Shanghai Biaowu High-Tensile Fastener and Shanghai Prime Machinery v Council [2012] EUECJ T-170/09 (10 October 2012)

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(Dumping -� Imports of certain iron or steel fasteners originating in China -� Market economy treatment -� Time-limit for adopting the decision on that treatment -� Principle of sound administration -� Burden of proof -� Obligation to state the reasons on which the decision is based -� Article 2(7)(b) and (c) and (10) of Regulation (EC) No 384/96 (now Article 2(7)(b) and (c) and (10) of Regulation (EC) No 1225/2009))

1 The applicants, Shanghai Prime Machinery Co. Ltd (-�PMC-�) and its subsidiary Shanghai Biaowu High-Tensile Fasteners Co. Ltd (-�Biaowu-�), produce and export fasteners to the European Union. Biaowu specialises in the production of fasteners, which it sells on the Chinese market and exports through PMC.

2 Following a complaint lodged on 26 September 2007 by the European Industrial Fasteners Institute AISBL (EIFI), on 9 November 2007 the Commission of the European Communities published a Notice of initiation of an anti-dumping proceeding concerning imports of certain iron or steel fasteners originating in the People-�s Republic of China (OJ 2007 C 267, p. 31). The investigation covered the period from 1 October 2006 to 30 September 2007.

3 On 26 November 2007, the applicants sent the Commission their replies to the sampling questionnaire.

4 On 3 December 2007, the applicants submitted a claim form for market economy treatment (-�MET-�) and for individual treatment.

5 On 5 December 2007, the Commission indicated that, owing to the large number of exporting producers in China, it had decided to apply sampling in accordance with Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community (OJ 1996 L 56, p. 1), as amended (-�the basic regulation-�) (replaced by Council Regulation (EC) No 1225/2009 of 30 November 2009 on protection against dumped imports from countries not members of the European Community (OJ 2009 L 343, p. 51, corrigendum OJ 2010 L 7, p. 22)), in particular in accordance with Article 17(1) of the basic regulation (now Article 17(1) of Regulation No 1225/2009). The applicants were included in that sampling.

6 Between 17 and 22 January 2008, the Commission carried out inspections at the applicants-� premises in connection with their MET claim.

7 By fax of 4 February 2008, the applicants submitted additional information in reply to certain concerns raised by the Commission during the inspections. On the same day, the applicants also sent the Commission their replies to sections A to D of the anti-dumping questionnaire.

8 On 31 March 2008, the applicants sent the Commission their replies to sections E and F of the anti-dumping questionnaire in accordance with the instructions given by the Commission in its letter of 21 February 2008.

9 Between 1 and 4 April 2008, the Commission carried out inspections at the premises of producers in an analogue country, namely India, to verify the data provided in their questionnaire responses, in particular, data on the price of raw materials on the Indian market.

10 On 30 April 2008, the applicants received the MET information document setting out the essential facts and considerations on the basis of which the Commission concluded that the applicants did not meet the criteria allowing them to receive MET.

11 By letter of 16 May 2008, following a hearing with the Commission on 15 May 2008, the applicants submitted observations concerning the denial of MET.

12 On 16 and 17 May 2008, the Commission carried out inspections at the applicants-� premises in order to verify the applicants-� replies to the anti-�dumping questionnaire.

13 On 4 August 2008, the Commission sent the applicants an information document on the non-imposition of provisional anti-dumping measures. The applicants did not submit comments on that document.

14 On 3 November 2008, the Commission sent the applicants the final information document setting out the essential facts and considerations on the basis of which it intended to propose to the Council of the European Union that a definitive anti-dumping duty be imposed on imports of certain iron or steel fasteners originating in China.

15 By letter of 24 November 2008, the applicants made comments regarding the information document and formally offered to submit to the Commission a proposal for an undertaking under Article 8 of the basic regulation (now Article 8 of Regulation No 1225/2009).

16 By letter of 2 February 2009, the Commission replied to the applicants-� letter of 24 November 2008.

17 On 26 January 2009, the Council adopted Regulation (EC) No 91/2009 imposing a definitive anti-dumping duty on imports of certain iron or steel fasteners originating in the People-�s Republic of China (OJ 2009 L 29, p. 1) (-�the contested regulation-�).

18 In the contested regulation, the applicants were denied MET on the grounds, first, that the costs of the major input, steel wire rod, did not substantially reflect market values, and, second, that the Chinese State was in a position to either significantly influence or block any decisions regarding the applicants. In that regard, recitals 63, 66, 67, 68 and 70 to 72 of the contested regulation are worded as follows:

19 On the other hand, the Council did consider that Biaowu met the conditions for granting individual treatment listed in Article 9(5) of the basic regulation (now Article 9(5) of Regulation No 1225/2009) (recitals 80 to 83 of the contested regulation).

20 Pursuant to Article 2(7)(a) of the basic regulation (now Article 2(7)(a) of Regulation No 1225/2009), normal value for the applicants was established on the basis of verified information received from the producer in India (recitals 91 and 92 of the contested regulation).

21 Article 1(1) and (2) of the contested regulation imposed a definitive anti-dumping duty of 69.9% on certain iron or steel fasteners, other than of stainless steel, imported by the applicants into the European Community.

22 By application lodged at the Registry of the General Court on 24 April 2009, PMC and Biaowu brought the present action.

23 By separate document lodged at the Court Registry on the same day, the applicants also made an application for an expedited procedure under Article 76a of the Rules of Procedure of the Court. On 28 May 2009, the Council presented its observations regarding that request.

24 By decision of 17 June 2009, the Court (Fifth Chamber) rejected the application for an expedited procedure.

25 By document lodged at the Court Registry on 16 July 2009, the Commission sought leave to intervene in the present case in support of the form of order sought by the Council.

26 By document lodged at the Court Registry on 24 August 2009, EIFI sought leave to intervene in the present case in support of the form of order sought by the Council. In their observations, lodged at the Court Registry on 18 and 29 September 2009, the Council and the applicants raised no objections to that intervention.

27 By order of 14 September 2009, the President of the Fifth Chamber of the Court granted the Commission leave to intervene.

28 By letter received at the Court Registry on 9 October 2009, the Commission waived its right to submit a statement in intervention.

29 By order of 13 November 2009, the President of the Fifth Chamber of the Court granted EIFI leave to intervene. EIFI lodged its statement within the prescribed period.

30 On 29 September 2009, the applicants requested confidential treatment, in respect of EIFI, of seven annexes to the application. They also requested, on 28 October 2009, the exclusion, from the communication to EIFI, of certain confidential data contained in the defence and in one of its annexes. They produced a non-confidential version of those various pleadings. The notification of those pleadings to EIFI was confined to that non-confidential version. No objection was raised by EIFI in that regard.

31 After a change in the composition of the Chambers of the Court, the Judge-Rapporteur was assigned to the Seventh Chamber, to which the present case was, consequently, assigned.

32 On 19 July 2011, the Council replied to the Court-�s written question of 4 July 2011.

33 Upon hearing the report of the Judge-Rapporteur, the Court (Seventh Chamber) decided to open the oral procedure.

34 The parties presented oral argument and answered the oral questions put to them by the Court at the hearing on 15 December 2011.

38 Without formally raising a plea of inadmissibility under Article 114 of the Rules of Procedure of the General Court, the Council states that the action should be declared inadmissible since the applicants seek the annulment of the contested regulation in its entirety and not only in so far as it concerns them.

39 As a preliminary point, it should be noted that the contested regulation imposes a definitive anti-dumping duty on imports of certain iron or steel fasteners by a number of companies.

40 The applicants seek the annulment of the contested regulation in its entirety. However, in setting out their pleas in law and arguments the applicants confine themselves to contesting the legality only of the anti-�dumping duty imposed on them.

41 In that regard, it must be stated that any illegality of that duty affects the legality of the contested regulation only in so far as that regulation imposes an anti-dumping duty on the applicants. By contrast, it does not affect the legality of other parts of the contested regulation, namely, in particular, the anti-dumping duties imposed on the other undertakings affected by that regulation.

42 It is apparent from case-law that, where a regulation which introduces an anti-dumping duty imposes different duties on a series of undertakings, an undertaking is individually concerned only by those provisions which impose on it a specific anti-dumping duty and determine the amount thereof, and not by those provisions which impose anti-dumping duties on other undertakings, with the result that an action brought by that undertaking will be admissible only in so far as it seeks the annulment of those provisions of the regulation that exclusively concern it (see Case C-239/99 Nachi Europe [2001] ECR I-�1197, paragraph 22 and the case-law cited).

43 In those circumstances, having regard to the pleas in law and arguments put forward by the applicants in support of their action, the present action for annulment must be treated as seeking only partial annulment of the contested regulation, in so far as it imposes a definitive anti-�dumping duty on the applicants.

44 In support of their action, the applicants put forward eight pleas in law. The first plea alleges infringement of the second subparagraph of Article 2(7)(c) of the basic regulation (now the second subparagraph of Article 2(7)(c) of Regulation No 1225/2009). The second plea alleges infringement of the first subparagraph of Article 2(7)(c) of the basic regulation (now the first subparagraph of Article 2(7)(c) of Regulation No 1225/2009).The third plea alleges that the institutions breached their duty to examine, carefully and impartially, all the relevant aspects of the present case. The fourth plea alleges infringement of the principle of sound administration and of the principle that an unreasonable burden of proof should not be imposed. The fifth plea alleges infringement of Council Regulation (EC) No 2026/97 of 6 October 1997 on protection against subsidised imports from countries not members of the European Community (OJ 1997 L 288, p. 1). The sixth plea alleges infringement of Article 2(10) of the basic regulation (now Article 2(10) of Regulation No 1225/2009). The seventh plea alleges infringement of Article 253 EC. Lastly, the eighth plea alleges infringement of the rights of the defence.

First plea, alleging infringement of the second subparagraph of Article 2(7)(c) of the basic regulation

45 The second subparagraph of Article 2(7)(c) of the basic regulation provides that a determination whether a producer is operating under market economy conditions -�shall be made within three months of the initiation of the investigation, after specific consultation of the Advisory Committee and after the Community industry has been given an opportunity to comment-� and that -�[t]his determination shall remain in force throughout the investigation-�.

46 It must be stated that the three-month time-limit mentioned in the second subparagraph of Article 2(7)(c) was exceeded in the present case. The investigation was initiated on 9 November 2007, whereas the decision in which the Commission set out for the applicants the essential facts and considerations on the basis of which it had concluded that the applicants did not meet the criteria allowing them to receive MET was sent to the applicants on 30 April 2008.

47 Accordingly, the Court must assess what the consequences of that non-�compliance with the time-limit must be in the present case and, in particular, must assess whether that non-compliance must entail the annulment of the contested regulation.

48 In that regard, the General Court has already rejected the argument that any failure by the Commission to comply with the three-month period must automatically entail the annulment of the review regulation subsequently adopted (see, to that effect, Case T-299/05 Shanghai Excell M&E Enterprise and Shanghai Adeptech Precision v Council [2009] ECR II-�565 (-�Shanghai Excell-�), paragraphs 115 and 126).

49 Although the case which gave rise to that judgment concerned a request for the review of an original regulation from a -�new exporter-� within the meaning of Article 11(4) of the basic regulation (now Article 11(4) of Regulation No 1225/2009), the same general conclusion on that issue must be reached in the present case. It cannot be inferred either from the content of the relevant provisions or from the purpose and structure of the basic regulation that non-compliance with the three-month time-�limit for taking the MET decision may automatically entail the annulment of the contested regulation.

50 In that regard, the three-month period is intended, in particular, to ensure that the question whether the producer meets the criteria set out in that article is not decided on the basis of its effect on the calculation of the dumping margin (see, to that effect, Case T-138/02 Nanjing Metalink v Council [2006] ECR II-�4347, paragraph 44; Shanghai Excell, paragraph 48 above, paragraph 127; and judgment of 8 November 2011 in Case T-274/07 Zhejiang Harmonic Hardware Products v Council, not published in the ECR, paragraph 37).

51 The applicants claim that, at the time of the MET decision, the Commission had available to it all the essential information to calculate the applicants-� dumping margin and to calculate the normal value in the analogue country. The Commission could thus have decided the applicants-� MET claim on the basis of its effect on the calculation of the dumping margins. Without the procedural irregularity caused by the non-compliance with the three-month time-limit, the MET decision and, consequently, the contested regulation could have been different since, calculated on the basis of the applicants-� own data, the applicants-� dumping margin would have been de minimis.

52 In that regard, it is apparent from the case-file that the applicants-� replies to sections E and F of the anti-dumping questionnaire, relating to normal value, were submitted to the Commission on 31 March and 1 April 2008, following the Commission-�s request dated 21 February 2008. Therefore, it should be considered that, during the period between the expiry of the three-month period and the MET decision, the Commission did have information at its disposal enabling it to know what effect that decision might have on the calculation of the applicants-� dumping margin.

53 Accordingly, it must be assessed whether, in the present case, that circumstance could have undermined the practical effect of the three-�month time-limit as noted in the case-law recalled in paragraph 50 above.

54 This cannot be the case. It should be borne in mind that, in the present case, and pursuant to Article 2 of the basic regulation, if it had been considered that the applicants were operating under market economy conditions, the normal value of their goods would have been determined in accordance with the rules applicable to market economy countries, namely on the basis of the information they had disclosed. By contrast, since the applicants were denied MET, normal value had to be determined, pursuant to Article 2(7)(a) of the basic regulation, on the basis of the prices paid in the analogue country. Therefore, in order to know what the effect of the MET decision would be on the calculation of the dumping margin, the institutions would have had to have information at their disposal concerning the prices paid or payable in the exporting country, together with those paid or payable in the analogue country.

55 The Council does not dispute the fact that the applicants-� replies to sections E and F of the anti-dumping questionnaire, submitted to the Commission on 31 March 2008, contained information regarding the normal value of the product in question. It simply claims that, since MET was not granted, that information was never verified. In addition, the Council submits that the effect of the MET decision on the calculation of the dumping margin in the present case was obvious even before the expiry of the three-month period and certainly before the Commission had received or analysed the applicants-� normal value information.

56 In that regard, it is apparent from the case-file that, from the beginning of the investigation, the Commission had general information at its disposal indicating that the Chinese prices for steel wire rod, the major input of fasteners, representing approximately 50% of their production costs, were significantly below prices on other international markets. The Council adds that, with regard in particular to the applicants, that fact was also clear from the evidence supplied by the applicants in the context of their MET claim and verified by the Commission before the expiry of the three-month period, namely during the visits to the applicants-� premises between 17 and 22 January 2008. The applicants have not disputed that fact.

57 Therefore, the Commission could reasonably infer from that fact that, since the applicants-� production costs were lower than those of producers in a market economy country without access to Chinese raw materials, the normal value and thus the dumping margin for the applicants would in all likelihood be lower if the applicants were to be granted MET.

58 Accordingly, it must be held that, in the present case, the effect on the dumping margin of the MET decision regarding the applicants was known before the request for, and receipt of, the applicants-� replies to sections E and F of the anti-dumping questionnaire.

59 It is true that those replies did supply the Commission with additional information, particularly the replies concerning the prices listed for different products by Biaowu on the national market. At the hearing, the applicants asserted that that information, taken together with the information from the Indian undertakings and the exporting undertakings, was necessary in order to be able to calculate the dumping margin. In that regard, it should be borne in mind that the possibility that the granting of MET may be decided by reference to its effect on the calculation of the dumping margin does not presuppose awareness of the exact dumping margin, calculated on the basis of the applicants-� normal value information, but only awareness of information relating to the effect that granting MET may have on that margin according to the two possible methods of calculation. In the present case, it should be observed that, according to the information which was available to the Commission, the Chinese prices for the major input were so much lower that a lower dumping margin if the applicants were to be granted MET was the only plausible hypothesis.

60 It follows that, in the particular circumstances of the present case, it was not its failure to comply with the three-month time-limit which enabled the Commission to decide whether the applicants should receive MET depending on its effect on the calculation of the dumping margin. The practical effect of the three-month time-limit could not therefore be undermined by the Commission-�s awareness of the information contained in those replies.

61 In addition, the applicants claim that the Council-�s line of argument is contradictory, since if, as the Council claims, the distortion was clear before the expiry of the three-month period and the applicants-� costs and domestic sales information were of little importance, the Commission could have rejected their MET claim immediately. However, it should be borne in mind that the relevant information as regards the effect of the MET decision on the calculation of the dumping margin did not concern the possible distortions and distorted nature of the input prices, but simply the low level of those prices. In that regard, it should be noted that the Council asserted, first, that the presence, scope, and relevance of distortions in the steel wire rod market were an important and complex issue in the present case, which had to be investigated in detail, and, second, that the effect of the MET decision on the dumping margin calculation was obvious even before the expiry of the three-month time-limit and certainly before the Commission had received or analysed the applicants-� normal value information.

62 In any event, it must be concluded that, in the absence of a provision setting out either expressly or implicitly the consequences of failure to comply with a procedural time-limit such as the one in the present case, the failure can entail the annulment in whole or in part of the act to be adopted within the period in question only if it is shown that, in the absence of such alleged irregularity, that act might have been substantively different (see Shanghai Excell, paragraph 48 above, paragraph 138 and the case-law cited).

63 In that regard, the applicants claim that a MET decision within the three-month period, or before the Commission had all the necessary information at its disposal to calculate the applicants-� dumping margin, could have been different, in so far as determining the dumping margin purely on the basis of comparing the applicants-� export and profitable domestic sales would result in a de minimis dumping margin. The table and the calculation submitted by the applicants in support of that argument show that, if they had been granted MET, the contested regulation might have been substantively different and been more favourable to the applicants.

64 That line of argument does not prove that, if the Commission had not exceeded the three-month time-limit, the Council might have adopted a different regulation more favourable to the applicants-� interests than the contested regulation. The applicants-� claim that a dumping margin calculated on the basis of the information they provided would have been much lower than that set by the contested regulation presupposes a decision granting them MET. However, the applicants have not proved that that would have been the result of the MET decision if that decision had been adopted within the three-month period. In that context, the mere assertion by the applicants that it would be reasonable to think that the Commission might have decided to refuse MET in order to obtain a higher duty is not sufficient to establish that possibility.

Second plea, alleging infringement of the first subparagraph of Article 2(7)(c) of the basic regulation

66 This plea is in three parts. In the first two parts, the applicants submit that the Council has infringed that provision in that it denied them MET on the grounds, first, that their main shareholder, a State-owned company, could indirectly influence their business decisions and, second, that the costs of major inputs did not substantially reflect market values. The third part alleges infringement of Article 2(7)(c) of the basic regulation, as interpreted in line with the rules of the World Trade Organisation (WTO).

67 Given that the third part and part of the second part allege a supposed misinterpretation of the criterion set out in the second part of the first indent of the first subparagraph of Article 2(7)(c) of the basic regulation (now the second part of the first indent of the first subparagraph of Article 2(7)(c) of Regulation No 1225/2009), requiring that costs of major inputs substantially reflect market values, the Court considers that those two branches should be examined together first of all.

68 According to settled case-law, in interpreting a provision of Community law, it is necessary to consider not only its wording but also the context in which it occurs and the objects of the rules of which it is part (see Case C-17/03 VEMW and Others [2005] ECR I-�4983, paragraph 41 and the case-law cited).

69 In addition, where the textual and historical interpretations of a regulation, and in particular one of its provisions, do not permit its precise scope to be assessed, the legislation in question must be interpreted by reference to its purpose and general structure (see, to that effect, Joined Cases C-68/94 and C-30/95 France and Others v Commission [1998] ECR I-�1375, paragraph 168, and Case T-102/96 Gencor v Commission [1999] ECR II-�753, paragraph 148).

70 Lastly, it should also be borne in mind that the operative part of an act is indissociably linked to the statement of reasons for it, so that, when it has to be interpreted, account must be taken of the reasons which led to its adoption (Case C-355/95 P TWD v Commission [1997] ECR I-�2549, paragraph 21).

71 According to Article 2(7)(b) of the basic regulation (now Article 2(7)(b) of Regulation No 1225/2009), -�[i]n anti-dumping investigations concerning imports from [China], normal value shall be determined in accordance with paragraphs 1 to 6, if it is shown, on the basis of properly substantiated claims by one or more producers subject to the investigation and in accordance with the criteria and procedures set out in subparagraph (c), that market economy conditions prevail for this producer or producers in respect of the manufacture and sale of the like product concerned. When this is not the case, the rules set out under subparagraph (a) shall apply-�.

72 Article 2(7)(c) of the basic regulation states that -�[a] claim under [Article 2(7)(b) of the basic regulation] must be made in writing and contain sufficient evidence that the producer operates under market economy conditions, that is [,inter alia,] if: -� decisions of firms regarding prices, costs and inputs, including for instance raw materials, cost of technology and labour, output, sales and investment, are made in response to market signals reflecting supply and demand, and without significant State interference in this regard, and costs of major inputs substantially reflect market values-�.

73 First of all, the applicants criticise the institutions-� interpretation to the effect that a -�non-distorted market-� must be taken into account in order to ascertain whether costs of major inputs substantially reflect market values. According to the applicants, the requirement that -�costs of major inputs substantially reflect market values-� means that account must be taken of the values of the market where the company buys its inputs, that is, in the present case, the price of steel wire rod on the Chinese market. By deciding, in recital 67 of the contested regulation, that Article 2(7)(c) of the basic regulation concerned a -�non-distorted market-� and by taking into account the value of steel wire rod on the international market, the institutions misinterpreted that provision.

74 In order to ascertain whether the institutions misinterpreted the first indent of the first subparagraph of Article 2(7)(c) of the basic regulation, and therefore erred in law, in deciding that the expression -�market values-� ought to be understood as referring to a non-distorted market, the general structure and purpose of Article 2(7) of the basic regulation must be taken into account.

75 Article 2(7)(a) of that regulation establishes a general rule applicable to non-market economy countries as regards determining the normal value of the product concerned. By way of derogation, Article 2(7)(b) of that regulation provides for the possibility, concerning, inter alia, imports from China, of allowing one or more producers to show that market economy conditions prevail in respect of them and, thus, to avoid Article 2(7)(a) being applied to them. The purpose of the criteria listed in Article 2(7)(c) of that regulation is to enable it to be determined whether the possibility provided by Article 2(7)(b) is applicable.

76 Thus, the method of determining the normal value of a product set out in Article 2(7)(b) of the basic regulation is an exception to the specific rule laid down for that purpose in Article 2(7)(a) of that regulation, which is, in principle, applicable to imports from non-market economy countries. It is settled case-law that any derogation from or exception to a general rule must be interpreted strictly (see Shanghai Excell, paragraph 48 above, paragraph 82 and the case-law cited).

77 It must be stated that the criterion set out in the first indent of the first subparagraph of Article 2(7)(c) of the basic regulation, requiring that costs of major inputs substantially reflect market values, would lose a great deal of its effectiveness if values which had been artificially lowered due to State interference could be taken into account.

78 Therefore, since the interpretation of one of the factors intended to ascertain whether market conditions prevail in respect of a producer is at issue, the expression -�market values-� appearing in the first indent of the first subparagraph of Article 2(7)(c) of the basic regulation can only be understood as referring to a market in which the determination of prices is not distorted by State interference of the type highlighted by the Council in, inter alia, recitals 63 and 67 of the contested regulation.

79 It must therefore be concluded that the institutions did not err in law as claimed by the applicants.

80 In the third part, the applicants complain that the institutions have misinterpreted Article 2(7)(b) and (c) of the basic regulation by denying MET to those exporting producers claiming it on the ground that their suppliers did not operate under market economy conditions themselves, even though the markets for steel wire rod and for fasteners were different.

81 In support of their argument, the applicants note that Council Regulation (EC) No 905/98 of 27 April 1998 amending the basic regulation (OJ 1998 L 128, p. 18), which led to the insertion of Article 2(7)(b) and (c) into the basic regulation, was adopted due to the reforms carried out in China. They also submit that those provisions should be interpreted in the light of the Community-�s obligations under the WTO, that is, in the light of Article 2 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (OJ 1994 L 336, p. 103) (-�the 1994 anti-dumping code-�) and Paragraph 15 of the Protocol on the Accession of the People-�s Republic of China to the World Trade Organisation of 23 November 2001 (-�the Protocol-�). It follows that MET can be denied only if market economy conditions are not present in the production area under investigation. Therefore, Article 2(7)(c) of the basic regulation cannot be interpreted in a way which leads to a Chinese company being denied MET on the ground that its raw material suppliers do not operate under market economy conditions themselves.

82 Since one of the criteria listed in Article 2(7)(c) of the basic regulation is that -�costs of major inputs substantially reflect market values-�, it necessarily follows from a literal interpretation of the basic regulation that the reference to the -�market-� in the specific context of that criterion can only be understood to refer to the market of the inputs and not the market of the product concerned. Moreover, for the reasons set out in paragraphs 75 to 78 above, the -�market values-� referred to in the first indent of the first subparagraph of Article 2(7)(c) of the basic regulation can only be understood as referring to a market in which the determination of prices is not distorted by State interference.

83 Therefore, the institutions did not err in law in any way in taking into account the fact that the price of the major input, steel wire rod, did not reflect market values.

84 That finding, far from being undermined by the applicants-� argument concerning the Council-�s intention as expressed in Regulation No 905/98, is strengthened by it.

85 Recital 5 in the preamble to that regulation points out that it is appropriate to revise anti-dumping practice with regard to China, by specifying in particular that the normal value of a product may be determined in accordance with the rules applicable to market economy countries in cases where it can be shown that market conditions prevail for one or more producers subject to investigation in relation to the manufacture and sale of the product concerned. It is also pointed out in recital 6 of that regulation that -�an examination of whether market conditions prevail will be carried out on the basis of properly substantiated claims by one or more producers subject to investigation who wish to avail themselves of the possibility to have normal value [of the product concerned] determined on the basis of rules applicable to market economy countries-�.

86 Thus, that preamble shows the legislature-�s choice to offer Chinese producers the opportunity to show that market conditions prevail in respect of them and that, consequently, they are in a similar situation to those applicable in market economy countries, which justifies the normal value of their products being determined in the same way as in those countries.

87 Accordingly, it is completely in accordance with the intention of the legislature that the institutions should verify the way in which the prices of major inputs are determined on the domestic market. A Chinese producer whose major input prices are artificially reduced due to State interference is not in a similar situation to a producer operating in a market economy country.

88 Regarding the argument based on the need to interpret Article 2(7)(b) and (c) of the basic regulation in the light of Paragraph 15 of the Protocol, it is true that, pursuant to settled case-law, Community legislation must, so far as possible, be interpreted in a manner that is consistent with international law, in particular where its provisions are intended specifically to give effect to an international agreement concluded by the Community (see Case C-76/00 P Petrotub and Republica [2003] ECR I-�79, paragraph 57 and the case-law cited).

89 However, for the reasons referred to in paragraph 82 above, the criterion set out in Article 2(7)(c) of the basic regulation, requiring that -�costs of major inputs substantially reflect market values-�, is completely unambiguous. It is not therefore possible to interpret it in the light of Paragraph 15 of the Protocol. In any event, it should be noted that, contrary to what the applicants claim, it in no way follows from Paragraph 15 of the Protocol that the institutions may not take account of the fact that a Chinese company-�s raw material suppliers do not operate under market economy conditions themselves.

90 In the second part, the applicants submit, second, that, during the on-�the-spot verifications, they had demonstrated that their purchases of raw materials were made strictly at market prices. Moreover, the price differences found by the institutions could have been caused by many factors other than subsidies.

91 It is apparent from the provisions recalled in paragraphs 71 and 72 above that the burden of proof lies with the exporting producer wishing to claim MET under Article 2(7)(b) of the basic regulation. Accordingly, there is no obligation on the institutions to prove that the exporting producer does not satisfy the criteria laid down for the receipt of that treatment. On the contrary, it is for them to assess whether the evidence supplied by the exporting producer in question is sufficient to show that the criteria listed in the first subparagraph of Article 2(7)(c) of the basic regulation are fulfilled and for the judicature to examine whether the institution-�s assessment is vitiated by a manifest error (see, to that effect, Shanghai Excell, paragraph 48 above, paragraph 83 and the case-law cited).

92 In the present case, the applicants present no additional argument or evidence to support the assertion that their purchases of raw materials were made strictly at market prices or regarding the factors referred to which could have caused the price differences found by the institutions. Therefore the applicants-� argument must be rejected.

93 In the light of the foregoing, the second and third parts of the second plea must be rejected.

94 In that regard, it should be noted that the criteria laid down in Article 2(7)(c) of the basic regulation are cumulative, such that, should an exporting producer fail to fulfil one of them, its MET claim must be rejected (see, to that effect, Case T-35/01 Shanghai Teraoka Electronic v Council [2004] ECR II-�3663, paragraph 54).

95 Accordingly, for reasons of economy of procedure, there is no longer any need to rule on the first part of this plea, alleging infringement of the first part of the first indent of the first subparagraph of Article 2(7)(c) of the basic regulation in that the applicants were denied MET on the ground that their main shareholder, a State-owned company, could indirectly influence their business decisions.

Third plea, alleging that the institutions breached their duty to examine, carefully and impartially, all the relevant aspects of the present case

97 The applicants submit that the conclusion that raw material prices in China were distorted due to subsidisation is based on insufficient information and, therefore, breaches the institutions-� duty, in areas where they have a wide power of appraisal, to examine, carefully and impartially, all the relevant aspects of the case. The price difference found by the institutions could be because the Indian producers are not as efficient and because, in the European Union, industries are subjected to much more onerous environmental and social requirements than those imposed on their Chinese counterparts. The institutions-� finding that the allegedly lower Chinese prices were caused by subsidies was based on studies prepared, or commissioned, by groups and associations with interests which are opposed to those of the Chinese steel industry.

98 The applicants also refer to the fact that, in Commission Regulation (EC) No 112/2009 of 6 February 2009 imposing a provisional anti-�dumping duty on imports of wire rod originating in the People-�s Republic of China and the Republic of Moldova (OJ 2009 L 38, p. 3), the Commission concluded that a Chinese exporting producer met the first criterion of Article 2(7)(c) of the basic regulation.

99 It should be recalled that, according to settled case-law, in the sphere of measures to protect trade, the institutions enjoy a wide discretion by reason of the complexity of the economic, political and legal situations which they have to examine. It is also settled case-law that, where the institutions have such discretion, respect for the rights guaranteed by the Community legal order in administrative procedures is of even more fundamental importance. Those guarantees include, in particular, the duty of the competent institution to examine carefully and impartially all the relevant aspects of the individual case (see Case T-462/04 HEG and Graphite India v Council [2008] ECR II-�3685, paragraph 68 and the case-law cited).

100 However, the fact that, as stated in paragraph 91 above, the burden of proof lies with the exporting producer wishing to claim MET should also be taken into consideration. It is in that context that it must be ascertained whether the institutions breached their duty under the case-�law cited in paragraph 99 above.

101 It must be stated that the applicants do not refer in their argument to precise evidence which had been disclosed to the institutions and which could have undermined the institutions-� conclusions regarding the distorted prices of raw materials in China. In addition, it is apparent from the case-file that the observations submitted by the applicants in that regard during the administrative procedure were not accompanied by such evidence either.

102 Under those circumstances, the applicants cannot legitimately invoke a breach by the institutions of their duty to examine carefully and impartially all the relevant aspects of the present case.

103 Regarding the criticism concerning the conflict between the approach favoured in the present regulation and the approach favoured by the Commission in Regulation No 112/2009, it is sufficient to point out that that criticism is based on a mistaken premiss. The applicants submit, in essence, that it follows from that latter regulation that the Commission acknowledged that a Chinese exporting producer of steel wire rod met the criteria set out in the first indent of the first subparagraph of Article 2(7)(c) of the basic regulation. However, a reading of recitals 24 to 31 of Regulation No 112/2009 shows that the Commission did not analyse compliance with the first indent of the first subparagraph of Article 2(7)(c) of the basic regulation, but, in dismissing his claim, relied entirely on the fact that the exporting producer in question was not able to prove that he met other criteria necessary for obtaining MET.

Fourth plea, alleging infringement of the principle of sound administration and of the principle that an unreasonable burden of proof should not be imposed

105 According to the applicants, the contested regulation disregarded the principle of sound administration, also enshrined in Article 41 of the Charter of Fundamental Rights of the European Union (OJ 2007 C 303, p. 1) (-�the Charter of Fundamental Rights-�), as an unreasonable burden of proof is placed on the applicants to show that costs of major inputs substantially reflect market values. The applicants do not have access to information which could show that the major inputs markets are not distorted, that the industry producing the input receives no subsidy from the authorities and that the prices of those inputs are similar to those on non-distorted markets.

106 According to case-law, it follows from the principle of proper administration, which is one of the general principles of European Union law, that the burden of proof imposed by the institutions on exporting producers claiming MET may not be unreasonable (see, to that effect, judgment of 8 July 2008 in Case T-221/05 Huvis v Council, not published in the ECR, paragraph 77).

107 In the present case, it should be borne in mind that it was for the applicants to adduce evidence demonstrating that the costs of their major input materials reflected market values and, if need be, following the MET decision, that the differences found by the Commission between the prices of raw materials were due to reasons other than State interference. In that context, it was not necessary for the applicants to show that there was no State interference in the upstream industry, but simply that the low purchase prices for raw materials were justified.

109 In addition, the circumstances which, according to the Commission, did not allow it to grant the applicants MET were clearly identified in the MET decision. The fact that the applicants subsequently contested those circumstances confirms that they were properly able to identify them.

110 The applicants submit that, in letters dated 16 May and 24 November 2008, they fully discussed the substance of the arguments put forward by the institutions. First, it should be observed that, in those letters, the applicants in no way contested the institutions-� conclusion regarding the low prices of raw materials. Second, regarding, in particular, the distorted prices of raw materials in China, the applicants merely put forward, generally and without supporting evidence, other theories which could explain the lower prices. However, such unsubstantiated assertions cannot constitute sufficient evidence in the context of a MET claim.

112 The applicants submit that the institutions have infringed the provisions of Regulation No 2026/97, read in the light of the WTO rules. In essence, they claim that, by denying the applicants MET in the context of an anti-dumping procedure, the institutions, first, found that subsidies had been granted, without following the procedure laid down in Regulation No 2026/97 and, second, countervailed those subsidies using an illegal measure, namely MET rejection.

113 As has been pointed out in paragraphs 75 to 78 above, the institutions correctly interpreted the requirement that costs of major inputs substantially reflect market values, set out in the first indent of the first subparagraph of Article 2(7)(c) of the basic regulation, by concluding that that requirement referred to a market in which the determination of prices was not distorted by State interference. In that context, they observed that several sources and studies pointed to State interference in the Chinese steel sector and that some of the largest Chinese producers of steel wire rod had received various types of subsidies (recital 67).

114 However, it must be stated that the present anti-dumping procedure related to -�the product concerned-� as defined in recitals 40 to 47 of the contested regulation and not the major input of the companies claiming MET. It was only in the context of examining the MET claims that the institutions evoked the existence of subsidies capable of explaining the abnormally low prices of that major input in China. Contrary to what the applicants claim, the institutions were in no way obliged to initiate and successfully bring to conclusion a procedure laid down in Regulation No 2026/97 in respect of products other than the product concerned and situated in the upstream market.

115 In any event, following the applicants-� line of argument would amount to finding that the institutions, in similar circumstances to those in the present case, may refuse to grant MET only after having initiated an anti-subsidy procedure pursuant to Regulation No 2026/97. Such an interpretation would render the criterion set out in the first indent of the first subparagraph of Article 2(7)(c) of the basic regulation largely ineffective.

118 In addition to the factors expressly stated for which adjustments may be made, Article 2(10)(k) states that -�[a]n adjustment may also be made for differences in other factors not provided for under [the preceding subparagraphs] if it is demonstrated that they affect price comparability -�, in particular that customers consistently pay different prices on the domestic market because of the difference in such factors-�.

119 The applicants submit that, at their request, the institutions should have made due adjustment of the demonstrated difference of input prices in China and India, since that difference has a direct impact on the prices of fasteners on those two markets and on their comparability. According to the applicants, the normal value should have been adjusted in accordance with Article 2(10)(k) of the basic regulation (now Article 2(10)(k) of Regulation No 1225/2009).

120 It is apparent from recital 92 of the contested regulation that, since they had not obtained MET, normal value for the applicants was established on the basis of verified information received from the producer in the analogue country, namely India. Accordingly, in order to calculate the dumping margin, the institutions were right to compare export prices with the normal value thus established.

121 In order for that comparison to be -�fair-�, adjustments had to be carried out in view of the differences found between the factors which were claimed, and demonstrated, to affect prices and thus the possibility of comparing those prices. It should be observed that, according to that provision, such differences must be found between the export prices and the prices constituting the normal value, but do not concern differences found between Chinese and Indian prices of raw materials which would be reflected in the prices of the products concerned and thus the normal value.

122 According to the applicants, it has been demonstrated that the differences between the prices of raw materials affect the prices of the products concerned. However, they do not show how that difference affected the possibility of comparing normal value and export price. In that regard, they cannot legitimately claim, as they did during the administrative procedure, that, due to the differences between the Chinese and Indian prices of raw materials, -�customers consistently [paid] different prices on the domestic market-�. The price difference referred to in Article 2(10)(k) of the basic regulation must be established in the context of a single domestic market and not with reference to other markets, such as the Chinese market.

123 Moreover, although Article 2(10)(k) of the basic regulation allows for a reasonably broad application of the technique of adjustment, it may not be used in order to render Article 2(7)(a) of that regulation ineffective.

125 The applicants argue that the institutions did not examine the evidence submitted by the applicants in their comments on the MET decision and that they failed to give reasons for maintaining the MET rejection. In the document of 4 August 2008, the institutions stated that, considering the evidence provided by the applicants, further analysis was needed to decide whether State interference had taken place. However, they did not give reasons for confirming their rejection of the evidence provided, either in the final information document or in the contested regulation.

126 In that regard, it is apparent from case-law that the statement of reasons required by Article 253 EC must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in question in such a way as to enable the persons concerned to ascertain the reasons for the measure in order to defend their rights and to enable the judicature to exercise its power of review. It is not, however, necessary for the reasoning to go into all the relevant facts and points of law, since the question whether it meets the requirements of Article 253 EC must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question (Case C-76/01 P Eurocoton and Others v Council [2003] ECR I-�10091, paragraph 88, and judgment of 13 April 2011 in Case T-167/07 Far Eastern New Century v Council, not published in the ECR, paragraph 103).

127 In the present case, it follows, in a clear and unequivocal fashion, from recitals 70 to 72 of the contested regulation (see paragraph 18 above) and from paragraphs 62 to 64 of the final information document of 3 November 2008 that, following the comments and evidence submitted by the applicants challenging the conclusion that they should also be refused MET because it was found that the Chinese State was in a position to either significantly influence or block any decisions regarding the company, the institutions maintained their initial finding that MET should be denied to the applicants also on that ground. In addition, the institutions indicated the main reasons for that finding, which were connected with the composition of the applicants-� Board of Directors.

128 Moreover, it should be observed that, in their comments of 24 November 2008 on the final information document, the applicants contested that finding by the institutions. In particular, they stated that the Commission-�s statements regarding its doubts as to the independence of the Board members and as to the indirect influence of the State on the company-�s business decisions were not incorrect. However, the applicants reiterated their argument that those circumstances did not enable the State significantly to influence the company-�s decisions concerning prices, costs and inputs such that those decisions would be taken against market signals. It must be concluded that, even though the applicants disagreed with the Commission as to the necessary analysis of that specific criterion for obtaining MET, they had completely understood its reasoning and were in a position to defend their rights.

130 According to settled case-law, respect for the rights of the defence is, in all proceedings initiated against a person which are liable to culminate in a measure adversely affecting that person, a fundamental principle of Community law which must be guaranteed even in the absence of any rules governing the proceedings in question (see Case C-141/08 P Foshan Shunde Yongjian Housewares & Hardware v Council [2009] ECR I-�9147, paragraph 83 and the case-law cited).

131 Pursuant to that principle, the undertakings affected by an investigation preceding the adoption of an anti-dumping regulation must be placed in a position during the administrative procedure in which they can effectively make known their views on the correctness and relevance of the facts and circumstances alleged and on the evidence presented by the Commission in support of its allegation concerning the existence of dumping and the resultant injury (see Case T-147/97 Champion Stationery and Others v Council [1998] ECR II-�4137, paragraph 55 and the case-law cited).

132 The applicants invoke a breach of the rights of the defence in so far as the institutions allegedly failed to provide them with essential information regarding the calculation of normal value and dumping margins, which prevented the applicants from effectively contesting important investigation findings.

133 In the reply, the applicants acknowledge that that information on pricing and costs is confidential and that EU secondary law does not provide for the equivalent of the disclosure mechanism provided for in other systems. On the other hand, they claim that the procedure provided in the basic regulation, as applied by the contested regulation, is a breach of their rights of the defence, which are fundamental rights ranking above all secondary legislation, and arguably primary legislation as well.

134 It must be stated that, in their written pleadings, the applicants do not claim to have asked the Commission to disclose that information during the administrative procedure. In that regard, it should be observed that, in the final information document of 3 November 2008, the Commission informed the applicants that the normal value had not been disclosed as it could not be disclosed in a non-confidential format. At the hearing, the Council and the Commission asserted that the applicants had never asked the institutions to disclose the data in question and had not invoked a breach of their rights of the defence in that regard. The applicants did not challenge that assertion. Moreover, no request to that effect appears in the case-file.

135 Under those circumstances, the applicants cannot legitimately allege a breach of their rights of the defence in the context of the present proceedings. According to the basic regulation, in particular Article 6(7) and Article 20(1) thereof (now Article 6(7) and Article 20(1) of Regulation No 1225/2009), requests for disclosure must be made to the institutions in writing.

136 Moreover, assuming that, in the context of this plea, the applicants intended to plead, in essence, the illegality of the basic regulation, on the ground of an alleged breach of Article 41 of the Charter of Fundamental Rights, that complaint cannot be upheld.

137 According to Article 41(2) of the Charter of Fundamental Rights, the right to good administration -�includes -� the right of every person to have access to his or her file, while respecting the legitimate interests of confidentiality and of professional and business secrecy -� -�.

138 Although the applicants mention the possibility of reconciling the rights and interests of the different parties involved, they do not provide any further arguments regarding the alleged illegality of the basic regulation in the light of Article 41 of the Charter of Fundamental Rights.

141 Under Article 87(2) of the Rules of Procedure of the General Court, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party-�s pleadings. Since the applicants have been unsuccessful, they must be ordered to bear their own costs and to pay those of the Council and EIFI in accordance with the form of order sought by those parties.

142 The Commission shall bear its own costs, in accordance with the first subparagraph of Article 87(4) of the Rules of Procedure.

2. Orders Shanghai Biaowu High-Tensile Fasteners Co. Ltd and Shanghai Prime Machinery Co. Ltd to bear their own costs and to pay those of the Council of the European Union and of the European Industrial Fasteners Institute AISBL;

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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> Shanghai Biaowu High-Tensile Fastener and Shanghai Prime Machinery v Council [2012] EUECJ T-170/09 (10 October 2012) URL: http://www.bailii.org/eu/cases/EUECJ/2012/T17009.html Cite as: [2012] EUECJ T-170/9, [2012] EUECJ T-170/09

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