**Case T-423/09**

**Dashiqiao Sanqiang Refractory Materials Co. Ltd**

**v**

**Council of the European Union**

(Dumping – Imports of certain magnesia bricks originating in the People’s Republic of China – Regulation closing an interim review – Comparison between the normal value and the export price – Inclusion of value added tax in the country of origin – Application of a method different from that used in the original investigation – Change of circumstances – Article 2(10)(b) and Article 11(9) of Regulation (EC) No 384/96 (now Article 2(10)(b) and Article 11(9) of Regulation (EC)
No 1225/2009))

Summary of the Judgment

1.      *Common commercial policy – Protection against dumping – Review procedure – Comparison between the normal value and the export
price on a ‘value added tax inclusive’ basis*

*(Council Regulations No 384/96, Arts 2(10)(b) and 11(3), No 1659/2005, No 826/2009 and No 1225/2009, Arts 2(10)(b) and 11(3))*

2.      *Common commercial policy – Protection against dumping – Dumping margin – Comparison between the normal value and the export
price – Discretion of the institutions – Comparison at the same level of trade*

*(Council Regulations No 384/96, Arts 1(2) and 2(10), and No 1225/2009, Arts 1(2) and 2(10))*

3.      *Common commercial policy – Protection against dumping – Review procedure – Change of calculation method*

*(Council Regulations No 384/96, Arts 2(10), 11(9) and 17, and No 1225/2009, Arts 2(10), 11(9) and 17)*

1.      Since, in Regulation No 826/2009, amending Regulation No1659/2005 imposing a definitive anti-dumping duty and collecting definitively
the provisional duty imposed on imports of certain magnesia bricks originating in the People’s Republic of China, the Council
takes the view that, in the interim partial review procedure of an anti-dumping measure carried out under Article 11(3) of
the Basic Anti-dumping Regulation No 384/96 (now Article 11(3) of Regulation No 1225/2009), in contrast to the position in
the original investigation, the conditions for an adjustment of the normal value and/or of the export price under Article
2(10)(b) of the Basic Regulation (now Article 2(10(b) of Regulation No 1225/2009) are not satisfied, so that that provision
cannot be applied, there is no reason to consider that, in Regulation No 826/2009, the Council, by using the figure of 17%
value added tax, applied Article 2(10)(b) of the Basic Regulation and thus made adjustments within the meaning of that provision
to the normal value and the export price in order to restore symmetry between that value and that price. Consequently, there
is no reason to consider that the comparison method applied in Regulation No 826/2009 consists of adjusting the normal value
and the export price under Article 2(10)(b) of the Basic Regulation. The comparison between that value and that price on a
‘value added tax-inclusive’ basis is made solely by reference to the general terms of the first and second sentences of Article
2(10) of the Basic Regulation (now the first and second sentences of Article 2(10) of Regulation No 1225/2009).

(see paras 37-38)

2.      In the sphere of measures to protect trade, the institutions enjoy a broad discretion by reason of the complexity of the economic,
political and legal situations which they have to examine. That discretion extends to appraisal of the facts relied on to
demonstrate the fairness of the comparison method used, the concept of fairness being vague in character and needing to be
narrowed down by the institutions in each individual case having regard to the relevant economic context. The choice between
the different methods of calculating the dumping margin together with the assessment of the normal value of a product require
an appraisal of complex economic situations and the judicial review of such an appraisal must therefore be limited to verifying
whether the relevant procedural rules have been complied with, whether the facts on which the contested choice is based have
been accurately stated, and whether there has been a manifest error in the appraisal of those facts or a misuse of powers.

In addition, an adjustment to the export price or the normal value may be made only in order to take account of differences
in factors which affect the prices and therefore their comparability. That means that the purpose of an adjustment is to re-establish
the symmetry between the normal value and the export price, with the result that, if the adjustment has been validly made,
that implies that it has re-established the symmetry between the normal value and the export price. By contrast, if the adjustment
has not been validly made, that implies that it has created an asymmetry between the normal value and the export price.

In any assessment of the fairness of the comparison method used, the concept of symmetry between the normal value and the
export price thus constitutes a key element reflecting the need to establish the comparability of prices within the meaning
of Article 1(2) of the Basic Anti-dumping Regulation No 384/96 (now Article 1(2) of Regulation No 1225/2009). By virtue of
the first, second and third sentences of Article 2(10) of the same regulation (now the first, second and third sentences of
Article 2(10) of Regulation No 1225/2009), a fair comparison between the export price and the normal value must be made, at
the same level of trade and in respect of sales made at, as closely as possible, the same time and with due account taken
of other differences which affect price comparability and it is only in cases where the normal value and the export price
established cannot be compared that the institutions are authorised to make adjustments.

In those circumstances, the Council does not commit any manifest error of assessment in considering that the comparison between
the normal value and the export price on a ‘value added tax-inclusive’ basis constitutes a fair comparison method because
that comparison is carried out in accordance with the requirement of symmetry between the normal value and the export price
at the same level of trade for sales, both domestic and for export, which are all subject to the same rate of value added
tax.

(see paras 40-43, 45)

3.      It is clear from Article 11(9) of the Basic Anti-Dumping Regulation No 384/96 (now Article 11(9) of Regulation No 1225/2009)
that as a general rule, in a review of an anti-dumping measure, the institutions are required to apply the same method, including
the method of comparing the export price and the normal value under Article 2(10) of that regulation (now Article 2(10) of
Regulation No 1225/2009), as that used in the original investigation which led to the imposition of the anti-dumping duty.
However, the same provision contains an exception whereby the institutions may apply a method other than that used in the
original investigation only where the circumstances have changed.

Furthermore, the concepts of ‘method’ and ‘adjustment’ are not coterminous. However, even if it were accepted that the term
‘adjustment’ in Article 2(10) of the Basic Regulation could be considered the same as the term ‘method’ as used in Article
11(9) of the same regulation, since the institutions merely dispensed with any adjustment on the ground that, in contrast
to the situation obtaining in the original investigation, the conditions laid down in Article 2(10)(b) of the Basic Regulation
(now Article 2(10)(b) of Regulation No 1225/2009) for such an adjustment to be justified were not fulfilled at the time of
the review, the mere abandonment of that adjustment cannot be regarded as a change of method within the meaning of Article
11(9) of the Basic Regulation. That provision requires that the method concerned conforms with Article 2 and Article 17 of
the same regulation (now Article 2 and Article 17 of Regulation No 1225/2009), the requirements of which must be complied
with in all cases. Thus, if it should be found at the review stage that application of the method used in the original investigation
was not in conformity with Article 2(10)(b) of the Basic Regulation, the institutions would no longer be required to apply
that method even though that might imply a ‘change of method’ in the strict sense.

Thus, where, in the review procedure, the institutions are not authorised to make an adjustment under Article 2(10) of the
Basic Regulation, they cannot be compelled, under Article 11(9) thereof, nevertheless to do so, merely because such an adjustment
was made in the original investigation.

In any event, even if it were accepted that, in the review procedure, the Council adopted a method of comparing the normal
value and the export price of the products concerned different from that used in the original investigation, it does not commit
a manifest error of assessment since it demonstrates, first, that, between the original investigation and the review procedure,
the circumstances had changed and, second, that that change was such that the abandonment of such an adjustment was justified.

(see paras 54, 57-59, 62, 65)


JUDGMENT OF THE GENERAL COURT (First Chamber)

16 December 2011 ([\*](#Footnote*))

(Dumping – Imports of certain magnesia bricks originating in the People’s Republic of China – Regulation closing an interim review – Comparison between the normal value and the export price – Inclusion of value added tax in the country of origin – Application of a method different from that used in the original investigation – Change of circumstances – Article 2(10)(b) and Article 11(9) of Regulation (EC) No 384/96 (now Article 2(10)(b) and Article 11(9) of Regulation (EC)
No 1225/2009))

In Case T‐423/09,

**Dashiqiao Sanqiang Refractory Materials Co. Ltd,** established in Dashiqiao (China), represented by J.-F. Bellis and R. Luff, lawyers,

applicant,

v

**Council of the European Union,** represented initially by J.-P. Hix and subsequently by J.-P. Hix and B. Driessen, acting as Agents, assisted initially by
G. Berrisch and G. Wolf, and subsequently by G. Berrisch, lawyers,

defendant,

supported by

**European Commission,** represented by É. Gippini Fournier and H. van Vliet, acting as Agents,

intervener,

APPLICATION for annulment of Council Regulation (EC) No 826/2009 of 7 September 2009 amending Regulation (EC) No 1659/2005
imposing a definitive anti-dumping duty on imports of certain magnesia bricks originating in the People’s Republic of China
(OJ 2009 L 240, p. 7) in so far as the anti-dumping duty that it imposes on the applicant exceeds that which would have been
applicable if it had been determined using the calculation method applied in the original investigation to take account of
the non-refund of Chinese export value added tax,

THE GENERAL COURT (First Chamber),

composed of J. Azizi (Rapporteur), President, V. Vadapalas and S. Frimodt Nielsen, Judges,

Registrar: V. Nagy, Administrator,

having regard to the written procedure and further to the hearing on 14 June 2011,

gives the following

**Judgment**

**Legal context**

1        The basic anti‐dumping rules are set out in 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’) (replaced
by Council Regulation (EC) No 1225/2009 of 30 November 2009 on protection against dumped imports from countries not members
of the European Community (OJ 2009 L 343, p. 51, corrigendum OJ 2010 L 7, p. 22)).

2        According to Article 2(1), (8) and (10) of the Basic Regulation (now Article 2(1), (8) and (10) of Regulation No 1225/2009):

‘1.      The 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.

...

8.      The export price shall be the price actually paid or payable for the product when sold for export from the exporting country
to the Community.

...

10.      A fair comparison shall be made between the export price and the normal value. This comparison shall be made at the same level
of trade and in respect of sales made at, as closely as possible, the same time and with due account taken of other differences
which affect price comparability. Where the normal value and the export price as established are not on such a comparable
basis due allowance, in the form of adjustments, shall be made in each case, on its merits, for differences in factors which
are claimed, and demonstrated, to affect prices and price comparability. Any duplication when making adjustments shall be
avoided, in particular in relation to discounts, rebates, quantities and level of trade. When the specified conditions are
met, the factors for which adjustment can be made are listed as follows:

...

(b) Import charges and indirect taxes

An adjustment shall be made to normal value for an amount corresponding to any import charges or indirect taxes borne by the
like product and by materials physically incorporated therein, when intended for consumption in the exporting country and
not collected or refunded in respect of the product exported to the Community.

...

(k) Other factors

An adjustment may also be made for differences in other factors not provided for under subparagraphs (a) to (j) if it is demonstrated
that they affect price comparability as required under this paragraph, in particular that customers consistently pay different
prices on the domestic market because of the difference in such factors.’

3        According to Article 11(3) and (9) of the Basic Regulation (now Article 11(3) and (9) of Regulation No 1225/2009), as applicable
to the present case:

‘3.      The need for the continued imposition of measures may also be reviewed, where warranted, on the initiative of the Commission
or at the request of a Member State or, provided that a reasonable period of time of at least one year has elapsed since the
imposition of the definitive measure, upon a request by any exporter or importer or by the Community producers which contains
sufficient evidence substantiating the need for such an interim review.

...

9.      In all review or refund investigations carried out pursuant to this Article, the Commission shall, provided that circumstances
have not changed, apply the same methodology as in the investigation which led to the duty, with due account being taken of
Article 2, and in particular paragraphs 11 and 12 thereof, and of Article 17.’

**Background to the dispute**

*Relevant anti-dumping regulations*

4        On 11 April 2005, the Commission of the European Communities adopted Regulation (EC) No 552/2005 imposing a provisional anti-dumping
duty on imports of certain magnesia bricks originating in the People’s Republic of China (OJ 2005 L 93, p. 6) which, among
other things, imposed a provisional anti-dumping duty of 66.1% on imports into the European Community of certain magnesia
bricks produced by the applicant, Dashiqiao Sanqiang Refractory Materials Co. Ltd.

5        By Council Regulation (EC) No 1659/2005 of 6 October 2005 imposing a definitive anti-dumping duty and collecting definitively
the provisional duty imposed on imports of certain magnesia bricks originating in the People’s Republic of China (OJ 2005
L 267, p. 1), the Council of the European Union imposed a definitive anti-dumping duty of 27.7% on imports into the European
Community of certain magnesia bricks produced by the applicant.

6        At the request of the applicant, Regulation No 1659/2005 was the subject of a partial interim review under Article 11(3) of
the Basic Regulation (now Article 11(3) of Regulation No 1225/2009). On conclusion of that review, the Council adopted Regulation
(EC) No 826/2009 of 7 September 2009 amending Regulation (EC) No 1659/2005 (OJ 2009 L 240, p. 7; ‘the contested regulation’),
by which the anti‐dumping duty applicable to certain imports of magnesia bricks produced by the applicant was reduced to a
rate of 14.4%.

*Chinese VAT legislation*

7        The Chinese legislature had established a system of value added tax (VAT) under which VAT of 17% was levied, in principle,
on all sales both in the domestic market and for export. However, where the seller was liable to full VAT for sales on the
domestic market, the VAT on export sales could be fully refunded to it.

8        At the time of the original investigation, which covered the period from 1 April 2003 to 31 March 2004 and led to the adoption
of Regulation No 1659/2005, the VAT applicable to export sales of magnesia bricks was partially refunded to the seller/exporter,
at rates of 15% in 2003 and 13% in 2004. Then, in the investigation period covered by the review, which led to the adoption
of the contested regulation, that is to say between 1 January 2007 and 31 March 2008, the rate of refund of VAT for export
sales of magnesia bricks was reduced to zero.

*Administrative procedures*

9        During the original investigation, the Commission compared the normal value and the export price, that procedure being summarised
as follows in recitals 61 and 62 to Regulation No 552/2005, to which reference is made in recital 9 to Regulation No 826/2009:

‘(61)      The normal value and export prices were compared on an ex‐factory basis and at the same level of trade. In order to ensure
a fair comparison between normal value and export price, account was taken, in accordance with Article 2(10) of the Basic
Regulation, of differences in factors which were claimed and demonstrated to affect prices and price comparability.

(62)      On this basis, allowances for differences in transport, insurance, handling, loading and ancillary costs, credit, commissions,
import charges and after-sales costs (warranty/guarantee) were made.’

10      In its defence, the Council explained the approach taken by the institutions during the original investigation as follows.
Having ascertained that the VAT refund for export sales of magnesia bricks was almost total, the institutions decided ‘to
use for comparison with the export price a normal value net of VAT, as if the export price had in fact been exempt from any
VAT, and to deduct from that price the amount of [the] VAT not refunded’. The Council stated that even if, ‘under Article
2(10)[(b) of the Basic Regulation,] it was more orthodox to [maintain] in the normal value a VAT rate proportional to that
applicable to export sales after refund and not to deduct the residual VAT from the price of the latter’, it was considered
that, ‘having regard to the low VAT rate applicable to export sales (close to zero) after refund by the Chinese tax authorities
during the original investigation, ... it was administratively more practical simply to eliminate that VAT from the export
prices’.

11      At the hearing, the applicant produced an undated document entitled ‘Specific definitive disclosure’, from which it is apparent
that the export price was in fact adjusted in the manner described by the Council. The views of the parties having been heard,
that document was placed in the file, and that fact was noted in the record of the hearing. The Council also indicated at
the hearing that the institutions now considered that the approach taken during the original investigation was not in conformity
with Article 2(10)(b) of the Basic Regulation (now Article 2(10)(b) of Regulation No 1225/2009), since the latter provision
concerned adjustment only of the normal value and not of the export price and that an adjustment of that price should be based
on Article 2(10)(k) of the same regulation (now Article 2(10)(k) of Regulation No 1225/2009).

12      On 15 July 2009, the Commission made available to the applicant a document entitled ‘General Disclosure Document R453’, in
which, with regard to the method of comparing the normal value and the export price applied in the review procedure, it stated,
in paragraph B.4, entitled ‘Comparison’, as follows:

‘The average normal value and the average export price for each type of the product concerned were compared on an ex-works
basis and at the same level of trade. In order to ensure a fair comparison between normal value and export price, account
was taken, in accordance with Article 2(10) of the Basic Regulation, of differences in factors which were claimed and demonstrated
to affect prices and price comparability. For this purpose, adjustments for transport costs, insurance, handling and loading
charges, credit costs, and actual anti-dumping duties paid were made where applicable and justified.

The investigation has established that the VAT paid on export sales was not refunded. In the original investigation, VAT was
deducted from both the normal value and the export price to ensure that both the export price and the normal value reflect
the same level of indirect taxation. However, it is considered that, pursuant to Article 2(10)(b) of the Basic Regulation,
the appropriate methodology when indirect taxes are not refunded on exports is to establish normal value inclusive [of] the
amount for internal taxes applicable when the like product is sold for consumption in the exporting country. Therefore, the
normal value was determined on a VAT paid or payable basis.’

13      In another document, entitled ‘Annex II Specific Disclosure Document’, passed to the applicant on the same date, the Commission
stated in paragraph 3.2, which is entitled ‘Adjustments – Normal value’, as follows:

‘Adjustments on normal value were made for transport costs, insurance, handling and loading charges and credit costs.

In accordance with Article 2(10)(b) of the Basic Regulation, the appropriate methodology when indirect taxes are not refunded
on exports is to establish normal value inclusive of the amount for internal taxes applicable when the like product is sold
for consumption in the exporting country. Therefore, the normal value was determined on a VAT paid or payable basis. The VAT
rate used for that purpose is 17%.’

14      By letter of 24 July 2009, the applicant submitted its observations on the documents referred to in paragraphs 12 and 13 above
and, in particular, objected to the ‘new’ method for comparing the export price with the normal value on a ‘VAT-inclusive’
basis.

15      On 31 July 2009, the Commission made available to the applicant a document entitled ‘Orientations of the Commission’s services
after your reactions to final disclosure’, which stated as follows in paragraph 3:

‘The investigation has established that the VAT paid on export sales was not refunded ... [and] that both the export price and
the normal value would be established on a VAT paid or payable basis. The applicant argues [in its observations of 24 July
2009] that this approach would be unlawful. Regarding [those] arguments, the following can be noted:

Firstly, regarding the argument that in the original investigation another methodology was used (i.e. the deduction of VAT
both from the normal value and the export price), it must be emphasised that the circumstances which were applicable during
the review investigation period ... were not the same as those applicable during the original investigation period. Whereas
during the original investigation period, ... VAT was partially refunded, which necessitated an adjustment pursuant to Article
2(10) [of the Basic Regulation], during the [review investigation period], no VAT on export sales was refunded. Therefore,
no adjustment in respect of VAT, neither to the export price nor to normal value, was necessary. Even if this could be qualified
as a change in methodology, it is justified under Article 11(9) of the Basic Regulation since the circumstances have changed.’

16      Finally, in recitals 29 to 32 to the contested regulation, the following is stated in paragraph 4, under the heading ‘Comparison’:

‘(29)      The average normal value and the average export price for each type of the product concerned were compared on an ex-works
basis and at the same level of trade and at the same level of indirect taxation. In order to ensure a fair comparison between
normal value and export price, account was taken, in accordance with Article 2(10) of the Basic Regulation, of differences
in factors which were claimed and demonstrated to affect prices and price comparability. For this purpose, adjustments for
transport costs, insurance, handling and loading charges, credit costs, and actual anti-dumping duties paid were made where
applicable and justified.

(30)      The investigation has established that the VAT paid on export sales was not refunded (not even partially, which was the case
in the original investigation). In the disclosure which was provided to the applicant pursuant to Article 20 of the Basic
Regulation [now Article 20 of Regulation No 1225/2009], it was therefore indicated that both the export price and the normal
value would be established on a VAT paid or payable basis. The applicant argues that this approach would be unlawful. Regarding
its arguments, the following can be noted.

(31)      Firstly, regarding the argument that in the original investigation another methodology was used (i.e. the deduction of VAT
both from the normal value and the export price), it must be emphasised that the circumstances which were applicable during
the review investigation period (RIP) were not the same as those applicable during the original investigation period. Whereas
during the original investigation period, as stated above, VAT was partially refunded, which necessitated an adjustment pursuant
to Article 2(10) [of the Basic Regulation], during the RIP, no VAT on export sales was refunded. Therefore, no adjustment
in respect of VAT, neither to the export price nor to normal value, was necessary. Even if this could be qualified as a change
in methodology, it is justified under Article 11(9) of the Basic Regulation since the circumstances have changed.

(32)      The second argument which the applicant makes is that the method used in this review would artificially inflate the dumping
margin. This argument cannot be accepted. The method used is neutral. It has the same effect, also if, for instance for certain
products or transactions, the company sells to the Community at an export price which does not result in dumping. In other
words, even assuming that the inclusion of VAT on both sides of the equation would increase the difference between the two
elements, that would also be the case for those models for which there was no dumping.’

**Procedure and forms of order sought**

17      By application lodged at the Registry of the General Court on 22 October 2009, the applicant brought the present action.

18      By a separate document lodged at the Registry of the General Court on the same date, the applicant requested the Court, in
accordance with Article 76a of the Rules of Procedure of the General Court, to adjudicate under an expedited procedure. By
letter of 9 November 2009, the Council submitted its observations on that request. By letter of 23 November 2009, the Court
informed the applicant that it had decided to reject the request for an expedited procedure.

19      The applicant claims that the General Court should:

–        annul the anti-dumping duty imposed with respect to the applicant by the contested regulation, in so far as the anti-dumping
duty that it sets exceeds that which would be applicable if that duty had been determined on the basis of the method applied
in the original investigation in order to take account of the fact, in accordance with Article 2(10) of the Basic Regulation,
that Chinese export VAT was not refunded;

–        order the Council to pay the costs.

20      The Council contends that the General Court should:

–        dismiss the action;

–        order the applicant to pay the costs.

21      By document lodged at the Registry of the General Court on 19 January 2010, the Commission sought leave to intervene in the
present case in support of the form of order sought by the Council. By order of 5 March 2010, the President of the Third Chamber
of the General Court acceded to that request. The Commission did not lodge a statement in intervention within the period notified
to it.

22      As a member of the Chamber was unable to sit, the President of the General Court designated another Judge to complete the
Chamber pursuant to Article 32(3) of the Rules of Procedure.

23      Upon hearing the report of the Judge-Rapporteur, the General Court (First Chamber) decided to open the oral procedure.

24      At the hearing held on 14 June 2011, the parties presented oral argument and answered the oral questions put to them by the
Court.

**Law**

*Summary of the grounds for annulment*

25      The applicant puts forward two pleas in law in support of its application.

26      The first plea alleges infringement of Article 2(10) of the Basic Regulation, in that the change of method is contrary to
the principle that a fair comparison should be made between the normal value and the export price.

27      The second plea alleges infringement of Article 11(9) of the Basic Regulation on the ground that, in the review procedure
leading to the adoption of the contested regulation, the Commission did not use the same method as that used in the original
investigation.

*The first plea: infringement of Article 2(10) of the Basic Regulation*

28      In support of its first plea, the applicant argues in essence that, in the original investigation, the Commission treated
the (partial) non-refund of export VAT as an export cost, since its effect was to reduce the income obtained by the exporter
from its export sales. The Commission thus deducted from the export price the unrefunded amount of VAT pursuant to Article
2(10) of the Basic Regulation. On the other hand, in the review procedure, the Commission radically changed the method.

29      According to the applicant, Article 2(10)(b) of the Basic Regulation is not applicable to the present case. That provision
applies only to tax rebates granted by certain States whereby duties and taxes collected on inputs used in the various stages
of production of a product are reimbursed when the product is exported. In such circumstances, the normal value is adjusted
through deduction of an amount corresponding to the refund of the duties and taxes concerned. In contrast, that provision
does not apply to the situation in this case, where a tax is levied when the product concerned is exported. The Commission
was therefore wrong to consider that it was required, under Article 2(10)(b) of the Basic Regulation, to compare the normal
value and the export price on a ‘VAT-inclusive’ basis, a method never previously used by the institutions. The applicant argues
that a mere difference in the export VAT refund rates cannot justify that radical change of method, the (partial) non-refund
being an export cost which should be deducted from the export price.

30      The applicant criticises the reasoning set out in recitals 31 and 32 to the contested regulation, according to which the comparison
made between the normal value and the export price is fair, or indeed neutral, because those two elements are compared on
the same basis, namely a ‘VAT‐inclusive’ basis, which produces the same results. Even in a case where the same VAT rates were
applied to both domestic sales and export sales, the amount on which that VAT was calculated would be different. In the situations
with which anti-dumping procedures are concerned, such as that in the present case, the export price is regularly lower than
the normal value, so that the amount of VAT added to the normal value is greater than that paid by the exporter on its export
sales. The method of comparing the normal value and the export price, including VAT, therefore has the effect of artificially
increasing the dumping margin. The Council thus infringed the principle of fair comparison between the normal value and the
export price within the meaning of Article 2(10)(b) of the Basic Regulation.

31      The applicant contends that the comparison method used in this case is incompatible with the institutions’ practice in dumping
cases. Thus, in recital 31 to Council Regulation (EC) No 1193/2008 of 1 December 2008 imposing a definitive anti-dumping duty
and collecting definitively the provisional duties imposed on imports of citric acid originating in the People’s Republic
of China (OJ 2008 L 323, p. 1), the Council itself expressly acknowledged that Article 2(10)(b) of the Basic Regulation was
not relevant and that non-refund of export VAT should be the subject of an adjustment based on Article 2(10)(k) of that regulation.

32      The applicant infers from this that the contested regulation infringes Article 2(10) of the Basic Regulation. In its view,
the anti-dumping duty imposed on its imports would have been appreciably lower, namely of the order of 4% to 5%, if the Commission
had used the same comparison method as that used in the original investigation, which complied with that provision.

33      The Council contends that the present plea should be rejected.

34      First, it is appropriate to examine the Council’s statement that it did not apply Article 2(10)(b) of the Basic Regulation
when undertaking its review in order to ‘adjust’ the normal value and/or the export price.

35      It is true that, in the document entitled ‘General Disclosure Document R453’, the Commission referred to Article 2(10)(b)
of the Basic Regulation to support its conclusion that ‘the appropriate methodology when indirect taxes are not refunded on
exports is to establish normal value inclusive [of] the amount for internal taxes applicable when the like product is sold
for consumption in the exporting country’ and ‘[t]herefore, the normal value was determined on a VAT paid or payable basis’
(see paragraph 12 above). Similarly, the Commission repeated that reasoning in the document entitled ‘Annex II Specific Disclosure
Document’ (see paragraph 13 above).

36      However, as is clear from the document entitled ‘Orientations of the Commission’s services after your reactions to final disclosure’,
it must be acknowledged that the Commission subsequently changed its approach. It considered, essentially, that, in the review,
no adjustment either of the export price or of the normal value within the meaning of Article 2(10)(b) of the Basic Regulation
was necessary (see paragraph 15 above). It was ultimately that same reasoning which the Council set out in recital 31 to the
contested regulation (see paragraph 16 above).

37      It follows that, in the contested regulation, the Council took the view that, in the review procedure, in contrast to the
position in the original investigation, the conditions for an adjustment of the normal value and/or of the export price under
Article 2(10)(b) of the Basic Regulation were not satisfied, so that that provision could not be applied. Accordingly, notwithstanding
the preliminary documents adopted by the Commission, entitled ‘General Disclosure Document R453’ (see paragraph 12 above)
and ‘Annex II Specific Disclosure Document’ (see paragraph 13 above), there is no reason to consider that, in the contested
regulation, the Council, by using the figure of 17% VAT, applied Article 2(10)(b) of the Basic Regulation and thus made adjustments
within the meaning of that provision to the normal value and the export price in order to restore symmetry between that value
and that price.

38      The Court must therefore reject the applicant’s argument that the comparison method applied in the contested regulation consisted
of adjusting the normal value and the export price under Article 2(10)(b) of the Basic Regulation. The comparison between
that value and that price on a ‘VAT-inclusive’ basis was made solely by reference to the general terms of the first and second
sentences of Article 2(10) of the same regulation (now the first and second sentences of Article 2(10) of Regulation No 1225/2009).

39      Second, it is necessary to consider whether that comparison method was fair within the meaning of the first sentence of Article
2(10) of the Basic Regulation, a view which the applicant contests, in particular, on the ground that the method used gave
rise to an artificial increase of the dumping margin.

40      In that regard, it should be borne in mind that, in the sphere of measures to protect trade, the institutions enjoy a broad
discretion by reason of the complexity of the economic, political and legal situations which they have to examine (Case C‐351/04
*Ikea Wholesale* [2007] ECR I‐7723, paragraph 40; judgment of 8 July 2008 in Case T‐221/05 *Huvis* v *Council*, not published in the ECR, paragraph 38; and judgment of 23 September 2009 in Case T‐296/06 *Dongguan Nanzha Leco Stationery* v *Council*, not published in the ECR, paragraph 40).

41      That broad discretion extends, in principle, to appraisal of the facts relied on to demonstrate the fairness of the comparison
method used, the concept of fairness being vague in character and needing to be narrowed down by the institutions in each
individual case having regard to the relevant economic context. It is settled case-law that the choice between the different
methods of calculating the dumping margin together with the assessment of the normal value of a product require an appraisal
of complex economic situations and the judicial review of such an appraisal must therefore be limited to verifying whether
the relevant procedural rules have been complied with, whether the facts on which the contested choice is based have been
accurately stated, and whether there has been a manifest error in the appraisal of those facts or a misuse of powers (*Ikea Wholesale*, paragraph 41; *Huvis* v *Council*, paragraph 39; and, to that effect, *Dongguan Nanzha Leco Stationery* v *Council*, paragraph 41; all cited in paragraph 40 above).

42      The case-law has further established that it is apparent from both the wording and the scheme of Article 2(10) of the Basic
Regulation that an adjustment to the export price or the normal value may be made only in order to take account of differences
in factors which affect the prices and therefore their comparability. That means, in other words, that the purpose of an adjustment
is to re-establish the symmetry between the normal value and the export price, with the result that, if the adjustment has
been validly made, that implies that it has re-established the symmetry between the normal value and the export price. By
contrast, if the adjustment has not been validly made, that implies that it has created an asymmetry between the normal value
and the export price (see *Dongguan Nanzha Leco Stationery* v *Council*, cited in paragraph 40 above, paragraph 42 and the case-law cited).

43      In any assessment of the fairness of the comparison method used, the concept of symmetry between the normal value and the
export price thus constitutes a key element reflecting the need to establish the comparability of prices within the meaning
of Article 1(2) of the Basic Regulation (now Article 1(2) of Regulation No 1225/2009). By virtue of the first, second and
third sentences of Article 2(10) of the same regulation (now the first, second and third sentences of Article 2(10) of Regulation
No 1225/2009), a fair comparison between the export price and the normal value must be made, at the same level of trade and
in respect of sales made at, as closely as possible, the same time and with due account taken of other differences which affect
price comparability and it is only in cases where the normal value and the export price established cannot be compared that
the institutions are authorised to make adjustments.

44      Moreover, as the Council submitted at the hearing, it is clear from the definitions in the first subparagraph of Article 2(1)
and in Article 2(8) of the Basic Regulation (now the first subparagraph of Article 2(1) and Article 2(8) of Regulation No
1225/2009) first that the normal value is the one that is ‘normally ... based on the prices paid or payable, in the ordinary
course of trade’ and, second, that the export price is the one that is ‘actually paid or payable’, which means, in principle,
that VAT must be included in that value and that price.

45      In those circumstances, the Council did not commit any manifest error of assessment in considering that, in this case, the
comparison between the normal value and the export price on a ‘VAT-inclusive’ basis constituted a fair comparison method because
that comparison had been carried out in accordance with the requirement of symmetry between the normal value and the export
price at the same level of trade for sales, both domestic and for export, which are all subject to VAT at the rate of 17%.

46      The applicant has not put forward any argument or fact capable of demonstrating the manifestly inappropriate character of
that comparison method, merely arguing that there was a change of calculation method as compared with that applied in the
original investigation, likely to result in an artificial increase of the dumping margin. However, in view of the broad discretion
enjoyed by the institutions, that argument does not substantiate the view that that method, which is based on identical parameters
of comparison, was unfair, or that its application was vitiated by a manifest error of assessment.

47      It must be noted that the applicant does not deny that, in the contested regulation, the institutions scrupulously adhered
to that comparison method or that that comparison concerned domestic and export sales made as closely as possible at the same
time, or that the levying of VAT on those sales took place at the same level of trade within the meaning of the second sentence
of Article 2(10) of the Basic Regulation.

48      Similarly, the applicant has failed to demonstrate the existence of a consistent practice on the part of the institutions
regarding the deduction of VAT both from the normal value and from the export price for the purposes of a fair comparison
thereof within the meaning of Article 2(10) of the Basic Regulation. The examples given in the application do not relate to
any situation of that kind but concern cases involving an adjustment of the export price alone by reason of a partial reimbursement
of VAT by the Chinese authorities, like the adjustment made during the original investigation in this case, the legality of
which is not at issue in the present proceedings.

49      Therefore, when comparing the normal value and the export price on a ‘VAT-inclusive’ basis, the Council did not commit any
manifest error of assessment or infringe the requirement of a fair comparison in accordance with the first sentence of Article
2(10) of the Basic Regulation.

50      Consequently, the first plea must be rejected as unfounded.

*The second plea: infringement of Article 11(9) of the Basic Regulation*

51      In support of its second plea, the applicant maintains that the contested regulation also infringes Article 11(9) of the Basic
Regulation in so far as it is based on a method for comparison of the normal value and the export price which differs radically
from that used in the original investigation. That approach is not in conformity with the relevant case‐law (*Huvis* v *Council*, cited in paragraph 40 above, paragraph 41).

52      According to the applicant, the institutions failed to give valid reasons for that change of comparison method. The fact that,
between the respective periods covered by the original investigation and the review, the rate of unrefunded VAT rose from
4% to 17% is not a change of circumstances within the meaning of Article 11(9) of the Basic Regulation such as to justify
abandoning the method used in the original investigation. Finally, it contends, the institutions have not demonstrated that
the method used in the original investigation was not in conformity with Article 2(10) of that regulation. In any event, the
applicant claims to have established that the new method was contrary to the principle of fair comparison embodied in that
provision and is based on an inconsistent statement of reasons.

53      The Council contends that this plea should be rejected.

54      It is clear from Article 11(9) of the Basic Regulation that as a general rule, in a review, the institutions are required
to apply the same method, including the method of comparing the export price and the normal value under Article 2(10) of the
Basic Regulation, as that used in the original investigation which led to the imposition of the anti-dumping duty. The same
provision contains an exception whereby the institutions may apply a method other than that used in the original investigation
only where the circumstances have changed. In that regard, it must be borne in mind that any derogation or exception to a
general rule must, however, be interpreted strictly. It is therefore incumbent on the institutions to demonstrate that circumstances
have changed if they wish to apply a method different from that used in the original investigation (see *Huvis* v *Council*, cited in paragraph 40 above, paragraph 41 and the case-law cited).

55      As noted in paragraphs 10 and 11 above, the Council accepted that it made an adjustment to the export price in the original
investigation, within the meaning of Article 2(10)(b) of the Basic Regulation, and that it dispensed with that adjustment
in the review procedure on the ground that the conditions laid down in that provision were not fulfilled.

56      It must be pointed out that that difference in the Council’s approach does not derive from a ‘change of method’ within the
meaning of Article 11(9) of the Basic Regulation.

57      In that regard, it must be observed that the concepts of ‘method’ and ‘adjustment’ are not coterminous. However, even if it
were accepted that the term ‘adjustment’ in Article 2(10) of the Basic Regulation could be considered the same as the term
‘method’ as used in Article 11(9) of the same regulation, it is clear from the grounds set out in recital 31 to the contested
regulation and from the considerations set out in paragraphs 34 to 38 above that, in this case, the institutions did not ‘change’
the ‘adjustment method’ as between the original investigation and the review procedure, within the meaning of the case-law
(see *Huvis* v *Council*, cited in paragraph 40 above, paragraphs 27, 28 and 43, concerning the change between the ‘advantage’ or ‘input’ method and
the ‘residual’ method), but merely dispensed with any adjustment on the ground that, in contrast to the situation obtaining
in the original investigation, the conditions laid down in Article 2(10)(b) of the Basic Regulation for such an adjustment
to be justified were not fulfilled at the time of the review. The mere abandonment of an adjustment that was not justified
in the circumstances of this case cannot be regarded as a change of method within the meaning of Article 11(9) of the Basic
Regulation.

58      Article 11(9) of the Basic Regulation requires that the method concerned conform with Article 2 and Article 17 of the same
regulation (now Article 2 and Article 17 of Regulation No 1225/2009), the requirements of which must be complied with in all
cases. Thus, the General Court has already held that, if it should be found at the review stage that application of the method
used in the original investigation was not in conformity with Article 2(10)(b) of the Basic Regulation, the institutions would
no longer be required to apply that method (see, to that effect, *Huvis* v *Council*, cited in paragraph 40 above, paragraphs 42 and 50) even though that might imply a ‘change of method’ in the strict sense.

59      Thus, where, in the review procedure, the institutions are not authorised to make an adjustment under Article 2(10) of the
Basic Regulation, they cannot be compelled, under Article 11(9) of the same regulation, nevertheless to do so, merely because
such an adjustment was made in the original investigation. In other words, given that the latter provision expressly requires
that the method applied in the review comply with the requirements of Article 2 of the Basic Regulation, such a review must
not give rise to an adjustment which is not authorised, in particular, by Article 2(10)(b) of that regulation.

60      However, as the applicant itself accepts (see paragraphs 29 and 31 above), Article 2(10)(b) of the Basic Regulation, which
was applied by the institutions in the original investigation, is not the appropriate legal basis for making, in the review,
any adjustments, in particular, of the export price, which is not covered by that provision. In these circumstances, it is
unnecessary to deal with the question whether, in this case, the method applied in the original investigation was in conformity
with Article 2(10)(b) of that regulation, a matter about which the Council itself raised doubts at the hearing (see paragraph
11 above).

61      It follows that the Council did not infringe Article 11(9) of the Basic Regulation by comparing the normal value and the export
price of the products concerned on a ‘VAT-inclusive’ basis.

62      In any event, even if it were accepted that, in the review procedure, the Council adopted a method of comparing the normal
value and the export price of the products concerned different from that used in the original investigation, it has demonstrated,
first, that, between the original investigation and the review procedure, the circumstances had changed and, second, that
that change was such that the abandonment of such an adjustment was justified.

63      It is common ground that, in the original investigation, the Chinese VAT on export sales of the products concerned was partially
refunded, whereas that VAT was levied in full on domestic sales. On the other hand, during the period covered by the review
procedure, both domestic sales and export sales were fully subject to such VAT. As stated in recital 31 to the contested regulation,
that difference between the two situations constitutes a change of circumstances within the meaning of Article 11(9) of the
Basic Regulation.

64      Moreover, in view of that change in circumstances, the Council was entitled to dispense with an adjustment of the normal value
and the export price in the review procedure because it was possible to make a fair comparison between that value and that
price on a ‘VAT-inclusive’ basis, whilst, in the original investigation, it had considered it necessary to make an adjustment
to restore the symmetry of the relevant parameters of comparison since the products that were exported attracted a partial
reimbursement of VAT.

65      Consequently, the comparison method adopted by the Council in the review procedure does not infringe Article 11(9) of the
Basic Regulation.

66      The second plea must therefore be rejected as unfounded.

67      In the light of all the above considerations, the action must be dismissed in its entirety.

**Costs**

68      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. Since the applicant has been unsuccessful, it must be ordered, in accordance
with the form of order sought by the Council, to bear its own costs and to pay those of the Council.

69      Under the first subparagraph of Article 87(4) of the Rules of Procedure, institutions which have intervened in the proceedings
are to bear their own costs. Consequently, the Commission must bear its own costs.

On those grounds,

THE GENERAL COURT (First Chamber)

hereby:

1.      **Dismisses the action;**

2.      **Orders Dashiqiao Sanqiang Refractory Materials Co. Ltd to bear its own costs and to pay those incurred by the Council of the
European Union;**

3.      **Orders the European Commission to bear its own costs.**

| | | |
| --- | --- | --- |
| Azizi | Vadapalas | Frimodt Nielsen |

Delivered in open court in Luxembourg on 16 December 2011.

[Signatures]

Table of contents

Legal context

Background to the dispute

Relevant anti-dumping regulations

Chinese VAT legislation

Administrative procedures

Procedure and forms of order sought

Law

Summary of the grounds for annulment

The first plea: infringement of Article 2(10) of the Basic Regulation

The second plea: infringement of Article 11(9) of the Basic Regulation

Costs

---

[\*](#Footref*) Language of the case: French.