold, the conditions of sale and the level of trade ( see the sixth, seventh and eighth recitals in the preamble to the regulation ). I now propose to examine each of those sets of provisions in order .
A - Regulation No 3017/79 establishes different methods for calculating the normal value . As far as possible, reference must be made above all to the price "actually paid or payable in the ordinary course of trade for the like product intended for consumption in the exporting country or country of origin" ( Article 2*(3)*(a )*).
In other words, not any internal consumption price but - I repeat - only the price actually paid in an ordinary transaction . Why is it necessary to make that stipulation? The reason is to be found in the sixth recital, which states that : "Sales on the domestic market ... do not ... (( always )) form a proper basis for determining the existence of dumping ". The transaction may for some reason be concluded at below the cost price of the product concerned ( Article 2*(4 )*) or between parties which are associated, for instance between a parent company and a subsidiary, or between parties which have a compensatory arrangement ( Article 2*(7 )*).
What is the position in such cases? The legislature solves the problem by recourse to the concept of "constructed value ". That expression must, however, be clearly understood . The constructed value is not an artificial value but is calculated by reference to specific and ascertainable economic factors . It corresponds to "the costs in the ordinary course of trade, of materials and manufacture, in the country of origin, plus a reasonable margin for overheads and profit" ( Article 2*(3)*(b)*(ii )*) or, in the terms of the Anti-Dumping Code, it is determined "in the ordinary course of trade" on the basis of the "cost of production in the country of origin plus a reasonable amount for administrative, selling and any other costs and for profits" ( Article 2 ( 4 )*).
The fact that both of those provisions refer to "ordinary" sales shows that, even where the internal price has to be constructed, the different costs or charges of which it is made up - whether incurred before or after the production stage, such as the cost of materials or overheads respectively - must not be fictitious . In other words, like the normal value, the constructed value must correspond in every respect to the price actually paid on the free market for the purchase of a product intended for consumption in the country of origin ( see Article 2*(3)*(a ) but also Article 2*(4 ), which refers to "the price at which a product is actually sold for consumption in the country of origin ").
B - According to Article 2*(8)*(a ) the export price is the price "actually paid or payable for the product sold for export to the Community ". But again if "there is an association or a compensatory arrangement between the exporter and the importer", the price charged to the latter is considered unreliable . In the absence of other reliable points of reference, it is preferred to reconstruct the export price taking as a basis the first element which is at the disposal of the supervisory body, namely the price paid by the consumer on the Community market . Article 2*(8)*(b ) - and Article 2*(5 ) of the Anti-Dumping Code, which is couched in similar terms - provides that "the export price may be constructed on the basis of the price at which the imported product is first resold to an independent buyer ... In such cases ... all costs incurred between importation and resale, including all duties and taxes, and ... a reasonable profit margin" are to be deducted .
Let me summarize the results yielded so far by my investigation . On the basis of the GATT rules and the rules of Community law, the normal value and the export price must preferably be determined by reference to the prices actually charged on the market in the country of origin . Should that approach be unworkable on account of circumstances which are such as to cast doubt on the figures thereby obtained, the two sides of the equation may be constructed by heterogeneous methods and by reference to criteria, or even to markets, which are unrelated . It is necessary, however, that the use of such methods should yield values that are not fictitious, that is to say values which correspond to prices paid by the consumer and by the exporter respectively in the ordinary course of trade on the market of the product' s country of origin .
C - At this point, a question which might arise is whether the fact that the two figures are calculated in different ways prejudices the result of the anti-dumping equation . The answer is no .
I would recall in the first place that, "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 . They shall normally be compared at the same level of trade, preferably at the ex-factory level, and as nearly as possible at the same time" ( Article 2*(9 )*). Should a comparison between those elements prove impossible, "due allowance shall be made in each case, on its merits, for differences affecting price comparability ". Clearly, if one party asks for such differences to be taken into account, it will have to justify its request ( Article 2*(10 )*).
The stages involved in that process may be illustrated by the following analogy : let us assume that the difference in weight between two items, A and B, has to be measured on a pair of scales . A and B, however, display two peculiarities . First, they are not immediately available, but have to be constructed, each on the basis of its own list of specific components . Secondly, since their structure and their function are different their weight may be affected in different ways by certain external factors . If we proceed in the order required by law, it is necessary to construct item A first, followed by item B . To that end, of course, we shall use the components set out on each list which, as I said earlier, are as a rule heterogeneous .
Once constructed, A and B are placed on the scales, but the resulting measurement cannot be treated as reliable . The reason is that extrinsic factors ( specifically, the quantity or physical characteristics of the goods and the conditions and terms of sale ) may have altered the weight of the two items . If the measurement is to yield a reliable result, account must be taken of such alterations by adding to the items on the scales suitable makeweights ( which I shall call "comparative allowances" in order to distinguish them from the elements used in the construction of A and B ). It is clear, however, that in adjusting the weight of one item or the other, or both, it will not be possible - on pain of rendering equal items that are physiologically different - to take account of all the differences between them . To do so - setting aside my analogy - would be tantamount to reducing both sides of the equation to the level of the cost of production of the product plus the overheads incurred in any kind of sale, whether the product is intended for internal consumption or for export, thereby ruling out altogether any possibility of calculating a dumping margin .
Once again, however, that effect is prevented by the rules of the regulation . In particular, so far as concerns differences in the conditions and terms of sale, Article 2*(10)*(c ) provides that "the (( comparative )) allowances shall be limited ... 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, insurance, handling, loading and ancillary costs; allowances generally will not be made for differences in overheads and general expenses, including research and development costs, or advertising ".
The rationale for the last rule ( that overheads and general expenses may not be deducted ) is simple . In order to prevent the absurd equalization of values to which I have referred and in order to guarantee the parties' right to a fair comparison between prices, the legislature allows only those differences which "bear a direct relationship to ... sales" of products intended for the domestic market or for export made in the ordinary course of trade to be weighed in the balance . Hence that criterion makes it possible to exclude from the comparative allowances the costs incurred by an undertaking before selling its product on one market or the other . That is precisely the case as regards the aforesaid expenses . As a rule, those expenses relate to the manufacture of the product or to the launching thereof onto the market and are not therefore closely connected with the sale of the product, as required by the provision in question .
After the allowances have been made, A and B can finally be weighed in order to determine whether or not the product to which they relate is dumped . That final stage is also governed by precise rules . When selling 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" ( Article 2*(13)*(b )*). As is clear, four different methods are indicated in that provision . Nor can the provision be said to list them in order of precedence or to furnish criteria for establishing when one of those methods is to be applied in preference to another . That omission, however, is fully justified .
Let us see why . Leaving legal considerations aside for the time being, I would recall that in economic terms the practice of dumping means to bring about price discrimination between different national markets and that the purpose of this practice is usually to take over new markets by means of the total or partial elimination of local competitors . However, when the legislature is called upon to adopt anti-dumping measures, it is not concerned with the motives of undertakings which practise discrimination . It is concerned only with the fact that such discrimination gives rise to economic injury, and the fact remains that this consequence is not always capable of being exposed .
For instance, undertaking X, which occupies a dominant position on a national market characterized by high prices and by tariff barriers designed to protect that market from the influx of cheaper foreign goods, decides to take over an economic area which forms a customs union but is divided into various States, with the result that different conditions of production and marketing exist within that area ( as is precisely the case with the Community ). In those circumstances the strategies which may be pursued by X include one which is particularly effective, namely the gradual isolation of internal competitors . The goods exported to sub-market A are sold at a price below the normal value ( for instance minus 100 ), whilst the export price of the same goods bound for sub-markets B, C, D, E and F is fixed at the normal value and, in at least one case, at a higher level ( plus 100 ). X' s competitor in country A will thus be isolated in relation to X' s competitors in the other countries and will soon be compelled to switch its business activities . X' s competitor in country B will then be the victim of price discrimination and will also be driven from the market, followed by X' s competitor in country C and so on until X has taken over the whole area .
It seems indisputable to me that in a situation of that kind injury is caused . In arithmetical terms, however, the differences between export prices in the various States offset one another with the result that, if such prices were calculable only by reference to the average price, it would be impossible to detect dumping and avert the injury . It is precisely in order to avoid such drawbacks that the Community legislature has laid down that, when internal consumption prices or export prices, or both, fluctuate between a minimum and a maximum level on the market of the country of origin of the product concerned, the export price and the normal value are in practice to be determined by reference to the criterion which, of those set out in Article 2*(13)*(b )*), is most appropriate to the situation as regards either side of the equation . In that respect, reference may be made to the ninth recital in the preamble to Regulation No 3017/79, which states that "the Community' s established practice for methods of calculation where prices or margins vary (( should be )) codified ".
Finally, Article 2*(13)*(c )*) provides that where dumping margins also vary "weighted averages may be established ".
3 . I now turn to the facts . A month or so after the Court had given judgment on 29 March 1979 in the cases referred to earlier ( see section 1 ), the Federation of European Bearing Manufacturers' Associations ( Febma ), which brings together the major ball bearing producers in the Community, made a complaint to the Commission concerning fresh dumping practices on the part of Japanese undertakings on the common market in small bearings . The Commission' s investigation culminated in Decision No 81/406/EEC of 4 June 1981 ( Official Journal 1981, L 152, p . 44 ), which embodied an agreement on prices concluded between the parties . It was, however, no more than a truce . In March 1983 Febma furnished further evidence to the Commission about anti-competitive practices pursued by the Japanese undertakings and of the injury which those practices were causing to the Community industry . In the light of that evidence, the substantial growth of the market in small bearings and the information which it had itself gathered during the monitoring of the agreement reached in 1981, the Commission considered that there was sufficient evidence to justify a review of the decision it had adopted .
Accordingly an anti-dumping proceeding concerning imports into the Community of small bearings originating in Japan and Singapore was initiated ( Official Journal 1983, C 188, p . 8 ). On the basis of the information gathered in the course of its investigation covering the period from 1 July 1982 to 30 June 1983, the Commission repealed Decision No 81/406 and imposed a provisional anti-dumping duty on the aforesaid imports . In paragraph 21 of the preamble to Regulation ( EEC ) No 744/84 of 19 March 1984 ( Official Journal 1984, L 79, p . 8 ) the Commission established the following dumping margins for each of the exporters investigated : Koyo Seiko, 4.36%; Minebea, 10.20%; Nippon Seiko KK, 18.30%; Nachi Fujikoshi, 11.88%; and NTN Toyo Bearing, 18.45 %.
The regulation further states in paragraph 11 that the "normal value ... was determined on the basis of the domestic prices of those producers exporting to the EEC who provided sufficient evidence and whose prices were considered to be representative of the domestic market concerned ". An exception was made, however, in the case of Minebea' s exports from Singapore . Here the Commission considered it appropriate to apply the method laid down in Article 2*(3)*(b)*(ii ) of Regulation No 3017/79 . Hence the constructed value was "computed by taking the company' s total cost of materials and manufacture, including overheads, and adding a profit margin of 6% considered to be reasonable in the light of the relevant industry' s performance during a representative profitable period" ( paragraph 15 of the preamble to Regulation No 744/84 ).
I now turn to the export price . In the case of Nachi Fujikoshi, who uses an independent importer in the Community, the export price was calculated "on the basis of the prices actually paid or payable for the products sold ". In the case of the other companies, where exports were made to subsidiary companies instead, the export price was constructed on the basis of the "prices at which the imported product was first resold to an independent buyer, suitably adjusted to take account of all costs incurred between importation and resale, including customs duty, and of a profit ... of 6%" ( paragraphs 17 and 18 ).
Finally, with regard to the injury caused to the Community industry, the Commission found that between 1979 and 1983 there was an "increase in the share of the market ... held by the exporting countries from 17.5 to 27.9%" ( paragraph 23 ). In particular, the market shares of the most-sold types was estimated at between 40.1 and 84.5% during the investigation period . That is not all . In most cases the importers' prices were lower than those required to "cover the costs of Community producers and provide a reasonable profit" ( paragraph 24 ). Accordingly, the financial losses and the consequent impact on employment, particularly in the case of smaller firms, were substantial . That is why it was necessary to fix the rates of duty at a level corresponding to the dumping margins provisionally established .
After taking note of the contents of the regulation which I have just summarized, the five Japanese undertakings were given an opportunity to make their views known to the Commission, whereupon they wrote a number of letters to the latter and offered to give price undertakings . The Commission furnished the applicants with all the necessary information and explanations but, together with the Council, decided not to accept their offer . Paragraph 24 of the preamble to the contested regulation, No 2089/84, states that "past experience with price undertakings in the ball-bearings sector has shown that undertakings, even if generally respected, do not constitute a satisfactory solution, seem likely to cause controversy and are difficult to monitor, thereby requiring a considerable amount of time and expense ".
On the basis of further details which it had gathered, and on a proposal from the Commission, the Council confirmed the levying of anti-dumping duties . Regulation No 2089/84 imposed on the applicants the following definitive rates of duty : Koyo Seiko, 4.03%; Minebea, 10.91%; Nachi Fujikoshi, 9.65%; Nippon Seiko KK, 14.71%; NTN Toyo Bearing Company Limited 11.97 %.
4 . In the proceedings before the Court, NTN Toyo Bearing applied, pursuant to Article 83 of the Rules of Procedure, for the adoption of an interim measure suspending the collection of the contested duties until final judgment in the main action . The application was dismissed by order of the President of the Court made on 7 December 1984 in Case 240/84*R*(*((1984 )) ECR 4093 ).
In Cases 256/84 Koyo Seiko and 260/84 Minebea, in which proceedings were instituted against the Commission as well as the Council, the Court declared by an order dated 8 May 1985 that the applications were inadmissible, and by a further order of the same date removed them from the register, but only in so far as they were directed against the Commission . Minebea also stated that it was using the system of refunds to reclaim the duty on imports from Singapore . Its application is therefore directed only against the duty on imports of small bearings from Japan . Finally, the Commission and Febma sought, and were granted in all five cases, leave to intervene in support of the Council .
Having said that, for other secondary aspects of the procedure I would refer to the Reports for the Hearing in the various cases .
5 . The Council has raised an objection of inadmissibility as regards part of the primary claim put forward by Koyo Seiko, Nachi Fujikoshi, Nippon Seiko KK and NTN Toyo Bearing for the annulment of Regulation No 2089/84 in its entirety . The Council maintains that the applications submitted are admissible only in so far as they are directed against that part of the regulation which applies to each applicant' s own exports . The applicants have not all reacted in the same way . NTN Toyo Bearing does not object to limiting its claim . Nachi Fujikoshi presents alternative claims along the lines envisaged by the Council . On the other hand, Koyo Seiko and Nippon Seiko KK firmly adhere to their application, relying in support thereof on the Court' s judgment of 4 October 1983 in Case 191/82 Fediol v Commission (( 1983 )) ECR 2913 .
The objection is unfounded . The Council seems to be challenging the interest of each applicant in seeking the annulment in toto of a measure of which only a part concerns it . If that is the case, the Council is confusing an interest in bringing proceedings with the consequences which the annulment of the measure may have with respect to the right, claimed by all the applicants, to export their products to the Community on equal terms with other producers of small bearings .
As regards the first point, I consider that, in the light of the aforesaid judgment ( and of the judgment of 20 March 1985 in Case 264/82, Timex v Council and Commission (( 1985 )) ECR 849 ), the applicants have a specific interest in seeking the annulment of the contested regulation as it is clearly of direct and individual concern to them . However, the question of the consequences which would ensue if judgment were given in their favour is unconnected with the matter now under consideration . The effects of annulment depend on both the nature attributed to the measure and the defects which invalidate it, and since the existence of any defects is considered when the substance of the case is examined, it is only when it gives final judgment that the Court will be able to determine the effects of the judgment on the addressees of the annulled regulation . The Court' s judgment of 29 March 1979 in Case 118/77 ISO v Council (( 1979 )) ECR 1277, is instructive in that regard . In those proceedings, which were brought by a Community importer associated with a Japanese firm, the Court held that the application was admissible and annulled the regulation imposing the duty with effect erga omnes .
6 . The applications are therefore admissible . As far as the substance is concerned I would point out, first of all, that notwithstanding the huge quantity of detailed information furnished by the applicants, the submissions and arguments relied upon in support of the application for annulment are substantially similar . Allow me, therefore, in keeping with the scheme of my Opinion in which I intend to deal with all the applications, to organize that mass of information around four principal charges . I would add, however, that certain submissions relating to the Commission' s procedure defy any attempt to classify them . I will therefore deal with those first .
A - In Case 256/84, Koyo Seiko contends that the investigation conducted against it by the Commission was unjustified . In particular : ( 1 ) Febma' s complaint did not relate to Koyo Seiko' s exports; ( 2 ) Koyo Seiko had continued to honour the undertakings given to the Commission on 20 June 1977 relating to all types of ball-bearings, with the result that, in the absence of an express revocation by the Commission, those agreements were to be regarded as still in force; and ( 3 ) the anti-dumping proceeding initiated in breach of those undertakings could not have been based on the provisions of Regulation No 3017/79 since Koyo Seiko had given the undertakings under the rules previously in force . It follows, according to Koyo Seiko, that the supervisory body infringed the procedural rules in force at the time and the principle of legitimate expectation .
This submission is unfounded . It is clear from the documents before the Court that the undertakings which Koyo Seiko relies upon were indeed given on 20 June 1977 but were subsequently renewed on 7 November 1980 and 3 March 1981 . The last agreement was concluded by the Commission on the basis of Article 10 of the aforesaid regulation, which clearly repealed its predecessor .
With regard to the subject-matter of the complaint, Febma acknowledges that it did not formally attribute a given volume of imports to any particular exporter . However, Regulation No 3017/79 did not require it to provide such details . Article 5 of that regulation provides that "the complaint shall contain sufficient evidence of the existence of dumping ... and the injury resulting therefrom ". That is all . For the rest, it is for the Commission, in the exercise of its supervisory powers, to decide on the kind of action to be undertaken .
In that regard a distinction must be drawn between the circumstances envisaged in Article 10*(6 ) and Article 14 of Regulation No 3017/79 . Article 10*(6 ) governs cases in which an undertaking is withdrawn or not observed, whilst Article 14 provides for the possibility of reviewing undertakings that have been given . As is clear from Regulation No 744/84 imposing a provisional anti-dumping duty ( see section 3 ), a review was justified in this case by two factors . The small bearings intended for the high-technology industries constituted a new market, and the Commission wished to acquaint itself with every aspect of that market by sending questionnaires to the producers concerned . In any event, the applicant was notified of the terms of the review and therefore had every opportunity to submit its views .
B - Koyo Seiko, Nippon Seiko KK and Minebea ( Cases 256, 258 and 260/84 ) contend that in the course of the contested proceeding the Commission calculated the dumping margins by a new method, namely on a transaction-by-transaction basis . The unilateral adoption of that method, which had not been communicated to the parties and which took place whilst the earlier undertakings based on different methods were still in force, was in breach of the principles of legitimate expectation, commercial certainty and sound administration . Furthermore, no reasons were ever given for the choice of the new system .
The charges summarized above have essentially been answered by the Court in its judgment of 28 October 1982 in Case 52/81 Faust v Commission (( 1982 )) ECR 3745 . There, the Court held that, since in the sphere of external relations Community institutions "enjoy a margin of discretion in the choice of the means needed to achieve their policies, traders are unable to claim that they have a legitimate expectation that an existing situation which is capable of being altered by decisions taken by those institutions within the limits of their discretionary power will be maintained ..." ( paragraph 27 of the decision ). Accordingly, the parties could not claim a right to the continued application of the previous method of calculation . Regulation No 3017/79 in fact provides that, "where prices vary", other criteria may be used, including the transaction-by-transaction method . It is in any event clear that, as is required by Article 3 of Regulation No 744/84, the applicants were requested to make known their views on the contested method and were given all the necessary explanations . Finally, in paragraph 18 of the preamble to Regulation No 2089/84, the Council gave a detailed exposition of the reasons which led the Commission to avail itself of that method .
In the light of those findings, I consider that this submission must be rejected .
7 . That brings me to the principal charges . As I said earlier, they may be reduced to four : ( a ) the definitive anti-dumping duties imposed by Regulation No 2089/84 were calculated in an unlawful manner ( paragraphs 11, 16 and 18 of the preamble to the regulation ); ( b ) no reasons were given for the refusal to accept the applicants' offers to increase their export prices ( paragraph 24 ); ( c ) during and after the investigation period, those prices were increased by some of the applicants on their own initiative, and that factor was not taken into account either ( paragraph 25 ); and ( d ) the rates of duty are out of all proportion to the injury actually suffered by the Community industry ( paragraph 21 ).
In their first submission, the applicants allege the infringement of two provisions of Regulation No 3017/79, namely Article 2*(13)*(b ), on the calculation of the dumping margin, and Article 2*(9 ) and ( 10 ), which embodies the principle of a "fair comparison ". In support of that submission, they rely on three arguments : ( A ) the dumping margin was calculated not by one of the methods provided for in Article 2*(13 ), but on the basis of an unacceptable combination of the weighted average and transaction-by-transaction methods ( Cases 240, 255, 258 and 260/84 ); ( B ) the allowances provided for in Article 2*(9 ) and ( 10 ) were made incorrectly and without justification particularly as regards the normal value ( Cases 255, 258 and 260/84 ); ( C ) the Commission compared prices of products which were not comparable ( Case 260/84 ).
A - I propose to begin my examination of the first argument by citing once again Article 2*(13)*(b ): "where (( internal consumption and export )) 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 ". The applicants contend - or at least it seems to me that their reasoning can be reconstructed in this manner - that the Commission calculated the dumping margin as follows : to begin with it determined the normal value by calculating the weighted average of the internal consumption prices on the basis of all the sales effected in Japan . It then compared that figure, on a transaction-by-transaction basis, with all the export prices, so as to separate prices below the normal value ( or dumping prices ) from those in excess of the normal value ( or non-dumping prices ). Finally, it excluded the latter prices from the calculation and deducted from the normal value a figure equivalent to the average of the dumping prices .
In other words, the applicants maintain that the Commission determined the normal value by applying the criterion of weighted average prices and calculated the export price on a transaction-by-transaction basis . In their view such an approach is unlawful because the relevant provision allows a choice to be made between the different methods of calculation but does not allow them to be combined . Moreover, it must also be incorrect because its effect is to leave out of account the large number of export sales made at non-dumping prices and to establish the existence of dumping practices even where export prices do not differ on average from internal consumption on the Japanese market .
The Council denies those charges . It maintains that Regulation No 3017/79 does not contain any prohibition on combining the methods concerned . The determination of the normal value, the export price and the dumping margin are in fact different operations because they are based on different data and circumstances . It follows that the methods of calculation are not the same . On the assumption that they are different, the applicants argue in reply, the fact remains that, since in any event a "fair comparison" must be ensured, such operations cannot be regarded as independent . The Council disagrees on the ground that the export price and the normal value are placed on a comparable basis not by means of the method used to calculate them but by means of the allowances referred to in Article 2*(10 ).
I could carry on in this vein for several pages, but I doubt whether any purpose would be served by doing so . I have dwelt at sufficient length in section 2 on the methods of calculating and comparing the two figures, and in any event those methods do not seem to be relevant to this particular charge . The crucial question which lies at the root of that charge concerns only the calculation of the dumping margin and may be formulated as follows : when internal consumption prices or export prices, or both, fluctuate appreciably on the market of the product' s country of origin, must the normal value and the export price always be determined by the same method or may they be calculated by different methods?
In my view, the correct answer lies in the second limb of the dilemma . As I demonstrated towards the end of section 2, Article 2*(13)*(b ) is designed to prevent the economic injury resulting from "selective" dumping practices from being concealed by the carefully orchestrated manipulation of higher and lower prices . In those circumstances, it is for the supervisory body to determine the most effective method of calculating either side or both sides of the anti-dumping equation, and it is only right that no obstacles should be placed in its path in that regard . Accordingly, there is no obligation to use only one of the four criteria listed in the aforesaid provision; instead, in the light of a correct analysis of the economic situation, the supervisory body is free to choose those of the criteria listed which seem to be most appropriate to the situation .
Having said that, it is clear that, where the law entrusts the administrative authority with the task of appraising complex economic matters involving choices of a technical nature, the Court must "limit its review ... to verifying whether the relevant procedural rules have been complied with, whether the statement of the reasons for the decision is adequate, whether the facts have been accurately stated and whether there has been any manifest error of appraisal or a misuse of powers" ( judgment of 11 July 1985 in Case 42/84 Remia and Others v Commission (( 1985 )) ECR 2545, paragraph 34 of the decision; see also the Opinion of Advocate General Warner in the first ball-bearing cases (( 1979 )) ECR 1212, in particular at p . 1259 ).
In the case now before the Court the applicants allege that, in determining the export price of small bearings, the Commission included in its calculation, of the many prices which it had established, only those which, on a transaction-by-transaction basis, were below the normal value . That method of calculation involves, in their view, a manifest error of fact and of law .
However, that allegation is unfounded . It appears from the documents before the Court and from the answers to the Court' s written questions that exports at non-dumping prices ( that is to say at prices equal to, or in excess of, the normal value ) were not left out of account . On the contrary, the Commission treated such exports as having been made at a price corresponding to the normal value and grouped them with exports whose prices appeared to be below the normal value . The weighted average was then calculated on the basis of the whole volume of exports including all sales to the Community . Finally, the percentage of the weighted average was compared with the normal value, which was also expressed as an average .
Admittedly, the exports whose prices were in excess of the normal value were not included in the calculation at their true value . Could it have been otherwise? I do not think so . I have already shown that to offset against one another prices in excess of the normal value and prices below the normal value would mathematically cancel out any dumping margin, whilst leaving intact the effects of the injury caused by dumping to the Community industry . To allow such a possibility would be tantamount to permitting the circumvention by legal means of the purposes for which anti-dumping duties are imposed by law . Moreover, Article 4*(2 ) of Regulation No 3017/79 provides that "an examination of injury shall involve (( in particular )) the following factors ...: ( a ) (( the )) volume of dumped ... imports ...; ( b ) the prices of dumped ... imports ...". In order to calculate the dumping margin, which forms the basis of any assessment of injury, the Community authorities must therefore take into account only the volume of imports made at dumping prices and not, as the applicants maintain, all sales including sales at non-dumping prices .
In other words the Commission' s conduct was more favourable to the exporters' interests than the provision seems to require . Having reached this conclusion, I do not believe it would serve any purpose to consider the operation of the other criteria provided for in Article 2*(13)*(b ) or to assess the results which their application would have yielded in this case .
B - I now turn to the second argument . Nachi Fujikoshi, Nippon Seiko KK and Minebea refer to Article 2*(9 ), which provides that, "for the purposes of a fair comparison, the export price and the normal value shall be on a comparable basis ". Thus, according to Article 2*(10 ), allowances must be made for differences in the quantities of the goods, their physical characteristics and their conditions and terms of sale . Accordingly, it follows from the principle of a fair comparison that the same costs must be deducted from the two sides of the anti-dumping equation . In making the necessary allowances, the supervisory body deducted from the export price all the expenses incurred by the applicants' European subsidiaries between the time of importation and the time of sale . However, the costs incurred by the Japanese subsidiaries in marketing small bearings on the domestic market were not deducted from the normal value .
In the applicants' view the consequences of that difference in treatment are obvious . They contend that since the more substantial deductions were made from only one side of the equation ( the export price ), the amount on the other side of the equation grew automatically, and this led to an artificial increase in the dumping margin . The system is said to be particularly unfair in the case of Nachi Fujikoshi and Nippon Seiko KK, who, as is clear from the answers they gave to questions put to them by the Court, market their products through a network of subsidiaries on the Japanese and Community markets . However, the same also holds true for Minebea . Admittedly, that company has its registered office in Singapore and hence its Japanese subsidiaries should be equated with those ( such as the German and United Kingdom subsidiaries ) which operate in the importing State . It is equally clear, however, that MNB Japan does not merely distribute small bearings on the Japanese market but also carries on other activities and should therefore be regarded as a manufacturing company with associated sales subsidiaries .
That argument may have its attractions but it is untenable because the system disregards in principle and excludes in practice the symmetry relied upon by Nachi Fujikoshi, Nippon Seiko KK and Minebea . The deductions made by the Commission from the export price were effected - in pursuance, it should be noted, of an obligation imposed on it by Article 2*(8)*(b ) - for the purposes of the reconstruction of that value, whilst the deductions which should in the applicants' view have been made could have been effected only for purposes of comparison between the two sides of the equation . But that was prohibited - and this is the point - by the provision in Article 2*(10)*(c ) governing "comparative" allowances .
As the Court will remember, such allowances may be made only in respect of expenses which "bear a direct relationship to the sales under consideration"; hence, they cannot possibly include the costs incurred by the subsidiaries of the three applicants in marketing the product on the domestic market . The reason for that is obvious . From the point of view of the legislature called upon to adopt anti-dumping measures, those costs do not differ from the costs which a company is likely to incur in setting up and managing a sales department within its organization, and therefore, like the latter costs, they form part of the company' s overheads and, as such, are not deductible . To put it another way, for the purposes of this case, the fact that a subsidiary and a company' s internal department take different legal forms is irrelevant since their activities are controlled by a single producer .
To those findings I would add the further consideration that sales expenses must be taken into account for the purposes of the construction of the normal value ( see Article 2*(3)*(b)*(ii ) and Article 2*(4 ) of the Anti-Dumping Code, which is couched in even clearer terms ). It would therefore be unreasonable if the legislature allowed those expenses to be deducted immediately thereafter by making comparative allowances .
Still in connection with the second argument, Nippon Seiko KK complains that the Commission refused to take account of the cost of communications and included only part of the cost of technical assistance and freight incurred on the Japanese market . In principle ( see Article 2 ( 10)*(c ) once again ) those costs are deductible . It is clear from the documents before the Court, however, that the applicant has not furnished the proof required for that purpose by Regulation No 3017/79 . The Council was therefore unable to assess those costs .
C - The third argument is advanced by Minebea alone . Minebea contends that, in examining the market in small bearings of the kind which it manufactures, the Commission erroneously compared a product marketed in the Community with a similar product of inferior quality sold in Japan . Let me say at once that this argument is unclear . During the oral procedure Minebea acknowledged that the technical features of the ball-bearings in question had been correctly established by the Commission . It would seem therefore that there is no longer any basis for the complaint . On the other hand, Minebea' s intention may be to criticize the Commission for failing to take account of this difference by making appropriate allowances . If that is so, however, Minebea should have furnished proof that the Commission' s assessment was incorrect or incomplete, yet no such proof was forthcoming .
8 . In their second and third submissions the applicants complain that the Council and the Commission failed to take into account the undertakings offered by the applicants or the fact that some of them increased their prices during and after the investigation period .
I propose to begin by considering the Commission' s refusal to accept the undertakings offered by raising the question - for that is all we can do - whether that refusal was based on sufficient reasons . In that regard, it should be pointed out that, in the exercise of the powers conferred upon it by Regulation No 3017/79, the Commission is required to establish in an objective manner whether there is evidence of dumping practised by undertakings from outside the Community . However, as the Court held in its judgment of 4 October 1983 in Case 191/82 Fediol v Commission (( 1983 )) ECR 2913, "it is no less true that it has a very wide discretion ... (( to select )), in terms of the interests of the Community", the most appropriate measures for dealing with "the situation which it has established" ( paragraph 26 of the decision ).
Accordingly, it was for the Commission alone to establish whether in the circumstances a price undertaking would have been sufficient to safeguard the Community' s economic interests . The Commission concluded that this was not the case because the market in ball-bearings is characterized by a product and price range which is too broad to permit effective checks to be carried out in order to determine whether undertakings are being honoured . Moreover, it is clear that in situations of this kind the Community must be able to intervene by taking "rapid and efficient" action ( 15th recital in the preamble to Regulation No 3017/79 ) and it is precisely for that reason that, once the existence of dumping and the injury resulting therefrom have been established, the legislature gives priority to the imposition of an anti-dumping duty, subject to the possibility of reimbursement on condition that the exporter is able to show that the duty "exceeds the actual dumping margin" ( Article 15*(1 )*). All those points - the grounds of refusal and the legislature' s options - are clearly set out and explained in paragraphs 24 and 25 of the preamble to Regulation No 2089/84 . This charge must therefore be rejected .
The applicants' third submission is no more tenable than the others . There is nothing in Regulation No 3017/79 which requires the Commission or the Council to take account of exporters' price increases . As is stated in paragraph 25 of the preamble to the contested regulation, it is not unusual - and, I would add, provides no evidence of reform or of good intentions for the future - for an exporter who is under investigation or whose goods are subject to a provisional anti-dumping duty to increase his sales prices, especially when the importer is related to the exporter . In any event, it seems clear to me that, if the applicants' argument were to be upheld, it would lead to the establishment of a permanent system of investigation and, even worse, deprive any attempt to establish the existence of a dumping margin of any possibility of success . That is sufficient to preclude any possibility of acceptance on the part of the legislature of the applicants' argument .
9 . The fourth and final charge is easy to summarize : NTN Toyo Bearing, Nachi Fujikoshi and Nippon Seiko KK contend that, in fixing the rates of duty, the Community institutions did not comply with Article 13*(3 ) of Regulation No 3017/79, thereby contravening the principle of proportionality .
I would recall that, according to that provision, the amount of anti-dumping duty must not exceed the dumping margin and must be reduced if a lesser duty would be adequate to remove the injury . It follows - according to the Court' s judgment of 23 May 1985 in Case 53/83 Allied Corporation (( 1985 )) ECR 1622 - that when the Council adopts an anti-dumping regulation, "it is required to ascertain whether the amount of the duties is necessary in order to remove the injury" ( paragraph 18 of the decision ). Consideration of paragraphs 23 and 24 in the preamble to Regulation No 744/84 and of paragraph 21 in the preamble to the contested regulation shows that, in this case, the extent of the injury and the importance of the Community interest at stake were assessed in great detail . In the light of those explanations, it is quite clear that the rates of duty fully meet the objectives pursued by the legislature .
Finally, Nachi Fujikoshi argues that the duties were imposed without taking account of the fact that the Japanese yen was revalued during the anti-dumping proceeding . In reply, the Council has correctly stated that fluctuations in the value of the yen were irrelevant for the purpose of calculating the amounts in question . Injury to the Community industry is determined on the basis of sales by importers, which are expressed in the currency of the importing Member State .
10 . Having regard to the foregoing considerations, I suggest that the Court should dismiss the applications submitted by NTN Toyo Bearing, Nachi Fujikoshi, Koyo Seiko, Nippon Seiko KK and Minebea against the Council of the European Communities . Under Article 69*(2 ) of the Rules of Procedure, the unsuccessful parties should be ordered to pay the costs, including the costs of the parties who intervened in support of the defendant .
(*) Translated from the Italian .
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