Report for the Hearing delivered in Joined Cases C-133/87 and C-150/87
I — The applicants' business
Nashua Corporation is the supplier of Nashua brand plain paper photocopiers, most of which it purchases from a Japanese manufacturer, Ricoh Limited (hereinafter referred to Ricoh). It exports Nashua plain paper photocopiers from Japan to the European Community and numerous other countries, and its subsidiary companies, which have joined it in the application in Case C-150/87, are the importers of Nashua plain paper photocopiers into the Community (the applicants are hereinafter collectively referred to as Nashua).
Nashua has had supply arrangements with Ricoh over a number of years for limited categories of photocopiers. In 1982 those arrangements were substantially extended when Nashua ceased its own manufacture in the United States of America of photocopier machines and began to purchase a wider range of photocopiers made by Ricoh.
The essential terms of the current agreement are that Ricoh agrees to manufacture photocopiers for the applicant bearing the Nashua trademark and finished in the distinctive Nashua livery. Nashua takes delivery of and title to the photocopiers in Japan and is solely responsible for exporting, shipping, marketing, selling and servicing those machines thereafter.
Nashua argues that the Commission and the Council should not have regarded Nashua as part of Ricoh's distribution network: it is the supplier of Nashua photocopiers, carries on business in its own name, and is entirely independent of Ricoh. The feature which most emphatically distinguishes the applicant from a subsidiary company of Ricoh or a regular importer or distributor of Ricoh brand photocopiers is the fact that the applicant is solely responsible for promoting and marketing Nashua products. Not only does it receive no benefit from Ricoh's promotion of its own branded products but it is also solely responsible for the performance of Nashua products and bears the risk of its products failing.
Paragraph 8 of Council Regulation (EEC) No 535/87 identifies the applicant as an OEM (original equipment manufacturer). According to that paragraph, original equipment manufacturers — that is to say, importers selling plain paper photocopiers in the Community under their own brand names — were generally companies which had previously manufactured their own brand of plain paper photocopier or continued to manufacture other products in the sector of office electronics or reprographics.
The machines sold by original equipment manufacturers are described in the same paragraph as being ... generally of a different design and ... different technical specifications from those sold under the Japanese manufacturers' own brand. The Commission and the Council have nevertheless treated the applicant's business as no more than another Ricoh distribution channel and have accordingly treated sales of Ricoh brand and Nashua brand machines together.
In that connection Nashua points out that, following notification of the applicant's OEM agreement with Ricoh to the Commission under Council Regulation No 17 of 6 February 1962, the first regulation implementing Articles 85 and 86 of the EEC Treaty (Official Journal, English Special Edition 1959-62, p. 87), the Commission wrote to Nashua on 27 September 1984 in the following terms (Annex IV to the application) :
II — Facts of the case
In July 1985 the Committee of European Copier Manufacturers (Cecom), acting on behalf of producers accounting for a large part of Community production of photocopiers, complained to the Commission that imports of certain plain paper photocopiers originating in Japan were being dumped and were causing injury to the Community industry.
In the course of the antidumping proceeding initiated by it pursuant to 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), the Commission sent a questionnaire seeking information to the applicant's wholly owned subsidiary in Germany, which had been named in the complaint lodged by the European producers. Nashua observes that since then it has been involved in every stage of the proceeding and has submitted a great volume of detailed information to the Commission.
The proceeding culminated in the imposition, by Commission Regulation (EEC) No 2640/86 of 21 August 1986 (Official Journal 1986, L 239, p. 5), of a provisional antidumping duty.
By a letter of 9 December 1986, the applicant offered an undertaking under Article 10 of Regulation No 2176/84 regarding its future exports to the EEC; the undertaking was rejected by a decision of the Commission notified to the applicant on 27 January 1987 (hereinafter referred to as the contested decision).
The applicant explains that it had initially considered a price undertaking but had dismissed that idea because, first, it had not been informed by the Commission what dumping margin had been established in relation to its machines and consequently was not aware by how much its prices would need to be increased to eliminate that margin and, secondly, since it was a company with only a 3% market share it would have been disastrous for the applicant to increase its prices unilaterally.
Accordingly, the undertaking which Nashua offered to the Commission — and which was rejected by the contested decision — proposed a limitation of its exports to 48536 units for each of the following five years (1987 to 1991). The terms of the undertaking also provided for the applicant to endeavour to prevent evasion of the undertaking by resales from outside the EEC and to supply regular reports and information to the Commission in order to ensure effective surveillance of the undertaking.
The relevant part of the Commission's decision rejecting the undertaking reads as follows:
The applicant's lawyers replied on 29 January 1987 as follows:
The Commission replied by a further undated letter received on 18 February 1987 and worded as follows:
This correspondence is summarized in paragraph 100 of the regulation where it is stated:
On 23 February 1987 the Council, on a proposal from the Commission, adopted Regulation No 535/87 (hereinafter referred to as the contested regulation), which imposes a definitive antidumping duty of 20% on imports of plain paper photocopiers originating in Japan.
III — Written procedure and conclusions of the parties
By an application lodged at the Court Registry on 27 April 1987, Nashua Corporation brought an action for the annulment of the Commission's decision rejecting the undertaking offered by the applicant in the course of the antidumping proceeding concerning the importation of photocopiers originating in Japan (Case C-133/87). On 22 May 1987 Nashua Corporation applied to the Court for adoption of an interim measure ordering the suspension in its regard of the application of Council Regulation No 535/87 on condition that it provided a banker's guarantee for the performance of the obligations imposed on it by that regulation. The application was dismissed by order of the President of the Court of 25 June 1987.
By an application lodged at the Court Registry on 13 May 1987 Nashua Corporation and its eight subsidiary companies in the Community brought an action for the annulment of Regulation No 535/87 in so far as it affects them (Case C-150/87).
By orders of 11 and 26 November 1987 the Court granted leave to the Commission and Cecom to intervene in Case C-150/87 in support of the conclusions of the defendant.
By order of 1 February 1989, Cases C-133/87 and C-150/87 were joined for the purposes of the oral procedure and the judgment.
Upon hearing the Report of the Judge Rapporteur and the views of the Advocate General the Court decided to open the oral procedure without any preparatory inquiry.
In Case C-133/87 the applicant claims that the Court should:
In Case C-133/87 the Commission concludes that the Court should:
In Case C-150/87 the applicants claim that the Court should:
In Case C-150/87 the Council contends that the Court should:
The Commission of the European Communities and Cecom support the conclusions of the Council and claim that the Court should also order the applicants to pay the costs incurred by them as intervening parties.
IV — Submissions and arguments of the parties
A — Application for the annulment of the Commission's decision rejecting the undertaking offered by the applicant
1. Admissibility
Nashua maintains that the contested decision is capable of review by the Court under Article 173 of the EEC Treaty, on the ground that it had legal effects which were binding upon it and affected its interests by bringing about a distinct change in its legal and economic position (judgment of 11 November 1981 in Case 60/81 IBM v Commission [1981] ECR 2639). Had the undertaking been accepted, Nashua would not have been liable to pay antidumping duties at the rate of 20% which are at present costing it around ... per month.
Nashua further points out that by analogy with the principles stated in the judgment of 4 October 1983 in Case 191/82 Fediol [1983] ECR 2913, a company involved in an antidumping investigation has the right, as is envisaged by Article 10 of Regulation No 2176/84, to offer an undertaking to the Commission, and consequently it has the right to have the Commission's decision reviewed by the Court.
The Commission begins by observing that there is no necessary connection between the rejection of the offer of an undertaking and the imposition of a definitive antidumping duty, since the two measures are adopted by different institutions in accordance with different procedures. The only effect of the rejection of an undertaking is that the Commission makes a proposal to the Council for a regulation imposing an antidumping duty; however, neither the rejection of the undertaking nor the submission of such a proposal alter the legal position of the exporter.
However, the Commission considers that Nashua's application should probably be considered to be admissible on the basis of the argument that findings have been made specifically about it for the purposes of a specific procedure envisaged by Article 10 of Regulation No 2176/84. The argument would be that the judgments of 21 February 1984 in Joined Cases 239 and 275/82 Allied Corporation v Commission [1984] ECR 1005, of 4 October 1983 in Case 191/82 Fediol, cited above, and of 20 March 1985 in Case 264/82 Timex Corporation v Council and Commission [1985] ECR 849 imply that Nashua's application is admissible on the principles stated in those judgments.
Nevertheless, in its rejoinder, the Commission claims that the legal principles established in the IBM case, on which the applicant relies, show that it is only definitive decisions at the end of a procedure which can be challenged under Article 173 of the EEC Treaty; the Commission observes that a decision rejecting an undertaking is always followed either by a decision accepting a revised undertaking or by the imposition of an antidumping duty.
Lastly, the Commission doubts whether such proceedings serve any useful purpose when, as in this case, the company concerned has also begun proceedings under Article 173 against the Council for the annulment of the regulation imposing the antidumping duty. In those circumstances the Commission leaves it to the wisdom of the Court to decide whether Nashua's application is admissible.
2. Substance
Nashua argues that, by failing to give proper consideration to its undertaking and by basing the decision rejecting that undertaking on invalid grounds, the Commission acted contrary to Regulation No 2176/84 and Article 190 of the Treaty. According to the applicant, the Commission also breached the principle of proportionality.
(a) Infringement of Regulation No 2176/84
Nashua maintains that the Commission failed to consider, as was required by Article 10(2)(b) of Regulation No 2176/84, the effect which the undertaking would have had on the injury to the relevant Community industry, and that — as is shown below — the grounds relied upon by the Commission for its rejection of the undertaking are invalid.
According to the applicant, in the case of an undertaking regarding quantity the Commission should investigate, in accordance with the criteria set out in Article 10(2)(b), whether exports would cease to the extent that the injurious effects of the dumped imports were eliminated; in that connection it cites Council Decision 87/104/EEC of 9 February 1987 (Official Journal 1987, L 46, p. 45). It is only once the Commission has reached a decision as to the effect of the undertaking that it may exercise a discretion whether or not to accept it. In this case there is no evidence whatsoever that the Commission carried out any inquiry as to the effect on injury. The Commission thus went beyond the margin of discretion conferred upon the institutions to which reference is made in the judgment of 7 May 1987 in Case 258/84 Nippon Seiko KK v Council [1987] ECR 1923.
The arguments given by the Commission for not accepting the undertaking offered by Nashua should not be upheld, on the following grounds:
The Commission argues that it is well established (judgments of 4 October 1983 in Case 191/82 Fediol v Commission [1983] ECR 2913, of 11 July 1985 in Case 42/84 Remia v Commission [1985] ECR 2545, and of 7 May 1987 in Case 240/84 NTN Toyo Bearing v Council [1987] ECR 1809, Case 255/84 Nachi Fujikoshi v Council [1987] ECR 1861, Case 258/84 Nippon Seiko KKv Council, cited above, and Case 260/84 Minebea v Council [1987] ECR 1975) that the Court must limit its review to verifying whether the relevant procedural rules have been complied with, whether the facts on which the decision has been made have been accurately stated, and whether there has been a manifest error of appraisal or a misuse of powers. Those principles should be applied to cases involving undertakings in the light of the fact that the Court has recently confirmed that the institutions have no duty to accept undertakings when they are offered (see the abovementioned judgments of 7 May 1987).
According to the Commission, neither the GATT Anti-Dumping Code nor Regulation No 2176/84 lays down any criteria indicating when undertakings may be accepted, and there can be no obligation to accept an undertaking irrespective of its terms. The Commission enjoys a wide discretion in judging whether an undertaking should be accepted, and that discretion must be exercised primarily in the light of practical rather than legal considerations.
For the Commission, undertakings offer the advantages of an amicable settlement, the saving of administrative time and cost, and flexibility, provided that they are appropriately drafted and that the Commission knows enough about the surrounding circumstances to be sure that they will operate effectively. Undertakings can, however, have disadvantages both for the Community institutions and for Community industry: circumstances can alter and make undertakings no longer effective; a company which gives an undertaking may not comply with it; undertakings are difficult to supervise; and, if an undertaking is infringed, no compensation is payable and no penalty can be imposed except under Article 13(4)(b) of Regulation No 2176/84.
Monitoring an undertaking does not rule out any risk of noncompliance, and it involves a substantial administrative burden.
A related problem is that exporters also have to give undertakings that they will take whatever measures are necessary to prevent the undertaking being circumvented by resales by intermediaries or traders buying in the lower price markets for re-export to the Community, or by related importers within the Community.
When deciding whether or not to accept an undertaking the Commission is obliged to balance the probable advantages against the probable disadvantages, on pragmatic, practical and administrative grounds and not on grounds of principle.
According to the Commission it is neither appropriate nor useful to accept undertakings from companies which do not themselves manufacture or sell in the exporting country. That is so because:
The Commission disagrees with Nashua's argument that it rejected the undertaking without having given any consideration to whether the undertaking would eliminate injury, and claims that the correspondence quoted by Nashua shows that that argument is incorrect. As to the alleged effect of the undertaking on the injury caused to Community industry, the Commission objects that an undertaking must eliminate injury and not merely reduce it. It notes that since Nashua's undertaking said nothing about prices there was no assurance that it would have eliminated injury.
With reference to the decisions cited by Nashua, in which undertakings offered by importers were accepted, the Commission contends that in all those cases the companies which gave undertakings were European sales subsidiaries of Japanese exporter-producers (or otherwise associated with exporter-producers).
Turning to Nashua's alleged status as an exporter, the Commission observes that the essential fact is that Nashua buys from Ricoh for export. It does not produce photocopiers and does not sell them in Japan. It was therefore impossible to establish a separate dumping margin for Nashua. The Commission's letter received by Nashua on 27 January 1987 relies on that argument and not on any particular definition of the term exporter. The same reasons lead to the rejection of Nashua's argument that undertakings may be accepted from OEMs. Unless such companies also sell in the exporting country — which is unusual in practice — it is not usually possible or appropriate to establish a dumping margin for them other than that of the manufacturer from which they are buying.
Finally, the Commission observes that the rejection of the undertaking offered by Nashua is not based on the argument that quantity undertakings are not in conformity with the GATT Anti-Dumping Code.
(b) Breach of the principle of proportionality
Nashua refers to the general principle of Community law whereby administrative bodies are required to take measures in such a way that the aims pursued may be attained under the most favourable conditions and with the smallest possible sacrifices by the companies affected (judgment of 13 July 1962 in Joined Cases 17 and 20/61 Klöckner v High Authority [1962] ECR 325). It submits that in the particular circumstances of this case the facts are such that the undertaking offered by it should have been accepted, given the disproportionate consequences to Nashua of having to pay antidumping duties of approximately ... per month. The applicant believes that the undertaking would have removed any injury to the Community industry, and that the imposition of duties results in no greater benefits.
The Commission takes the view that Nashua's standpoint disregards the fact that undertakings can be infringed and need monitoring, and that they are therefore less satisfactory than a duty, both to Community industry and to the Commission. Moreover, Nashua's undertaking gave no assurance as to price. In any case, the level at which the duty is fixed is not disproportionate but is influenced by the cif price at the Community frontier.
(c) Infringement of Article 190 of the Treaty
Nashua claims that even if the Commission did consider whether the type of quantity undertaking offered would have remedied the injury caused to the Community industry by the dumped imports, it did not, as required by Article 190, inform the applicant of this fact and did not state the reasons upon which it decided to reject the undertaking.
First, the reason given in the letter notifying the applicant of the decision — namely that it would be inappropriate to accept undertakings from OEMs — is inadequate. Secondly, Nashua points out that the Commission cannot, in rejecting the undertaking, rely on the point that it is not possible to establish a dumping margin for OEMs, because in the decision it states that the form of undertaking offered by Nashua does not require the calculation of separate dumping margins.
Lastly, in paragraph 100 of Regulation No 535/87 the Commission relied on its traditional practice in order to justify its decision, but that practice was not referred to in the letter notifying Nashua of the decision or in the statement of defence, and the degree of reasoning falls short of what the Court has held to be acceptable in other cases (see the judgments of 7 May 1987 in Case 240/84 NTN Toyo Bearing v Council, and in Case 255/84 Nachi Fujikoshi v Council, cited above).
The Commission contends that since an OEM cannot be regarded as an exporter (because it has bought the goods for expon), an individual dumping margin cannot be calculated for it. It refers to its letter and its statement of defence, arguing that they describe and explain its practice.
Finally, the judgments cited by Nashua do nothing to show that the reasons given in the Commission's letter were not sufficient.
B — Application for the annulment of Council Regulation No 535/87
1. Admissibility
Nashua maintains that the contested regulation constitutes a decision of direct and individual concern to it in its capacity (which the Commission wrongfully ignored) as exporter of Nashua photocopiers or, in the alternative, in its capacity as the exclusive importer of Nashua photocopiers into the EEC.
With regard to its capacity as exporter, Nashua submits that the fact (recognized by the Council) that it physically exports the products is sufficient to make its application admissible; it cites the judgment of 21 February 1984 in Joined Cases 239/82 and 275/82 Allied Corporation v Commission [1984] ECR 1005, in which the Court held that producers and exporters have standing to bring proceedings under Article 173 of the EEC Treaty. In that case, indeed, the Court ruled that the non-producing exporter Transcontinental had standing under Article 173.
As far as its status as importer is concerned, Nashua argues that it is not in the same position as a general importer of photocopiers, since it is the only importer of Nashua photocopiers into the Community and the only person entitled to use the Nashua brand name and to market those machines. It refers to the judgment of the Court of 29 March 1979 in Case 118/77 Import Standard Office v Council [1979] ECR 1277.
Nashua takes the view that the application of the order of the Court of 8 July 1987 in Case 279/86 Serines v Commission [1987] ECR 3109 is not relevant to the present case. Unlike Serines, which was an EEC importer of products bearing the manufacturer's brand name, Nashua is an American company which buys Nashua brand photocopiers in Japan and in America and exports them to the Community and other countries around the world. Nashua further notes that it differs from regular importers of products bearing the manufacturer's brand name, at issue in the Sermes and Allied cases and in Alusuisse v Council and Commission (judgment of 6 October 1982 in Case 307/81 [1982] ECR 3463), in that it sells its products as an independent supplier in direct competition with Ricoh brand products; it is therefore incorrect to regard it as simply an importer of Ricoh machines.
Nashua goes on to state that it does not maintain that all independent importers should have standing under Article 173 to challenge regulations imposing antidumping duties, but it notes that in the United States of America, Canada and Australia OEM suppliers always have the right to contest antidumping measures in a court or tribunal able to rule on the substantive issues.
According to Nashua, the option for independent importers of bringing proceedings in the relevant national court does not afford an effective alternative remedy, since a national court faced by a request for a declaration as to the validity of a regulation imposing an antidumping duty will have no choice but eventually to refer the question to the Court under the procedure laid down in Article 177 of the EEC Treaty. Indeed, as the Court held in the Allied judgment of 21 February 1984, mentioned above, it is for the Court of Justice alone to give a final decision on the validity of the contested regulations.
Finally, the applicant argues that it brought the proceedings under Article 173 partly in order to avoid the delay, expense and uncertainty of bringing multiple proceedings in national courts and awaiting a preliminary ruling by the Court of Justice under Article 177.
The Council contends that the application is inadmissible on the ground that the contested regulation is not of individual concern to Nashua; in that regard it sets out the following arguments:
Cecom supports the conclusions of the Council and maintains that the fact that Nashua entered into an agreement with Mita Industrial — despite the agreement with Ricoh — shows that Nashua is free in its procurement policy and can therefore be treated within the framework of Article 173 of the EEC Treaty only as an importer.
2. Substance
(a) Infringement o/Regulation No 2176/84 inasmuch as the applicant was not treated separately in the proceeding and in the measures adopted in the regulation
(i) The applicant's status as exporter and the alleged impossibility of calculating a separate dumping margin for it
Nashua argues that it is the exporter of Nashua photocopiers and should have been treated separately from Ricoh, on the same footing as all other exporters. It also maintains that there is nothing to prevent the calculation of a separate dumping margin for Nashua photocopiers, that the Council was in fact in a position to undertake that calculation, and that the dumping margin for the applicant's photocopiers would have been considerably lower than the margin for exports by Ricoh under its own brand name.
The Commission had both the essential elements necessary for that calculation (normal value and export price), and the applicant had supplied information concerning the adjustments required to ensure a fair comparison between the two. The resultant dumping margin (if any) would be the margin for Nashua products. Indeed, the Commission revealed to the applicant (at a meeting held on 14 November 1986) that it had calculated a dumping margin for Nashua photocopiers and that this was lower than for Ricoh branded photocopiers; however, the Commission refused to divulge the dumping margin thus established.
Nashua further argues that Regulation No 2176/84 does not prevent separate treatment for a supplier in the applicant's position, and it refers to several previous cases in which the Commission or the Council adopted separate measures in respect of two or more exporters of products obtained from the same manufacturer. (The decisions concerned are: Commission Decision 82/397/EEC of 14 June 1982, Official Journal L 172, 18.6.1982, p. 44; Commission Decision 1638/83/ECSC of 16 June 1983, Official Journal L 160, 18.6.1983, p. 32; Council Regulation (EEC) No 101/83 of 17 January 1983, Official Journal L 15, 19.1.1983, p. 1; and Council Regulation No 90/82 of 18 January 1982, Official Journal 1982, L 12). Nashua also asserts that the Council must have regard to the practice of its major trading partners in this respect when applying antidumping rules based on the GATT Code, and claims that it has had confirmation from the relevant authorities in the United States of America that, had those authorities been handling a similar case, the likely procedure would have involved calculation of a separate dumping margin for Nashua photocopiers, as is demonstrated by several cases cited as examples, the circumstances of which are similar to those of the applicant.
The applicant also rejects the reasons cited at paragraph 92 of the contested regulation to counter the applicant's proposals for separate treatment, and in particular the argument that it would be inappropriate for OEMs to be able to purchase from any exporter and pay the same level of duty irrespective of the level applicable to the exporter concerned. Referring to the OEM supply contract concluded with Ricoh, which involves a long-term commitment from both parties, and to the commitments which it gives to its own customers, Nashua emphasizes that before it could decide to change its supplier or obtain machines from a further supplier it would have to ensure that a complete servicing and distribution network was set up to cover those new machines. Nashua concludes by pointing out that, in the event of its deciding to alter its sourcing arrangements, the procedure established by Article 14 of Regulation No 2176/84 would be the appropriate mechanism for ensuring that antidumping duties (if appropriate) were set at the correct level.
The Council contends that it was right not to consider it necessary to determine a separate dumping margin for Nashua and thus to treat it as an exporter, and it stresses that the question before the Court is not whether it would have been possible to treat the applicant as an exponer but whether the institutions made a manifest mistake in not doing so.
According to the Council it is clear from Article 2(8) of Regulation No 2176/84 that what is relevant is when and by whom the product is first sold for export, what the export price is and who receives this price — not who the physical exporter is. In the present case, Ricoh sold the products to Nashua for export and consequently the price paid for the product sold for export to the Community is that paid by Nashua's importing organization in the Community to Ricoh in Japan. Furthermore, the next price in the distribution chain is that paid to the applicant by its customers within the Community.
The Council claims that a dumping margin must be calculated for the company which sells the product for export, not for the company which physically exports the product. Accordingly, no such calculation was possible for Nashua, which neither sells its photocopiers on the domestic (Japanese) market nor sells the product for export. Thus there is a substantial difference between Nashua and the trading houses for which separate dumping margins were calculated in the cases referred to by Nashua.
Turning to the meeting to which the applicant refers, the Council states that at that meeting the Commission explained that a special normal value was constructed for Ricoh's sales to OEMs, which indeed generally resulted in a lower dumping margin than that found for sales of Ricoh's own photocopiers. According to the Council, the Commission made a calculation for all Ricoh's sales channels, and the final dumping margin was a weighted average of all those channels, the costs taken into account for the calculation being only those of Ricoh, not those of the applicant (see paragraphs 11 and 27 of the contested regulation).
The Council does not consider it necessary or appropriate to discuss the administrative practice of authorities in nonmember countries, which is based on legislation differing from Community legislation. In any case, the methods of the United States authorities are essentially similar to those adopted by the Commission as regards the determination of a weighted average dumping margin for all sales channels.
Nashua's argument that both it and its subsidiaries were tied to Ricoh and could not change supplier, adduced in order to refute the reasons set out in paragraph 92 of the contested regulation, is merely a subsidiary argument, the main argument being that it is not the applicant but Ricoh which sells the products for export to the Community. Furthermore, the question whether circumventions of antidumping measures are possible (for example by changing supplier) will depend upon the factual and contractual situations, and changes can take place without the institutions being able to control or even monitor them.
Lastly, the Council asserts that there is an additional argument of fact which justifies treating Nashua as an importer. Nashua pays Ricoh in nonresident yen. If sales between Ricoh and Nashua had been domestic sales and not sales for export then in accordance with official Japanese exchange control rules the price would have been expressed in resident yen.
The main points put forward by Cecom, which intervened in support of the conclusions of the Council, are as follows.
It states that at least by 1988 the applicant had concluded an OEM agreement with Mita Industrials. Pursuant to this agreement — as reported in Info-Markt of 18.2.1988 — the applicant is supplied by Mita Hong Kong. That company was set up after the imposition of antidumping duties in order to circumvent the antidumping duties and, in addition, to benefit from the generalized tariff preferences conferred by the European Community on products originating in Hong Kong.
With reference to Nashua's argument that it should have been treated separately, Cecom observes that if the Community institutions followed the applicant's argument OEM importers could circumvent antidumping duties. OEM importers need only set up their own company in the country of origin (in this case, Japan) and export the products concerned at price levels which avoid the determination of antidumping duties. This was an essential reason for which the Council did not treat OEM importers, and specifically Nashua, as separate exporters in the proceeding and the measures adopted.
(ii) Calculation of the normal value
Nashua also takes issue with the calculation of the normal value in respect of sales to OEMs. It maintains that the arbitrary adjustment made by the Commission in using a lower profit margin for constructing a normal value for sales to OEMs (paragraph 11 of the regulation) took inadequate account of the differences between sales to dealers and sales to OEMs. The real difference between the two types of sale occurs at the level of selling, general and administrative expenses, which are negligible in sales to OEMs by comparison with the costs involved in selling to dealers machines bearing the manufacturer's brand name. In so doing the Commission ignored the detailed evidence submitted by the applicant, all of which related to actual costs, and chose instead its own arbitrary determination.
Moreover, it appears from paragraph 25 of the contested regulation that for one exporter selling to an OEM the normal value was constructed only on the basis of production costs plus a reasonable margin for profit without any addition for selling, general and administrative expenses. Such treatment for one manufacturer and its OEM customer but not for others is clearly discriminatory.
In that connection the Council explains that in constructing the normal value for sales to OEMs account was taken of possible differences in both costs and profit of the producer-exporter. Since those differences could not be calculated with sufficient accuracy, it was decided to take account of such possible differences (based upon the Commission's best estimate on the basis of the information available in the absence of OEM sales in that market) in a single element (the profit margin) to cover both kinds of possible difference. That is clearly stated in paragraph 11 of the contested regulation.
The Council further claims that the evidence presented by Nashua did not allow the Commission to determine with sufficient accuracy the amount of the additional differences (that is, differences in addition to those covered by applying the specially low profit margin) in selling, general and administrative costs, if any, between the two types of sales for purposes of constructing the normal value.
The Commission therefore considered — and the Council confirms this — that sufficient account was taken of the possible difference in either cost or profit by application of the low profit margin of 5%. Any remaining differences for other elements would have to be dealt with in the framework of adjustments under Article 2(9) and (10), on the merits of the evidence presented.
With reference to paragraph 25 of the contested regulation, the Council asserts that that paragraph adopts the wording of Article 2(3)(b)(ii) of Regulation No 2176/84, which clearly states that the constructed normal value is determined by adding cost of production and a reasonable margin of profit and that the cost of production does include a reasonable amount for selling, administrative and other general expenses. The applicant's argument that, in the case of one exporter, the institutions did not include such costs in the constructed normal value for that exporter is thus without merit.
(b) Infringement of Regulation No 2176/84 inasmuch as imports by the applicant were excluded from the calculation of the antidumping duty
Nashua maintains that it is unfair and discriminatory on the one hand to have taken account of its sales for the purpose of calculating the dumping margin but on the other hand to have imposed a duty upon the applicant's photocopiers based on a calculation from which sales of those machines were entirely excluded.
The applicant draws the Court's attention to the fact that not only did sales by OEMs account for approximately 28% of all sales of Japanese photocopiers in 1985, including the reference period, but sales by Ricoh's two OEM customers accounted for 49% of all sales of Ricoh-produced machines in the EEC during the same period. With regard to the calculation of the duty, the applicant cannot understand how the figure used can be claimed by the Council to be representative of all sales of photocopiers in the Community when it excludes a whole category of sales on the Community market.
The Council submits that the duty was calculated partly on the basis of the prices at which Japanese subsidiaries in Europe sell to independent dealers. For those prices, it was necessary to deduct a weighted average factor representing the costs of Japanese subsidiaries in Europe between importation and resale to dealers. This covered 70% of all photocopier sales in the Community during the reference period and was considered to be a representative figure.
The Commission did not use information on the costs of unrelated importers in Europe, since export prices were not constructed in the case of unrelated importers. Therefore, it was right not to include the applicant's costs of selling plain paper photocopiers in the EEC when determining this element of the rate of the duty for Ricoh. As the figure which was arrived at was based on a percentage of all sales which can be considered representative, this does not constitute a misuse of powers by the institutions.
(c) Breach of the principle of nondiscrimination and infringement of Regulation No 2176/84 inasmuch as antidumping duties are applied to Nashua and Ricoh at a uniform rate
Nashua asserts that the information contained in the Commission's proposal on the calculation of definitive antidumping duties disclosed that the Japanese manufacturers' related subsidiary companies enjoyed a gross margin of 42% on resales to dealers, whereas according to the most recent information the gross margin achieved by the applicant through its European distribution network was Given the disparity in gross margins, and the fact that the antidumping duty is expressed at the same ad valorem level of 20% for both the applicant and a typical Japanese manufacturer, Nashua argues that it pays much more duty in absolute terms than Ricoh does, and that this is contrary to the principle of nondiscrimination.
According to the Council, the argument put forward by Nashua is unconvincing. The duty applied is an ad valorem duty, based on the cif price at the frontier, which applies equally to all companies.
The Council submits that the applicant seems to base its assertions on the determination of the duty on the basis of the reconstructed export price and contends that that is not what the customs authorities will take as the basis for their duty calculations. The antidumping duty will be calculated on the customs value determined in accordance with Article 3 et seq. of Regulation No 1224/80 (Official Journal L 134, 31.5.1980, p. 1), the purpose of which is to determine a customs value that will be the same for the identical product whether it is imported by a related or an unrelated importer. Thus, the customs value for an identical product will be calculated in the same way for Nashua and for Ricoh's related sales subsidiaries; therefore, the antidumping duty paid will also in principle be the same, and there will be no different treatment on that basis.
The Council further claims that the antidumping duty is not aimed at guaranteeing the same profit margin for all importers but at removing injury caused by such imports. There cannot be discrimination merely as a result of the existence of different margins of profit after importation into the Community.
(d) Infringement of Regulation No 2176/84 inasmuch as the Commission /ailed to consider the substance of the undertaking offered by the applicant
With regard to the rejection of the undertaking which it offered to the Commission, Nashua puts forward the same arguments as it made in Case C-133/87. In order to avoid repetition, the Council refers the Court to the arguments submitted by the Commission in its statement of defence in Case C-133/87.
In its intervention, the Commission refers the Court to its written observations in Case C-133/87. The Commission argues inter alia that it is not normally appropriate to accept an undertaking from a company which buys the product concerned from the company which manufactures for export to the Community, since the effect of accepting an undertaking in such circumstances would be to give the buyer company an incentive to go on buying outside the Community at dumped prices, and because all importers, potential importers and companies in the position of importers would have to be treated equally, and there would normally be too many companies in this position to make acceptance of undertakings practicable (GATT Anti-Dumping Code, Article 7(2)).
1 Language of the case: French.