Keywords

Summary



Keywords

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1. Common commercial policy - Protection against dumping - Dumping margin - Determination of the normal value - Priority factor - Price charged in the ordinary course of trade - Reference to other factors - Conditions - Absence of sales on the domestic market made in the ordinary course of trade or permitting a proper comparison - Ordinary course of trade - Sales which permit a proper comparison - Concept - Threshold for determining whether or not sales on the domestic market are representative

(Council Regulation No 2423/88, Art. 2(3)(a) and (b) )

2. Common commercial policy - Protection against dumping - Dumping margin - Determination of the normal value - Price charged in the ordinary course of trade - Discontinuance of production of models sold on the domestic market - No effect on the calculation of the normal value

(Council Regulation No 2423/88, Art. 2(3)(a) and (b) )

3. Common commercial policy - Protection against dumping - Dumping margin - Determination of the normal value - Method of establishing the constructed value - Conformity of the basic anti-dumping regulation with the GATT Anti-dumping code

(Council Regulation No 2423/88, Art. 2(3)(b)(ii); Agreement on implementation of Article VI of the General Agreement on Tariffs and Trade, "the 1979 Anti-dumping Code", Art. 2(4) )

4. Common commercial policy - Protection against dumping - Dumping margin - Determination of the normal value - Reference to the constructed value - Order of priority as between the different methods of calculation - Calculation of the profit margin - Reference primarily to the profit realized by the producer or exporter on profitable sales of like products on the domestic market - Justification - Consideration of the specific characteristics of the undertaking concerned

(Council Regulation No 2423/88, Art. 2(3)(b)(ii) )

5. Common commercial policy - Protection against dumping - Dumping margin - Determination of the normal value - Reference to the constructed value - Profit margin - Export sales to Original Equipment Manufacturers (OEM) - Absence of comparable domestic sales - Determination on a reasonable basis - Calculation based on a percentage of the profits realized by the undertaking concerned on domestic own-brand sales - Legality

(Council Regulation No 2423/88, Art. 2(3)(b)(ii) )

Summary

1. According to the wording and scheme of Article 2(3)(a) of Regulation No 2423/88, the basic anti-dumping regulation, in order to establish the normal value regard must be had primarily to the price actually paid or payable in the ordinary course of trade. It is apparent from Article 2(3)(b) of that regulation that that principle can be derogated from only when there are no sales of the like product in the ordinary course of trade or when such sales do not permit a proper comparison.

The ordinary course of trade referred to in that provision is a concept which relates to the nature of sales themselves. It is designed to exclude, for the purpose of determining of the normal value, situations in which sales on the domestic market are not made under conditions corresponding to the ordinary course of trade, in particular where a product is sold at a price below production costs or where transactions take place between parties which are associated or have a compensatory arrangement with each other.

The requirement that sales on the domestic market permit a proper comparison is concerned with the question whether those sales are sufficiently representative to serve as a basis for the determination of the normal value. That is to say, transactions on the domestic market must reflect normal behaviour on the part of purchasers and result from normal patterns of price formation.

The practice of the Council and the Commission to consider that requirement to be satisfied where sales by the producer concerned on the domestic market exceed 5% of export sales to the Community offers the traders concerned a degree of legal certainty as regards the assessment made by the Community institutions of the question whether or not sales on the domestic market are representative. In the light of that guarantee, the 5% criterion should be upheld, and may be departed from only in exceptional circumstances.

Such circumstances may arise where the total volume of sales on the domestic market is not sufficiently large for selling prices to be determined by supply and demand.

However, a small volume in absolute terms of sales made by an exporter on its domestic market does not in itself constitute a factor permitting a departure from the 5% practice. To accept a departure from the 5% practice on account of the specific features of each individual case would have the effect of jeopardizing the legal certainty which that practice is designed to bring.

2. To discontinue production of the models sold on the domestic market does not as a rule have any bearing on the calculation of the normal value, since Article 2(3)(b) of Regulation No 2423/88 refers only to sales.

3. Article 2(3)(b)(ii) of Regulation No 2423/88 complies with Article 2(4) of the GATT Anti-dumping Code inasmuch as it does not disregard the spirit of the latter provision but simply specifies, as regards the different situations which may arise in practice, the reasonable methods of calculating the constructed normal value of the product which, it is alleged, is being exported to the Community at dumping prices.

Article 2(4) of the Anti-dumping Code, which is couched in general terms, does not make clear whether the profit normally realized on sales of products of the same general category in the domestic market of the country of origin relates to the profits realized by the exporter concerned or the average profit realized by all producers on the domestic market.

4. The three methods of calculating the constructed normal value laid down in Article 2(3)(b)(ii) of Regulation No 2423/88 must be considered in the order in which they are set out.

The profit margin must therefore be calculated primarily by reference to the profit realized by the producer on profitable sales of like products on the domestic market. Only if the data are unavailable, unreliable or not suitable for use is the profit margin to be calculated by reference to the profits realized by other producers on sales of the like product.

In giving priority in that way the use of data relating to the individual producer concerned, the aforesaid Article 2(3)(b)(ii) seeks to ensure that the constructed normal value corresponds as closely as possible to what the situation would have been if the producer had actually sold the product in question on the domestic market in sufficient quantities. That provision thus ensures that each undertaking is assessed by reference to its own specific characteristics.

Those characteristics include the pricing policy pursued by the producer concerned on the domestic market. Accordingly, the data relating to the profits generated by a policy of that kind cannot be disregarded simply because the profit margin realized by the producer concerned on sales of like products is particularly high in relation to that realized by other producers on that market.

5. Where no foreign producer or exporter sells its products to Original Equipment Manufacturers (OEM) on the domestic market, the determination of the profit margin by reference to a percentage of the profits realized by the undertaking concerned on domestic sales of own-brand products instead of by reference to a uniform average margin, calculated on the basis of the profit margins realized by all the producers concerned on own-brand sales, constitutes, for the purposes of the last sentence of Article 2(3)(b)(ii) of Regulation No 2423/88, a reasonable manner of calculating the profit margin applicable to products sold to OEM purchasers in the Community.

OEM sales and traditional own-brand sales are two possible ways in which a manufacturer can sell his products. The choice of one or other of those possibilities is made by reference to identical criteria of profitability specific to the undertaking concerned.

There is thus necessarily a link between OEM sales and own-brand sales, so that it is reasonable for the profit margin for OEM sales to be determined by reference to that obtained on own-brand sales.

Furthermore, since the purpose of constructing the normal value is to determine what the selling price of a product would be if that product were sold on the domestic market, the use of data relating to the individual producer concerned is the approach most suited to that objective, in particular where those data differ considerably from those relating to other producers.

Where the profit margins realized on own-brand sales are substantially different, the application of a uniform margin to all the producers concerned, corresponding to the average of all the profit margins realized on those products by all the producers concerned, is contrary to that objective. A higher average margin would be applied to a producer with only a small margin, whilst a producer with a high actual margin would benefit from a lower average margin.