Court of Justice of the European Communities (including Court of First Instance Decisions)

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1. Common commercial policy - Protection against dumping practices - Dumping margin - Determination of the normal value - Constructed value - Purpose of construction - Selling, administrative and other general expenses to be taken into consideration
(Council Regulation No 2176/84, Art. 2(3)(b)(ii))
2. Common commercial policy - Protection against dumping practices - Dumping margin - Determination of the export price - Construction on the basis of the price paid by the first independent purchaser - Allowances to take account of costs associated with the activities prior to importation of a subsidiary of the exporting manufacturer - Whether legal
(Council Regulation No 2176/84, Art. 2(8)(b))

1. The purpose of constructing the normal value is to determine the selling price of a product as it would be if that product were sold in the country of origin or in the exporting country. Consequently it is the expenses relating to sales on the domestic market which must be taken into account when the constructed value is determined.
Accordingly, the institutions were right to refuse to use data relating to a market other than the domestic market of the country of origin or exporting country.
2. When, for reasons other than those referred to in Article 2(8)(b) of the basic anti-dumping regulation, Regulation No 2176/84, the export price is constructed on the basis of the price paid by the first independent purchaser, the price must be adjusted to reflect the costs and profits inherent in the activities pursued by a subsidiary of the manufacturer through which export sales are realized with regard to handling customers' orders, sending out invoices and receiving payments. The costs incurred by the subsidiary in those activities effectively reduce the amount received by the exporter and Article 2(8)(b) of the regulation does not preclude the making of the necessary allowances to take account of those costs even if they relate to activities prior to importation.

In Case C-172/87,
Mita Industrial Co. Ltd, Osaka, Japan, represented by Jean-François Bellis, of the Brussels Bar, with an address for service in Luxembourg at the Chambers of Freddy Brausch, 8 Rue Zithe,
applicant,
supported by
Gestetner Holdings PLC, London, represented by Clare Tritton, Karel Paul Lasok and Fergus Randolph, Barristers-at-Law, with an address for service in Luxembourg at the Chambers of Messrs Arendt and Harles, 4 Avenue Marie-Thérèse,
intervener,
v
Council of the European Communities, represented by Hans-Juergen Lambers, Director in its Legal Service, and Erik Stein, Legal Adviser, acting as Agents, assisted by Hans-Juergen Rabe and Michael Schuette, Rechtsanwaelte, Hamburg and Brussels, with an address for service in Luxembourg at the office of Joerg Kaeser, Manager of the Legal Directorate of the European Investment Bank, 100 Boulevard Konrad Adenauer, Kirchberg,
defendant,
supported by
Commission of the European Communities, represented by its Legal Adviser John Temple Lang, acting as Agent, with an address for service in Luxembourg at the office of Roberto Hayder, a representative of the Commission' s Legal Service, Wagner Centre, Kirchberg,
intervener,
and by
Committee of European Copier Manufacturers (CECOM), Cologne, represented by Dietrich Ehle and Volker Schiller, Rechtsanwaelte, Cologne, with an address for service in Luxembourg at the Chambers of Messrs Arendt and Harles, 4 Avenue Marie-Thérèse,
intervener,
APPLICATION for the annulment of Articles 1 and 2 of Council Regulation (EEC) No 535/87 of 23 February 1987 imposing a definitive anti-dumping duty on imports of plain paper photocopiers originating in Japan (Official Journal 1987 L 54, p. 12), in so far as they relate to the applicant,
THE COURT (Fifth Chamber),
composed of: R. Joliet, President of the Chamber, Sir Gordon Slynn, F. Grévisse, J.C. Moitinho de Almeida and M. Zuleeg, Judges,
Advocate General: J. Mischo,
Registrar: D. Louterman, Principal Administrator,
having regard to the Report for the Hearing,
after hearing oral argument from the parties at the hearing on 3 October 1990,
after hearing the Opinion of the Advocate General at the sitting on 13 December 1990,
gives the following
Judgment

1 By application lodged at the Court Registry on 6 June 1987, Mita Industrial Co. Ltd (hereinafter referred to as "Mita"), whose registered office is in Osaka, brought an action under the second paragraph of Article 173 of the EEC Treaty for the annulment of Articles 1 and 2 of Council Regulation (EEC) No 535/87 of 23 February 1987 imposing a definitive anti-dumping duty on imports of plain paper photocopiers originating in Japan (Official Journal 1987 L 54, p. 12), hereinafter referred to as "the contested regulation", in so far as they relate to the applicant.
2 The Mita company manufactures plain paper copiers ("PPCs") which it exports to the Community through Mita Europe, on the one hand, to independent importers who re-sell them under the Mita name and, on the other hand, accounting for 50% of its export sales to the Community, to original equipment manufacturers (companies supplying under their own brand-name products manufactured by other undertakings, hereinafter referred to as "OEMs"), in particular Gestetner, Océ, Triumph-Adler, Utax, Olympia and Develop. In Japan, where it has no OEM sales, Mita sells PPCs under the Mita brand name to dealers and end-users through its own sales branches.
3 In July 1985 Mita, together with other Japanese manufacturers, was the subject of a complaint lodged with the Commission by the Committee of European Copier Manufacturers (CECOM), which accused it of dumping its products in the Community.
4 The anti-dumping procedure initiated by the Commission on the basis of Council Regulation (EEC) No 2176/84 of 23 July 1984 on protection against dumped or subsidized imports from countries not members of the European Economic Community (Official Journal 1984 L 201, p. 1) resulted in the adoption of Commission Regulation (EEC) No 2640/86 of 21 August 1986 imposing a provisional anti-dumping duty on imports of plain paper photocopiers originating in Japan (Official Journal 1986 L 239, p. 5). The rate of the provisional anti-dumping duty was set at 13.7% of the net free-at-Community-frontier price in the case of imports of PPCs manufactured and exported by Mita. By the contested regulation, adopted on a proposal from the Commission, the Council subsequently set the definitive anti-dumping duty at 12.6%.
5 Reference is made to the Report for the Hearing for a fuller account of the facts of the case, the course of the procedure and the submissions and arguments of the parties, which are mentioned or referred to hereinafter only in so far as is necessary for the reasoning of the Court.
6 In support of its action Mita relies upon two pleas in law alleging, first, incorrect construction of the normal value of products sold to OEMs and, secondly, miscalculation of the export price.
The plea in law alleging incorrect construction of the normal value of products sold to OEMs
7 Mita claims that, although when constructing the normal value of products sold to OEMs in accordance with Article 2(3)(b)(ii) of Regulation No 2176/84 the institutions correctly took account of the fact that the profit on its OEM sales was lower than that realized on sales of its branded products, the institutions were wrong to include in the normal value all distribution, promotion and servicing costs, which in reality Mita only incurs in its domestic market, not in its OEM sales.
8 Mita claims, in this connection, that the institutions should have taken into account the evidence it supplied to the Commission which, albeit relating to export sales, showed the said difference in costs. It considers that that evidence constituted the only "available information" within the meaning of Article 2(3)(b)(ii) of Regulation No 2176/84 which the institutions could take into account when constructing the normal value.
9 It should first be recalled that the Court held in ruling on a similar plea in law also seeking the annulment of Regulation No 535/87 in the judgment in Joined Cases C-133/87 and C-150/87 Nashua Corporation v Commission and Council [1990] ECR 719, at paragraph 33, that the institutions had taken into consideration the difference between the costs and profits associated with sales to OEMs and the equivalent figures for other sales and that it was for that purpose, and because the institutions had found it impossible to gauge that difference accurately, that in constructing the normal value of products sold to OEMs they had set the profit margin at 5% instead of its average rate, estimated at 14.6%, applied to sales under the manufacturers' own brand names. Furthermore, Mita did not adduce evidence that the level of the allowance made by the institutions was insufficient to cover all the alleged differences.
10 Moreover, the figures submitted to show the abovementioned cost differences relate only to sales on the Community market.
11 It emerges from the case-law of the Court, as laid down in particular in the judgment in Case 250/85 Brother v Council [1988] ECR 5683, at paragraph 18, that the purpose of constructing the normal value is to determine the selling price of a product as it would be if that product were sold in the country of origin or in the exporting country and consequently it is the expenses relating to sales on the domestic market which must be taken into account. Accordingly, it must be held that the institutions were right to refuse to use data relating to a market other than the domestic market of the country of origin or exporting country.
12 Mita also claims that the method used by the institutions, which consisted of applying the same profit margin of 5% to constructed normal values for products sold to OEMs by all the Japanese exporters concerned, instead of the actual profit margin realized by those exporters on sales of own-brand products, is discriminatory and favours exporters which incur low costs and realize a high profit margin on domestic sales of own-brand products.
13 That argument cannot be accepted. That a single profit margin was taken into account was, as stated above, due to the fact that the institutions lacked the data necessary in order reliably to evaluate each exporter' s profit margin.
14 It follows from the foregoing considerations that the plea in law alleging incorrect construction of the normal value of products sold to OEMs must be rejected.
The plea in law alleging that the export price was miscalculated
15 Mita claims, first, with regard to sales to OEM importers, that the export price was determined not, as the Council maintains, in accordance with Article 2(8)(b) of Regulation No 2176/84, but on the basis of Article 2(8)(a). The latter provision does not permit the deduction of 5% which was made in respect of agent' s commission for Mita Europe.
16 Mita goes on to argue that in the case of sales of Mita-brand PPCs to independent importers the Council should have taken as the export price, in accordance with Article 2(8)(a) of Regulation No 2176/84, the prices paid to Mita Europe and should not have constructed the export price on the basis of Article 2(8)(b) with a deduction of 6% for the costs incurred by Mita Europe and 5% for the profit margin.
17 Mita claims that in any event Article 2(8)(b) of Regulation No 2176/84 is not applicable in this case in view of the fact that in the two categories of sales mentioned above the PPCs were imported by customers who were independent of Mita and Mita Europe neither imports products into the Community nor resells them there. Costs incurred between importation and resale are borne solely by the independent importers who buy PPCs from Mita, not by Mita, and accordingly the deductions made are unlawful.
18 Finally, Mita maintains that the application of Article 2(8)(b) of Regulation No 2176/84 both to sales of Mita PPCs to independent importers and to sales of PPCs to OEM buyers resulted in the export price being determined by making a double deduction of profit, that is to say, on the one hand a resale profit or commission of 5% and, on the other hand, the normal profit made by independent importers and OEM buyers on the sale of their products in the Community.
19 It should be borne in mind, first of all, that in its judgment in Case C-156/87 Gestetner v Council and Commission [1990] ECR 781, at paragraph 27, concerning Mita' s sales to the OEM Gestetner, the Court pointed out that the PPCs produced by Mita were sold through Mita Europe, which handled customers' orders, sent them the invoices and received the relevant payments and that the price paid by purchasers to Mita Europe was not the same as the price invoiced by Mita Japan to Mita Europe.
20 It is clear from that judgment that it was because of Mita Europe' s involvement that the export price was determined on the basis of Article 2(8)(b) of Regulation No 2176/84, given the fact that neither the price paid by Mita Europe to Mita Japan nor the price paid by Gestetner to Mita Europe could serve as a point of reference, on account of the association between the exporting manufacturer and its subsidiary and the sales activities pursued by that subsidiary. The costs entailed by such activities effectively reduced the amount received by the exporting manufacturer inasmuch as they were normally borne by the importer (paragraph 31). In those circumstances, it was accepted that it was appropriate to construct the export price on the basis of the price paid by the first independent purchaser, adjusting that price to reflect the costs and the profits inherent in the role played by Mita Europe (paragraph 34).
21 Furthermore, it follows from the same judgment that the fact that the costs incurred by Mita Europe relate to activities pursued prior to importation does not prevent the application of Article 2(8)(b) of Regulation No 2176/84, which does not preclude the making of necessary allowances where the export price must be constructed for reasons other than those referred to in that article (paragraphs 32 and 33).
22 In those circumstances, it must be concluded that in this case the Council determined the export price in respect of OEM sales correctly, by constructing that price on the basis of the price paid by the first independent purchaser, adjusted to reflect the costs and profits inherent in the role played by Mita Europe.
23 The same applies as regards determination of the export price in the case of sales of Mita-brand PPCs by Mita through Mita Europe to independent importers. As the Council pointed out in the third subparagraph of paragraph 15 of the preamble to the contested regulation, in each case Mita Europe assumes functions typical of an importing subsidiary, similar to those performed in the case of OEMs.
24 In view of the foregoing, the argument that in applying Article 2(8)(b) of Regulation No 2176/84 to sales to independent importers (OEMs and others) the Council determined the export price by making a double deduction of profit cannot be accepted.
25 It appears neither from the documents before the Court nor from the arguments at the hearing that the level of the allowance was excessive. The plea in law alleging that the export price was miscalculated must therefore be rejected, and consequently the application must be dismissed in its entirety.

Costs
26 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs. Since the applicant has failed in its submissions, it must be ordered to pay the costs, including the costs of the intervener CECOM which has asked for them in its pleadings. The Commission shall bear its own costs in accordance with Article 69(4) of the Rules of Procedure. Gestetner, which intervened in support of the applicant, must bear its own costs.

On those grounds,
THE COURT (Fifth Chamber)
hereby:
1. Dismisses the application;
2. Orders the applicant to pay the costs, including those incurred by the intervener CECOM. Gestetner is ordered to bear its own costs.