JUDGMENT OF THE GENERAL COURT (Eighth Chamber)
27 April 2022 (*)
(Subsidies – Imports of cycles, with pedal assistance, with an auxiliary electric motor, originating in China – Definitive countervailing duties – Implementing Regulation (EU) 2019/72 – Determination of injury – Article 8(1), (2) and (5) of Regulation (EU) 2016/1037 – Price undercutting calculation – Causal link)
In Case T‑243/19,
Giant Electric Vehicle Kunshan Co. Ltd, established in Kunshan (China), represented by P. De Baere and J. Redelbach, lawyers,
applicant,
v
European Commission, represented by G. Luengo and T. Maxian Rusche, acting as Agents,
defendant,
APPLICATION under Article 263 TFEU for annulment of Commission Implementing Regulation (EU) 2019/72 of 17 January 2019 imposing a definitive countervailing duty on imports of electric bicycles originating in the People’s Republic of China (OJ 2019 L 16, p. 5), in so far as it concerns the applicant,
THE GENERAL COURT (Eighth Chamber),
composed of J. Svenningsen, President, C. Mac Eochaidh (Rapporteur) and J. Laitenberger, Judges,
Registrar: L. Ramette, Administrator,
having regard to the written part of the procedure and further to the hearing on 27 April 2021,
gives the following
Judgment
Background to the dispute
1        The applicant, Giant Electric Vehicle Kunshan Co. Ltd, is a company established in China active in the production of electric bicycles intended for the domestic market of that State and for export, inter alia to the European Union. It is part of a group of industrial and commercial companies (‘the Giant group’) the ultimate shareholder of which is Giant Manufacturing Co. Ltd. The Giant group has, inter alia, a network of wholly owned subsidiaries in various countries of the European Union, namely related sales companies within the meaning of Article 127 of Commission Implementing Regulation (EU) 2015/2447 of 24 November 2015 laying down detailed rules for implementing certain provisions of Regulation (EU) No 952/2013 of the European Parliament and of the Council laying down the Union Customs Code (OJ 2015 L 343, p. 558).
2        For its export sales to the European Union, the applicant uses two different sales channels. First, it makes own-brand sales through the related sales companies established in the European Union referred to in paragraph 1 above. Those related sales companies sell almost exclusively to independent retail buyers. They are responsible for importation, advertising, marketing, negotiation of sales contracts with retailers, distribution, logistics and after-sales services. Second, as an ‘original equipment manufacturer’ (OEM), it sells directly to an independent buyer, which then resells the electric bicycles through its own retail network in the European Union.
3        On 8 September 2017, the European Bicycle Manufacturers Association (EBMA) lodged a complaint with the European Commission under Article 5 of Regulation (EU) 2016/1036 of the European Parliament and of the Council of 8 June 2016 on protection against dumped imports from countries not members of the European Union (OJ 2016 L 176, p. 21; ‘the basic anti-dumping regulation’), in order to have it carry out an anti-dumping investigation concerning imports of electric bicycles originating in China.
4        By notice published in the Official Journal of the European Union on 20 October 2017 (OJ 2017 C 353, p. 19), the Commission initiated an anti-dumping proceeding concerning the imports at issue (‘the anti-dumping proceeding’).
5        In parallel, on 8 November 2017, the EBMA lodged a complaint with the Commission under Article 10 of Regulation (EU) 2016/1037 of the European Parliament and of the Council of 8 June 2016 on protection against subsidised imports from countries not members of the European Union (OJ 2016 L 176, p. 55; ‘the basic regulation’), in order to have it carry out an anti-subsidy investigation concerning the imports at issue, alleging the existence of various subsidies from which Chinese electric bicycle producers benefited.
6        By notice published in the Official Journal of the European Union on 21 December 2017 (OJ 2017 C 440, p. 22), the Commission initiated an anti-subsidy proceeding concerning the imports at issue (‘the anti-subsidy proceeding’), in particular in respect of cycles, with pedal assistance, with an auxiliary electric motor, originating in China, falling within CN codes 8711 60 10 and ex 8711 60 90 (TARIC code 8711 60 90 10) (‘the product concerned’).
Preliminary phases of the anti-subsidy investigation
7        The investigation of subsidisation and injury covered the period from 1 October 2016 to 30 September 2017 (‘the investigation period’). The examination of trends relevant for the assessment of injury covered the period from 1 January 2014 to 30 September 2017.
8        For the purposes of that investigation, the Commission selected a sample of four Union producers, representing 60% of the total production volume and 58% of the Union industry’s total sales. Given that a company related to one of the four abovementioned Union producers, also an electric bicycle producer, was also investigated, in this judgment, the Court, for the sake of simplicity, will refer to the five sampled Union producers.
9        As regards exports from China, the Commission selected a sample of five groups of exporting producers, including the applicant, on the basis of the largest representative volume of exports to the European Union. The sampled exporting producers represented 43% of the total imports of the product concerned into the Union.
10      On 22 March and 27 April 2018, the applicant submitted responses to the anti-subsidy questionnaire on behalf of certain companies of the Giant group involved in the production of electric bicycles and of its related European sales companies.
11      Between 16 and 29 May 2018, the Commission carried out verification visits at the premises of the applicant and of four other Chinese companies of the Giant group. The verifications related to the responses to the anti-subsidy questionnaire.
12      On 3 July 2018, the applicant requested that the Commission ask the sampled Union producers to provide non-confidential information on the level of trade at which they were making the first sale to an independent customer and the related sales channels. Those documents were, in the applicant’s view, necessary in order for it to be able to identify whether, like itself, the sampled Union producers also mainly sold directly to retailers or whether they sold at a different level of trade, for example, to large pan-European distributors or under OEM arrangements, which could affect the comparison of prices and the determination of injury. That request for information covered both the anti-dumping proceeding and the anti-subsidy proceeding.
13      It is apparent from the case file that, in the determination of injury, where the sampled exporting producers exported the product concerned directly to independent customers in the European Union, the Commission took into consideration the price actually paid or payable for the product concerned when sold for export to the Union, in accordance with Article 2(8) of the basic anti-dumping regulation. That was the case for the applicant’s direct sales to its OEM customer (‘the applicant’s OEM sales’), which represented less than 15% of its sales, as well as for the other sampled exporting producers which made only direct OEM sales.
14      By contrast, where the sampled exporting producers exported the product concerned to the European Union through related companies acting as importers, the Commission took into consideration a constructed export price, established on the basis of the price at which the imported products were first resold to independent buyers in the Union, in accordance with Article 2(9) of the basic anti-dumping regulation. In those cases, adjustments to the price were made for all costs incurred between importation and resale, including selling, general and administrative expenses (‘SG&A expenses’), as well as the profits of those related companies. That was the case for the applicant’s indirect sales under its own brand to independent retailers, made through its related sales companies in the Union (‘own-brand sales’). Own-brand sales represented the vast majority of the applicant’s export sales, namely more than 85% of its sales, of which more than 90% were to retailers.
15      On several occasions during the anti-subsidy proceeding, the applicant reiterated its request for information concerning the level of trade at which the sampled Union producers had made their sales during the investigation period (see paragraph 12 above). In addition, the applicant disputed the methodology adopted by the Commission to determine price undercutting.
16      On 31 August 2018, the Commission contacted the sampled Union producers and asked them to provide non-confidential summaries of the level of trade of their sales on the Union market. The information requested was provided by the parties concerned in the form of ranges and was communicated to the applicant in September 2018. It shows that four of the five sampled Union producers had a sales profile similar to that of the applicant, that is to say, mostly to retailers. One Union producer made the majority of its sales to OEM customers.
17      On 24 September 2018, the Commission informed all interested parties that no provisional countervailing duties would be imposed on imports into the Union of electric bicycles originating in China and that the investigation would continue.
18      On 28 September 2018, the applicant provided the Commission with information on its use of bank acceptance notes as a means of payment.
19      On 31 October 2018, the Commission sent interested parties a final disclosure setting out the essential facts and considerations on the basis of which it intended to impose a definitive countervailing duty on imports of electric bicycles into the Union (‘the final disclosure’).
20      It is apparent from recital 5 of the final disclosure that the injury, causation and Union interest analyses performed in the anti-subsidy investigation and the parallel anti-dumping investigation were, mutatis mutandis, identical given that the definition of the Union industry, the representative Union producers and the investigation period were the same in both investigations. Recitals 461, 463 and 568 of that document show that the Commission adopted the same methodology for the determination of injury and the injury elimination level in the anti-subsidy proceeding as that adopted in the anti-dumping proceeding.
21      Thus, in its examination of the existence of injury, in recital 461 of the final disclosure, the Commission stated that it had determined price undercutting during the investigation period by comparing (a) the weighted average sales prices per product type of the sampled Union producers charged to unrelated customers on the Union market, adjusted to an ex-works level, and (b) the corresponding weighted average prices per product type of imports from the sampled exporting producers charged to the first independent customer on the Union market, established on a cost, insurance, freight (CIF) basis with appropriate adjustments for customs duties of 6% and post-importation costs.
22      In recital 463 of the final disclosure, the Commission stated that the price comparison had been made on a type-by-type basis for the transactions concerned, duly adjusted where necessary, and after deduction of rebates and discounts. As regards the level of trade of the transactions concerned, it explained that, since both the sampled Union producers and the sampled exporting producers sold to OEM customers as well as under their own brand, it had examined whether an adjustment for level of trade was warranted. In that regard, it is stated that it examined whether there was a consistent and distinct difference in prices between sales to OEM buyers and own-brand sales, and concluded that no such consistent and distinct difference in prices existed for the sales of the sampled Union producers.
23      In recital 568 of the final disclosure, the Commission explained that it had determined the injury elimination level on the basis of a comparison of the weighted average import price of the sampled exporting producers, duly adjusted for importation costs and customs duties, as had been established for the price undercutting calculation – following the method referred to in paragraph 21 above – with the weighted average non-injurious price of the like product sold by the sampled Union producers on the Union market during the investigation period.
24      On 22 and 26 November 2018, at a hearing with the Commission services and in writing, the applicant submitted comments on the final disclosure. It argued, inter alia, that the Commission’s subsidy analysis was flawed in relation to its purchases of engines and batteries, the use of bank acceptance notes, the cost of land-use rights, the use of credit line agreements and the receipt of allegedly preferential loans. In relation to the Commission’s injury analysis, it claimed, inter alia, that there was no legal basis for the use, by analogy, of Article 2(9) of the basic anti-dumping regulation. Moreover, it essentially reiterated its position (see paragraph 15 above) that, given that both the sales of its related sales companies and the sales of the sampled Union producers were mainly to independent retailers and were thus already at the same level of trade, the Commission should simply have compared them with each other, instead of using, for its own-brand sales, and by analogy with the construction of the export price under Article 2(9) of the basic anti-dumping regulation in the context of the determination of the existence of dumping, a constructed CIF price. The CIF price constructed for the applicant’s own-brand sales corresponded, due to the deduction of SG&A expenses and profit of its related sales companies, to a price hypothetically applicable to a large independent importer and not to a retailer. As regards its OEM sales, an adjustment should have been made to the Union producers’ prices used for the price comparison since they corresponded to retail prices.
25      On 30 November 2018, the Commission sent interested parties an additional final disclosure containing revisions to the final disclosure referred to in paragraph 19 above. On 3 and 12 December 2018, the applicant submitted additional comments and information concerning the functioning of the Canadian system of bank acceptance notes.
26      Following the anti-subsidy proceeding and the anti-dumping proceeding, the Commission adopted Commission Implementing Regulation (EU) 2019/72 of 17 January 2019 imposing a definitive countervailing duty on imports of electric bicycles originating in the People’s Republic of China (OJ 2019 L 16, p. 5; ‘the contested regulation’), and Commission Implementing Regulation (EU) 2019/73 of 17 January 2019 imposing a definitive anti-dumping duty and definitively collecting the provisional duty imposed on imports of electric bicycles originating in the People’s Republic of China (OJ 2019 L 16, p. 108, and corrigendum OJ 2019 L 16 I, p. 1), which is the subject of an action for annulment in Giant Electric Vehicle Kunshan v Commission (T‑242/19).
Contested regulation
27      The Commission in particular considered, in the contested regulation, that, owing to the various subsidies identified, the average prices of imports of the product concerned from China were significantly lower than those of Union producers and of imports from third countries other than China, such as to show significant undercutting of the prices of that product and thereby to cause injury to the Union industry, which has been unable to take advantage of the growth of the electric bicycle market.
28      In that regard, in the context of its analysis of preferential financing, the Commission set out, in recitals 304 to 344 of the contested regulation, the reasons why it concluded, inter alia, that bank acceptance notes were a form of preferential support from which the electric bicycle sector benefited. It is indicated that bank acceptance notes are a form of unconditional credit whereby banks take over supplier account payables from buyers and transfer an agreed amount to the suppliers at an agreed date. By the same date, the buyer must have transferred the same amount to the bank. Given that the date of repayment to the bank is often later than the supplier payment date, bank acceptance notes serve as a bank guarantee and as a de facto loan and represent a transfer of funds since they are used as a means of payment at the same level as a money order. They were granted without account being taken of the financial situation of the sampled exporting producers and for a flat-rate fee lower than available international benchmarks. Recitals 345 and 346 of the contested regulation indicate that the subsidy amount established for the Giant group in relation to preferential lending, including bank acceptance notes, during the investigation period was 0.93%.
29      In recitals 368 to 502 of the contested regulation, the Commission set out the reasons for having concluded, in essence, that the Chinese public authorities were providing subsidies to the engine industry and to the battery industry and entrusting and directing or ordering the suppliers of those inputs to provide them for less than adequate remuneration in order to support the electric bicycle industry. Recitals 442 and 502 of the contested regulation indicate that the subsidy amounts established for the Giant group in relation to the provision of engines and the provision of batteries for less than adequate remuneration, during the investigation period, were 0.84% and 0.38% respectively.
30      In recitals 503 to 532 of the contested regulation, the Commission set out the reasons for having concluded that the provision of land-use rights by the Chinese public authorities, inter alia, to the electric bicycle industry, at preferential rates, had to be considered a subsidy in the form of provision of goods which conferred a benefit upon the recipient companies. Recital 533 of the contested regulation indicates that the subsidy amount established for the Giant group in relation to the provision of land-use rights for less than adequate remuneration during the investigation period was 0.91%.
31      Recitals 578 to 580 of the contested regulation indicate that the total amount of countervailable subsidies calculated in respect of the Giant group was 3.9%.
32      In its examination of the existence of injury, in recitals 610 and 612 of the contested regulation, the Commission confirmed the methodology for determining price undercutting set out in paragraphs 21 and 22 above. In recital 613 of the contested regulation, it is indicated that the result of the comparison for the purpose of determining price undercutting, expressed as a percentage of the sampled Union producers’ turnover during the investigation period, had shown price undercutting margins ranging from 16.2 to 43.2%.
33      In recitals 614 to 619 of the contested regulation, the Commission explained the reasons why, as regards the applicant’s own-brand sales, it had used Article 2(9) of the basic anti-dumping regulation by analogy in order to calculate the price undercutting margin. It also explained the reasons why it had rejected the applicant’s arguments concerning the use of the constructed CIF price instead of the declared CIF value of its imports in the determination of price undercutting as regards the applicant’s own-brand sales (see paragraph 24 above). In that context, it stated, in particular, that, in order to allow for a fair comparison, the deduction of SG&A expenses and profit from the resale price to unrelated customers made by the related importer was warranted in order to arrive at a reliable CIF price. In recital 621 of the contested regulation, the Commission explained why it had rejected the applicant’s level of trade adjustment claim in respect of its OEM sales, namely that there was no consistent and distinct price difference for OEM sales and brand owner sales in the Union.
34      In the context of the examination of the causal link and, in particular, of the effects of the dumped imports, recital 696 of the contested regulation states, inter alia, that the prices of subsidised imports from China significantly undercut Union industry prices during the investigation period, with price undercutting margins ranging from 16.2 to 43.2%, and that the Union industry had lost 24 points of market share in a market growing by 74% while imports from China had increased by 250% and gained 17 points of market share (from 18 to 35%).
35      In recitals 770 and 776 of the contested regulation, the Commission confirmed the methodology for determining the injury elimination level set out in paragraph 23 above. The injury elimination level established for the applicant, expressed as a percentage of the weighted average CIF import value, was 24.6%.
36      By Article 1(2) of the contested regulation, the applicant was made subject to a definitive countervailing duty of 3.9% applicable to the net, free-at-Union-frontier price.
Procedure and forms of order sought
37      By application lodged at the Court Registry on 9 April 2019, the applicant brought the present action.
38      By document lodged at the Court Registry on 12 August 2019, the EBMA applied to intervene in the present proceedings in support of the form of order sought by the Commission. By order of 16 September 2019, Giant Electric Vehicle Kunshan v Commission (T‑243/19, not published, EU:T:2019:665), the President of the Ninth Chamber of the General Court dismissed the EBMA’s application to intervene.
39      Following a change in the composition of the Chambers of the Court, pursuant to Article 27(5) of the Rules of Procedure of the General Court, the Judge-Rapporteur was assigned to the Eighth Chamber, to which the present case was accordingly allocated.
40      The applicant claims that the Court should:
–        annul the contested regulation in so far as it concerns it;
–        order the Commission to pay the costs.
41      The Commission claims that the Court should:
–        dismiss the action as unfounded;
–        order the applicant to pay the costs.
Law
42      In support of its action, the applicant puts forward seven pleas in law alleging various infringements of the basic regulation, namely:
–        first, a manifest error of assessment committed by the Commission in concluding that a subsidy had been granted through the applicant’s purchase of engines and batteries, thereby infringing Article 1(1) and Article 3 of the basic regulation;
–        second, a manifest error of assessment committed by the Commission in the calculation of the subsidy amount by wrongly including benefits which were unrelated to electric bicycles released for free circulation in the European Union, thereby infringing Article 1 and Article 7(1) of the basic regulation;
–        third, a manifest error of assessment committed by the Commission in concluding that the use of bank acceptance notes offered by certain Chinese banks constituted a financial contribution within the meaning of Article 3(1) of the basic regulation;
–        fourth, a manifest error of assessment committed by the Commission in concluding that the use of bank acceptance notes conferred a benefit on it;
–        fifth, that the Commission failed to establish the specificity of the alleged subsidy granted through bank acceptance notes, thereby infringing Article 4 of the basic regulation;
–        sixth, a manifest error of assessment committed by the Commission in concluding that the applicant obtained a benefit through the acquisition of land-use rights, thereby infringing Article 6(d) of the basic regulation;
–        seventh, a manifest error of assessment committed by the Commission in failing to compare, for the purposes of the undercutting and underselling calculations, import prices with the price of the like product produced by the Union industry at the same level of trade and at the point where the goods enter into competition with each other, thereby infringing Article 8(1), (2) and (5) of the basic regulation.
43      The Court considers it appropriate to examine the seventh plea first.
The seventh plea
44      In its seventh plea, the applicant claims that the Commission infringed Article 8(1), (2) and (5) of the basic regulation in failing to compare, for the purpose of the price undercutting calculation, import prices with the price of the like product produced by the Union industry at the same level of trade and at the point where the goods enter into competition with each other.
45      First, as regards its own-brand sales, the applicant disputes the application by analogy, by the Commission, of Article 2(9) of the basic anti-dumping regulation, provided for in the context of the determination of the existence of dumping, in the present case, for the purpose of the calculation of price undercutting. Applying that provision in the context of the determination of price undercutting has no legal basis and is unnecessary in the present case. Since both the sales of the applicant’s related sales companies and the sales of the sampled Union producers were mainly to independent retailers and were already at the same level of trade, the Commission should simply have compared them with each other. Applying the abovementioned provision created a difference in the level of trade, whereas no such difference had existed prior to its application, and an artificial finding of price undercutting. Moreover, the impact of the imports and their effect on the prices of the Union industry should be determined by looking at the actual prices of the imports which compete with the prices of the Union producers on the Union market.
46      Second, the applicant claims that its OEM sales were compared with Union producers’ sales of own-brand products to retailers. The latter sales should be adjusted to bring them to the level of a sale to an unrelated OEM customer in the Union.
47      Those errors in the calculation of price undercutting biased the finding of injury to the Union industry caused by subsidised imports, and the underselling and injury margin calculations determined for it.
48      The Commission disputes those arguments, contending that the present plea is ineffective and, in any event, unfounded.
49      With regard to the plea’s alleged ineffective nature, the Commission contends that the applicant has failed to show how the alleged error in the price undercutting calculation with respect to it would have led to a different conclusion on injurious subsidisation or how it would taint the injury analysis as a whole. It states that its findings on the existence of price undercutting relied also on the very low average price of Chinese imports based on statistical data from the statistical office of the European Union (Eurostat) and on the calculations made in respect of the four other sampled exporting producers. It states that, in finding injury, it also relied on considerations relating to the volumes of the imports at issue as well as on the correlation between the decrease in the Union industry’s market share and the increase in the market share of the Chinese exporting producers.
50      Next, the Commission argues that the applicant has not succeeded in calling into question the calculation of price undercutting established in respect of the four other sampled exporting producers for which the contested asymmetry did not arise. Furthermore, if it had excluded the applicant from the analysis, or even if no price undercutting had been found in respect of applicant, it would nevertheless have observed price undercutting, since the range of price undercutting found would remain between 16.2 and 43.2%.
51      In addition, the Commission contends, relying on alternative price undercutting calculations relating to the applicant, annexed to the defence and to the rejoinder, that, even following those alternative calculations, the applicant’s prices would still undercut those of the Union industry. In the first of those calculations, in which the applicant’s prices were compared with those of the sampled Union producers, price undercutting would still be above 2%. In the second, in which the Commission used the CIF EU border price for the applicant’s sales, but deducted hypothetical SG&A expenses and profit of the sampled Union producers’ related selling entities, the calculation would still show price undercutting of more than 10%. In the third, in which the Commission added customers to the type-by-type analysis and compared the sales of the sampled Union producers to distributors, retailers and OEM customers with sales made by the applicant to distributors, retailers and OEM customers respectively, the overall result would be even higher than the price undercutting margin established for the applicant in the contested regulation.
52      Last, the Commission contends that the applicant’s arguments concerning errors in the calculation of the underselling margin and the injury margin in respect of the applicant are also ineffective.
53      As regards the allegedly unfounded nature of the present plea and concerning the applicant’s own-brand sales, the Commission states that Article 8(2) of the basic regulation specifically provides that the existence of significant price undercutting has to be examined at the level of the subsidised imports, and not at the level of any subsequent resale price on the Union market. It also stresses the importance of using reliable export prices which are not affected by an intra-group relationship. Therefore, the Commission was justified in applying Article 2(9) of the basic anti-dumping regulation to determine the price undercutting margin in respect of the applicant’s own-brand sales in this case. In addition, the methodology which it followed ensures that all exporting producers receive equal treatment, whether they sell directly or through related selling entities. Lastly, as regards the applicant’s OEM sales, the Commission states that the applicant failed to show that there were consistent price differences according to the type of customer – OEM or retailer – on the part of the sampled Union producers. Given that the prices of the Union producers’ sales to OEM customers and to retailers were similar, the use of those prices without any distinction based on the type of customer had no impact on the applicant’s OEM sales.
Preliminary observations
54      By the present plea, the applicant submits that the Commission made errors in the calculation of price undercutting which constitute infringements of Article 8 of the basic regulation and affect the validity of the contested regulation with regard to it. The plea is divided into two parts, alleging, first, that the application, by analogy, of Article 2(9) of the basic anti-dumping regulation in relation to the applicant’s own-brand sales has no legal basis and was unnecessary in the present case for the purpose of the calculation of price undercutting in respect of those sales and, second, that the Commission did not make a fair comparison, for the purpose of calculating price undercutting, between import prices and the price of a like product of the Union industry.
55      Analysing the effect of the subsidised imports on the prices applied in the European Union for a like product of the Union industry is an essential element of anti-subsidy investigations. Under Article 1(1) of the basic regulation, countervailing measures may be applied to a subsidised product only if its release for free circulation in the Union causes injury.
56      In accordance with Article 8(1) of the basic regulation, a determination of injury is to be based on positive evidence and is to involve an objective examination of, first, the volume of the subsidised imports and the effect of those imports on prices in the Union market for like products and, second, the consequent impact of those imports on the Union industry.
57      With regard to the effect of the subsidised imports on prices, Article 8(2) of the basic regulation provides for the obligation to give consideration to whether there has been, for those imports, significant price undercutting as compared with the price of a like product of the Union industry, or whether the effect of such imports is otherwise to depress prices to a significant degree or prevent price increases, which would otherwise have occurred, to a significant degree. No one or more of those factors can necessarily give decisive guidance.
58      Under Article 8(5) of the basic regulation, it must be demonstrated, from all the relevant evidence presented in relation to paragraph 1 of that article, that the subsidised imports are causing injury. Specifically, that entails demonstrating that the volume or price levels identified pursuant to paragraph 2 of the said article are responsible for an impact on the Union industry as provided for in paragraph 4 of the same article, and that that impact exists to a degree which enables it to be classified as material.
59      Moreover, according to settled case-law, in the realm of measures to protect trade, the Commission enjoys a broad discretion by reason of the complexity of the economic, political and legal situations which it has to examine (see, to that effect, judgment of 3 September 2009, Moser Baer India v Council, C‑535/06 P, EU:C:2009:498, paragraph 85 and the case-law cited).
60      The determination of the existence of injury caused to the Union industry requires an appraisal of complex economic situations and the judicial review of such an appraisal must therefore be limited to verifying whether relevant procedural rules have been complied with, whether the facts have been accurately stated, and whether there has been a manifest error in the appraisal of those facts or a misuse of powers. That is particularly the case as regards the determination of the factors injuring the Union industry in an anti-subsidy proceeding (see, to that effect, judgment of 3 September 2009, Moser Baer India v Council, C‑535/06 P, EU:C:2009:498, paragraph 86 and the case-law cited), and in particular the analysis of price undercutting.
61      The basic regulation does not contain any definition of the concept of price undercutting and does not lay down any method for the calculation thereof (judgment of 10 April 2019, Jindal Saw and Jindal Saw Italia v Commission, T‑300/16, EU:T:2019:235, paragraph 238).
62      The calculation of the price undercutting of the imports at issue is carried out, in accordance with Article 8(1) and (2) of the basic regulation, for the purposes of determining the existence of injury suffered by the Union industry by reason of those imports and it is used, more broadly, to assess that injury and to determine the injury margin, namely the injury elimination level. The obligation to carry out an objective examination of the impact of the subsidised imports, as set out in Article 8(1) of the basic regulation, requires a fair comparison to be made between the price of the product concerned and the price of the like product of that industry when sold in the territory of the Union (see judgment of 10 April 2019, Jindal Saw and Jindal Saw Italia v Commission, T‑300/16, EU:T:2019:235, paragraph 239 and the case-law cited).
63      In order to guarantee the fairness of that comparison, prices must be compared at the same level of trade. A comparison of prices obtained at different levels of trade, that is to say, one which does not include all the costs relating to the level of trade which must be taken into account, would necessarily be misleading in its results and would not allow a correct assessment to be made of the injury to the Union industry. Such a fair comparison is a prerequisite of the lawfulness of the calculation of the injury to that industry (see judgment of 10 April 2019, Jindal Saw and Jindal Saw Italia v Commission, T‑300/16, EU:T:2019:235, paragraph 239 and the case-law cited).
64      It is in the light of the foregoing considerations that it is necessary to examine, at the outset, the second part of the present plea, alleging that the Commission did not make a fair comparison, for the purpose of the calculation of price undercutting, between import prices and the price of a like product of the Union industry.
The second part of the seventh plea, alleging that the Commission did not make a fair comparison, for the purpose of the calculation of price undercutting, between import prices and the price of a like product of the Union industry
65      In the present case, as is indicated in paragraph 32 above, in its examination of the existence of injury, in recital 610 of the contested regulation, the Commission stated that it had determined price undercutting during the investigation period by comparing:
‘(a)      the weighted average sales prices per product type of the four sampled Union producers charged to unrelated customers on the Union market, adjusted to an ex-works level; and
(b)      the corresponding weighted average prices per product type of the imports from the sampled exporting producers … to the first independent customer on the Union market, established on a CIF basis with appropriate adjustments for customs duties of 6% and importation costs.’
66      Recital 610 of the contested regulation appears to show that, according to the Commission, the price comparison was made at the same level of trade, namely by taking into account the prices at an ex-works level for the sampled Union producers’ sales and the prices established on a CIF basis after customs clearance for the applicant’s sales.
67      However, following questions put by the Court by way of measures of organisation of procedure, the Commission explained that, when comparing the prices charged by the sampled Union producers to retailers with those charged by the applicant to retailers, it had, as regards the Union producers, used the prices reported by those producers for their sales to independent customers – whether wholesalers, distributors, traders, retailers, end-users or consumers, OEM customers or others – and deducted certain costs, namely discounts, commissions, transport costs and credit notes, in order to establish an ex-works price, that is to say, the price at which a customer could buy the product at the factory. In the case of sales made by the sampled Union producers’ related selling entities to retailers, it had not deducted SG&A expenses and the profits of those related selling entities.
68      Thus, it is apparent that, in reality, in the price comparison, as regards the sampled Union producers, either the ex-works prices of the said producers, when they sold directly to independent buyers, or the prices of those producers’ related selling entities, were taken into account, the latter prices including SG&A expenses and the profits of those related selling entities.
69      On the other hand, as regards the applicant’s own-brand sales, the Commission indicated that the price comparison took into account ‘EU landed’ prices, established on the basis of the CIF export price at the EU border, corresponding to the export price as constructed, in accordance with Article 2(9) of the basic anti-dumping regulation in the context of the determination of the dumping margin, after customs clearance.
70      In that regard, the Commission explained that, as it had done in respect of the Union producers, it had deducted discounts, commissions, transport costs and credit notes from the prices of the applicant’s related sales companies, so that all sales, namely those of the Union producers and those of the applicant, would be compared on the same terms. It had then deducted SG&A expenses and the profits of the applicant’s related sales companies, using Article 2(9) of the basic anti-dumping regulation by analogy, in order to establish the CIF export price at the EU border. Finally, it had added amounts for customs duties (6%) and post-importation costs in order to establish the ‘EU landed’ price, namely a constructed price at which any customer in the European Union can purchase the product concerned at the time it is released within the internal market.
71      Thus, it is apparent that, as regards the applicant’s own-brand sales, the CIF export prices at the EU border were based on export prices constructed by taking into account various adjustments, in particular those intended to reflect the export price of the product concerned before any involvement of the applicant’s related sales companies.
72      The adjustments made by the Commission for the purposes of the price undercutting analysis to the applicant’s prices in respect of its own-brand sales, namely through its related sales companies in the European Union, and to the prices of the sampled Union producers, may be illustrated by the simplified table reproduced below:
Adjustments made to prices to first independent buyers
Sampled Union producers
Irrespective of sales channel used (direct sale/sale through related selling entity) and all categories of buyer combined
Applicant
Own-brand sales through related sales companies in the European Union
Sales mainly to retailers
Deduction of:
–      discounts
–      commissions
–      transport costs
–      credit notes
Deduction of:
–      discounts
–      commissions
–      transport costs
–      credit notes
–      SG&A expenses of related sales company
–      profits of related sales company
= CIF export price at EU border
Addition of:
–      customs duties (6%)
–      post-importation costs
= ex-factory level price (according to Commission)
= EU landed price
73      Last, it is apparent from the case file that, as regards the OEM sales of the applicant and of the four other sampled exporting producers which made direct OEM sales, shipments of the product concerned were, in general, made either on a CIF basis or on a free-on-board (‘FOB’) basis in China. The Commission therefore used, in order to establish price effects, their reported CIF export prices or, in the case of shipments on an FOB basis, the reported FOB export prices to which it added the amounts for freight and insurance to establish the CIF export price at the EU border, in accordance with Article 2(8) of the basic anti-dumping regulation. It then added amounts for customs duties (6%) and post-importation costs in order to establish the ‘EU landed’ price.
74      Since independent buyers on an OEM basis undertake the downstream marketing of the product concerned in the European Union, including marketing to retailers, the prices referred to in paragraph 73 above used by the Commission did not include SG&A expenses or profits relating to the subsequent downstream sales.
75      It is apparent from the considerations set out in paragraphs 67 to 74 above that, even though the Commission indicated, in recital 610 of the contested regulation, that it had taken into consideration in the comparison the prices of the sampled Union producers at the ‘ex-works’ level, in reality it compared the prices of sales to the first independent buyers of those producers with the applicant’s CIF prices.
76      The marketing of products carried out not directly by the producer, but through selling entities, implies the existence of costs and a profit margin specific to those entities, so that the prices charged by them to independent buyers are generally higher than the prices charged by producers in their direct sales to such buyers and thus cannot be assimilated to those latter prices (judgment of 10 April 2019, Jindal Saw and Jindal Saw Italia v Commission, T‑300/16, EU:T:2019:235, paragraph 248).
77      That consideration is not called into question by the Commission’s argument that the differentiated treatment of the SG&A expenses and profits of the applicant’s related sales companies and of those of the sampled Union producers’ related selling entities is explained by the fact that the applicant has SG&A expenses and profits in China corresponding to the SG&A expenses and profits of the Union industry. The SG&A expenses and profits which are the subject of the deductions in question and which are, ultimately, marketing costs in the European Union are necessarily different from any SG&A expenses that the applicant might have borne in China. It follows that the Commission was not entitled to take the view that the marketing costs borne by the applicant in China were comparable to the SG&A expenses borne by the sampled Union producers’ related selling entities with a view to marketing the like product in the European Union.
78      In the present case, it is common ground that the applicant’s sales networks and those of four of the five sampled Union producers are similar, in so far as the bulk of the sales of the applicant and of those Union producers in the European Union is made to independent retailers of electric bicycles.
79      In that regard, first, it is apparent from the case file that more than 85% of the applicant’s sales were own-brand sales, made through its related sales companies in the European Union, more than 90% of which were made to retailers. Less than 15% of the applicant’s sales were direct OEM sales.
80      Second, according to the case file, typically, more than 85% of the sampled Union producers’ sales were to retailers. Moreover, it is apparent that a part of the sampled Union producers’ sales were made through related selling entities.
81      Therefore, by carrying out, for the price comparison made in the context of the price undercutting calculation, the assimilation, referred to in paragraph 68 above, between the prices charged by the sampled Union producers in their direct sales to independent buyers and the prices charged by the related selling entities of those producers to such buyers, only as regards the like product of the Union industry, the Commission took into account for that product a price which was inflated and therefore unfavourable to the applicant, which makes most of its sales in the Union through related sales companies.
82      In those circumstances, by taking into account, in the present case, in relation to the prices of the sampled Union producers, certain elements which concern a different level of trade from that which it used for the purposes of the comparison (ex-works), elements which it had nevertheless deducted from the applicant’s prices as regards its own-brand sales, or which were not present as regards its OEM sales since the downstream marketing of the product concerned was carried out by the independent buyer itself, the Commission did not make a fair comparison in the calculation of the applicant’s price undercutting margin.
83      It is clear, however, from the case-law cited in paragraphs 62 and 63 above, that the obligation to carry out an objective examination of the impact of the subsidised imports, laid down in Article 8(1) of the basic regulation, requires a fair comparison to be made between the price of the product concerned and the price of the like product of the Union industry, such a fair comparison being a prerequisite of the lawfulness of the calculation of the injury to that industry.
84      Moreover, while it is for the Commission to choose the method of analysis which it considers most appropriate for determining price effects, according to the particularities of the investigation in question, the fact remains that the objectivity and fairness of the examination must be guaranteed.
85      It follows that if, in the exercise of its broad discretion referred to in paragraphs 59 and 60 above, the Commission deemed it necessary, in the present case, to bring the applicant’s prices to a CIF level, inter alia, to ensure that reliable prices were taken into account and to ensure equal treatment between all the sampled exporting producers, it was also incumbent on it to ensure that the prices of the sampled Union producers had been established at an equivalent level.
86      Accordingly, the price undercutting calculation carried out by the Commission in respect of the applicant in the context of the contested regulation must be regarded as vitiated by a methodological error which led to an unfair comparison and, therefore, as contrary to Article 8(1) of the basic regulation.
87      Consequently, the applicant’s challenge to the calculation of price undercutting in respect of its products is well founded.
Consequences of the error found
88      It follows from the foregoing considerations that the methodological error found in paragraph 82 above made by the Commission in calculating the price undercutting of the product concerned for the applicant’s products had the effect of identifying undercutting of those prices, the importance or even existence of which has not been properly established.
89      Nevertheless, the Commission contends that the seventh plea is ineffective in so far as the alleged errors have no impact on the quantification of the injury suffered by the Union industry.
90      In that context, as is set out in paragraphs 48 to 52 above, in the first place, the Commission submits that the price undercutting of the imports at issue is only one of the factors on which it based its findings relating to the existence of material injury to the Union industry.
91      In that regard, it is true that, according to the case-law and as is noted in paragraphs 56 and 57 above, the objective examination regarding the determination of injury caused to the Union industry, provided for in Article 8(1) of the basic regulation, must relate, first, to the volume of the subsidised imports and the effect of those imports on prices in the Union market for like products, and, secondly, to the consequent impact of those imports on the Union industry. Thus, as regards the determination of that volume or those prices, Article 8(2) of the basic regulation sets out the factors to be taken into account in that examination, while specifying that one or more of those factors cannot in themselves give decisive guidance (see, by analogy, judgment of 10 September 2015, Bricmate, C‑569/13, EU:C:2015:572, paragraphs 52 and 53 and the case-law cited).
92      The same is true with respect to the impact of the subsidised imports on the Union industry. It follows from Article 8(4) of the basic regulation that the Commission has the task of evaluating all relevant economic factors and indices which have a bearing on the state of that industry, and one or more of those factors does not necessarily give decisive guidance. That provision thus gives the Commission discretion in the examination and evaluation of the various items of evidence (see, by analogy, judgment of 10 September 2015, Bricmate, C‑569/13, EU:C:2015:572, paragraph 54 and the case-law cited).
93      Finally, with respect to the causal link, under Article 8(5) of the basic regulation the Commission must demonstrate that the volume or price levels identified pursuant to paragraph 2 of that article are responsible for an impact on the Union industry as provided for in paragraph 4 thereof and that that impact exists to a degree which enables it to be classified as material (see, by analogy, judgment of 10 September 2015, Bricmate, C‑569/13, EU:C:2015:572, paragraph 55).
94      It follows from the case-law cited in paragraphs 91 to 93 above that the Commission was not obliged, in the present case, to determine price undercutting margins and that it was perfectly entitled to base its injury analysis and, therefore, the causal link, on other price phenomena listed in Article 8(2) of the basic regulation, such as significant depression of Union industry prices or prevention of price increases to a notable extent.
95      In recitals 681 and 696 of the contested regulation, however, in the context of its conclusion on injury and the causal link between the subsidised imports and that injury, the Commission stressed the importance it attached to the existence of price undercutting. It observed in those recitals in particular that the prices of subsidised imports from China ‘significantly undercut Union industry prices during the investigation period’, with price undercutting margins ranging from 16.2 to 43.2%. It also noted that, during the period from 1 January 2014 to 30 September 2017, the Union industry had lost 24 points of market share in a market growing by 74% while imports from China had increased by 250% and gained 17 points of market share (from 18 to 35%). It further added that the pressure exerted on prices by subsidised imports from China had kept profits and cash flows at a depressed level.
96      Admittedly, as a complement to the calculation of the price undercutting margins of the sampled exporting producers, the Commission used, in recitals 604 to 609 and in Table 15 of the contested regulation, Eurostat statistics to demonstrate the downward evolution of the average prices of imports into the European Union from China between 2014 and the investigation period and found that the average prices of imports were below those of the Union producers. Nevertheless, the Commission itself indicates, in recital 607 of the contested regulation, that the evolution of prices is ‘not completely reliable’ in so far as ‘the detailed product type mix was not known due to the general nature of the Eurostat statistics’. Moreover, it makes no reference to those statistics in recital 696 of the contested regulation relating to the causal link between the imports at issue and the injury suffered by the Union producers, whereas that recital refers, a contrario, to the price undercutting margins.
97      In addition, in recital 609 of the contested regulation, in its analysis of the prices of imports from China and price undercutting, the Commission emphasised, in essence, that the declining trend in the average prices of imports from China referred to by the Eurostat statistics had to be considered in the light of the analyses carried out on the basis of product type, which had led to the findings of ‘substantial’ price undercutting.
98      In any event, the fact that the Eurostat statistics show that the prices of imports are lower than the prices of the Union producers does not contradict the fact that, in recital 696 of the contested regulation, the Commission relied on the price undercutting margins to demonstrate the causal link between the imports at issue and the injury to the Union producers.
99      Last, in recital 674 of the contested regulation, the Commission referred to a significant volume of imports at subsidised and undercutting prices and, in recital 715 of the same regulation, also emphasised the relevance of the finding of price undercutting.
100    It follows from the recitals of the contested regulation mentioned in paragraphs 95, 97 and 99 above that the price undercutting margins as calculated in that regulation were an indicator of primary importance for the Commission and are, in essence, a decisive element in the conclusion that imports of the product concerned are at the root of the injury to the Union industry.
101    Therefore, any error affecting the calculation of the price undercutting margins in the present case is likely to have a bearing on the causal link between the imports of the products concerned and the injury to the Union industry.
102    In accordance with Article 1(1) and Article 8(5) of the basic regulation, the existence of a causal link between the subsidised imports and the injury to the Union industry is a necessary condition for the imposition of countervailing duties.
103    It follows that, contrary to what the Commission asserts, the methodological error found in paragraph 82 above cannot be overcome by taking other indicators into consideration.
104    In the second place, the Commission submits that the alleged errors concern only the determination of price undercutting in respect of the applicant and that the applicant has failed to call into question the price undercutting calculation for the other sampled exporting producers. Furthermore, if it had excluded the applicant from the analysis, or even if no price undercutting had been found in respect of the applicant, it would nevertheless have observed price undercutting, based on the macroeconomic analysis of the prices and of the price undercutting margins of the other sampled exporting producers.
105    In that regard, first, the methodological error found in paragraph 82 above is likely to have a bearing on the calculation of price undercutting established in respect of the other sampled exporting producers.
106    The four sampled exporting producers other than the applicant, after all, made only direct OEM sales, namely direct sales to independent buyers on an OEM basis, those buyers themselves carrying out the downstream marketing of the product concerned in the European Union. As is indicated in paragraph 74 above, their export prices did not include SG&A expenses or profits relating to the subsequent downstream marketing of the product concerned. By contrast, as is noted in paragraphs 68, 75, 81 and 82 above, with regard to the sampled Union producers, the Commission assimilated the prices charged by those producers in their direct sales to independent buyers to those charged by those same producers’ related selling entities to such buyers. In doing so, that institution took into consideration elements which concern a different level of trade from that which it used for the purposes of the comparison (ex-works), which were not present as regards the OEM sales of the sampled exporting producers and, ultimately, a price that was possibly higher than that used for the four sampled exporting producers other than the applicant.
107    Second, the Commission’s suggestion to remove the applicant from the examination of the price undercutting margins must be rejected in so far as, as is mentioned in recitals 33 to 43 of the contested regulation, the Commission decided to create a representative sample of all Chinese exporting producers on the basis, inter alia, of the largest representative volume of exports to the European Union and decided to include the applicant in that sample.
108    Third, the Commission’s attempt to mitigate the scope of the methodological error found in paragraph 82 above on the grounds, first, that the applicant and the sample of exporting producers represent only a part of the total imports from China to the European Union and, second, that between 70% in terms of volume and approximately 50% in terms of value of the subsidised imports within the sampled exporting producers would still show significant price undercutting based on the other four sampled exporting producers must be dismissed. Again, that line of argument ignores the Commission’s decision to carry out sampling and to concentrate its analysis on the five exporting producers supposedly representative of all Chinese exporting producers. Furthermore, as is noted in paragraphs 95, 97 and 98 above, in recital 696 of the contested regulation, the Commission relied on the price undercutting margins of the five sampled exporting producers, and not of all Chinese exporting producers, to demonstrate the existence of a causal link between the imports at issue and the injury to the Union producers.
109    In the third place, the Commission contends, relying on alternative price undercutting calculations relating to the applicant, produced in the context of the present action, that, even following those alternative calculations, the applicant’s prices would still undercut the prices of the Union producers.
110    The Commission cannot however rely on the three alternative price undercutting calculations put forward in the present action to overcome the methodological error found in paragraph 82 above.
111    The Commission cannot properly rely, in support of the contested regulation, on reasons which were not contained in that regulation and which were raised by it only after the bringing of the action (see, by analogy, judgment of 21 March 1996, Farrugia v Commission, T‑230/94, EU:T:1996:40, paragraph 36 and the case-law cited). In that context, it must be pointed out that the applicant had challenged the methodology adopted by the Commission relating to the calculation of price undercutting throughout the administrative procedure.
112    Moreover, the Commission’s line of argument amounts to nothing more than asking the Court to make a substitution of grounds. It is settled case-law that, in the context of an action for annulment, the General Court cannot substitute its own reasoning for that of the author of the contested act (see judgment of 26 October 2016, PT Musim Mas v Council, C‑468/15 P, EU:C:2016:803, paragraph 64 and the case-law cited).
113    Last, the Commission contends that the applicant’s arguments concerning errors in the calculation of the underselling margin and the injury margin in respect of the applicant are ineffective.
114    In that regard, first, it is apparent from recital 770 of the contested regulation, referred to in paragraph 35 above, that the injury elimination level was determined on the basis of a comparison involving the weighted average import price of the sampled exporting producers, duly adjusted for importation costs and customs duties, as had been established for the price undercutting calculation. Second, it is apparent from recitals 773 and 776 of the contested regulation that the Commission concluded that the definitive countervailing duty had to be imposed at a level sufficient to eliminate the injury caused by the subsidised imports, without exceeding the amount of subsidisation found, and that the latter was below the injury elimination level.
115    Accordingly, it cannot be ruled out that, were it not for the methodological error identified in paragraph 82 above, relating to the undercutting of the applicant’s prices, the injury margin of the Union industry would have been established at a level below the amount of subsidisation found and, therefore, even lower than that established in the contested regulation.
116    It follows that, contrary to what the Commission asserts, the methodological error found in paragraph 82 above cannot be overcome.
117    Since the methodological error found in paragraph 82 above in the calculation of price undercutting is liable to call into question the legality of the contested regulation, by invalidating the Commission’s entire analysis relating to the causal link (see, by analogy, judgment of 10 April 2019, Jindal Saw and Jindal Saw Italia v Commission, T‑301/16, EU:T:2019:234, paragraph 195 and the case-law cited), that regulation must be annulled in so far as it concerns the applicant, without it being necessary to examine and assess the merits not only of the applicant’s claim alleging that the Commission erred in the calculation of the underselling margin, but also of the first part of the present plea and of the six other pleas in law which it raises.
118    So far as concerns, in particular, the first part of the seventh plea, it should be noted that, irrespective of the application by analogy of Article 2(9) of the basic anti-dumping regulation for the purposes of assessing the existence of injury within the meaning of Article 8 of the basic regulation, the unfair nature of the comparison found under the second part of that plea vitiated, in any event, the Commission’s analysis under Article 8 of the basic regulation.
Costs
119    Under Article 134(1) 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 Commission has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by the applicant.
On those grounds,
THE GENERAL COURT (Eighth Chamber)
hereby:
1.      Annuls Commission Implementing Regulation (EU) 2019/72 of 17 January 2019 imposing a definitive countervailing duty on imports of electric bicycles originating in the People’s Republic of China in so far as it concerns Giant Electric Vehicle Kunshan Co. Ltd;
2.      Orders the European Commission to bear its own costs and to pay those incurred by Giant Electric Vehicle Kunshan.
Svenningsen
Mac Eochaidh
Laitenberger
Delivered in open court in Luxembourg on 27 April 2022.
E. Coulon
S. Papasavvas
Registrar
President
*      Language of the case: English.