Opinion of Mr Advocate General Lenz delivered on 16 March 1994. - Gao Yao (Hong-Kong) Hua Fa Industrial Co. Ltd v Council of the European Union. - Action for annulment - Conditions of admissibility - Anti-dumping duties - Pocket lighters. - Case C-75/92.



European Court reports 1994 Page I-03141



Opinion of the Advocate-General

++++

Mr President,

Members of the Court,

A ° Introduction

1. The present proceedings relate to an action brought under Article 173 of the EC Treaty against Council Regulation (EEC) No 3433/91 of 25 November 1991 imposing a definitive anti-dumping duty on imports of gas-fuelled, non-refillable pocket flint lighters originating in Japan, the People' s Republic of China, the Republic of Korea and Thailand and definitively collecting the provisional anti-dumping duty. (1)

The identity of the applicant

2. The applicant ° Gao Yao (HK) Hua Fa Industrial Company Ltd (hereinafter referred to as "Gao Yao (HK)") ° is a limited liability company which was formed in Hong Kong in 1987 and is based there. In its reply responding to the defence, the applicant provided more precise particulars about the ownership of the shares in the company.

According to those particulars, two of the shares are owned by natural persons from Hong Kong. The remaining 49 998 shares are held by a company incorporated under Chinese law, Gao Yao (hereinafter referred to as "Gao Yao (China)"). Gao Yao (China) is a joint venture in which two companies are each 50% shareholders, namely Gao Yao Xian Hua Fa Factory of Machinery Guang Dong Sheng, a company incorporated under Chinese law, and Mikosa Trading Company Ltd ("Mikosa"), a company incorporated under Hong Kong law. Mikosa belongs to four natural persons, who are citizens of Hong Kong; two of them (owning 20% and 34% respectively of Mikosa' s capital) are the same natural persons who have already been mentioned as owning two of the shares in the applicant company.

As will be shown, before the explanations in question were given in the reply, the applicant' s identity and in particular its relationship with Gao Yao (China) gave rise to a number of misunderstandings and ambiguities. Consequently, in setting out the facts and procedure I shall from time to time refer generally to "Gao Yao".

Procedure before the Commission and the Council

3. In November 1989, the Fédération Européenne des Fabriquants de Briquets (European Federation of Lighter Manufacturers) lodged a complaint with a view to the bringing of an anti-dumping proceeding in respect of imports of gas-fuelled, non-refillable pocket flint lighters originating in the People' s Republic of China and other countries in the Far East. The complaint referred to Gao Yao as being among the Chinese manufacturers.

In order to appreciate the background to the proceedings, it seems to me to be not without significance that, according to the Commission' s findings, two manufacturers ° BIC SA and Swedish Match SA ° account for the major proportion of Community production of the products at issue. (2)

4. On 7 April 1990, the Commission gave notice that an anti-dumping proceeding had been initiated with regard to the product in question pursuant to Council Regulation (EEC) No 2423/88 of 11 July 1988 on protection against dumped or subsidized imports from countries not members of the European Economic Community. (3) At the same time, it invited interested parties to make their views known, in particular by replying to a special questionnaire. One such questionnaire was sent to Gao Yao at an address in China.

The notice states that the People' s Republic of China is a non-market economy country and that hence it is necessary to use an analogue country. The complaint of the association of EC manufacturers proposes that Korea should be used for this purpose. (4)

5. On 25 May 1990, Gao Yao sent its answers to the questionnaire to the Commission. The name stated as being that of the undertaking was "Gao Yao (HK) Hua Fa Industrial Co., Ltd" and its address was given as "Guangdong Province, Zhaoqing City, Gao Yao County, Jing Dao, People' s Republic of China". It was further stated that the undertaking had a "Sales Office & Correspondent Office" in Hong Kong. The notepaper used was headed "Gao Yao (HK) Hua Fa Industrial Co., Ltd". At the foot, the words "Sales Office" (together with an address in Hong Kong) were printed on the left and on the right the word "Factory" (together with the aforementioned address in China).

It was stated in the letter that the company was a joint venture, with Gao Yao Xian Hua Fa Factory of Machinery Guang Dong Sheng and Mikosa Trading Co., Ltd each owing 50%. It appears from the documents enclosed with the letter that the undertaking exports a substantial proportion of its output to Hong Kong. It expressly stated that it made no domestic sales. (5)

6. In a letter dated 15 December 1990, the China Association of Enterprises with Foreign Investment suggested to the Commission that it should use Thailand as an analogue country. In its reply dated 21 December 1990, the Commission agreed to this. In a letter of 17 January 1991 to the Commission, the China Association' s lawyers (who are also acting for the applicant in this case) again suggested that the Commission should use Thailand as an analogue country.

7. On 1 March, the China Association' s lawyers informed the Commission that the decision to use Thailand as an analogue country for the purposes of calculating the normal value was contrary to Article 2(6) of Regulation No 2423/88, (6) and urged that the normal value be calculated on the basis of the price on the domestic market in Hong Kong.

8. In a letter to the Commission dated 26 March 1991, the China Association' s lawyers substantiated their view that in the case of the applicant the normal value should be calculated on the basis of Article 2(6) of Regulation No 2423/88. The letter included the following passage:

"Gao Yao (HK) Hua Fa Ind. Co. Ltd exports all its production through its affiliate Hong Kong company Gao Yao (HK) Hua Fa Ind. Co. Ltd as evidenced in its answers to the [anti-dumping] Questionnaire."

That Hong Kong based company sells to independent companies, chiefly based in Hong Kong, and also exports directly to the Community.

9. In a fax message sent to the Commission on 23 April 1991, the China Association' s lawyers asserted once again that the normal value with regard to the applicant should be calculated, not on the basis of Article 2(5) of Regulation No 2423/88 (using Thailand as an analogue country), but in accordance with Article 2(6). It stated that "Gao Yao (HK) Hua Fa Ind. Co." produced in China through its affiliate company incorporated under Chinese law "Gao Yao (HK) Hua Fa Ind. Co.". Consequently, the goods originated in China, but were exported from Hong Kong.

Regulation (EEC) No 1386/91

10. On 23 May 1991, the Commission adopted Regulation (EEC) No 1386/91, which imposed a provisional 17.8% anti-dumping duty on imports originating in the People' s Republic of China. (7) The Commission stated in that regulation that the procedure related to gas-fuelled, non-refillable pocket flint lighters. (8) Following that, it stated as follows:

"While there are other gas-fuelled pocket lighters on the market (piezo lighters) their technical characteristics are quite different from the abovementioned product. Therefore, they are not covered by the product which is the subject of the present procedure." (9)

11. With regard to the determination of the normal value, as far as is relevant for present purposes the Commission stated as follows:

"In order to establish normal value for the People' s Republic of China, the Commission had to take account of the fact that this country does not have a market economy and the Commission therefore had to base its determinations on the normal value in a market economy country. ..." (10)

The Commission then gave reasons for its decision to use Thailand as an analogue market for the purposes of establishing the normal value. Although no provision was mentioned in that connection, it is patent that the Commission applied Article 2(5) of Regulation No 2423/88.

12. The injury to the Community industry was discussed in paragraphs 30 to 43 of the regulation. First, paragraph 30 describes consumption in the Community:

"As regards market volume, the consumption of lighters in the Community showed a steady increase from 317.5 million pieces in 1986, 363.7 million pieces in 1987, 383.6 million pieces in 1988 to 439.8 million pieces in 1989, that is a 38.5% rise".

In paragraph 31, it is stated that, on the basis of the information received from the companies investigated, imports from Japan, the People' s Republic of China and Thailand increased from 11.3 million pieces in 1986 to 92.4 million pieces in 1989. In the case of imports from China alone, the rise was from 0 in 1986 to 6.1 million in 1989.

In paragraph 32, the Commission says that the figures provided for the Republic of Korea did not show accurately the actual Korean presence in the market since only one exporter cooperated in the investigation. It goes on to give figures based on Eurostat (Statistical Office of the European Communities) statistics. According to those figures, 7.8 million pieces were imported from Korea in 1989. At the end of paragraph 32, it is stated as follows:

"Based on Eurostat data (i.e. data which aggregates flint disposable gas-fuelled lighters with piezo lighters) imports from the countries concerned increased at the same rate from 35.4 million pieces in 1986 to 152.5 million pieces in 1989.

This development represents a rise in market share held by the dumped imports from 11% in 1986 to 35% in 1989."

13. That which is stated with regard to production, capacity, capacity utilization and stocks is so important as to warrant being quoted in full:

"(36) In this respect, the Commission found that the production of the Community industry decreased between 1986 and 1989. If an index of 100 was taken in 1986 production was 97 in 1989.

Capacity increased between 1986 and 1989. Using 100 as an index for 1986 capacity was 114 in 1989.

Capacity utilization decreased from the 100 index in 1986 to 85 in 1989. Even if capacity had not increased capacity utilization would have dropped from 100 in 1986 to 97 in 1989.

(37) No major changes of stocks could be observed between 1986 and 1989. All producers kept their stocks at the same level and it was therefore considered appropriate not to take into account the evolution of such stocks."

14. Paragraph 38 describes the development of sales by Community producers:

"1986 249.0 million pieces,

1987 256.8 million pieces,

1988 254.0 million pieces,

1989 266.5 million pieces.

This development represents a decrease in market share from 78.4% in 1986 to 60.5% in 1989 (70.6% in 1987, 65.3% in 1988)."

15. In paragraph 39, it is stated that the prices of Community producers showed a steady downward trend between 1986 and 1989. In addition, the financial results of the Community industry worsened "between 1986 and 1989".

In paragraph 40, the Commission says that employment in the Community industry decreased substantially. If 1986 is taken to be 100, the figure for 1989 was 73.

16. The Commission draws the following conclusion in paragraph 41:

"The Commission thus determined that the Community industry' s production, capacity utilization, market share, prices, profits and employment had followed a downwards trend."

Similarly, in paragraph 47 (examination of causation) the Commission finds that there has been a decline in production, capacity utilization, sales volume and market share, prices, profits and employment.

17. On 19 June 1991, a hearing was held at which the applicant argued once again that the normal value should be calculated in its case on the basis of Article 2(6) of Regulation No 2423/88. In its Memorandum of Defence submitted to the hearing, the applicant relied, inter alia, on the assertion that its lighters were not merely transhipped through Hong Kong, but also sold in large quantities in that territory.

18. On 2 August 1991, the Commission provided the applicant with the "essential facts and considerations" on the basis of which it intend to recommend that the Council impose a definitive anti-dumping duty on imports from China.

In that document, the Commission also considered the argument that the normal value should be calculated in accordance with Article 2(6) of Regulation No 2423/88. It took the view that, in cases where the product under consideration is produced in a non-market economy country, Article 2(5) should be applied.

19. In its reply of 14 August 1991 to that document, the applicant objected that the Commission had not given reasons for that view, and further insisted that Article 2(6) was applicable. It confirmed this in a fax message sent to the Commission on 7 November 1991.

In a fax message sent on 12 November 1991, the Commission observed with regard to that argument that it "confirmed" that the products were merely transhipped through Hong Kong and that therefore Article 2(5) was applicable.

In a fax message sent to the Commission on 13 November 1991, the applicant contested that view.

Regulation (EEC) No 3433/91

20. On 25 November 1991, the Council adopted the regulation contested by the applicant. The Commission had submitted the proposal for that regulation to the Council on 28 October 1991.

21. Paragraph 10 of that regulation rejects Gao Yao' s submission, based on Article 2(6), concerning the calculation of the normal value on the following ground, which is taken over virtually verbatim from the Commission' s proposal of 28 October:

"The Council, however, confirms that in this case the products concerned were merely transhipped through Hong Kong and therefore the normal value should be determined in accordance with Article 2(5) of Regulation (EEC) No 2423/88." (11)

22. In paragraph 14, the Council confirmed the Commission' s conclusions on injury set out in Regulation No 1386/91. As to the question of the causation of the injury to the Community industry, the Council stated as follows in paragraph 15:

"The Commission found that the rapid increase of Japanese, Chinese, Korean and Thai low-priced lighters coincided with an equally rapid decrease of production, capacity utilization, sales volume, market share, prices, profits and employment of the Community industry.

No new facts or new arguments concerning these findings were submitted to the Commission after the publication of Regulation (EEC) No 1386/91. The Council therefore confirms the conclusions of the Commission as set out in recitals 44 to 50 of that Regulation."

23. The Council accordingly imposed a definitive anti-dumping duty for imports from China (Article 1 of the regulation) and ordered the definitive collection of the provisional anti-dumping duty (Article 2). Since the dumping margin for the analogue country of Thailand had been slightly altered, the definitive anti-dumping duty was set at 16.9%.

Proceedings before the Court

24. On 11 March 1992, the applicant brought an action under Article 173 of the EC Treaty against the Council of the European Union. It claims that Articles 1, 2 and 3 of Regulation No 3433/91 should be declared void in so far as they relate to the applicant, and that the defendant should be ordered to pay the costs.

25. The defendant claims that the application should be dismissed as inadmissible and, in the alternative, as unfounded, and that the applicant should be ordered to pay the costs.

26. The Commission of the European Communities and the Fédération Européenne des Fabriquants de Briquets ("the Federation") intervened in support of the defendant.

B ° Opinion

Preliminary observation

27. Imports into the Community from China have increasingly frequently been the subject of anti-dumping proceedings in recent years. (12) However, the present case seems to be the first in which judicial proceedings have been brought against the imposition of an anti-dumping duty on imports from China.

28. Before considering the questions raised by the instant case in detail, I would like to make one preliminary observation of a general nature. The contested Council Regulation ° as will be seen ° is sufficiently open to criticism. The applicant has set out in its submissions a large number of factors which, in its view, mean that the regulation is unlawful. But it has not left it at this; it has also discussed those factors from all possible legal angles. For instance, it has dealt with the complaint that the Council should have applied Article 2(6) (and not Article 2(5)) of Regulation No 2423/88 inter alia from the points of view of the principle audi alteram partem, insufficient statement of reasons, infringement of Community law and discrimination. To use a musical metaphor, a theme with variations springs to mind.

I do not regard this approach as appropriate. As the Council has rightly argued, it results not only in needless repetition, but also, at times, in manifestly groundless arguments. It would have been more sensible for the applicant to have confined itself to the essential points, expanding on them as appropriate at the hearing.

Admissibility

29. The Council and ° in common with it ° the interveners take the view that the application is inadmissible on the ground that the preconditions for the application of the second paragraph of Article 173 of the EEC Treaty (now the fourth paragraph of Article 173 of the EC Treaty) are not met.

30. The Council points out that Gao Yao (HK) and Gao Yao (China) are two different legal entities. The question as to whether an application by Gao Yao (HK) is admissible can be tackled from three approaches, all of which lead to the same outcome, namely that it is inadmissible. The first approach could be described as "formal". The anti-dumping duty imposed by the contested regulation is charged on the goods produced by the manufacturer ° Gao Yao (China). The applicant is to be regarded merely as a middleman established in a country which is covered neither by the investigation nor by the contested regulation. The regulation is therefore not of direct and individual concern to Gao Yao (HK) and hence the latter has no locus standi.

The second approach could be termed "economic". If the companies Gao Yao (HK) and Gao Yao (China) are regarded as an economic entity, only the whole of that entity could have locus standi. Since the action was brought only by one of the two companies, it must be considered inadmissible.

Lastly, a "procedural-law" approach could be taken. According to the Court' s case-law, an action may be brought under Article 173 of the EC Treaty by such manufacturing and exporting firms as can demonstrate that they are referred to in the Council' s legal measures or are affected by the preceding investigations. However, Gao Yao (HK) has represented itself simply as a sales office which is used by Gao Yao (China) to facilitate correspondence. That fact alone cannot, however, entitle Gao Yao (HK) to bring an action under Article 173.

31. In this connection, the Council takes the view that, in the case of a State without a market economy, only that State itself or a body entrusted by that State with carrying out trade is empowered to challenge a Community regulation imposing anti-dumping duties. The Commission concurred with this view. At the hearing, it expressed the view that Gao Yao (China) was not entitled to bring an action under Article 173 as it was not individually concerned.

32. None of these arguments convince me. To my mind, the question of the admissibility of the application is instead to be tackled from the point of view of the applicant' s relationship with the manufacturing company in China and from that of its function within the Gao Yao group.

The Council has rightly observed in this connection that the applicant has created much confusion in this regard during the proceedings. On examining the correspondence between the various parties involved in the investigation, the conclusion is reached that nowhere is the identity of the applicant and its relationship with Gao Yao (China) precisely and authoritatively defined. It merely appears from the letter of 26 March 1991 to the Commission (13) that the two affiliated companies bear the same name. Yet the relationship between the two companies in terms of company law is not specified.

Only the applicant' s statements in the reply afforded a better understanding of this question. From them, it appears that the applicant is a subsidiary of Gao Yao (China), which owns virtually all the shares in Gao Yao (HK). It is certainly possible to start out from this information, since it is not contested by the Council. Nevertheless, those statements on the part of the applicant have not removed every doubt, since it stated at the same time in the reply that the majority of the applicant' s shares were held by shareholders from Hong Kong. Although it may be possible to resolve this contradiction, (14) it is clear from this that the applicant' s statements during the proceedings as a whole were not characterized by their particular clarity. From time to time it seems as if the applicant' s representatives themselves were not completely clear about its position in terms of company law within the Gao Yao group.

33. In spite of these ambiguities, however, the essential facts as far as I am concerned are clear: Gao Yao (HK) ° and that company alone ° sells the goods produced by Gao Yao (China); Gao Yao (China) merely manufactures them. Both this sole distributorship agreement and the capital structure of Gao Yao (HK) evidence the relationship of dependency which exists between that company and Gao Yao (China). Accordingly, what we are dealing with is manifestly an economic entity. As the Court stated in another context (15) the division of production and sales activities within a group made up of legally distinct companies can in no way alter the fact that the group is a single economic entity which organizes in that way activities that in other cases are carried on by what is, also from a legal point of view, a single entity. (16)

34. I would now turn to the general question as to the circumstances in which an undertaking can bring an action against a regulation imposing an anti-dumping duty. As I have already mentioned, under the second paragraph of Article 173 of the EEC Treaty (now the fourth paragraph of Article 173 of the EC Treaty), any natural or legal person may institute proceedings against a decision which, although in the form of a regulation, is of direct and individual concern to that person.

According to the case-law of the Court, any manufacturing and exporting companies may bring such proceedings if they can establish "that they were identified in the measures adopted by the Commission or the Council or were concerned by the preliminary measures", as may importers "whose retail prices for the goods in question have been used as the basis for establishing the export prices". (17)

35. There appears to me to be no doubt that those conditions are met in this case. Gao Yao is identified both in Commission Regulation No 1386/91 and in Council Regulation No 3433/91. Regulation No 1386/91 names a Chinese company "Gao Yao, Hua Fa Industrial Co." in paragraphs 6 and 7. In paragraph 28 an anti-dumping margin of 17.84% is calculated for that company. Paragraphs 35, 59 and 60 set out the extent to which prices were undercut, the injury threshold and the ensuing rate of duty for "Gao Yao, People' s Republic of China". Likewise with Regulation No 3433/91: paragraph 10 mentions "Gao Yao Co. China" and "Gao Yao Co. Hong Kong"; in paragraph 21 a rate of duty is set for "Gao Yao Co., People' s Republic of China".

Consequently, in the light of the aforementioned case-law, at least Gao Yao (China) must unquestionably be regarded as having locus standi. Although the Council and the Commission correctly point out that, in the case of imports from a State which has no market-economy system, that State itself or a body entrusted by that State with carrying out trade is entitled to bring an action, (18) that does not mean that an application brought by an individual undertaking satisfying the requirements laid down in the case-law has to be regarded as inadmissible. It may be added that the undertaking at issue in this case is owned to the extent of 50% by businessmen from Hong Kong. Consequently, it has not been shown that the People' s Republic of China actually uses the company Gao Yao for particular economic-policy purposes.

36. On the basis of the aforementioned case-law of the Court of Justice, it appears that a challenge to Regulation No 3433/91 by the applicant is also admissible. Manifestly, the Community institutions calculated the export price on the basis of the sales prices obtained by Gao Yao. (19) However, those prices were the sales prices of Gao Yao (HK), which sold the products manufactured by Gao Yao (China).

37. In my view, therefore, both Gao Yao (China) and Gao Yao (HK) could have brought an action in the Court. It would certainly even have been possible for both of them at the same time to have brought proceedings. (20) But it would amount to excessive formalism to require all the undertakings making up an economic entity to bring an action in order for the application to be admissible. It appears unquestionably from the Court' s case-law that the Council' s approach is wrong. In a recent judgment, the Court held that an undertaking together with more than 70 distribution companies controlled by the same group formed an economic unit, without casting any doubt on the admissibility of the application, which was brought by the applicant alone. (21)

38. In my view, no particular importance should be attached to the fact that the applicant is a company which is based in Hong Kong, an area which is not affected by the anti-dumping proceeding. The Court' s case-law on actions brought by importers linked to manufacturers shows that capacity to bring proceedings in such cases is not confined to undertakings based in the State from which the goods in question were exported. (22) In determining the export price, the Community institutions based themselves on the applicant' s figures. It is therefore not possible to see why, simply on the ground that its seat is in a third country, the applicant should be disqualified from bringing an action under Article 173 of the EC Treaty.

Admittedly, the Council has repeatedly stated that to admit the application of Gao Yao (HK) would give rise to serious consequences. It did not, however, explain what those consequences would be. At the hearing, the Council' s representative tried to clarify those objections by imagining a scenario in which the Gao Yao group used an undertaking in an EFTA country in order to sell its products in the Community. However, not even that ° hypothetical ° example can explain why the application in this case should be inadmissible.

39. The Council' s objection that, during the anti-dumping proceeding, the applicant was involved only as a sales office or ° as the Council' s representative maintained at the hearing ° invariably held itself out to be a Chinese undertaking, is irrelevant to the question of admissibility. However, for completeness' sake, I would state that that view must be incorrect. As I have already shown, the identity and the legal relationship to each other of Gao Yao (China) and Gao Yao (HK) were not considered more particularly until during the course of the proceedings before the Court. It is clear that for the Community institutions the primary aim during the anti-dumping proceeding was to obtain the information necessary for the purposes of the investigation; it was (rightly) of no particular importance to the institutions which undertaking in the Gao Yao group provided that information. It is therefore strange that the institutions should now attach such importance to differentiating between the individual undertakings in that group.

40. Since the application in this case should therefore be regarded as admissible simply on the basis of the case-law, it is, in my opinion, unnecessary to go into the applicant' s argument that the application is admissible simply on account of its participation in the anti-dumping proceeding. The question whether participation in the anti-dumping proceeding is as such sufficient in itself to entitle the undertaking concerned to bring proceedings under Article 173 is notoriously controversial. Some time ago, the Court answered that question in the negative in the judgment in Alusuisse. (23) As I have already stated, that question does not need to be considered in more detail here. (24) I should observe, however, that I find Mr Advocate General Jacobs' discussion of this issue in Extramet persuasive. (25)

The substance

Infringement of the rights of the defence

41. The applicant claims that the Council and the Commission, contrary to Article 7(4) of Regulation No 2423/88, failed to inform it of the essential facts and considerations on the basis of which the definitive duty was imposed and the provisional duty collected. It refers to three areas alleged to be affected by this defect: the calculation of the normal value on the basis of Article 2(6) of Regulation No 2423/88, the question of the like nature of the products and the relationship of cause and effect between the injury to the Community industry and the alleged dumping practices.

42. The Court has consistently held that the rights of the defence are respected "if the undertaking concerned has been afforded the opportunity during the administrative procedure to make known its views on the truth and relevance of the facts and circumstances alleged and, if necessary, on the documents used". (26) The undertaking concerned should have been placed in a position in which it could "effectively make known" its views on the correctness and relevance of the facts and circumstances alleged. (27) The Council claims that in this case the applicant was informed of the "essential facts and considerations" within the meaning of Article 7(4)(b) of Regulation No 2423/88 by the Commission' s letter of 2 August 1991.

Calculation of the normal value

43. I shall first consider the question of the basis for calculating the normal value in the case of the applicant. The relevant provisions of Regulation No 2423/88 need briefly to be called to mind. According to Article 2(2) of the regulation, a product is to be considered to have been dumped if its export price to the Community is less than the normal value of the like product. Paragraphs 3 to 7 of Article 2 are concerned with the question as to what the normal value is to be considered to be.

Article 2(5) of the regulation provides as follows:

"In the case of imports from non-market economy countries and, in particular, those to which Regulations (EEC) No 1765/82 and (EEC) No 1766/82 apply, normal value shall be determined in an appropriate and not unreasonable manner on the basis of one of the following criteria: ...".

According to that provision, the basis for calculating the normal value is to be the price at which the like product of a market-economy third country is actually sold or the constructed value of the like product in a market-economy third country. If neither of those methods provides an adequate basis, the price actually paid or payable in the Community, duly adjusted, if necessary, to include a reasonable profit margin, is to be used.

It is clear that the People' s Republic of China is a "non-market economy country" within the meaning of Article 2(5). (28)

44. Article 2(6) of the regulation reads as follows:

"Where a product is not imported directly from the country of origin but is exported to the Community from an intermediate country, the normal value shall be the comparable price actually paid or payable for the like product on the domestic market of either the country of export or the country of origin. The latter basis might be appropriate, inter alia, where the product is merely transhipped through the country of export, where such products are not produced in the country of export or where no comparable price for it exists in the country of export."

45. In the fax message of 2 August 1991 to which I have already referred, the Commission mentioned that Gao Yao argued that the normal value should be calculated on the basis of Article 2(6) of the regulation. Following this, the fax message (which was drawn up in English) reads as follows:

"The Commission services examined this request and took the view that in cases where the product under consideration is produced in a non-market economy country Article 2(5) of the basic regulation applies."

The Commission went on the say that, in any case, it gave the applicant the opportunity to put forward "concrete arguments" against the selection of Thailand as an analogue country; however, the applicant did not take up that opportunity.

46. The Commission did not deal at all in that fax message with the possibility that the products in question might have been "transhipped" through Hong Kong. The Commission deployed that argument for the first time in the proposal of 28 October 1991 for the contested Council regulation, where it is stated ° as in the contested regulation itself ° that it is "confirmed" that the products concerned were merely transhipped through Hong Kong and therefore the normal value should be determined in accordance with Article 2(5).

The applicant seems to have been informed of this for the first time in the Commission' s fax message of 12 November 1991. The wording ("confirms") creates the impression that the Commission had give notice of this before. The applicant contests this. Since the Community institutions would have had to prove that the information in question was actually communicated (29) and no evidence to that effect was produced, it must be assumed that the applicant' s account is correct. If I am not mistaken, the Council does not seriously maintain that such prior communication took place.

47. In any event, the Council maintains that the right to a fair hearing was secured in so far as the applicant could have reacted to the Commission' s fax message of 12 November 1991 and submitted its views to the Community institutions. The contested regulation was not adopted until 25 November 1991.

That argument of the Council is extremely remarkable. It is doubtless based on the view that the Council and the Commission would have been in a position to react to any views of the applicant received between 12 and 25 November and to take them into account in the final Council regulation. As I have already mentioned, as early as its letter of 1 March 1991, the applicant asked the Commission to calculate the normal value on the basis of Article 2(6) and repeated that view several times thereafter. The Council considers that it can refute the criticism of the fact that the Commission did not go into that point in Commission Regulation No 1386/91 by stating that the applicant did not put across the argument in question until shortly before ("peu avant") the regulation was adopted.

Be that as it may, the fact remains that the contested regulation follows the Commission' s proposal of 28 October 1991 word for word in the passage in question. As the Commission' s representative explained at the hearing, that proposal embodies the Commission' s final reasoning ("raisonnement final"). It cannot be seen how a hearing after that time could, in the material circumstances, have helped to secure the applicant' s right to a fair hearing.

48. In this connection, the Council' s assertion that the relevant passage of the contested regulation constituted simply a response to an argument put forward by the applicant must be rejected. Certainly, after the "essential facts and considerations" have been communicated, the Community institutions are entitled to discuss the objections lodged against them and to dismiss them while stating the grounds for doing so. In this case, however, the applicant did not press for the application of Article 2(6) only after 2 August 1991, but already as from 1 March 1991. Quite obviously, this was not a new argument of which the institutions were previously ignorant.

49. It also appears to me irrelevant that the applicant itself already in the administrative procedure went into the conditions for the applicability of Article 2(6). If, for example, in its Memorandum of Defence of 18 June 1991 the applicant stated that its products were not only transhipped through Hong Kong, this shows that it was aware of those conditions. However, it did not know ° and this is what, in my view, it turns on ° that the Commission took a different view about this and that the Council would base itself on that view.

50. In view of what has been stated so far, it is clear that the contested regulation contained a consideration which was neither in the Commission regulation of 23 May 1991 nor in the communication of 2 August 1991, on which therefore the applicant could not express its views on its justification and relevance. However, that does not mean that there has been an infringement of the applicant' s right to a fair hearing or ° more generally ° of the rights of the defence, since in order for that to be so it must have been an important factor.

51. I must admit that I find the Council' s arguments on this matter somewhat confusing and contradictory. On the one hand, it maintains that Article 2(5) constitutes a lex specialis, which therefore takes precedence over Article 2(6). On the other hand, the defendant takes the view that Article 2(5) and (6) are not mutually exclusive; rather, the application of Article 2(6) inevitably means in this case that the normal value has to be calculated on the basis of the actual prices in the country of origin and that, since that country ° the People' s Republic of China ° is a non-market economy, in the final analysis Article 2(5) has to be applied.

52. The view first mentioned, according to which Article 2(5) is a lex specialis for imports of products originating in a country which does not have a market economy, has apparently determined the Commission' s attitude in these proceedings over a long period. It is discernible already in the notice of initiation of the anti-dumping proceeding. (30) It is clearly expressed in Regulation No 1386/91 (31) and in the Commission' s fax message of 2 August 1991. (32)

I consider that that view is wrong. As the Council itself has quite rightly stated, Article 2(6) covers cases of "indirect" dumping, that is to say, cases in which the goods concerned were not brought into the Community "directly from the State of origin" but via another State. (33) Both the wording and the situation of that provision suggest that Article 2(6) is also applicable where the country of origin is a non-market economy country.

53. The Commission and ° following the Commission' s proposal ° the Council seem ultimately to have come to recognize this view. However, the reasoning set out in paragraph 10 of the contested regulation is extremely unclear. In that paragraph, the Council "confirms" that the products concerned were merely transhipped through Hong Kong and concludes from this ("therefore") that the normal value should be determined in accordance with Article 2(5). Article 2(6) is not mentioned in that context. It is nevertheless clear that in that paragraph the Council is considering an element taken into account in that provision, namely whether the product in question was merely transhipped through the country of export (Hong Kong). If the Council concludes from the affirmative answer to that question that Article 2(5) is applicable, this can only mean that that provision applies via a reference contained in Article 2(6). The argument manifestly set out only in abbreviated form in the contested regulation is understandable in this light. If the products are merely transhipped in the country of export, the normal value can be determined on the basis of either the price on the domestic market of the country of export (Hong Kong) or the price on the domestic market of the country of origin (China). In the latter case, this in fact leads to the application of Article 2(5), since otherwise ° as the Council correctly stated ° those provisions could undoubtedly have been circumvented.

54. But Article 2(5) becomes applicable (via Article 2(6)) only if the price on the domestic market of the country of origin is used as the basis. However, Article 2(6) provides expressly for two different bases for calculating the normal value ° the price on the domestic market of the country of origin or the price on the domestic market of the country of export. The second sentence of the provision identifies several situations in which the price on the domestic market of the country of origin might be appropriate. Consequently, as the Council itself argued in the defence, the provision gives the Community authorities a "large discretion" ("un large pouvoir d' appréciation discrétionnaire"). In contrast, the Council maintains that the application of Article 2(6) in this case must result in the price in the country of origin being used as a basis and hence in Article 2(5) being applicable. The applicant rightly objects that this turns a discretionary provision into a mandatory one.

During the proceedings before the Court, the parties also discussed at length a further criterion mentioned in Article 2(6) (namely the question whether the products in question were produced in the country of export). To my mind, those discussions are irrelevant for the purposes of deciding this case. Even if the Council were correct in contending that such products are not manufactured in Hong Kong, this would not alter the fact that Article 2(6) provides for a discretionary decision.

55. From that which has been stated so far, it appears that the statement contained in paragraph 10 of the contested regulation is an essential consideration which should have been brought to the applicant' s notice and on which the applicant should have been given an opportunity to state its views. Since this was not done, I consider that there was an infringement of the applicant' s right to a fair hearing on which the application succeeds.

The like nature of the product and the causal connection between the dumping and the injury

56. The applicant alleges that the rights of the defence were also infringed with regard to the way in which the question whether the lighters manufactured by Gao Yao are comparable with the products manufactured by manufacturers in the Community was treated. In its view, the same is true of the way in which the question whether the dumping practices of which Gao Yao stands accused caused the injury to the Community industry was handled.

57. These issues do not, however, need to be gone into more closely in this connection. It appears from that which the applicant has stated that it is not complaining that it was not heard by the Community institutions on the relevant facts and considerations. Instead it maintains that the objections which it raised in the course of the proceeding were not taken into account or were not properly taken into account by the Commission and the Council. In the result, therefore, it is complaining that the Community institutions wrongly applied the substantive law or failed to fulfil their duty to give reasons for the legal measure at issue. It is not a question of a possible infringement of the rights of the defence.

Defective statement of reasons

58. The applicant considers that the contested regulation contains a defective statement of reasons in several respects. This claim applies in the first place to the way in which the areas already mentioned in connection with the alleged infringement of the rights of the defence were dealt with (calculation of normal value, like nature of the product, causal connection between the dumping practices and the injury). The applicant adds some additional considerations in this regard. Thus it claims that the contested regulation does not discuss, for instance, the rule played by imports from third countries (not affected by the anti-dumping proceeding). It argues that there is also a defect in the statement of reasons in so far as the applicant was not omitted from the anti-dumping proceeding despite its small market share. Lastly, it maintains that the contested regulation contains figures which include other products without giving any reasons for this.

59. As the Court has consistently held, the statement of reasons required by Article 190 of the EC Treaty must disclose in a clear and unequivocal fashion the reasoning followed by the Community authority which adopted the measure in question in such a way as to make the persons concerned aware of the reasons for the measure and to enable the Court to exercise its supervisory jurisdiction. (34)

The question as to the figures used

60. The applicant claims that the figures used by the Council and the Commission do not cover only the products at issue but others as well which are not under investigation. In the reply, the applicant claimed that the defendant had still not explained why it had used Eurostat figures which also included piezo lighters. (35) It should be mentioned here by way of precaution that the applicant had already brought that matter to the Commission' s notice in its memorandum of 18 June 1991. (36)

61. According to the paragraph 11 of Commission Regulation No 1386/91, piezo lighters are not covered by the anti-dumping proceeding at issue. (37) Although the contested Council regulation does not expressly confirm this definition of the products covered by the proceeding, (38) there can be no doubt that the Council nevertheless adopted it. (39) Moreover, in the present proceedings the Council has not denied that piezo lighters were not covered by the anti-dumping proceeding or the contested regulation.

62. It is clear that the figures given in paragraph 32 of Regulation No 1386/91 for imports from Korea and for aggregate imports from the countries concerned were calculated on the basis of Eurostat data and hence cover piezo lighters. The calculation contained in the same paragraph showing that the market share "held by the dumped imports" rose from 11% in 1986 to 35% in 1989 is also based on those figures for aggregate imports (35.4 million pieces in 1986 and 152.5 million pieces in 1989).

63. The Commission explains in that paragraph that it used those figures for Korea because the figures provided by the Korean exporter did not appear to it to be representative. It has not explained, however, why it based the "rise in market share held by the dumped imports" on the Eurostat data. The Eurostat data also covered products which were not covered by the anti-dumping investigation. The use of such data obviously requires justification. No such justification is to be found in the contested regulation or in Commission Regulation No 1386/91.

64. The defendant does not deny that it used those data. Moreover, the fact that it did is clear from the relevant regulations. (40) However, it marshals two arguments in its defence. First, it claims that the coverage of piezo lighters was advantageous to the applicant, since piezo lighters are not manufactured in China and the figures for Gao Yao alone therefore appear in a more favourable light. Secondly, it maintains that covering piezo lighters does not affect the outcome, since the "trends" are the same for both categories of products.

65. The first argument stands up only at first glance. Naturally, the rise in exports from China to the EC shown in Regulation No 1386/91 (from 0 million pieces in 1986 to 6.1 million in 1989) seems less substantial if it is viewed against the background of total imports including imports of piezo lighters. However, it must be observed that in examining causation the Community institutions analysed the effects of the dumped imports cumulatively. (41) Consequently, the Community institutions based themselves on aggregate imports from all the countries concerned (Japan, China, Thailand and Korea) which also include piezo lighters. Consequently, the use of those figures was in no way advantageous to the applicant.

66. The second argument is extraordinary. Manifestly, neither the Council nor the Commission was in a position to determine even approximately the figures for the products covered by the investigation, on the one hand, and the figures for piezo lighters, on the other. Yet the Council claims that the trends for both products were the same. Not the slightest evidence of this has been adduced. Even if that claim were true, the fact would remain that it was neither justified nor even simply adverted to in the contested regulation (or in Regulation No 1386/91). The necessary reasoning is therefore absent.

67. This, however, is far from bringing the remarkable aspects of this case to an end. In section 108 of its defence, the Council states that piezo lighters are covered only by the figures for consumption and market shares; all other figures relate solely to the relevant product. In the first place, this is not easy to understand, since in paragraph 32 of Regulation No 1386/91 ° and it is only here, according to the wording, that Eurostat data were used ° mention is made only of imports (or sales) and market shares, but not of consumption. The picture is different according to section 84 of the defence, since there it is stated that the figures for trends in consumption, sales and market shares include piezo lighters.

If we take as our basis the figures set out in paragraph 32 of Regulation No 1386/91, according to which imports of 35.4 million pieces in 1986 and of 152.5 million pieces in 1989 correspond to a market share of 11% and 35% respectively, figures for consumption which largely accord (42) with the figures given in paragraph 30 (43) can be calculated. The difference compared with the figures given in paragraph 30 is, admittedly, quite substantial (about 4 million pieces in each case), but cannot be explained by the non-inclusion in the figures given in paragraph 30 of piezo lighters. (44) In all probability, therefore, a mathematical error is involved.

A comparison shows that ° in so far as is verifiable ° the figures given in paragraph 38 (45) of Regulation No 1386/91 for Community producers' sales must also have been calculated on this basis. If those sales came to 249.0 million pieces in 1986 (for a market share of 78.4%) and to 266.5 million pieces in 1989 (for a market share of 60.5%), consumption figures of 317.6 million pieces in 1986 and of 440.5 million pieces in 1989 can be worked out. This comes gratifyingly close to the figures given in paragraph 30.

68. It therefore follows that Eurostat data, which also cover piezo lighters, were used not only in paragraph 32 of Regulation No 1386/91, but also at several other places without this being made known, let alone justified. The only reference to the use of those data is to be found in paragraph 32 and is confined to the figures given there. Such an approach can only be described as extremely remarkable. This reinforces my view that the applicant' s complaint that the contested regulation (in which the statements in Regulation No 1386/91 which I have just discussed are confirmed) is vitiated in this respect by a defective statement of reasons is completely justified.

Other matters

69. As far as the remaining aspects are concerned in which the applicant considers the statement of reasons to be defective, I am unable to subscribe to its view.

As far as the calculation of the normal value is concerned, the Council states in paragraph 10 of the contested regulation (discussed above) why it used an analogue country. The reasoning is admittedly extremely terse, but it does enable the essential considerations to be discerned. According to that paragraph, the Council calculated the normal value in accordance with Article 2(5) of Regulation No 2423/88 because the products were merely transhipped in Hong Kong. As I have already mentioned, the Council therefore manifestly assumed that in such a case the application of Article 2(6) inevitably means that the price of the country of origin has to be used as the basis. As I have already stated, this cannot be correct. (46) But, to my mind, this is a substantive error and not a defect in the statement of reasons.

Also as regards the question of similarity, the necessary particulars are to be found in the contested regulation. In paragraph 5 of that regulation, the Council confirms the Commission' s findings to the effect that the lighters made by manufacturers from the countries investigated and those made by Community manufacturers are alike. The Council has rightly pointed out that the question of product comparability is also relevant in determining the analogue country under Article 2(5) of Regulation No 2423/88. It need not be considered here whether the applicant made its complaint in this regard in time. In any event, sufficient reasons are given by the Community institutions for the choice of Thailand as the analogue country. (47)

The question of the causal connection between the dumping practices and the injury to the Community industry is extensively discussed both in the contested regulation (paragraph 15) and in Regulation No 1386/91 (paragraphs 44 to 50). The relevant statements are defective (as will be shown). However, that does not alter the fact that they constitute a statement of reasons which satisfies the requirements of Article 190 of the EC Treaty.

70. The fact that the Community institutions, contrary to the applicant' s request, refused to exclude it from the anti-dumping proceeding on account of its small market share also does not constitute a defect in the statement of reasons. In the first place, the view underlying the applicant' s request does not appear to me to be well-founded. (48) Moreover, there can be no requirement for the institutions to go into all of an undertaking' s arguments in their regulations.

Lastly, it cannot be regarded as a defect in the statement of reasons that the Council did not discuss imports from third countries in the contested regulation. On the one hand, that claim on the part of the applicant is not correct, since the contested regulation does in fact refer (in paragraph 15) to the corresponding statements in Regulation No 1386/91 where this question is discussed. (49) On the other, the applicant' s claim that imports from third countries not covered by the investigation increased in the period in question from 46.6 million to 73.1 million pieces, that is to say, by 57%, cannot be squared with the figures used by the institutions in their regulations. If those figures are used as the basis, imports from third countries (50) amounted to 33.1 million pieces in 1986, whilst they declined in 1989 to 20.8 million pieces. This corresponds to the figures given by the defendant in section 79 of the defence.

As far as the last-mentioned point is concerned, it should however be pointed out that the figures used by the Community institutions ° and hence also the figures for imports from countries not covered by the anti-dumping investigation ° also include piezo lighters, which were not covered by the proceeding. The use of such figures for imports from third countries is therefore subject to the same reservations which I have already discussed in connection with the determination of the figures for imports from the countries covered by the investigation. (51)

The question of the substantive legality of the contested regulation

Infringement of GATT provisions

71. The applicant claims that the contested regulation conflicts with Article 2(3) of the GATT Anti-Dumping Code as respects the calculation of the normal value. That provision accords, as far as its substance is concerned, largely with Article 2(6) of Regulation No 2423/88. However, unlike the Community provision, Article 2(3) of the Anti-Dumping Code states that in the cases which it covers the normal value should "normally" ("normalement") be calculated on the basis of the price on the domestic market of the country of export.

72. In my view, however, Article 2(6) and the relevant provision of the Anti-Dumping Code are largely in accord with each other in the final analysis, despite this difference. For cases where "the product is merely transhipped through the country of export, where such products are not produced in the country of export or where no comparable price for it exists in the country of export", both provisions stipulate that the normal price may be determined on the basis of the price in the country of origin. In that respect, reference can therefore be made to my remarks about Article 2(6) of Regulation No 2423/88. (52)

73. In this case, however, the applicant' s complaint does not in any event need to be gone into further. It is true that the Community is bound by the provisions of the GATT and of the Anti-Dumping Code. (53) However, it must be observed that in this case imports from China are involved. The Council has rightly pointed out that the People' s Republic of China is not a GATT Contracting State and so it is not possible to pray in aid the provisions of the GATT or of the Anti-Dumping Code. Admittedly, the Chinese-manufactured products did reach the Community via Hong Kong. But if that were deemed sufficient in order to hold the rules of the GATT and of the Anti-Dumping Code applicable, it would allow a non-Contracting State to enable its products to partake of the advantages of those rules without being subject to the duties arising under them. That cannot be right. The reference made by the applicant to the fact that Gao Yao (China) is part-owned by shareholders from Hong Kong, which is a member of GATT, is therefore also irrelevant.

Infringement of Article 2(6) of Regulation No 2423/88

74. The applicant accuses the Council of having infringed Article 2(6) of Regulation No 2423/88 in so far as it used the price ruling in the analogue country, Thailand, and not that ruling in the country of export (Hong Kong) in determining the normal value. As I have already mentioned, the Council referred in the contested regulation to the fact that the goods in question were merely transhipped through Hong Kong. If that was the case, the Council was in fact entitled to consider that it was appropriate not to calculate the normal value on the basis of the price ruling on the domestic market of Hong Kong; the second sentence of Article 2(6) expressly covers that case.

75. As the wording of the second sentence of Article 2(6) makes clear, to base the normal value on the price payable on the domestic market of the country of origin may be appropriate "inter alia" in three different circumstances. It is therefore not necessary that the features of all three cases should be present ° namely transhipment through a country where such products are not produced and where no comparable price exists. Instead it is sufficient that the product in question was transhipped through the country of export.

However, the applicant maintains that, of the 6.1 million lighters manufactured by Gao Yao which came onto the Community market in 1989, only something less than 4.61 million pieces were exported by it directly to the Community. The remainder (approximately 25% of the total quantity) was sold to independent trading companies in Hong Kong, which then proceeded to export them to the Community. The Community institutions should have determined the prices calculated by those trading companies for sales in the Community and then worked out an average. The Council responds to this by stating that those prices could not be taken into account, since they were not known. As direct sales accounted for 88% of aggregate sales, it was possible to regard them as being representative.

In the rejoinder, (54) the Council stated that the difference between the applicant' s figures and the Council' s are attributable to a mathematical error on the part of the applicant. This seems to plausible to me at first sight. As the applicant itself has not given particulars as to how it calculated its own figures (differing from those of the Council) and also has not contested the figures given by the Council in the rejoinder, (55) it should in my view be assumed that the Council' s view is correct.

According to the Council, the proportion of direct exports to the Community came to 88% of aggregate exports; therefore the Commission and the Council were entitled, to my mind, to assume that by far the bulk of the goods sold by Gao Yao in the EC was merely transhipped through Hong Kong and that the direct exports were thus to be regarded as being representative for the purposes of determining the normal value.

76. Consequently, the Council was entitled to take the view that in this case the normal value should be determined under Article 2(6) of Regulation No 2423/88 on the basis of the price in the country of origin. Since the country of origin was China and hence a non-market economy country, an analogue country had to be determined in accordance with Article 2(5).

As I have already mentioned, the Council, however, apparently assumed that in the event of mere transhipment the normal value had to be determined on the basis of the price in the country of origin. (56) It therefore failed to realize that Article 2(6) confers a discretion on the Community institutions, and hence wrongly applied that provision.

77. During the proceedings before the Court, the Council sought to justify its view inter alia on the ground that the product in question was not manufactured in Hong Kong. Manifestly, in this way it sought to rely in the alternative on one of the other two situations mentioned in Article 2(6) of Regulation No 2423/88. That consideration was not used in the contested regulation; and the applicant does not seem to have been given the necessary opportunity to state its views on it. For that reason, the Council could not in any event rely on it. Furthermore, neither has it been proved that the Council' s claim is correct; indeed the Council' s representative conceded at the hearing that the product in question was produced in Hong Kong at the time of the anti-dumping investigation (although manufacture was on the point of disappearing).

Determination of the analogue country in accordance with Article 2(5)

78. The applicant complained in the first place that the Community institutions wrongly assessed the comparability of its product with those of the EC manufacturers. The Council stated in the defence that the question of comparability was important also for the purposes of determining the analogue country in accordance with Article 2(5) of Regulation No 2423/88, whereupon the applicant extended its complaint accordingly in the reply.

79. I agree with the Council' s view that this is a new plea in law within the meaning of Article 42(2) of the Court' s Rules of Procedure and should be rejected. Moreover, the Council quite rightly points out that it was the China Association and the applicant itself ° each of them represented by the applicant' s lawyers ° which proposed that Thailand should be taken as the analogue country. The applicant' s attempts to describe Thailand as unsuited for comparison purposes in reliance on differences in gross domestic product (between Thailand and China) are not convincing. That is not a decisive factor. In addition, the applicant has not succeeded in refuting the considerations which guided the Community institutions in determining the analogue country. (57)

Like nature of the products

80. The applicant has sought by means of very voluminous, detailed explanations to prove that the product which it sells and the products manufactured by the EC manufacturers could not be regarded as being "like products" within the meaning of Article 2(12) of Regulation No 2423/88. In particular, it claims that the EC manufacturers' lighters produced 3 000 ignitions whereas the product sold by it produced only 1 200. It also mentions ten further respects in which it considers the products differ.

81. According to Article 2(12), a product is to be regarded as like if it is identical to the product under consideration or has characteristics closely resembling those of the product under consideration. Consequently, they do not have to be absolutely identical. The Commission stated in Regulation No 1386/91 that the similarities in the physical characteristics of the EC products and the imported lighters "by far outweighed" the difference in the number of ignitions. (58)

It seems to me to be neither appropriate nor even feasible to discuss in detail all the particulars mentioned by the applicant. The Commission and the Council must necessarily be allowed a certain discretion in deciding whether products are comparable. To my mind, the only significant fact which might cast doubt in this case on the comparability of the products is the different number of ignitions. Whilst the Federation seems in its observations to deny the existence of such a difference, when it states that the EC product produced only 1 200 ignitions, the contested regulation and Regulation No 1386/91 assume that the products manufactured in the EC are superior to the lighters imported from East Asia in point of the number of ignitions produced; hence that claim on the part of the Federation cannot be taken into account.

The Council has stated that the Commission relied, inter alia, on the fact that consumers cannot discern any difference between the lighters and that the products of the EC manufacturers and those of the manufacturers from East Asia were in competition with each other. In the alternative, it added that the difference in the number of ignitions ° which were not discernible to the consumer ° did not alter the fact that the products were very similar.

82. I consider that this is convincing. In fact, it probably is not of key importance for the consumer whether a lighter produces 1 200 or 3 000 ignitions. Such lighters are mass-produced articles which are not particularly expensive and are therefore purchased without thorough inspection. Since in addition ° as I know from my own experience ° a feature of such products seems to be that they are never to hand precisely when they are needed, in practice a new lighter is often purchased before the old one has been used up. Consequently, what is decisive, in my view, is that the lighters manufactured by the EC manufacturers and those made by Gao Yao and others are in competition with each other. The significance of this for the question of comparability is recognized in the Court' s case-law. (59) Contrary to that which the applicant maintains, there can be no doubt that such a competitive relationship exists between the products of the EC manufacturers and those of manufacturers from the countries which were investigated.

83. Lastly, it should be pointed out that for the sake of fair comparison the Community institutions took into consideration only lighters with similar content of gas during the price undercutting exercise. (60)

Injury to the Community industry and the question of causation

84. First, as regards the question of aggregating imports from the countries affected by the investigation, the applicant concedes in the reply that this is, in principle, permissible. However, it takes the view that this should not apply in the case of Gao Yao, since its market share was under 2% and actually declined in the period in question (1988: 1.9%; 1989: 1.4%).

The Council argues, as against this, that the applicant is taking only its own exports into account. Yet the contested regulation applies to all imports from China and hence the totality of such imports (including, therefore, lighters from other Chinese companies) should be taken into account; this yields a 2.2% share of the Community market. The Council concedes that from time to time the institutions refrain from considering imports in the aggregate in cases where the exporters' conduct is not comparable. However, that was not the case in these proceedings, since exports from all the countries concerned had contributed towards the injury to the Community industry.

85. I cannot discern any error of law here. There is certainly no rule that, in the case of exports accounting for less than 2% of the Community market, the Community should refrain from imposing anti-dumping duties. Neither is it apparent that bringing in China was wrong; in fact, the calculation carried out on the basis of the figures provided by Gao Yao showed that in its case prices were undercut more substantially than in the case of any of the other manufacturers investigated. (61)

In its assessment, the Council also rightly used the figures for imports from China as a whole. The investigation and the contested regulation referred ° as is appropriate in the case of a non-market economy country ° to the country, not only to the applicant' s exports. Neither has the applicant succeeded in establishing that the figures produced by the Community institutions were incorrect. It is true that those figures did incorporate data for piezo lighters, a manner of proceeding which I have already discussed extensively. However, if those figures are taken as the basis, it is unquestionably clear that they were actually favourable to the applicant in this context: its share of imports of lighters from China (which apparently does not manufacture piezo lighters) to the whole of the EC market (including the market in piezo lighters) came to 2.2% and its share would doubtless have been higher if the figures had referred only to the products covered by the present proceedings.

86. As far as imports from third countries are concerned, there is no need for me to go further into the applicant' s complaint. As I have already said, the share of the Community market taken by such imports ° again on the basis of the figures used by the Community institutions ° has declined and not, as the applicant claims, risen.

87. I would now turn to the question of the effects which imports from the countries concerned have had on the Community industry. As I have already mentioned, the Commission found that production, capacity utilization, market share, sales, prices, profits and employment have declined in the relevant sector of Community industry. (62) The Council confirmed those findings in the contested regulation. (63)

88. I shall first consider the question of prices. According to the Commission' s figures, prices of the products investigated fell by 28% between 1986 and 1989. Community manufacturers endeavoured to match these prices; the prices which they obtained deteriorated ° taking 1986 prices as the yardstick ° to 96% in 1987, 88% in 1988 and 86% in 1989.

Without calling in question the relevance of these figures, it should perhaps be observed that there is nothing unusual about falling prices in a highly competitive sector. It would be interesting to know how prices of the necessary raw materials (particularly gas) moved over that period. Since the applicant does not seem to have made any complaint in that respect, however, that question need not be considered here.

89. In addition, according to the Commission, the financial results of the Community industry worsened "between 1986 and 1989". To my way of thinking, that statement is so imprecise that it is hard to be of any use. On the one hand, it leaves the question open as to how profits moved in detail. The wording used would not even rule out the possibility that profits fell in one year only (say, from 1986 to 1987) and then rose again. On the other hand, the institutions' statement is of dubious value even if ° as one may well assume ° it is intended to mean that profits fell year-on-year in the period in question. According to the Commission, one of the two Community manufacturers undertook a restructuring operation in 1986 and 1987. Apparently, this resulted not only in job cuts but also in a marked increase in capacity. (64) The applicant rightly points out that such a process entails costs, which are usually spread over several years. In the rejoinder, the Council conceded that the investments made were depreciated in the usual way. It is therefore hard to understand the Community institutions' having left the effects of that process on profits out of account.

90. On the subject of employment in the Community, the Commission states ° again taking the figures for 1986 as its yardstick ° that it fell to 81% in 1987, 78% in 1988 and 73% in 1989. In this connection ° and in this connection only °, it is mentioned that one of the two Community producers carried out a restructuring operation which led to a "substantial" decrease in its employees. However, no attempt was made to reflect the effects of this restructuring operation in the figures. Yet this would have been especially appropriate, since according to the Commission' s figures the bulk of the decline in the number of persons employed occurred in the very years over which the restructuring operation was carried out (1986/1987).

91. It is perhaps appropriate at this juncture to pause briefly in order to point out that the Community institutions' examination of injury to the Community industry "must take account of a whole series of factors, and no single factor can in itself be decisive". (65) It is also undeniable that the institutions have a "wide discretion" when evaluating complex economic situations, in particular when determining injury in an anti-dumping proceeding. (66) One might therefore be inclined to leave out of account the shortcomings described up to now with regard to the determination of injury. The following considerations show that such a lenient approach would be absolutely inappropriate in this case.

92. Both the Council and the Commission maintain in their respective regulations that the sales volume of EC manufacturers on the Community market has declined. However, paragraph 38 of Regulation No 1386/91 sets out the figures for such sales in the period 1986 to 1989 (67) and they show that sales have not declined, but increased ° considerably. It is completely inexplicable in view of these figures ° which they themselves calculated ° how the Community institutions could claim that sales by the EC manufacturers declined.

93. The treatment of the EC manufacturers' production and capacity utilization by the Community institutions is also inexplicable. First, it is claimed that the EC manufacturers' production declined between 1986 and 1989 and, taking 1986 figures as the yardstick, amounted to only 97% in 1989. It is claimed that capacity utilization also deteriorated. If 1986 is again taken as the base year and if the increase in capacity which has taken place in the meantime is left out of account, capacity utilization in 1989 amounted to 97% (of the figure for 1986).

However, since ° as I have just shown ° sales by EC producers increased considerably during the period in question, whilst at the same time production went down, this could be attributable only to the fact that EC producers had large stocks which they sold off in that period. (68) However, this must be ruled out, since the institutions stated that "no major changes of stocks" were observed between 1986 and 1989. (69)

94. At the hearing, the Commission representative admitted in reply to a question put by myself that it could not properly explain this inconsistency. It is significant that in the rejoinder the Council passed over in silence the applicant' s complaints in this connection, merely confining itself to correcting an error on the part of the applicant, which it had apparently already corrected itself. (70)

From what I have stated so far, it should already be clear that what is involved here is a manifest error which is most probably attributable to a calculation error. I can rely in support of this proposition on a document submitted by the Council.

In the annex to the rejoinder, the Council submitted a document intended to provide information about consumption in the Community, the growth of imports and the effects on the Community industry. It is apparently an internal working document listing the figures referred to in the regulation. Against each of the figures for production and capacity utilization appears, in addition to a reference to the place in which the figures are to be found in Regulation No 1386/91, the word "error". There is then in every case a new line showing other figures for 1989; on the right of those figures appears the word "real".

Manifestly, the institutions themselves realized that the figures which they were using were wrong. The figures marked "real" in the document in fact resolve the contradiction described above; by reference to the figures for 1986, production and capacity utilization in 1989 both stood at 107%.

95. The Court will draw the necessary conclusion from the fact that the institutions apparently sought to suppress an error which they made. In this case, the application should in any event be successful on other grounds alone and hence this fact ° remarkable as it may seem ° no longer plays a decisive role. Nevertheless, it makes it appear desirable quite generally to investigate very thoroughly the Community institutions' activities in the sphere of anti-dumping law whenever actions are brought. It will have to be trusted that the Court of First Instance, which will have jurisdiction over such cases in future, will show the same diligence as it has exhibited to date in examining competition-law cases.

96. Following this statement of principle, there remains to be considered the Council' s statement that the rapid increase of imports from the countries concerned coincided with an "equally rapid" decrease in production, capacity utilization, sales volume, market share, prices, profits and employment in the Community industry. This alleged parallel development is the only new factor which the Council inserted in the contested regulation in addition to the Commission' s considerations. It is typical of this case that that argument, too, is not correct. According to that which has been observed above, there can have been no such parallel development. If I may pick just one example: the increase in imports from the countries concerned coincided with a considerable rise ° and not a decrease ° in sales by the EC manufacturers themselves.

97. Towards the end of the hearing, the Council expressed the view that the contested regulation nevertheless exhibited a "certain consistency". For my part, I would refer to what I have observed above.

The only observation which stands up to any examination after all that is that relating to the decline in the EC manufacturers' share of the Community market from 78.4% (1986) to 60.5% (1989). However, the imposition of anti-dumping duties cannot be based on that fact alone, especially since those data are based on figures which include products not covered by the investigation and must therefore be regarded as unreliable. (71)

98. In its observations, the Federation gave new figures for imports from China. According to those figures, imports from China in 1989 stood at just under 9.6 million pieces. It is self-evident that those figures, the source of which was not disclosed, cannot be utilized, since they were not used in the contested regulation. Although the Commission nevertheless relied on those figures at the hearing, this can only be firmly opposed.

99. In conclusion, it should be remarked that, in view of that which has been determined with regard to this point, it might be considered that the contested regulation is vitiated by a defective statement of reasons (72) rather than by a substantive error. It is difficult to draw the demarcation line in this area. Since, however, I consider that the defects found did not deprive the applicant of the chance properly to exercise its right to bring proceedings under Article 173 of the EC Treaty, it appears more appropriate to me to assume that there was a substantive error. (73)

The issue of discrimination

100. Finally, I shall, with appropriate brevity, discuss the applicant' s remaining arguments. The applicant claims that it was discriminated against because Article 2(5) (rather than Article 2(6)) was applied. I must admit that it is not completely clear to me what the applicant wishes to achieve by this submission. It seems, however, that the applicant seeks to draw a distinction between the products which it sold in the Community directly and the products which reached the Community via middlemen in Hong Kong. It is therefore claimed that the principle of equal treatment has been infringed in so far as two different situations were treated in the same way (that is to say, the same anti-dumping duty was imposed). There is no need to go further into this question, since only the middlemen in Hong Kong were affected by that discrimination (if there was discrimination at all). In contrast, the applicant cannot rely on this argument, since it was not itself disadvantaged.

Infringement of the principles of sound administration

101. The applicant claims that there has been an infringement of the principles of sound administration in so far as the Community institutions did not respond to all the arguments and facts which it put forward and the Commission did not notify an essential consideration to the Council. These are obviously issues which belong in the realm of the infringement of the rights of the defence and of the duty to provide a statement of reasons, and I have already discussed them under those heads.

Lack of competence

102. The applicant further relies on the fact that, under Article 12(1) of Regulation No 2423/88, the Council is competent to impose the definitive anti-dumping duty. It maintains that, since the Council was led into error by the Commission in respect of essential matters, the competent institution did not adopt the contested regulation.

That argument is mistaken. The contested regulation was adopted by the Council, as provided in Regulation No 2423/88.

Misuse of powers

103. Lastly, the applicant claims that the Community institutions misused their powers within the meaning of Article 173 of the EC Treaty. The Council was not guided by the interest of the Community but by a desire to protect a Community industry which did not require protection.

In view of the foregoing considerations, such a suspicion cannot be dismissed completely out of hand. However, it must be pointed out that, according to the case-law, it has to be shown "on the basis of objective, relevant and conclusive evidence" that the measure in question was adopted in order to achieve purposes other than those for which it was intended. (74) The applicant has not adduced such evidence.

Summing-up and order as to costs

104. Consequently, the application must be regarded as admissible and well-founded. The order as to costs follows from Article 69(1) and (2) and the first and second subparagraphs of Article 69(4) of the Rules of Procedure of the Court of Justice. Although the applicant claimed that the Council should also pay the interveners' costs, the first subparagraph of Article 69(4) constitutes a mandatory rule for the Commission. As far as the Federation is concerned, it appears justified to have recourse to the second subparagraph of Article 69(4), since it introduced a further lack of clarity into the proceedings by producing new figures.

C ° Conclusion

105. I therefore propose that the Court should:

° declare Council Regulation (EEC) No 3433/91 of 25 November 1991 void as far as the applicant is concerned;

° order the Council to pay the costs, with the exception of those of the interveners, which should bear their own costs.

(*) Original language: German.

(1) ° OJ 1991 L 326, p. 1.

(2) ° See paragraph 3 of Commission Regulation (EEC) No 1386/91 of 23 May 1991 imposing a provisional anti-dumping duty on imports of gas-fuelled, non-refillable pocket flint lighters originating in Japan, the People' s Republic of China, the Republic of Korea and Thailand (OJ 1991 L 133, p. 20).

(3) ° OJ 1988 L 209, p. 1.

(4) ° The notice was published in OJ 1990 C 89, p. 3.

(5) ° The actual wording was, We have no domestic sales .

(6) ° For the wording of the relevant provisions, see sections 43 and 44, below.

(7) ° See footnote 2.

(8) ° Loc. cit. (footnote 2), paragraph 10.

(9) ° Loc. cit. (footnote 2), paragraph 11.

(10) ° Loc. cit. (footnote 2), paragraph 18.

(11) ° The only difference between the final version and the Commission' s proposal is that the latter refers to the basic regulation whereas the passage quoted cites the reference number of the regulation.

(12) ° For a survey, see, for instance, Wang Xiaoye, Das EG-Antidumpingrecht und die Ausfuhren der VR China in die EG, RabelsZ 1993, p. 685, at p. 688 et seq.

(13) ° See section 8, above.

(14) ° The applicant' s representatives seem to have based themselves on the fact, not only that two of the applicant' s shares are held by citizens of Hong Kong, but also that a 50% interest in Gao Yao (China) ° which holds the rest of the shares in Gao Yao (HK) ° is owned by Hong Kong citizens.

(15) ° Here, too, the Court was concerned with calculating normal value.

(16) ° Judgments in Case 250/85 Brother v Council [1988] ECR 5683, paragraph 16, in Case C-175/87 Matsushita v Council [1992] ECR I-1409, paragraph 12, and in Case C-104/90 Matsushita v Council [1993] ECR I-4981, paragraph 9.

(17) ° Judgment in Case C-358/89 Extramet Industrie v Council [1991] ECR I-2501, paragraph 15, which contains extensive references to earlier case-law; cf. also the Opinion of Mr Advocate General Jacobs in that case, [1991] ECR 2507, at 2510 et seq.

(18) ° Cf., for instance, the circumstances underlying the judgment in Joined Cases 294/86 and 77/87 Technointorg v Commission and Council [1988] ECR 6077.

(19) ° See paragraph 22 of Regulation No 1386/91 and paragraph 12 of Regulation No 3433/91, in which the Council confirmed that calculation.

(20) ° Cf. Case C-175/87 Matsushita v Council (cited in footnote 16).

(21) ° Judgment in Case C-104/90 Matsushita v Council (cited in footnote 16).

(22) ° See, for example, the judgment in Case 118/77 ISO v Council [1979] ECR 1277.

(23) ° Judgment in Case 307/81 Alusuisse [1982] ECR 3463, paragraph 13.

(24) ° For further discussions, see, for instance, Anthony Arnull, Challenging EC anti-dumping regulations : The problem of admissibility [1992] ECLR, 73, at 76 et seq.

(25) ° Cited in footnote 17, at 2520 et seq.

(26) ° Judgment in Case C-69/88 Nakajima v Council [1991] ECR I-2069, paragraph 108.

(27) ° Judgment in Case C-49/88 Al-Jubail Fertilizer v Council [1991] ECR I-3187, paragraph 17.

(28) ° Cf. the Opinion of Mr Advocate General Van Gerven in Case C-16/90 Noelle [1991] ECR I-5172, paragraph 13.

(29) ° Cf. the judgment in Al-Jubail (cited in footnote 27), paragraph 20.

(30) ° See the end of section 4, above.

(31) ° Cf. section 11, above.

(32) ° See section 45, above.

(33) ° See in this connection Beseler, J.F./Williams, A.N.: Anti-Dumping and Anti-Subsidy Law: The European Communities, London, 1986, p. 73; Boudant, J.: L' anti-dumping communautaire, Paris 1991, p. 73 et seq.

(34) ° Cf. the recent judgment in Case C-171/87 Canon v Council [1992] ECR I-1237, paragraph 55. See also my Opinion in Case C-69/89 Nakajima v Council [1991] ECR I-2112, paragraph 34.

(35) ° As regards this term, see section 10, above. In the application, the applicant claimed that the figures used by the Community institutions also covered lighters with a higher content of gas than the lighters manufactured by Gao Yao, which were therefore not comparable. In paragraph 34 of Regulation No 1386/91, the Commission states, however, that, in order to assure a fair comparison, it took into account in the price undercutting exercise only lighters with a similar content of gas. This is confirmed by the Council in paragraph 13 of the contested regulation. The applicant seems no longer to wish to persist with this aspect of its complaint in the reply. In view of what I shall have to say later with regard to the inclusion of piezo lighters, this aspect probably, in any event, has no separate role to play.

(36) ° See section 6.1 of that memorandum.

(37) ° See section 10, above.

(38) ° Cf. paragraph 5 of the contested regulation.

(39) ° My view is probably confirmed by paragraph 1 of the contested regulation.

(40) ° See in particular the second subparagraph of paragraph 41 of Regulation No 1386/91.

(41) ° Paragraph 44 of Regulation No 1386/91, confirmed in paragraph 15 of the contested regulation.

(42) ° On this basis, a figure for consumption of 321.8 million pieces can be calculated for 1986 and a figure of 435.6 million pieces for 1989.

(43) ° See section 12, above.

(44) ° The figures would in that case have to be lower (and not higher). Moreover, comparison with the figures set out in paragraph 31 of the regulation shows that imports of piezo lighters from the countries concerned must have been much higher (more than 50 million in 1989 at least).

(45) ° See section 14, above.

(46) ° See section 54, above.

(47) ° See paragraphs 18 to 21 of Regulation No 1386/91.

(48) ° See section 84, below.

(49) ° Cf. paragraph 48 of Regulation No 1386/91.

(50) ° In each case, consumption less sales by EC manufacturers and imports from Korea, Japan, China and Thailand (for 1989, for example, 439.8 million - 266.5 million - 152.5 million = 20.8 million pieces).

(51) ° See section 60 et seq., above.

(52) ° See section 74 et seq., below.

(53) ° See the judgment in Nakajima, cited in footnote 26, paragraph 29.

(54) ° The information reproduced here comes from Annex 2 to the rejoinder. The Council marked that annex confidential . However, it did not give express instructions that it should be treated as confidential and hence it appears to have been served on all the parties to the proceedings. However, I shall (for obvious reasons) nevertheless confine myself to describing the conclusion drawn by the Council without quoting detailed information provided by the Council about sales.

(55) ° The applicant would have had an opportunity to do so at the hearing. However, it did not appear at the hearing.

(56) ° See sections 54 and 69, above.

(57) ° Cf. paragraph 21 of Regulation No 1386/91.

(58) ° See paragraphs 12 and 13 of the regulation, which are confirmed by paragraph 5 of the contested regulation.

(59) ° Cf. the judgments in Technointorg, cited in footnote 18, paragraphs 37, 38 and 39, in Case C-176/87 Konishiroku v Council [1992] ECR I-1493, paragraph 11 et seq., and in Case C-177/87 Sanyo Electric v Council [1992] ECR I-1535, paragraph 11 et seq.

(60) ° Paragraph 34 of Regulation No 1386/91, confirmed by paragraph 13 of the contested regulation.

(61) ° Cf. paragraph 35 of Regulation No 1386/91.

(62) ° Paragraphs 41 and 47 of Regulation No 1386/91 (see section 16, above).

(63) ° Paragraphs 14 and 15 of the contested regulation (see section 22, above).

(64) ° Cf. paragraphs 36 and 40 of Regulation No 1386/91.

(65) ° Judgment in Case C-315/90 Gimelec v Commission [1991] ECR I-5589, paragraph 17.

(66) ° See the judgment in Nakajima, cited in footnote 26, paragraph 86, reflecting that which the Court has consistently held.

(67) ° Quoted in section 14 of this Opinion.

(68) ° Purely hypothetically, it is also conceivable that the increase in sales in the EC came about as a result in a shift of lighter sales which had formerly been made abroad. Although the EC producers evidently export to third countries, such a development is extremely unlikely. Neither in the regulations at issue nor in the correspondence exchanged during the anti-dumping proceeding, have I found the slightest evidence for this. The Community institutions also did not pray such a possibility in aid.

(69) ° Paragraph 37 of Regulation No 1386/91.

(70) ° The applicant seems initially to have construed the fact that the Commission and the Council used each time 1986 as the yardstick (=100%) as meaning, for instance, that the EC manufacturers' capacity utilization actually stood at 100% in 1986, which is a manifestly absurd assumption.

(71) ° Cf. section 60 et seq., above.

(72) ° For the requirements for an infringement of Article 190 of the EC Treaty, see section 59, above.

(73) ° Cf. with regard to this demarcation my Opinion of 15 July 1993 in Case C-216/91 Rima v Council, not yet published in the ECR, paragraph 110.

(74) ° See the judgment in Nakajima, cited in footnote 26, paragraph 134.