Judgment — ECLI:EU:T:1997:198
Date: 1997-12-17
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;Rights of the defence and procedural guarantees
Procedure: Action for annulment - unfounded

summary (Article 7(4)(a) of the basic regulation). 48. The Council asserts, first, that it never claimed that there are chemical differencesbetween Russian urea and urea produced in the Community; the difference inquality is the result of other factors. It states that, during the investigation, visits to the premises of Community importers of Russian-produced urea enabled theCommission's officials to find that the quality of the urea caused serious problemsfor the importers when it arrived in the Community. The quality of the productsometimes deteriorated so much because of the long journey and frequent handlingthat the importers were no longer able to sell it to farmers. 49. The Council observes that a price adjustment for quality differences is, at least inthe present case, essentially a question of consumer perception. If consumersbelieve (rightly or wrongly) that Russian urea is of inferior quality to that producedin the Community, and are thus not willing to offer a higher price, the questionwhether a quality difference actually exists is quite irrelevant. 50. It observes that it is irrelevant in the present case whether the true cause of theprice differences is an objective difference in quality or a subjective perception byconsumers. The price adjustment was intended to make it possible to calculate thetarget price, and the existing quality difference between Russian urea and ureaproduced in the Community meant that Community producers could obtain fortheir product a price at least 10% above the target price. That price levelcorresponds to the Community producers' production cost plus a reasonable profitmargin, which the Council fixed at 5%, and is the price level which makes itpossible to eliminate the injury caused by the dumped Russian imports. It furthersubmits that if the Community institutions had not made the 10% adjustment forquality differences, they would have fixed the target price (and consequently theduty) at a higher level than that necessary to eliminate the injury caused by thedumped imports, which would have been contrary to Article 13(3) of the basicregulation. 51. Moreover, the Council rejects the table of comparative chemical and physicalanalyses of Russian-produced and Community-produced urea submitted by theapplicant to show that there are no chemical differences between them. It considersthat the analyses do not support the applicant's arguments. The way in which thesamples were selected is not clear, and how representative they are is thus open todoubt. Moreover, the samples of Russian urea tested on the spot had notundergone the frequent handling and transshipment which led the institutions toconclude that an adjustment should be made. 52. As to the other evidence relied on by the applicant, namely the faxes fromSinochem to the applicant which are used in order to show that Russian urea andCommunity urea are sold at the same price in the People's Republic of China, theCouncil observes that it was stated in the first fax that only a very small quantityof urea had been exported to China in recent years. 53. Moreover, in its letter of 30 April 1997 in reply to a written question of the Court,the Council explained that the tendency of Russian urea to deteriorate resultedfrom improper handling during transport, the length and conditions of transport,the fact that Russian urea, unlike urea of Community origin, is transported in bulk rather than in bags and requires more frequent handling, and the fact that Russianurea is not coated with an anti-caking agent, as urea produced in the Communitygenerally is. 54. The Council rejects the applicant's assertion that urea produced in the Communityis transported in the same way as Russian urea. It submits that urea produced inthe Community in the majority of cases leaves the factory by lorry with a minimumamount of handling before it reaches the end user, whereas urea produced inRussia is loaded and unloaded several times between the factory and the end userin the Community, and that it therefore considers it inevitable that Russian ureatends to deteriorate during transport. 55. Second, with regard to the question of security of supply, the Council points outthat the importers themselves informed the Commission of the supply difficultiesand that that information was confirmed in the article in Fertilizer Week of 6September 1993 (Volume 7 No 16). It adds that that information proves that therewere also quality differences which affected prices. 56. The Council submits that the Ferchimex press release, referred to by the applicantin support of its argument on delivery guarantees (see paragraph 39 above), is ofno probative value. It submits that it is merely an advertisement by a company, andthat the fact that the company stresses the delivery guarantee suggests that thesupply of urea from Russia generally causes problems. The Council adds that itnever stated that importers of Russian urea could never guarantee the samesecurity of supply; it stated that they could not always guarantee that security ofsupply. It considers, finally, that the conclusion drawn from the article in FertilizerWeek, namely that there had not been any problems with gas supplies in Russia,is incorrect, and that the conclusion on the same subject drawn from the BritishSulphur report is an attempt to mislead the Court. 57. Third, with regard to the method used to arrive at the 10% adjustment, the Councilbegins by rejecting the applicant's argument that there is a general principle in theanti-dumping legislation that a party which claims an adjustment must prove thatits claim is justified. Assuming that the applicant relies in this respect on Article2(9)(b) of the basic regulation, the Council observes that that provision relates onlyto the comparison between the normal value and the export price for the purposeof calculating the dumping margin, and so does not prevent the Communityinstitutions from making an adjustment if they consider that to be justified on thebasis of the information they have gathered during the investigation. 58. The Council asserts that this also follows from the nature of an anti-dumpinginvestigation, which is only an administrative procedure in which the Communityinstitutions seek to determine whether anti-dumping measures should be imposedin a given case. Consequently, the provisions which put the burden of proof on one party (such as Article 2(9)(b) of the basic regulation) are relevant only with respectto relations between the Community institutions and that party. 59. It is therefore immaterial, according to the Council, which party bears the burdenof proof. 60. The Council submits, moreover, that it is very difficult to quantify an adjustmentmade to take account of consumer perception of quality differences, and theCommunity institutions must necessarily have a comparatively wide margin ofdiscretion when fixing the level of such an adjustment. It considers that the bestinformation on which to base such an adjustment is not scientific evidence on thedegree of differences in quality but information on sales. 61. The Council then addresses the applicant's argument that the Communityinstitutions infringed its right to a fair hearing during the investigation. It begins bynoting that during anti-dumping investigations the obligation of the Communityinstitutions to disclose information to the undertakings concerned is limited if, interalia, the information must be regarded as confidential (see the Al-Jubail Fertilizerjudgment cited above). 62. It observes that the Commission informed the applicant in the disclosure letter of10 May 1994 that it intended to make a 10% adjustment and gave the reasons whyit considered that adjustment appropriate. The Commission also providedadditional information in a fax dated 18 May 1994, and the question was discussedwith the applicant at the meeting on 18 July 1994. The Council states that at thatmeeting the Commission's approach was explained and the applicant was informedthat the Commission had learnt from an importer that in one transaction a rebateof 19% had been asked for, and given, for quality differences. The Council stressesthat the Commission could not disclose the corresponding evidence to theapplicant, since that information was clearly confidential (see Article 8 of the basicregulation). 63. Finally, the Council submits that the applicant's assertion that EFIA participatedin the procedure only after receiving the disclosure letter is incorrect. It submitsthat the conclusion which the applicant draws from that assertion, namely that theCommission did not base its finding that a 10% price difference was justified oninformation from the importers, is consequently wrong.  Findings of the Court 64. The question whether an adjustment should be made for quality differencesinvolves the appraisal of complex economic situations. Judicial review by this Courtmust therefore be limited to verifying whether the procedural rules have beencomplied with, whether the facts have been accurately stated and whether there has been a manifest error of assessment or a misuse of powers (see, inter alia, CaseC-174/87 Ricoh v Council [1992] ECR I-1335, paragraph 68). 65. According to point 64 of the contested regulation, '... a certain difference in price existed between Community-produced urea andthat from the former USSR as a result of the imported product's inferior qualityand finish. Its tendency to deteriorate during transport, combined with the fact thatimporters cannot always offer the same security of supply as the Communityproducers, leads naturally to lower prices. While these differences are difficult toevaluate in monetary terms, it has been concluded that such a difference exists andthat a 10% adjustment in value is considered to be appropriate. 66. It follows from that passage that the Council did not base the adjustment intendedto compensate for the quality differences between urea from the Community andurea from Russia on the condition of the latter when it leaves the factory in Russia.The difference in quality is due to the fact that urea exported from Russia tendsto deteriorate during transport and that security of supply is not always ensured.That does not relate to the original condition of the Russian urea. Consequently,the applicant's arguments are immaterial in so far as they concern the physical andchemical composition of the urea when it leaves the Russian factory. 67. Furthermore, the Council's explanation on this point must be accepted. 68. The question of a price adjustment for quality differences is essentially a questionof consumer perception, since what matters for determining an adjustment in thecontext of determining the injury in an anti-dumping investigation is the price whichthe consumer is prepared to pay for the dumped products compared with productsof Community manufacture, not the objective differences between them. 69. Moreover, the applicant has not produced evidence to disprove the fact that ureafrom Russia was improperly and more frequently handled during transport thanurea produced in the Community, and that, unlike Community urea, it wastransported in bulk rather than in bags and was not coated with an anti-cakingagent. 70. As to the question of security of supply, it appears from the documents in the casethat the Commission was informed during the investigation by the importersthemselves that they were not always able to guarantee security of supplyequivalent to that of Community producers, and that that information wasconfirmed by an article in Fertilizer Week of 6 September 1993 (Volume 7 No 16). 71. It follows that the applicant's arguments to the effect that the institutions made amanifest error of assessment by taking into consideration the fact that Russian ureatended to deteriorate during transport and that importers of Russian urea were not always able to guarantee security of supply equivalent to that of Communityproducers must be rejected. 72. As to the method used to arrive at the 10% adjustment, the applicant submits thatthe burden of proof is on the importers to show that there is a difference in quality. 73. That argument cannot be accepted. 74. It is for the Commission as investigating authority to determine whether theproduct being dumped causes injury when put into free circulation in theCommunity. The Commission must ascertain whether there has been significantprice undercutting compared with the price of a like product in the Community(see Article 4(2)(b) of the basic regulation), and in so doing it must use theinformation available at the time without imposing the burden of proof on one ofthe parties (see Article 7(7)(b) of the basic regulation). 75. Moreover, the applicant provided, inter alia, information intended to show that thephysical and chemical composition of Russian urea is the same as that of ureaproduced in the Community. Since that information is of altogether secondaryimportance in determining a specific level of adjustment, it must be concluded thatthe applicant did not in fact provide any evidence on which a precise level ofadjustment could be determined. 76. As regards the calculation of the adjustment, the contested regulation states: '(65) Whilst admitting that the Community producers' product commanded ahigher price, EFMA considered that the level of the adjustment was too high.Moreover, they argued that the conclusions drawn were without basis given the lackof factual supporting evidence. EFIA also contested the level of the adjustment, but on the grounds that it wasinsufficient given the significantly inferior state of the Russian product on arrivalat the end user in the Community. They argued that this poorer quality had to becompensated for by lower prices. (66) In view of the inconclusive and conflicting information received by theCommission, it was concluded, based on the information available, that a 10%adjustment level was both reasonable and appropriate. It also constituted themiddle ground between the figure put forward by the Community producers andthe amount requested by EFIA. (67) Allowing for these differences, the level of undercutting of the Communityproducers' prices was found to be approximately 10% for urea of Russian origin. 77. To support its conclusion that a 10% adjustment was reasonable and appropriate,the Council, particularly in its letter of 30 April 1997 in reply to a written questionof the Court, summarized the relevant issues in the case as follows:  the Community producers agreed that an adjustment of the order of 5%might be acceptable in respect of the difference in quality between Russianurea and urea produced in the Community;  the Community importers asked for an adjustment of the order of 15% inthat respect;  an importer stated that it had made a claim for 19% of the purchase priceof a consignment because of its poor quality;  an Australian producer which cooperated in the investigation declaredduring the verification visit of the Commission's officials to its premises thata price difference of 10% to 15% between its prilled urea and that from theformer Soviet Union would be perfectly justified. 78. The Council confirmed at the hearing that it had no other information available forassessing the level of the adjustment. It further stated that it was difficult to reacha conclusion in view of the hypothetical nature of the operation in monetary terms. 79. The Court observes that the question of the appropriate level of adjustmentdepends essentially on an assessment of consumer perception. If importers buyRussian urea only if it costs 10% less than urea produced in the Community, theCommunity industry is in danger of losing its market share or having to reduce itsprices if the price of the Russian product falls to such an extent that the pricedifference exceeds 10%, whatever the similarity or difference between the twoproducts. 80. Moreover, assessment of that difference between Russian and Community urea inmonetary terms is, as the Council submits, altogether hypothetical, given thatRussian urea is being dumped on the Community market. That also means that itwas not possible to produce evidence on the point, apart from the opinions of theCommunity producers and importers which were available to the institutions. 81. It follows that the institutions made their decision on the basis of an evaluation ofall the information gathered during the investigation. 82. Accordingly, the Court considers that the institutions did not exceed their marginof discretion in that regard. 83. Finally, the Court must consider the applicant's argument that its right to a fairhearing was infringed, in that it did not have access to information on the methodused by the Commission to arrive at the 10% adjustment. 84. It is settled case-law that the right to a fair hearing is respected if the undertakingconcerned has been afforded the opportunity during the administrative procedureto make known its views on the correctness and relevance of the facts andcircumstances alleged (see Al-Jubail Fertilizer, paragraphs 15 and 17, and NakajimaAll Precision, paragraph 108). 85. In the present case the applicant, by letter of 17 May 1994 in response to thedisclosure letter, asked for additional information on the 10% adjustment. TheCommission replied in its letter of 18 May 1994: 'The 10% adjustment ... is anaverage estimation of information obtained from different importers-traders-distributors involved in the trade of Russian as well as Community-produced urea. 86. Moreover, at the meeting on 18 July 1994 (see paragraph 15 above) theCommission informed the applicant that it had been told by an importer that inone transaction a rebate of 19% had been asked for and given on the ground ofdifferences in quality. 87. It is therefore clear that the applicant was informed during the anti-dumpingproceedings of the principal facts and considerations on which the institutions basedtheir conclusions. The only additional factor provided in this respect by the Council,during the written procedure before the Court, is the statement by the Australianproducer mentioned in paragraph 77 above. However, as that information is merelyconfirmatory and did not form part of the statement of reasons in the contestedregulation, its non-disclosure cannot have deprived the applicant of its right to afair hearing. 88. In those circumstances, and having regard to the fact that the Commission wasobliged to assess the level of the adjustment by reference to all the informationcollected during the investigation, the applicant also cannot claim that theinformation it received concerning the adjustment was supplied at too late a stagein the administrative procedure. 89. Accordingly, the applicant's right to a fair hearing was not infringed. 90. It follows from all the foregoing that the first limb of the plea must be rejected. The profit margin of 5% for assessment of loss of profit  Arguments of the parties 91. In relation to the profit margin for Community producers the applicant advances,in effect, two arguments. First, it considers that the profit margin of 5% before taxused to evaluate the loss of profit is too low. Second, it submits that theCommunity institutions were in breach of an essential procedural requirement inthat they never stated the methodology used to arrive at that figure. 92. The applicant first challenges the figure of 5% for the profit margin calculated bythe Community institutions, on the basis that that figure is insufficient to producethe necessary capital for the fertilizer industry to operate and to ensure the newinvestment needed to maintain plant and equipment and bring them intocompliance with new environmental standards. It states that during the investigationand in all its correspondence with the Commission it always claimed that a figureof 10% was more reasonable. It relies on an analysis of 3 May 1995 by GrandeParoisse (one of its members) to show that the figure of 5% is inadequate. 93. With the reply the applicant submitted a report produced in November 1995 byZ/Yen Ltd entitled 'Profitability Requirement Review  European Urea FertilizerIndustry (hereinafter 'the Z/Yen report), giving an analysis of the fertilizerindustry in Europe, which it refers to in support of its argument that the profitmargin is too small. 94. The applicant also submitted in the reply the results of a survey on profitabilitywhich it had carried out among the Community producers in order to ascertain thereliability of the information disclosed by the Commission. The applicant explainsthat it asked them individually on a strictly confidential basis for a copy of theirresponses to the Commission's questionnaire on profitability. In the applicant'sopinion, the results of the survey are difficult to reconcile with the Commission'sassertions regarding the profit margin of the Community producers. 95. Second, the applicant submits that if there was a method of calculation, theCommunity institutions never disclosed or explained it to the applicant. It wastherefore unable to make comments either on the level of profit margins generallyor on the basis of its assessment, so that its right to a fair hearing was infringed(see the Al-Jubail Fertilizer judgment, paragraph 17). 96. The Council states first that to determine the profit margin the Communityinstitutions took into account the factors they generally use, and that in the presentcase the factors taken into account were clearly explained in point 73 of thecontested regulation. 97. It observes that in order to determine the profit margin the Commission must takeinto account various factors relating to the overall financial situation of the industry,such as normal and fair competition in the market, the efficiency or inefficiency ofindividual undertakings, comparative advantages, and the increase or decrease indemand. They must be taken into account in order to determine the profit which could reasonably be achieved in the absence of dumped imports. The Council statesthat that is what the Commission did in the present case. 98. With respect to the results of the questionnaire on profitability sent to theCommunity producers, the Council submits that a substantial number ofCommunity producers (representing about 40% of total sales by Communityproducers) considered that the level of profitability was less than 10%, and thatthey stated this either in their replies to the Commission's questionnaire or duringthe verification visits to their premises by Commission officials. The Council statesthat for reasons of confidentiality it is unable to disclose the names of thosecompanies or provide the corresponding evidence. 99. As to the survey submitted by the applicant concerning the Community producers'replies, the Council for its part submits a table drawn up on the basis of all theinformation received by the Commission during the investigation, which contradictsthe results of the applicant's survey. That is due in particular, it explains, to the factthat the results of the applicant's survey do not take into account the informationobtained during the visits carried out as part of the administrative procedure. 100. The Council then submits that no evidence was ever produced by the applicantduring the investigation to support its assertion that Community producers had tomake a profit of 10% before tax to remain competitive. In the Council's opinion,the applicant's submissions contain only vague references to investment said to benecessary to ensure compliance with new environmental standards. 101. The Council considers that it was for the applicant to provide during theinvestigation the necessary information to support its claim that a profit margin of10% should be used. 102. As to the Z/Yen report, the Council submits that the applicant may not rely on it,for two reasons. First, the Council claims that the Z/Yen report constitutes a newplea in law within the meaning of Article 48(2) of the Rules of Procedure of theCourt of First Instance. The Z/Yen report is related neither to an argument putforward in the application nor to a specific argument raised by the Council in itsdefence or in the contested regulation. The Z/Yen report cannot therefore beregarded as a mere complement to arguments and submissions made in theapplication. 103. The Council submits, second, that the applicant may not rely on the report, sinceit could and should have submitted it during the administrative investigation. Onthis point, the Council states that in the disclosure letter the Commission sent theapplicant, it informed it of its intention to use a profit margin of 5% to calculatethe anti-dumping duty and the loss of profit. In the letter the applicant sent theCommission on 17 May 1994, it sought clarification on some points, but not on thedetermination of the profit margin, so that the Commission's explanations musthave been clear. 104. Should the Court consider that the applicant may rely on the Z/Yen report, theCouncil submits that in any event it has not the slightest probative value. It submitsin particular that the Z/Yen report does not deal with the question of the profitmargin necessary for the Community industry to eliminate the injury caused by thedumped imports.  Findings of the Court 105. It appears from the contested regulation that in establishing the profit margin of5% the Commission took account of the decline in demand for urea, the need tofinance additional investments in manufacturing facilities and the profit which wasconsidered reasonable in the original anti-dumping investigation concerning thatproduct (see point 73 of the contested regulation). 106. The Court therefore holds that the applicant has not adduced any evidence to showthat in so doing the Commission made a manifest error of assessment. 107. It appears from the documents in the case and the applicant's reply to a writtenquestion of the Court (letter of 17 April 1997) that the applicant has done no morethan assert during these proceedings that a profit margin before tax of 5% wasmanifestly not sufficient to provide the capital necessary for the fertilizer industryto operate and to ensure the new investment necessary for maintaining plant andequipment and bringing it into compliance with new environmental standards,without producing any evidence in support of those assertions. 108. As regards the Z/Yen report, the Court finds that it was submitted after thecontested regulation had been adopted. The Court must ascertain whether theinstitutions based their decisions on correct material facts and whether theassessment of those facts was not manifestly erroneous, in the situation as itappeared at the time of adoption of the contested measure. In the present case, ithas been shown that the applicant did not during the administrative procedureproduce any evidence in support of its assertion that a higher profit margin wasrequired. The institutions were therefore unable to take that factor into accountwhen they adopted the contested regulation. For that reason the Court considersthat the Z/Yen report should not be taken into account in the present proceedings. 109. The same applies to the analysis by Grande Paroisse of 3 May 1995, submitted bythe applicant with its application. 110. Nor may the applicant rely on the results of the survey on profitability it conductedamong Community producers. There is nothing to contradict the Council'sexplanation that the different results are due to the fact that the applicant's surveydoes not take account of the information obtained during the visits made in thecourse of the investigation. In addition, the applicant itself maintained in its letter of 17 April 1997 that the Community producers had provided the Commission witha variety of methods for calculating profitability which did not have the samemeaning, and which could be clarified by the Commission during the on-siteverifications at the premises of the Community producers. 111. As to the applicant's allegation that its right to a fair hearing was infringed, itsuffices to note that it was in a position to make known its views on theappropriateness of the 5% figure and to show why a pre-tax profit of 10% wasnecessary. It did no more, however, than assert in general terms that a profit of theorder of 10% would be more appropriate, and did not even seek further detailsregarding any particular method for calculating the profit margin. 112. The disclosure letter of 10 May 1994 stated: 'The majority of Communityproducers claimed that a minimum pre-tax profit of 15% was required for them toremain competitive. However, this was not substantiated and, being an establishedproduct, this figure is considered to be high. The applicant thus knew during theadministrative procedure that, in the Commission's opinion, it was for the applicantto show why a higher profit margin was necessary. 113. Consequently, the applicant's right to a fair hearing was not infringed in theadministrative proceedings. 114. It follows from the foregoing that the plea must be rejected in its entirety. The first and second pleas 115. The applicant claims that the Court should annul Article 1 of the contestedregulation and order that the anti-dumping duty imposed by that regulation bemaintained until the competent institutions adopt more stringent measures. 116. According to point 106 of the contested regulation, the injury elimination thresholdwas lower than the dumping margin established for Russia. Consequently, inaccordance with Article 13(3) of the basic regulation, the definitive anti-dumpingduty was set at the level of the injury elimination threshold. 117. That conclusion, which was moreover stated in the disclosure letter of 10 May 1994,was never contested by the applicant. 118. Nor has the applicant challenged the method by which the amount of duty wasfixed, that is to say, an amount equal to the difference between ECU 115 per tonneand the free-at-Community-frontier price before customs clearance, if the latter islower. 119. It follows from the foregoing that the institutions quite rightly set the duty at thelevel necessary to eliminate the injury caused by dumped imports from Russia. 120. Consequently, even if the applicant were correct in complaining that the institutionsfixed a dumping margin which was too low, it would not be possible in any event for it to obtain annulment of Article 1 of the contested regulation. 121. The first and second pleas are thus ineffective, and the claim for annulment ofArticle 1 of the contested regulation must therefore be rejected in its entirety. 122. Accordingly, the application must likewise be dismissed in its entirety. Costs 123. Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to beordered to pay the costs if they have been applied for in the successful party'spleadings. Since the applicant has been unsuccessful, and since the Council has applied for costs, the applicant must be ordered to pay, in addition to its own costs,the costs of the Council. In accordance with Article 87(4) of the Rules ofProcedure, the Commission as intervener must be ordered to bear its own costs. On those grounds, THE COURT OF FIRST INSTANCE (Fourth Chamber, ExtendedComposition) hereby: 1. Dismisses the application; 2. Orders the applicant to bear its own costs and to pay the costs of theCouncil; 3. Orders the Commission to bear its own costs. Lenaerts Lindh Azizi Cooke Jaeger Delivered in open court in Luxembourg on 17 December 1997. H. Jung P. Lindh Registrar President 1: Language of the case: English.