Judgment — ECLI:EU:T:1998:184
Date: 1998-07-17
Language of the case: English
Court formation: Fourth Chamber, Extended Composition
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Dumping;External relations;Commercial policy
Concepts: Anti-dumping and anti-subsidy measures;Admissibility and examination of applications, forms of order sought and pleas in law
Procedure: Action for annulment - unfounded

summary of the pleas in law relied on, and that new pleas in law may not be introduced in the course of the proceedings unless they are based on matters of law or of fact which come to light in the course of the procedure. However, a submission which may be regarded as amplifying a submission made previously, whether directly or by implication, in the original application, and which is closely connected therewith, will be declared admissible (Case 108/81 Amylum v Council [1982] ECR 3107, paragraph 25, Case 306/81 Verros v Parliament [1983] ECR 1755, paragraph 9, and Case T-37/89 Hanning v Parliament [1990] ECR II-463, paragraph 38). 143. In the introductory part of its application (p. 3), the applicant observed that ‘the information ... concerning Victory played a fundamental role in the determination of the dumping margin of the applicant’. In connection with its first ground of annulment (pp. 10 to 12 of the application), it stated that that information was incomplete, so that it could not serve as a basis for determining the constructed normal value of its products. On this point, it stressed (p. 10) the highly suspect nature of the information concerning Victory's profits on its profitable domestic sales of the like product. 144. The applicant's arguments concerning the correctness of the production costs communicated by Victory and their calculation therefore amplify a submission previously made in the application and are closely connected therewith. 145. Since those arguments are admissible, the Court must examine whether they are well founded. 146. The applicant considers that the comparative table produced in Annex 6 to the reply shows that the production costs furnished to the Commission by Victory were manifestly incorrect. 147. However, in that table the applicant merely entered the technical references of certain bicycle models without even indicating how its own models could have been validly or usefully compared with those of Victory. Moreover, it gave no explanation as to the way in which it had calculated the average production costs and average sales prices of Victory's bicycles. 148. In those circumstances, the table in question has no probative force. 149. The applicant further considers that the institutions, by finding that the bicycle production costs incurred by Victory during the investigation period amounted to THB ..., failed to take into account an amount of THB ... corresponding to the purchase of bicycle parts. 150. That argument must be rejected. It appears from the Council's replies to the Court's questions that Victory did not use those parts in the manufacture of its bicycles, but sold them as parts on the domestic market. Accordingly, the amount of THB ... should not be included in Victory's bicycle production costs. 151. It follows from all the foregoing that the fourth limb of the plea is unfounded. 152. The first plea in law must therefore be rejected. 2. Second plea in law: infringement of the basic regulation, in that the Council refused to make an adjustment in calculating the profit margin to be included in the constructed normal value of the applicant's products sold in the Community to OEM purchasers Arguments of the parties 153. The applicant observes that the Council refused on two grounds to make an adjustment in calculating the profit margin to be included in the constructed normal value of its products sold in the Community to OEM purchasers. First, its request for an adjustment was not supported by evidence. Second, its sales did not satisfy the conditions for granting an OEM adjustment. Those grounds are contrary to Article 2(3) of the basic regulation. Requirement that a request must be supported by evidence 154. The applicant submits that the institutions are obliged to make an OEM adjustment on their own initiative, even in the absence of a substantiated request. 155. The OEM adjustment is made in the context of Article 2(3)(a) of the basic regulation. That provision states that the normal value of a product is the ‘comparable’ price paid or payable for that product in the exporting country or country of origin. However, where a producer sells its products both for export to OEMs in the Community and, under its own brand, to ordinary distributors on the domestic market, its domestic sales cease to be ‘comparable’ to its export sales. OEM sales are generally made at lower prices and profit margins than domestic sales of own-brand products. In that case, the normal value of the products exported to the Community is determined on the basis of a constructed value. In determining that value, the OEM adjustment enables account to be taken of the differences in price and profit. It consists of using a flat-rate profit margin lower than the profit margin actually realised by the producer on its domestic own-brand sales. 156. In so far as the OEM adjustment aims to establish a constructed normal value comparable to the export price, the institutions are obliged under Article 2(3)(a) of the basic regulation to make the adjustment on their own initiative. The requirement of a substantiated request in fact concerns only the adjustments provided for by Article 2(10) of that regulation. The OEM adjustment is not referred to in that provision. 157. In addition, the OEM adjustment does not constitute a level-of-trade adjustment. In that respect, the applicant refers to recitals 11 and 24 of Council Regulation (EEC) No 537/87 of 23 February 1987 imposing a definitive anti-dumping duty on imports of plain paper photocopiers originating in Japan (OJ 1987 L 54, p. 12). 158. In any event, level-of-trade adjustments were abolished by the basic regulation. Article 2(9) of Council Regulation (EEC) No 2176/84 of 23 July 1984 on protection against dumped or subsidised imports from countries not members of the European Economic Community (OJ 1984 L 201, p. 1) required the export price and the normal value to be compared at the same level of trade. Similarly, under Article 2(10)(c) of that regulation, producers or exporters were able to obtain a level-of-trade adjustment, provided they had made a substantiated request to that effect. Article 2(9) and (10) of the basic regulation purely and simply abolished those references to level of trade. 159. The Council observes that the OEM adjustment constitutes a level-of-trade adjustment. OEMs sell products manufactured by other producers under their own brand. However, they make use of identical distribution networks to those of genuine producers. They carry out specific functions and thus represent an additional stage between manufacture and distribution of the products. In support of its point of view, the Council relies inter alia on recital 29 of Commission Regulation (EEC) No 4062/88 of 23 December 1988 imposing a provisional anti-dumping duty on imports of video cassettes and video tape reels originating in the Republic of Korea and Hong Kong (OJ 1988 L 356, p. 47). 160. The requirement of a substantiated request is not confined to the adjustments referred to in Article 2(10) of the basic regulation, but applies to all adjustments relating to the level of trade (Minebea, paragraph 43, and Canon, paragraph 32). Such a request is all the more justified in the case of an OEM adjustment. That adjustment consists in taking account of the differences in price and profit between export sales to OEMs in the Community and domestic own-brand sales. Consequently, it is for the producer concerned to establish whether and to what extent the OEM adjustment is justified. Moreover, in the context of Article 2(3) of the basic regulation, the institutions require detailed and substantiated information for all aspects relating to the determination of the normal value. 161. Contrary to the applicant's submission, the basic regulation did not abolish level-of-trade adjustments. Article 2(9) provides that, in order to make a valid comparison between export sales and domestic sales, the institutions must take account, in the form of adjustments, of the different levels of trade. Conditions for granting the OEM adjustment 162. The applicant states that the conditions for granting the OEM adjustment were defined by the Council in recital 8 of Regulation No 537/87. In the present case, it satisfies those conditions. 163. On the one hand, all its export sales to the Community are to importers who resell its products under their own brand name - apart from two particular models (‘Pheasant’ and ‘Flamingo’) which it sells under its own brand in the Community to ordinary distributors. 164. On the other hand, the models exported to the Community are manufactured exclusively to the order of Community OEMs, in accordance with their specific detailed instructions. The design and technical specifications of those models are thus different from those of the models sold by the applicant under its own brand on the domestic market. 165. The applicant has demonstrated that those facts were genuine in its reply to the questionnaire and during the on-the-spot verification. 166. Consequently, the institutions were obliged to make an OEM adjustment when determining the constructed normal value of its products. 167. The applicant submits that it did not have to satisfy the two additional conditions which it considers were required by the Council, namely: - to show that its export sales to OEMs in the Community were made at a price and profit margin lower than those of its domestic own-brand sales; - to show that there was a difference in pricing between its export sales to Community OEMs and its export sales to Community distributors. 168. Those conditions are new. They do not appear in Regulation No 537/87 or in the Goldstar judgment. 169. The first condition is impossible to satisfy. The Commission calculated the applicant's profit margin on the basis of the profits realised by Siam and Victory on their domestic sales of the like product. The applicant was not aware of that margin until publication of the provisional regulation. It was therefore unable to show materially in its reply to the questionnaire that the profits realised on its export sales to OEMs were lower than its profit margin, as calculated by the Commission. 170. The second condition is manifestly erroneous. The OEM adjustment does not involve a comparison between export sales to Community OEMs and those to Community distributors. It consists in a comparison between export sales to Community OEMs and domestic own-brand sales. 171. The Council submits that, in order to benefit from an OEM adjustment, the producer concerned must satisfy two conditions, namely: - show that its export sales to the Community are made to OEMs; - show that its export sales to OEMs in the Community are made at a price and profit margin lower than those of its domestic own-brand sales. 172. Those conditions are not new. Since Regulation No 537/87 they have formed part of a constant practice of the institutions (see, for example, recital 20 of Commission Regulation (EC) No 2426/95 of 16 October 1995 imposing a provisional anti-dumping duty on imports of certain magnetic disks (3.5" microdisks) originating in the United States, Mexico and Malaysia (OJ 1995 L 249, p. 3)). 173. In the present case, the applicant did not satisfy any of those conditions. Findings of the Court 174. It appears from the contested regulation (recital 50) that the Council refused on two grounds to make an adjustment in calculating the profit margin to be included in the constructed normal value of the products sold by the applicant in the Community to OEM purchasers. The first ground was the absence of a substantiated request for an adjustment. The second was that the conditions for granting an OEM adjustment were not satisfied. 175. It is first necessary to examine whether by adopting the second ground the Council infringed Article 2(3) of the basic regulation. 176. In that respect the applicant submits that it did not have to show that there was a price difference between its sales to OEMs and its own-brand sales. 177. It should be noted that the essential difference between OEM sales and own-brand sales is at the marketing stage. Those two types of sale are aimed at different customers, who generally operate at different marketing stages (Goldstar, paragraph 45). An OEM functions in a different way from ordinary retailers. It buys products from a manufacturer and then sells them under its own brand, while assuming the manufacturer's liability and bearing the costs inherent in marketing the products. The special nature of those functions is reflected in particular in the structure of the prices charged by the manufacturer to OEM purchasers, in that those prices are generally lower than those charged to ordinary distributors. 178. Consequently, by requiring the applicant to show that its export sales to OEM purchasers in the Community were made at a price and profit margin lower than those of its domestic own-brand sales, the Council did not infringe Article 2(3) of the basic regulation. 179. In the present case, the applicant has produced no evidence from which it might be concluded that it satisfied that requirement. Yet such proof, contrary to its assertion, was not impossible to provide. It would have been enough for it to show that there was a distinct and consistent pricing pattern for its export sales to OEMs in the Community and for its domestic own-brand sales. 180. As regards the difference in pricing between the applicant's sales to Community OEMs and its own-brand sales to Community distributors, the Council stated that that did not constitute a condition for granting the OEM adjustment but a means of verifying whether the OEMs actually performed specific functions compared to ordinary distributors. The documents in the case show that the applicant sold certain bicycle models to Community OEMs at a higher price than that of the models it sold to Community distributors under its own brand (‘Pheasant’ and ‘Flamingo’). That finding bears out the Council's conclusion that ‘the majority of the export sales [of the applicant to the Community] were not made at a level which would constitute an OEM sale’ (recital 50 of the contested regulation). 181. Consequently, by refusing to make an OEM adjustment on the ground that the applicant's sales did not satisfy the conditions for an adjustment, the Council did not infringe Article 2(3) of the basic regulation. 182. In those circumstances, any defects there may be in the first ground for refusing to grant the adjustment, namely the absence of a substantiated request, do not in any event have any effect on the assessment of the second plea in law. 183. It follows from all the above considerations that the second plea is unfounded. 184. The application must therefore be dismissed. Costs 185. 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 to pay the costs, as applied for by the Council. On those grounds, THE COURT OF FIRST INSTANCE (Fourth Chamber, Extended Composition) hereby: 1. Dismisses the application; 2. Orders the applicant to pay the costs. Lindh García-Valdecasas Lenaerts Cooke Jaeger Delivered in open court in Luxembourg on 17 July 1998. H. Jung P. Lindh Registrar President Summary Facts of the case II - 2 The regulations at issue II - 3 Procedure and forms of order sought by the parties II - 6 Substance II - 6 1. First plea in law: infringement of the basic regulation, manifest error of assessment and breach of the principle of non-discrimination, in that the Council refused to use the applicant's actual profit margin in establishing the constructed normal value of its products exported to the Community II - 7 First limb: the applicant's profit margin II - 7 Arguments of the parties II - 7 Findings of the Court II - 9 - Adoption of the 10% threshold II - 10 (a) Introduction of a new requirement II - 11 (b) Arbitrary nature of the 10% threshold II - 11 (c) Existence of a previous practice II - 12 - Application of the 10% threshold to the applicant II - 12 (a) The applicant's sales in absolute terms II - 12 (b) The applicant's domestic sales in terms of value II - 13 (c) Rigid application of the 10% threshold II - 13 Second limb: adjustments of production costs and SG&A expenses II - 14 Adjustment of the applicant's production costs II - 14 - Arguments of the parties II - 14 - Findings of the Court II - 15 Adjustment of the applicant's SG&A expenses II - 16 - Arguments of the parties II - 16 - Findings of the Court II - 16 Third limb: Siam's profit margin II - 18 Arguments of the parties II - 18 Findings of the Court II - 18 Fourth limb: Victory's profit margin II - 19 Arguments of the parties II - 19 Findings of the Court II - 20 - Information supplied by Victory II - 21 - Average sales price of Victory's bicycles II - 21 - Different levels of trade II - 21 - Victory's production costs II - 21 2. Second plea in law: infringement of the basic regulation, in that the Council refused to make an adjustment in calculating the profit margin to be included in the constructed normal value of the applicant's products sold in the Community to OEM purchasers II - 23 Arguments of the parties II - 23 Requirement that a request must be supported by evidence II - 23 Conditions for granting the OEM adjustment II - 25 Findings of the Court II - 26 Costs II - 27 1: Language of the case: English. 2: - Some figures have been omitted in order to protect confidential information concerning Siam and Victory.