Report for the Hearing delivered in Joined Cases 260/85 and 106/86
I — Facts and procedure
The age of electronic typewriters began in 1978 when the first model of an electronic typewriter manufactured by Olivetti was launched on the market. Until then, the market had been dominated by typewriters of the traditional variety, that is to say mechanical and later electromechanical typewriters.
The spectacular breakthrough achieved by the new product completely overturned the structure of the market in typewriters. Within a very short time sales of mechanical and electromechanical typewriters plunged to the lowest level ever recorded, whilst sales of electronic typewriters soared.
In 1982 European manufacturers of electronic typewriters (Olivetti, Olympia, and Triumph-Adler) began to feel the evergrowing pressure exerted by Japanese competition which, in their view, was undercutting prices. According to the European manufacturers, Japanese companies were exporting ever-increasing quantities of electronic typewriters at dumping prices in order to take over the European market in that product and to drive out European undertakings.
In order to contend with what they call the Japanese dumping conspiracy, European manufacturers formed an association known as the Committee of European Typewriter Manufacturers (hereinafter referred to as Cetma) which, on 15 February 1984, submitted a complaint to the Commission requesting the latter to initiate an antidumping proceeding against Japanese exporters.
The proceeding 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) culminated in the adoption by the Commission of Regulation (EEC) No 3643/84 of 20 December 1984 (Official Journal 1984, L 335, p. 43). That regulation imposed a provisional antidumping duty on imports of electronic typewriters manufactured by a number of companies including Brother Industries Ltd, Canon Inc., Sharp Corporation, Silver Seiko Ltd, Tokyo Electric Company Ltd (hereinafter referred to as TEC), Tokyo Juki Industrial Co. Ltd and Towa Sankiden Corporation, and terminated the proceeding with regard to Nakajima All Co. Ltd on the ground that the dumping margin established for that company was negligible.
On 19 June 1985 the Council adopted Regulation (EEC) No 1698/85 imposing a definitive antidumping duty on imports of electronic typewriters originating in Japan (Official Journal 1985, L 163, p. 1), which imposed a definitive antidumping duty on all the undertakings that were already subject to provisional antidumping duty. The duty imposed on TEC was fixed at 21%. That measure was contested by all the parties concerned.
By Regulation (EEC) No 113/86 of 20 January 1986 (Official Journal 1986, L 17, p. 2), the Council declared Regulation No 1698/85 inapplicable to Tokyo Juki as from the date of its entry into force.
By application lodged at the Court Registry on 20 August 1985 (Case 260/85), TEC, TEC Belgium SA, TEC Elektronik GmbH, TEC Europe Company Ltd and TEC France SA (jointly referred to as the applicant) brought an action for a declaration that Articles 1 and 2 of Council Regulation No 1698/85 were void in so far as they applied to electronic typewriters manufactured by Tokyo Electric.
By an application for the adoption of interim measures lodged at the Court Registry on 22 August 1985, those companies sought an order suspending the application of Regulation No 1698/85 with regard to electronic typewriters manufactured by TEC until the Court had given judgment on the main application. The interlocutory application was dismissed by order of the President of the Court of 18 October 1985.
By order of 18 September 1985 the Court granted UTAX GmbH Organizationssysteme (hereinafter referred to as UTAX), an importer of electronic typewriters manufactured by TEC, leave to intervene in the proceedings in support of the applicant's conclusions.
By orders of 18 September 1985 and 19 February 1986 respectively, the Court granted the Commission of the European Communities and Cetma leave to intervene in support of the defendant's conclusions.
On hearing the Report of the Judge-Rapporteur and the views of the Advocate General, the Court decided, in accordance with Article 95 (1) of the Rules of Procedure, to assign the case to the Fifth Chamber and to open the oral procedure without any preparatory inquiry. However, it asked the parties to supply it with certain information and to answer a number of questions. The parties complied with that request within the prescribed period.
In their action against Regulation No 1698/85 (Case 260/85), TEC and the other applicant companies had contended, inter alia, that the comparison between the prices of imported products and the prices of Community products had been distorted by numerous errors.
By Regulation (EEC) No 113/86 of 20 January 1986 (Official Journal 1986, L 17, p. 2), the Council, acting on a proposal from the Commission, raised the definitive antidumping duty to 24%, taking account of the fact that the correction of the error involving the inclusion of electronic typewriters manufactured in Singapore had the effect of increasing the dumping margin established in relation to TEC's imports into the Community.
By application lodged at the Court Registry on 5 May 1986 (Case 106/86), TEC brought an action for the annulment of Regulation No 113/86. It stated that the latter application raised no new grounds of annulment and that it was essentially designed to enable TEC to ensure that the Court reviewed both the initial measures under Regulation No 1698/85 and the measures as amended by Regulation No 113/86.
By a document lodged at the Court Registry on 17 July 1986, the Council raised an objection of inadmissibility against that application, on the ground that Regulation No 113/86 merely confirmed Regulation No 1698/85.
TEC replied that there were reasons for taking the view that Regulation No 113/86 does not merely confirm Regulation No 1698/85, and it could not therefore risk laying itself open to the charge that it had failed to contest that regulation within the prescribed period.
By decision of 17 December 1986, the Court joined the objection of inadmissibility to the substance of the case.
By order of 3 June 1986, the Court granted the Commission leave to intervene in support of the defendant's conclusions. By order of 3 July 1986, UTAX was given leave to intervene in support of the applicant's conclusions.
On hearing the Report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to assign the case to the Fifth Chamber and to join it to Case 260/85.
II — Conclusions of the parties
In Case 260/85
TEC and the other applicant companies claim that the Court should:
The Council contends that the Court should:
UTAX, intervening in support of the applicant's conclusions, claims that the Council should also be ordered to reimburse the costs incurred by UTAX.
The Commission of the European Communities and Cetma support the Council's conclusions and contend that the applicant should also be ordered to pay the costs incurred by them in their capacity as interveners.
In Case 106/86
TEC claims that the Court should:
The Council contends that the Court should:
UTAX, intervening in support of the applicant's conclusions, claims that the Council should also be ordered to reimburse the costs incurred by UTAX.
The Commission of the European Communities and Cetma support the Council's conclusions and contend that the applicant should also be ordered to pay the costs incurred by them in their capacity as interveners.
III — Submissions and arguments of the parties
A — Submissions and arguments specific to these joined cases
TEC puts forward four submissions against the contested regulation. TEC's submissions are endorsed in their entirety by UTAX, which intervened in support of the applicant's conclusions. UTAX draws particular attention to the discriminatory nature of the definitive findings concerning dumping in so far as different criteria were applied in the course of the same procedure for different exporters with the aim of favouring those which, like Nakajima and Tokyo Juki, supplied Community manufacturers.
1. Reasonable margin of profit
In its first submission, TEC contends that by including a reasonable margin of profit of 47.92% in the constructed value of TEC's products, the Community authorities incorrectly applied Regulation No 2176/84.
Whereas in its provisional determination of the constructed value the Commission used a profit margin of 10% of the cost of production, for the definitive determination the Community institutions used a profit margin of 47.92% of the cost of production, corresponding to a margin realized by a Japanese producer other than TEC on domestic sales of a limited number of electronic typewriters.
According to TEC, a profit margin of that kind cannot possibly constitute a reasonable margin of profit or a normal profitwithin the meaning of Article 2 (3) (b) (ii) of Regulation No 2176/84.
The use of a profit margin of 47.92% is incompatible with the consistent practice of the Community authorities; in past cases the margin found to be reasonable has never exceeded 10%. The profit margin used is also inconsistent with the Commission's own provisional determination.
In their complaint against the Japanese exporters, the Community manufacturers had indicated a normal profit margin of 8% for the product in question. Moreover, the use of such a high profit margin is inconsistent with the profit margin which was considered reasonable for Community manufacturers by the Community authorities themselves in the definitive determination of injury, which was made by attributing to Community manufacturers a profit margin of 10% on sales.
TEC further submits that the use of a profit margin of 47.92% is contrary to the rule laid down in Article 2 (3) (b) (ii), according to which the profit added must not exceed the profit normally realized on sales of products of the same general category on the domestic market of the country of origin. As TEC pointed out in its reply to the antidumping questionnaire sent to it by the Commission in the course of the investigation, its profit for office machinery was 3.4% in 1985, and the profit levels of other Japanese manufacturers were similar.
TEC adds that the method used by the Community authorities in order to determine the reasonable profit in this case leads to arbitrary and unpredictable results contrary to the principle of legal certainty. The profit margin was calculated on the basis of the profit margins allegedly realized by a company other than TEC on sales of 300 and 400 units of two particular models during the investigation period. That method leads to arbitrary results inasmuch as it is impossible to gauge the profit margins of one company from those of another, as is demonstrated by the fact that the Commission established, in the case of undertakings selling in Japan, profit margins ranging from less than zero (for Tokyo Juki) to 75% (for Silver Seiko). That method also leads to unpredictable results, inasmuch as a company cannot ascertain the profit margins realized by another company and therefore has no way of knowing how to set its prices so as to avoid dumping. Moreover, the only data on profit to which another company has access are published documents and the reports published by Canon, Brother Industries and Silver Seiko on their level of profits do not show profits of the same magnitude as those used by the Commission. Accordingly, there has been a breach of the principle of legal certainty on which both the Council and the Commission have often laid great weight as a guiding principle in the interpretation of Regulation No 2176/84.
Finally, the use of a 47.92% profit margin for the definitive determination of the normal value of TEC's products is discriminatory by comparison with the attitude adopted in relation to Nakajima All Co. Ltd. The definitive determination arrived at by the Commission in the Nakajima case in February 1986 bears out TEC's allegation of discrimination and precludes the Council from arguing that Nakajima was treated in the same way as the other Japanese manufacturers. The Community institutions discriminated against TEC on two occasions. The first time by using in Regulation No 1698/85 a profit margin considerably higher than that which they adopted in Regulation No 3643/84 when they calculated a negligible dumping margin for Nakajima; and the second time by using for Nakajima, in the decision of 10 February 1986, a profit margin lower than that which had been taken into account for the other exporters in Regulation No 1698/85.
Finally, TEC contends that the profit margin which was applied to it is based on data which were not communicated to it and which may not therefore legally be relied upon by the Community authorities. Despite repeated requests by TEC, the Commission failed to supply the applicant with information that would have enabled it to comment on the profit margin attributed to it. The Commission's statement that the profit margin was arrived at by deducting total cost from the selling price is clearly insufficient since it is important to examine whether all the costs have been subtracted from the price. The companies in question had no interest in challenging that figure since for them the final result would have remained unchanged. However, it would appear from Canon's submission that this profit margin is purely and simply the result of gross errors made by the Commission, which ignored the fact that the selling expenses actually incurred by Canon for sales of electronic typewriters, that is to say a new product requiring substantial advertising, were higher than the average of the selling expenses incurred by Canon's sales subsidiary. Moreover, the lowest profit margin was that of Tokyo Juki, in relation to which the Commission was able to exclude any profit only by inflating its selling expenses and allocating them also to sales of electronic typewriters supplied by the Japanese exporters and marketed by Community manufacturers under their own brand name (original equipment manufacturer — OEM — sales), that is to say without those exporters incurring any distribution costs.
The Council maintains that, in determining the profit margin, it took account of all the considerations which are relevant to the calculation of a reasonable or normal margin. In doing so the Community authorities looked at the profit margin actually realized on the domestic market in order to arrive at a constructed normal value as close as possible to a normal value that would have been established on the basis of sales on the domestic market.
Such a high profit margin had never been used before solely because the Community authorities had not previously found such a high margin.
Nor is there any inconsistency between the provisional and the definitive determination since the Commission did not discover that the profits on the Japanese market were higher until after it made the provisional determination.
Although the profit margin that was used seems to be inconsistent with the assessment set out in Cetma's complaint of the normal profit margin in Japan, it should be borne in mind that since Cetma could have no way of knowing what the profit margin on the Japanese domestic market would be, its assessment is irrelevant.
Nor is there necessarily any connection between the profit margin of 10% considered adequate for the protection of Community manufacturers from injury and the profit margin actually found on the Japanese domestic market, particularly if it is borne in mind that opportunities for making a profit may be very different, for instance depending on how competitive or how protected the market may be.
In view of the fact that, according to the principle laid down in Article 2 (2) of Regulation No 2176/84, 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, it was legitimate for the Community authorities to have regard to the profits realized on the product most similar to the product under consideration, that is to say electronic typewriters, even if those profits were realized by other manufacturers, rather than the profits realized by the applicant on office machinery other than electronic typewriters.
In any event, the profit realized for the general category of office machinery cannot correspond to 3.4%, the figure given by TEC, where a company has sales departments which are legally distinct but are wholly controlled or owned by the headquarters company and also have their own profit margins which should also be taken into account in order to arrive at a realistic overall profit margin on the domestic market.
The method chosen by the Commission was in no way arbitrary. It would have been arbitrary to do the reverse, that is to say, to ignore the actual state of the market and to use an entirely hypothetical profit margin.
With regard to the contention that the method selected is contrary to the principle of legal certainty, it should be pointed out that a straightforward comparison between the normal value and the export prices can be made only where the normal value reflects the price charged on the domestic market. Where the constructed value is used, which is permitted both by the GATT Anti-Dumping Code and the relevant Community legislation, in practice an exporter cannot generally have all the information necessary to enable it to be certain of the price level at which dumping would occur. Moreover, some of the information given to the Commission is confidential. Thus the objective of legal certainty, recognized by the Court in other circumstances, has to be reconciled with the requirements of the antidumping procedure.
With regard to the allegedly different treatment of Nakajima, the Council points out that the difference in treatment initially established was fully justified by the facts as they appeared at the time and does not therefore constitute discrimination. The Commission was not obliged to hold up the imposition of provisional duties whilst the investigation which it had reopened in relation to Nakajima was in progress. Otherwise, there would be no possibility of according effective protection to the Community market.
With regard to the profit margin finally determined for Nakajima in the Commission's decision of 12 February 1986, the Council emphasizes that, as was clearly explained in that decision, Nakajima was unlike any of the other companies concerned since it was basically a factory manufacturing a limited number of products which were sold to a limited number of customers and it lacked a conventional sales force or sales structure. One company's profit margin cannot be used for constructing another company's normal value unless the two companies are broadly similar. Those findings have not been contradicted by the applicant.
In response to the criticism that the definitive decision concerning Nakajima is based on a different reference period from that used for the other companies, the Council states that the adoption of the same reference period for a decision taken seven months later than the others would not have been satisfactory. Since Nakajima is a very different kind of company from all the other Japanese companies involved in these cases, the desirability of using the same reference period was very much less than it would otherwise have been.
With regard to the allegation that the Community authorities did not communicate to TEC the data on which the final decision was based, the Council points out that TEC was informed of the profit margin that was used. TEC requested further information, which was given to the applicant in so far as it was not confidential. The applicant complains in particular that it was not given further details concerning the subtraction of the relevant costs. Even if the applicant had specifically requested such information, which it did not, the Commission could not have provided it without disclosing the name of the company concerned which would have been a breach of its obligation not to disclose confidential information.
Cetma considers that the determination of a normal profit margin involves the evaluation of a complex economic situation, for which the Community institutions have a wide measure of discretion. The Court's power of review in that regard is therefore confined to examining whether there has been a manifest error or a misuse of powers or the bounds of the discretion have been exceeded. None of the arguments advanced by TEC demonstrates that the contested measure is vitiated by one of those flaws.
Effective protection of the European electronic typewriter industry requires the determination of the normal value to be based on potential profit margins on the Japanese market. That is particularly important because Japanese companies often use the very high profits made on the domestic market to finance their dumping practices.
2. Inclusion of selling, administrative and other general expenses in the calculation of the normal value
In its second submission, TEC contends that by including in the cost of production of its products an amount for selling expenses at a level of trade beyond the ex-factory level and relating to sales of products other than those under consideration, the Community authorities incorrectly applied Regulation No 2176/84.
According to TEC, the Commission included in its definitive determination of the cost of production, an amount for selling, administrative and other general expenses which comprised not only the expenses incurred by TEC Ltd, which makes and exports electronic typewriters, but also those incurred by TEC Electronics Co. Ltd, a subsidiary of TEC Ltd, which is engaged in the distribution of cash registers, electronic scales and other products primarily to end-users in Japan.
TEC Electronics has never sold a single electronic typewriter in Japan and it is therefore difficult to see how its expenses could have been decisive in determining the cost of production of electronic typewriters. The inclusion of those expenses makes no sense at all and is inconsistent with Regulation No 2176/84.
To begin with, that approach is inconsistent with Article 2 (9) of Regulation No 2176/84, which provides that, in order to be fair, the comparison between the export price and the normal value must be made at the same level of trade, preferably at the ex-factory level.
It is also inconsistent with Article 2 (10) (c). That provision is not applicable to a case of constructed value since no allowances can be made as regards the level at which the cost of production is constructed, and Article 2 (9) provides that the cost of production must be constructed at the ex-factory level. Moreover, Article 2 (10) refers only to differences in conditions and terms of sale.
Finally, the Community's approach is inconsistent with Article 2 (11), which provides that all cost calculations must be based on available accounting data, normally allocated in proportion to the turnover. As the turnover of TEC Electronics for electronic typewriters is zero, it follows that the proportion of costs that can be allocated to electronic typewriters is also zero.
According to TEC, the constructed value is not designed, contrary to the opinion of the Community institutions, to lead to a normal value as if sales on the domestic market had taken place. It is nowhere provided that the purpose of establishing the constructed value is the computation of a hypothetical domestic market price.
The constructed value in fact refers to the value of the exported product, not to that of a hypothetical like product intended for consumption in the exporting country, as is clear from Article VI of the GATT and from an analysis of the wording of Article 2 of Regulation No 2176/84. Therefore the selling expenses to be included in the cost of production of the product are those associated with the export thereof and not with hypothetical sales on the domestic market. That view is consistent with- the previous practice of the Community institutions, as is shown by the decision adopted by the Commission in connection with the importation of cotton yarn from Turkey (Official Journal 1982, L 90, p. 2). The Community's abrupt departure in this case from the interpretation reflected in that precedent is also contrary to the principle of legal certainty.
However, even if the Community institutions' basic premise were correct, it would still not justify, in TEC's view, the inclusion of the selling, administrative and other general expenses of TEC Electronics in the cost of production of electronic typewriters. It cannot simply be assumed that if domestic sales had taken place, the selling price would necessarily have reflected the selling, administrative and other general expenses of TEC Electronics. It is quite conceivable for those sales to have been made through independent distributors or, even in the case of a related company, for prices to be fixed in the ordinary course of trade.
The inclusion of the selling expenses of TEC Electronics in the constructed value of TEC products is based on a series of arbitrary assumptions, for instance if TEC had sold electronic typewriters on the domestic market, it would have sold them through a related distribution company at non-market prices, and the latter company would necessarily have been TEC Electronics. None of those three assumptions is supported by evidence. The amount to be added cannot be based on the worst possible assumptions for the applicant.
According to TEC, the only selling, administrative and other general expenses to be taken into account for the purpose of establishing the constructed value of the product under consideration are those relating to that product and not those relating to sales of other products. In the present case, however, the Community authorities included in the cost of producing electronic typewriters exported by TEC the selling expenses of a company which has never sold any electronic typewriters. The inclusion of those expenses is unjustified. The only reference to a category wider than the product itself is in the third sentence of Article 2 (3) (b) (ii) as regards the calculation of the profit. There is nothing in that article which provides for the possibility of including in the cost of production of a product the selling expenses incurred in respect of another product. To include such expenses would be wholly illogical.
The Council, for its part, contends that Article 2 (3) (b) of Regulation No 2176/84, which expressly applies when there are no sales of the like product in the ordinary course of trade on the domestic market of the exporting country, provides for the inclusion, in the determination of the constructed value, of a reasonable amount for selling, administrative and other general expenses.
Nor is there any inconsistency with Article 2 (9) concerning allowances to be made after the normal value has been established. In response to the applicant's argument that the inclusion of expenses by the Commission is contrary to the requirement that the comparison provided for in Article 2 (9) and (10) must be made at the ex-factory level, the Council states that Article 2 (3) (b) (ii) expressly provides that certain expenses incurred at a stage beyond the actual production stage must be included for the construction of the normal value. According to TEC, some of those expenses may be included in the actual domestic price. In that case, a corresponding sum should also be included in the constructed value since that method of calculation is designed to yield a normal value as if sales had taken place on the domestic market.
The Council challenges the applicant's statement to the effect that the constructed value is not designed to yield a normal value as if sales on the domestic market had taken place.
The rules applicable to the normal value should be designed to yield, if not the same results, at least results which are not substantially different from those which may be arrived at on the basis of Article 2 (3) (a), that is to say when domestic prices are taken into account. Article 2 (3) (b) (ii), which refers to all costs, in the ordinary course of trade ... in the country of origin ... plus ... a profit... on the domestic market of the country of origin, shows that the applicant's interpretation is incorrect. That is also confirmed by a comparison between Article 2 (3) (b) (ii) and the provisions of Article 2 (8) (b).
Similarly, TEC's reliance on the regulation concerning the interpretation of cotton yarn originating in Turkey is not convincing. In that case, certain costs and expenses of a subsidiary company dealing with exports were added to the costs of production in Turkey since reliable data concerning sales on the domestic market were not available. That does not mean that the Community institutions held the view that a constructed normal value should be the normal value of the exported product and not be related as closely as possible to prices on the domestic market.
The Commission's findings were based not on assumptions, as the applicant alleges, but on facts. TEC has adduced no evidence to suggest that the expenses used by the Commission are very different from what they would have been if the TEC group had sold electronic typewriters in Japan.
Finally, it is self-evident that the expenses incurred on other electronic products may be a guide to the expenses that would have been incurred by the applicant if it had sold electronic typewriters in Japan.
The assumptions made by the Commission were neither arbitrary nor systematically unfavourable to TEC. On the contrary, the method used was based on the distribution system employed by the great majority of Japanese manufacturers who sold their products on the domestic market.
Cetma considers that the expenses in question were based on real selling, administrative and other general expenses incurred by TEC in Japan for electronic products, other than electronic typewriters, that are products of the same general category on the domestic market, within the meaning of Article 2 (3) (b) (ii) of Regulation No 2176/84. According to Cetma, it is extremely important in order to ensure effective protection against dumping that such expenses, incurred on the Japanese domestic market by related distribution companies, should be included in the computation of the constructed normal value, even if the product in question is not sold on the domestic market. Otherwise, Japanese manufacturers who do not sell their products on the domestic market would receive preferential treatment with regard to the construction of the normal value.
In Cetma's experience, dumping is a practice commonly used by Japanese producers as a means of gaining a disproportionately large share of the common market. In order to prevent, or at least minimize, the risk of being charged with dumping, those manufacturers set up purportedly independent distribution companies in Japan. By shifting selling, administrative and other general expenses and a share of the profit onto those distribution companies, the normal value appears much lower than it is in reality.
In those circumstances, it is absolutely essential, in order to ensure that Community manufacturers are protected, for two principles to be adhered to:
3. Error in the allocation of the selling costs of TEC's subsidiary in France and in the imputation of those miscalculated costs to TEC's subsidiaries in the Federal Republic of Germany and the United Kingdom
In its third submission, TEC contends that the definitive determination of the existence of dumping is vitiated by an error in the allocation of the selling costs of TEC's subsidiary in France and in the imputation of those miscalculated costs to TEC's subsidiaries in Germany and the United Kingdom.
TEC submits that in constructing the export price on the basis of the selling price to the first independent buyer in the Community, it is necessary to deduct all the costs incurred by the manufacturer's Community subsidiary; however, where that subsidiary also sells other products, only the costs relating to the product under consideration are to be deducted from the resale price of that product. The Commission refused to correct an error made in the allocation of the selling costs of TEC France, rejected the replies of TEC's subsidiaries in Germany and the United Kingdom to the questionnaire because it had not verified them, and arbitrarily imputed the miscalculated selling costs of TEC France to TEC's other subsidiaries in the Community.
In allocating the general expenses and staff salaries of TEC France on the basis of turnover from sales of electronic typewriters and other products — a criterion which was accepted by TEC — the Commission erroneously allocated to sales of electronic typewriters certain expenses relating to staff engaged exclusively in the sale of other products. Electronic typewriters are sold by TEC France to distributors or large dealers, whilst other products are sold to end-users primarily from branch offices which have a large sales and maintenance staff.
TEC's request that the error should be corrected evoked no response.
Next, the Commission arbitrarily imputed the selling costs of TEC France to TEC's subsidiaries in Germany and the United Kingdom. Although those subsidiaries had replied to the questionnaires it sent to them, the Commission decided not to accept the figures given in those replies on the ground that those figures had not been verified, and to rely on the expenses of TEC's Belgian subsidiary which were the lowest and the only ones to have been verified. After TEC suggested using the corrected figures for TEC France, the Commission took those figures into consideration without, however, correcting the error in question.
The reason given by the Commission, namely that if account had been taken of the expenses of the German and United Kingdom subsidiaries, whose replies had not been verified, this would have resulted in a higher dumping margin, is unjustified particularly in view of the fact that, in the case of the subsidiaries whose replies were verified, the selling, administrative and other general expenses attributable to typewriters were found to be lower than the ratio set out in the general accounts. Like TEC France, both TEC Europe (United Kingdom) and TEC Germany employed a large number of salesmen engaged exclusively in the sale of products other than electronic typewriters.
The Council considers that no error was made but there was a disagreement between TEC and the Commission on the appropriate method of allocation, and the Commission was not satisfied with TEC's arguments in that regard. TEC has not succeeded in demonstrating that the salaries of staff employed in its branch offices could not be allocated, even in part, to sales of electronic typewriters. In that regard, the list of salaries, which, moreover, TEC could have provided at any time, was not of decisive importance as evidence.
The use of the expenses of TEC France for TEC's subsidiaries in Germany and the United Kingdom stems from the fact that TEC itself had proposed using the expenses of its French subsidiary for its other Community subsidiaries since TEC France's cost structure was representative.
4. Unlawful imposition of an antidumping duty on imports of compact electronic typewriters
In its fourth submission, TEC contends that the determination of injury is unjustified inasmuch as:
With regard to the first point, TEC submits that the share of the market held by Japanese compact electronic typewriters declined after 1980 and that all compact electronic typewriters sold by Olympia are produced by Nakajima, as are also many of the compact electronic typewriters sold by Olivetti. That information was communicated to the Community institutions, which none the less considered that those imports caused injury to the complainants.
In TEC's view, the Council's assertion that there is no separate market for compact electronic typewriters is inconsistent with the views expressed by the complainants, the exporters and the Commission.
If there is a market for compact electronic typewriters, the state of that market should be considered separately from the state of the market for other typewriters. An examination of that kind would lead to the result referred to earlier, which the Council failed to take into consideration.
The Council considers that the exponers have not adduced any evidence to show that there are two different markets, one for portable or compact typewriters and the other for professional typewriters. Moreover, any distinction that might have existed has disappeared as a result of technical developments.
With regard to the second point, TEC contends that the determination of the level of price undercutting must be based on a comparison with actual prices and not hypothetical target prices computed on the basis of the cost of production plus a target profit. Since the level of price undercutting was incorrectly determined, the disputed regulation should be annulled.
Furthermore, the three models for which the Commission had set target prices were manufactured in Singapore, which reveals the superficiality of the Commission's investigation.
The Council submits that TEC is mistaken in suggesting that target prices were used to determine the level of price undercutting. In reality, the target prices were used to provide a rational and objective basis for deciding what the amount of duty should be. The applicant's complaints are therefore unfounded.
Cetma shares the Council's opinion that there is a uniform market in electronic typewriters and that there are no objective criteria for distinguishing between compact and professional typewriters. The complaint against dumping, whilst subdividing electronic typewriters into two categories in accordance with the statistical classification in the Nimexe Code, none the less expressly states that all electronic typewriters are like products. In any event, the Community manufacturers also made compact electronic typewriters during the investigation period, with the result that injury was occasioned even if those electronic typewriters constituted a separate market. The decrease in the Japanese market share of that category of electronic typewriters is not sufficient evidence, on its own, to exclude the existence of injury.
Cetma considers that the level of price undercutting can also be analysed on the basis of target prices, since Regulation No 2176/84 does not provide that only actual prices may be used for purposes of comparison. Furthermore, the use of target prices is necessary in cases in which the actual prices of European manufacturers have already fallen owing to dumping over a long period, or in which those prices could not be raised to a profitable level owing to the fact that dumping was already being practised at the time when the manufacture of the product started.
B — Arguments put forward in the observations common to the applicants in Case 250/85, Joined Cases 260/85 and 106/86, Joined Cases 273/85 and 107/86, Joined Cases 277 and 300/85, and Case 301/85, and in response to those observations
1. Observations common to the applicants
The applicants in the aforesaid cases, including TEC, have advanced in their replies a number of arguments common to all of them which highlight what they consider to be one of the most fundamental defects in the findings of the existence of dumping made by the Commission in this case, namely the fact that the export price and the normal value were not put on a comparable basis. According to the applicants, the high dumping margins attributed to them by the Community institutions are to a large extent the result of the unfair comparison between the export price and the normal value made by the Commission and are inconsistent with both Regulation No 2176/84 and the GATT Anti-Dumping Code on which that regulation is based.
The joint observations are divided into two parts; the first part describes the procedure followed by the Commission, and merely taken over by the Council, to calculate the dumping margin, whilst the second part seeks to show that the comparison made by the Commission is inconsistent with Regulation No 2176/84 and the GATT Anti-Dumping Code.
In their general description of the manner in which a finding of the existence of dumping is made, the applicants emphasize, in particular, the difference between the approach taken by the Community institutions, according to which the calculation of the normal value and of the export price are two separate exercises to which different methodologies should apply, and their own point of view, namely that the purpose of those two calculations is to arrive at two figures comparison of which must be fair according to Regulation No 2176/84.
Next, the applicants observe that the Commission followed a radically different approach according to whether it was calculating the export price or the normal value. In the first case, it took care to ensure that the export price did not include any expenses incurred in the Community and, in the case of imports made through related sales companies, it deducted all the costs incurred by those companies plus a profit margin. In the latter case, a substantial part of the expenses and an element for the profit related to distribution in Japan were included in the normal value.
In other words, the Commission did not exclude from the normal value any such distribution costs incurred in Japan which were of a kind corresponding to distribution costs incurred in Europe that were not included in the export price with which the normal value was generally compared.
That methodology necessarily yields a high apparent dumping margin even though the exporter sells his products, at the same level of trade, at a higher price in the Community than in Japan and makes the same profit on his export sales as on his domestic sales.
The applicants submit that in adopting that methodology the Community institutions infringed the fundamental requirement that the export price and normal value should be put on a comparable basis, contrary to the provisions of Article 2 of Regulation No 2176/84, which are based on those of Article VI of GATT and of the GATT 1979 Anti-Dumping Code to which the second recital in the preamble to that regulation expressly refers. That requirement is fundamental because it is obvious that a finding that the export price is less than the normal value is justified only if it is based on a fair comparison between the two.
Contrary to what is contended by the Community institutions, the unfair comparison between export prices and domestic market prices made in this case is neither required nor permitted by Article 2 (10) of Regulation No 2176/84.
That provision lays down that due allowance shall be made in each case, on its merits, for differences affecting price comparability and indicates the guidelines which are to be applied for the purpose of determining the necessary allowances.
It would appear from the wording of the provisions of Regulation No 2176/84, of GATT and of the GATT 1979 Anti-Dumping Code that the aforesaid provision is intended to ensure a fair comparison between the expon price and the normal value.
To begin with, the Community institutions misinterpreted the expression conditions and terms of sale in Article 2 (10) (c). The reference in that provision to commissions or salaries paid to salesmen shows that the expression conditions and terms of sale cannot be as limited in scope as the Council maintains and cannot refer only to the obligations which may be laid down in the contract of sale or in the general conditions of sale but must also cover the factual conditions of, and surrounding, the sale in question.
Hence the restrictions contained in the aforesaid provision were, according to the applicants, misinterpreted by the Community institutions.
The limitation of allowances to differences which bear a direct relationship to the sales under consideration and the exclusion of any allowances for differences in overheads and general expenses are designed to relieve the Commission, in general terms, of the burden of allocating between domestic trade and exports the general costs of a single organization that is concerned with both domestic and export trade. However, neither of those restrictions applies to a case such as this, where the dispute centres on the failure to allocate to domestic trade the indirect costs of organizations, specifically the Japanese sales companies, that were concerned exclusively with domestic trade.
With regard to differences which bear a direct relationship to the sales under consideration, it should be emphasized that selling the products in Japan entails certain costs that are specifically attributable to the distribution of those products in that country.
Similar considerations apply in the case of overheads and general expenses. A differential allocation of common overheads is irrelevant in the present case.
Further, the expression differences in the level of trade in Article 2 (10) (c) of Regulation No 2176/84 has been misinterpreted, inasmuch as all local marketing and distribution costs were excluded from the export price, whilst significant costs of that kind were included in the normal value. Accordingly, the export price and the normal value were not compared at the same level of trade.
The guidelines should not be applied where their application would lead to an unfair comparison and the list set out therein is illustrative, not exhaustive. It is clear that the first two sentences of Article 2 (10), which require due allowance to be made in each case, on its merits, for differences affecting price comparability, are of a general nature, whereas the guidelines referred to in the third sentence can in no way be regarded as exhaustive. Admittedly, those guidelines apply prima facie, but if their application, on the facts of a particular case, would conflict with the basic principle of fair comparison, there is no doubt that it would be impossible to reject a claim solely on the ground that the case does not fall within one of those guidelines.
The Commission was also wrong in including in the constructed normal value an amount for selling expenses in connection with distribution by related sales companies in Japan.
If the Community institutions had not included in the cost of production the expenses incurred by the exporters' Japanese sales companies, the normal value and the export price would have been on a comparable basis and no question of allowances would have arisen.
The applicants' analysis has the advantage that the likelihood of an exporter being found guilty of dumping will not vary according to whether (i) the normal value is based on actual domestic prices or is constructed, or (ii) export prices are based on actual export prices or are constructed. The principle is always the same: so far as practicable, material elements that are not included or reflected in the export price should not be included or reflected in the normal value.
Moreover, the Community institutions erroneously inflated the constructed value with abnormally high profit margins. The profit margins which the Commission established for certain producers, and the loss established in respect of Tokyo Juki, are simply the result of the Commission's failure properly to allocate costs incurred in connection with the distribution of electronic typewriters.
In determining the profit margin for undertakings selling their products on the domestic market, the Commission took no account of the fact that the advertising costs incurred by those undertakings in connection with their sales of electronic typewriters in Japan were much higher than the advertising costs incurred in relation to their overall turnover.
The loss established for Tokyo Juki stems from the fact that the Commission has disregarded verified accounting data for that company, which showed that Tokyo Juki's domestic sales were profitable. However, the Commission allocated to sales of electronic typewriters an unreasonable amount of Tokyo Juki's distribution expenses for unrelated products or product lines.
The profits used for the determination of the constructed value are thus based on gross errors in the allocation of the relevant costs.
In conclusion, the high dumping margins that have been established are to a large extent the result of an unfair and legally improper comparison rather than any objectively unfair trade practice which exporters may have engaged in.
2. The Council's response
Before replying to the joint observations of the applicants, the Council considers it appropriate to make two preliminary points.
In the first place the Council recalls that for each of the three main elements used for determining whether dumping is being practised (normal value, export price and a comparison between the two), there are precise, distinct and separate rules. It challenges the applicants' assertion that the GATT Anti-Dumping Code requires allowances to be made for all differences affecting price comparability. Apart from the fact that the code does not use the word all as the applicants allege and that the provisions of GATT have never been regarded as directly applicable, as the Court has confirmed in its case-law, it is clear from the text of the code itself that the code represents a compromise, the result of which is a text which is deliberately imprecise and which leaves a considerable margin of discretion to the legislature of each contracting party to decide exactly what allowances should be made.
The second preliminary point concerns the hypothetical example given by the applicants to show that the methodology adopted by the Commission necessarily leads to the establishment of a dumping margin. According to the Council, that example has certain fundamental flaws which render it unusable. It is based on the internal transfer prices between the manufacturing company and its subsidiaries in Japan or the Community, which are inherently unreliable and always subject to manipulation. It omits completely both the expenses and profits of the corporate headquarters company. It considers the domestic sales company as a separate entity, whereas it was found to be an integral part of the corporate structure. It fails to deduct Common Customs Tariff duties. It is incorrectly based on the assumption that the sales price to independent purchasers in Japan is always below the price in the Community. Finally, it does not refer to the constructed normal value.
Next, the Council observes that the applicants' first argument seeks to show that the requirement of a comparable price or of a fair comparison between the normal value and the export price is fundamental, and that the words in Article 2 (10) concerning a fair comparison should override the other conflicting words in that provision. That is contrary to two basic principles of interpretation, namely:
The Council observes that the phrase conditions and terms of sale should be interpreted in the light of the rest of Article 2 (10) (c), which shows that that phrase applies only to differences in terms and conditions which are capable of bearing a direct relationship to specific sales. The only costs which may bear a direct relationship to a sale are those which may be mentioned specifically in a contract of sale and which are likely to influence the mind of the buyer. In a normal contract of sale, it would be unusual to find any clause concerning overheads and general expenses, but not for there to be a clause concerning, for instance, credit and delivery terms.
The price charged in the exporting country and the export price may have different payment, credit, delivery and guarantee terms attached to them. Those prices should be brought on to a comparable footing by means of the operation described in Article 2 (10). That operation is designed not to compare costs, but to compare prices, and the cost element is used only when it is necessary' to iron out different conditions attached to prevailing prices. However, even if there were no specific reference to overheads, and general expenses, it is clear that such expenses would not bear a direct relationship to specific sales. That interpretation is confirmed by the last clause in Article 2 (10) (c) which is worded as follows: the amount of these allowances shall normally be determined by the cost of such differences to the seller, though consideration may also be given to their effect on the value of the product; that shows that Article 2 (10) (c) is concerned only with costs to the seller which are likely to affect the price of the product on the open market, or with advantages to the buyer which may vary for different purchases of the same type of goods.
The applicants rely more specifically on the expression commissions or salaries paid to salesmen. According to the Council, commissions are clearly expenses directly related to sales. The legislature has added salaries paid to salesmen simply in order to avoid different treatment depending solely on the legal form of the relationship between the manufacturer and the sales staff. Therefore that derogation, made for a very specific and legitimate reason, does not justify the general conclusions which the applicants seek to derive from it.
According to the Council, the applicants' second argument is based on two clauses in Article 2 (10) (c) which they do not contest but which, in their view, are intended only to make it unnecessary to allocate, as between domestic trade and exports, overheads and general expenses of a company's headquarters. The clauses in question read as follows:
According to the Council, those clauses do not have the meaning attributed to them by the applicants. The Commission has already explained in its intervention the reasons why it is often inappropriate or impossible to attempt to allocate overheads as between domestic sales and export sales.
With regard to the statement that the general expenses of a domestic sales company can never be included, even partly, in the general expenses allowed for in the normal value, the Council makes the following comments on the points raised by the applicants in their joint observations:
On the question of the level of trade, the applicants have contended that significant local marketing and distribution costs were included in the normal value and that the resulting level of trade was therefore not before any local marketing and distribution as it was in the case of the export price. The Council observes that the applicants give no reason for the suggestion that the phrase in Article 2 (9) which lays down the principle of comparison at the same level of trade should override Article 2 (10), which provides that no allowances are normally made for overheads and general expenses. Moreover, the applicants' argument rests on a misunderstanding of the expression level of trade. Where two companies sell to both wholesalers and end-users, they should be regarded, unless each category represents very different proportions of the total sales of the two companies, as selling at the same level of trade.
The applicants' argument that the Community institutions should have taken into consideration overheads and general expenses not directly related to sales solely on the ground that the Japanese sales were made by separate sales companies cannot be accepted. It is quite clear that, if the same sales had been made by sales departments, the applicants' argument would be contrary to Article 2 (10) (c) and the important findings that the sales companies formed integral parts of the same economic units or enterprises as their parent companies, and that their functions were similar to those of sales departments, have not been challenged by the applicants.
Next, the Council challenges the applicants' contention that in order to reject a claim, either the institutions must be satisfied that allowance of the claim is not necessary to enable a fair comparison to be made or they must point to something in the regulation which specifically permits them to reject the claim even though it is or may be so necessary.
The Council observes that the general principle of a fair comparison may not be relied upon in order to override the specific terms of Article 2 (10) (c), especially because those terms are the result not of imprecise drafting but of a carefully considered policy for dealing with an inherently difficult problem. Moreover, the applicants do not suggest that these cases are in any way special or unusual. They take the view that their arguments should apply in every case in which the domestic sales were made by a separate company.
Contrary to the applicants' contention, the difference between the ways in which the export price and the normal value are calculated is the natural and intended result of the express wording of Regulation No 2176/84 and does not inherently have any necessarily protectionist effect.
The applicants' argument to the effect that Article 2 (10) (c) is not applicable to a constructed normal value is incorrect for several reasons. In the first place, a comparison between normal value, however arrived at, and export price always has to be made in any antidumping case and in making such a comparison it is always necessary to decide whether allowances need to be made. The applicants' argument is wrong also because it may be necessary to calculate the reasonable amount for selling, administrative and other general expenses on the basis of the real costs of a sales department or sales company selling the same or a similar product in the exporting country at a price containing allowable and non-allowable cost elements. If Article 2 (10) were not applicable, no allowances at all would be possible, and that clearly runs counter to the applicants' argument.
Finally, the constructed normal value would be unaffected by any change in the relative proportions of costs and profit in Japan since the total of the two elements is included in the constructed normal value. The applicants complain about the use of the lower figure for costs only in the calculation of the profit to be used in constructing the normal value. Even if they were right, their argument would lead to an increase in the costs which would be precisely equivalent to the reduction in the profit based on those costs.
3. The Commission's observations
The Commission observes that, under the rules in force, the normal value includes selling expenses in addition to an element for general expenses, that is to say, expenses which do not bear a direct relationship to sales of the product in question. That rule can be justified by arguments of a general nature, including the fact that any effort to relate general expenses to particular sales is likely to be arbitrary.
In the special context of dumping investigations, a further point to be made is that all enquiries by the Commission outside the Community depend on the voluntary cooperation of the companies concerned and that if it were necessary to allocate overheads and general expenses within the headquarters of an exporting company in a nonmember country that would probably raise great difficulties even if adequate information were made available by the exporter to the antidumping authority.
An allocation of overheads in proportion to current sales would require the manufacturer's cooperation and might, moreover, be inappropriate as there is not necessarily a relationship between the proportion of research and development spending or advertising costs and current sales on different markets. No solution has been found so far in the discussions which took place within GATT, both because it was impossible to reach agreement on certain principles and because any rule must, in many situations, inevitably rest on subjective considerations.
Following those preliminary considerations, the Commission considers the treatment of the general expenses of a manufacturing company when the normal value is based on the domestic price. It points out in the first place that, in the case of a manufacturing company which sells on its domestic market only to independent buyers, the normal value is based on the domestic price, with the result that the normal value generally includes overheads and general expenses since Article 2 (10) (c) provides that no allowance will be made for overheads, research and development costs or advertising costs attributable to domestic sales even if they are higher than those attributable to export sales to the Community. The principle that general expenses are not allocated was adopted on practical grounds in view of the huge difficulties involved in allocating overheads satisfactorily.
The problem which arises in this case is how to deal with the companies which sell on their domestic market only through a related sales company (not necessarily a wholly owned subsidiary), in view of the fact that, in the Commission's view, transfer prices between a company and its subsidiary cannot be regarded as being in the ordinary course of trade.
There is nothing in Regulation No 2176/84 which suggests that the prices charged by a sales company cannot be used at all as a basis for determining the normal value. If it is decided that a proper comparison is possible, the domestic price in the exporting country should be used in preference to either of the alternatives provided for in Article 2 (3) (b). Regulation No 2176/84 gives priority to that criterion, provided that it permits a proper comparison to be made, regardless of whether that comparison is perfect or easier to make than a comparison based on other criteria.
Once it has been established that domestic prices may be used as a basis for calculating the normal value, the question arises of what deductions should be made from the prices charged by the Japanese sales companies.
According to the Commission, the general expenses of a sales company in the exporting country should be treated as far as possible in the same way as the general expenses of a manufacturing company which has a sales department. The formal difference in the corporate structure should not affect the result, if the sales company is effectively controlled by the manufacturing company and if it is fulfilling essentially the same function as a sales department. The Commission established that the Japanese sales companies formed integral parts of the same economic units as the manufacturing companies and that their functions were similar to those of sales departments. On the basis of those findings the Commission concluded that the general expenses of such companies should also be treated in the same manner as those of a sales department. That does not rule out the possibility that in certain cases a sales company might have functions different from those of a sales department. In those circumstances, for instance, many of the expenses would probably be directly related to sales and consequently they would be allowable. In any event, every situation should be dealt with on its own facts.
The Commission considers that similar considerations apply with regard to the profits of sales companies. It would be intolerable if a manufacturing company which exports its products could effectively reduce the normal value which the Community institutions could arrive at under Regulation No 2176/84 merely by having its sales to independent buyers handled by a sales company rather than a sales department. Admittedly, if a sales company also sold goods produced by other manufacturing companies or if it handled distribution down to and including the operation of retail outlets, it would be necessary to apportion its profits. In order to do so, however, reliable information would have to be made available by other companies in the same industry showing the profit margins made by distributors from sales to independent buyers on the domestic market.
In conclusion, the Commission considers that when the normal value is based on the prices of domestic sales companies, it must include both an element of general expenses and an element of profit, just as it would where it is based on the domestic prices of a manufacturing company's sales department. There is nothing in that approach which necessarily leads to a normal value which is higher for producers distributing their products through related companies than it is for those marketing their products through a sales department.
The Commission then deals with the problem of ascertaining what profit margin is reasonable when the normal value is constructed in accordance with Article 2 (3) (b) (ii).
The Commission considers that when interpreting and applying that provision no rule should be adopted which would be likely to lead to the calculation of normal values different from those which would be arrived at by using domestic prices. The word reasonable does not have a fixed meaning, nor does it refer to a percentage which should always be the same; instead, it is necessary to consider the circumstances of the market. More particularly, it is necessary to take into account any findings which the Community institutions have made in connection with domestic prices.
The desirability of ensuring that the two methods of calculating the normal value lead to parallel results makes it permissible, and even necessary, to use any findings concerning general expenses and profit on the domestic market for the purpose of interpreting and applying the term reasonable when constructing the normal value. It would be not only undesirable but also wrong in principle if the establishment of a dumping margin were to depend on which method of calculating the normal value was chosen.
The Commission goes on to consider the applicants' argument to the effect that the Community institutions have contravened the principle of legal certainty by applying Regulation No 2176/84 in a manner which is unforeseeable and which prevents the undertakings concerned from ascertaining what export price needs to be fixed in order to avoid dumping.
The Commission points out, in the first place, that an exporter cannot in any case expect to know with confidence whether dumping will cause injury to Community industry or whether the Community institutions will conclude that it is in the interest of the Community to impose an antidumping duty; no objection can be made on grounds of legal certainty. Nor can the exporter rely on that principle with regard to the methods of calculating the normal value or the export price. The basic antidumping regulation confers on the Community institutions a considerable discretion with regard to the application of the rules which it lays down in particular situations which, as is the nature of things, cannot all be foreseen precisely.
Next, the Commission considers the argument that it is contrary to the principle of legal certainty for the constructed normal value to include an element of profit or of the general expenses which is not based on the individual exporter's own activities because that element cannot be predicted or anticipated by the exporter. According to the Commission, that argument amounts to a denial of the right of the Community institutions to use accurate confidential information available to them and, in practice, a denial of their power to determine what is reasonable in the light of the circumstances of the industry concerned and to use anything other than a standard low rate of profit unless, by coincidence, suitable information is published.
The Commission goes on to consider the problem of the reasonable profit margin to be attributed to a related sales company in the Community under Article 2 (8) (b) of Regulation No 2176/84.
The first question which arises is whether any profit margin should be attributed to a sales company in the Community. The answer to that question should be in the affirmative. The profit margin referred to in the aforesaid provision cannot be that of the exporter because it would not be appropriate to deduct it in order to calculate the export price; nor can it be the independent buyer's profit margin, which would not affect the price to that buyer. The next question is how the Community institutions should decide what constitutes a reasonable profit margin. According to the Commission, the term reasonable does not refer to a profit margin which is fixed and unchanging irrespective of the circumstances, but rather to one which is appropriate to the circumstances of the industry and the market.
The purpose of deducting a profit margin is to reduce the price charged by a related sales company to a level at which it is equivalent to the price which would be charged to independent importers. That is the only correct solution.
To that end, therefore, it is necessary to examine the profit margins of independent importers, if there are any. There is no authority for the view that the maximum profit margin to be attributed to the related sales company is the profit margin based on the transfer price to that company. If independent importers make a large profit margin in the Community, there would be no justification for attributing a small margin to a related sales company merely because its manufacturing parent company had chosen to absorb a large proportion of the profit made by the group in the exporting country.
With regard to the arguments put forward by the applicants in connection with the level of trade, the Commission observes that these cases actually raise three issues:
Unfortunately, the activities of companies do not fall into clearly defined levels of trade. Some companies sell both to wholesalers and to end-users. In that case, unless each category of customer accounts for very different proportions of the total sales of two companies, they should be regarded as being at the same level of trade. The fact that the applicants have not seriously argued that specific allowances should be made may mean that the slight differences between the different categories of customers did not justify any significant allowance.
IV — Answers given by the parties to questions put to them by the Court
In its answer lodged on 4 April 1987, TEC amongst other things denied being a party to any agreement or concerted practice between Japanese manufacturers or following the directions of the Japanese Ministry of International Trade and Industry with a view to penetrating the Community market.
In its answer of 7 April 1987, the Council indicated the dumping margin and the precise level of injury established in relation to the applicant.
At the Court's request, the Commission produced the minutes of the information meetings with TEC held on 9 January and 3 May 1985, and the memorandum transmitted to the Commission by TEC on 31 January 1985.
With regard to the calculation of the costs of TEC France for the purpose of constructing TEC's export price, the Commission pointed out that the evidence furnished by TEC was not sufficient to justify using anything other than turnover as a basis for allocation. Accordingly, a departure from the general rule of allocation, laid down in Article 2 (11) of Regulation No 2176/84, would not have been justified.
1 Language of the Case: English.
2 As TEC inserted in its reply certain observations which it drew up jointly with the applicants in Case 250/85, Joined Cases 273/85 and 107/86, Joined Cases 277 and 300/85, and Case 301/85, it is appropriate to summarize those observations under a separate heading which also includes the Council's response to those observations and the observations submitted by the Commission, in so far as they deal with the problems raised in the joint observations. All those arguments will be set out in Section III B of this report.
3 As regards the substance of Case 106/86, TEC and the Council refer to their pleadings in Case 260/85.
4 The Commission's observations are summarized here in so far as they refer to the submissions and arguments set out in the observations common to the applicants. The section concerning the determination of the injury has been omitted since none of the submissions put forward by TEC relates to that point.