Case T‑246/19

Kingdom of Cambodia
and
Cambodia Rice Federation (CRF)

v

European Commission

Judgment of the General Court (Fifth Chamber, Extended Composition), 9 November 2022

(Safeguard measures – Rice market – Imports of Indica rice originating in Cambodia and Myanmar/Burma – Regulation (EU) No 978/2012 – Concept of ‘Union producers’ – Concept of ‘like or directly competing products’ – Serious difficulties – Rights of the defence – Essential facts and considerations – Manifest errors of assessment)

1. Action for annulment – Pleas in law – Pleas that may be raised against a contested decision – Plea not raised at the stage of the administrative procedure – Whether permissible

   (Art. 263 TFEU)

   (see paragraph 38)

2. Common commercial policy – Trade protection measures – Discretion of the institutions – Judicial review – Limits

   (Art. 207(1) TFEU)

   (see paragraphs 40-42, 117)

3. Customs union – Common Customs Tariff – System of Generalised Tariff Preferences for developing countries – General safeguard measures – Reintroduction of the Common Customs Tariff duties – Importation of a product concerned in volumes and/or at prices which cause serious difficulties for Union producers of like or directly competing products – Determination of like or directly competing products – Taking into account of the criterion of origin applicable to the imported product benefitting from tariff preferences – Not permissible

   (European Parliament and Council Regulation No 978/12, Arts 22(1) and (2), and 33)

   (see paragraphs 70-77)

4. Customs union – Common Customs Tariff – System of Generalised Tariff Preferences for developing countries – General safeguards – Reintroduction of the Common Customs Tariff duties – Importation of a product concerned in volumes and/or at prices which cause serious difficulties for Union producers of like or directly competing products – Concepts of like or directly competing products – Criteria

   (European Parliament and Council Regulation No 978/12, Art. 22(1) and (2))

   (see paragraphs 80-82)

5. Customs union – Common Customs Tariff – System of Generalised Tariff Preferences for developing countries – General safeguards – Reintroduction of the Common Customs Tariff duties – Importation of a product concerned in volumes and/or at prices which cause serious difficulties for Union producers of like or directly competing products – Determination of the existence of injury suffered by the Union industry – Calculation of the undercutting margin – Comparison of import prices and Union industry prices – Adjustment – Burden of proof – Commission’s obligations

   (European Parliament and Council Regulation No 978/12, Art. 22(1) and (2))

   (see paragraphs 124, 125, 144)

6. Customs union – Common Customs Tariff – System of Generalised Tariff Preferences for developing countries – General safeguards – Reintroduction of the Common Customs Tariff duties – Importation of a product concerned in volumes and/or at prices which cause serious difficulties for Union producers of like or directly competing products – Determination of the existence of injury suffered by the Union industry – Calculation of the undercutting of import prices – Obligation to make a fair comparison between the price of the product concerned and the price of the like product – Comparison of prices obtained at different levels of trade – Infringement

   (European Parliament and Council Regulation No 978/12, Art. 22(1) and (2))

   (see paragraph 128)

7. Customs union – Common Customs Tariff – System of Generalised Tariff Preferences for developing countries – Temporary withdrawal of the benefit of the system of generalised tariff preferences – Rights of the defence – Obligation on the part of the Commission – Disclosure of the details underlying the essential facts and considerations on which its decisions are based – Condition – Interested parties’ request – None

   (European Parliament and Council Regulation No 978/12; Commission Regulation No 1083/2013, Art. 17)

   (see paragraphs 171-176, 186)

8. EU law – Principles – Rights of the defence – Right to be heard – Right of access to the file – Observance thereof in the context of administrative proceedings – Investigative proceedings preceding the adoption of regulations imposing safeguard measures – Duty of the institutions to keep the undertakings concerned informed – Obligation to hear the person concerned before adopting a measure adversely affecting that person – Scope

   (European Parliament and Council Regulation No 978/12; Commission Regulation No 1083/2013, Art. 17)

9. Customs union – Common Customs Tariff – System of Generalised Tariff Preferences for developing countries – Temporary withdrawal of the benefit of the system of generalised tariff preferences – Rights of the defence – Obligation on the part of the Commission – Disclosure of the details underlying the essential facts and considerations on which its decisions are based – Infringement – Administrative procedure which might have led to a different result in the absence of that irregularity – Annulment of the measure in question

   (European Parliament and Council Regulation No 978/12; Commission Regulation No 1083/2013, Art. 17)

   (see paragraphs 205-207)

10. Customs union – Common Customs Tariff – System of Generalised Tariff Preferences for developing countries – Temporary withdrawal of the benefit of the system of generalised tariff preferences – Rights of the defence – Obligation on the part of the Commission – Disclosure of the details underlying the essential facts and considerations on which its decisions are based – Scope

    (European Parliament and Council Regulation No 978/12; Commission Regulation No 1083/2013, Art. 17)

    (see paragraphs 225, 226)

11. Customs union – Common Customs Tariff – System of Generalised Tariff Preferences for developing countries – Temporary withdrawal of the benefit of the system of generalised tariff preferences – Rights of the defence – Duty of the institutions to keep the undertakings concerned informed – No disclosure by the Commission of evidence in support of the fairness of the comparison between the import price and the Union industry price – Infringement of the rights of the defence

    (European Parliament and Council Regulation No 978/12; Commission Regulation No 1083/2013, Art. 17)

    (see paragraphs 234-241, 243, 244)

Résumé

Since 2012, under the ‘Everything but Arms’ regime intended to promote the development of the least advanced countries, imports of Indica rice originating in Cambodia and Myanmar/Burma benefited from a total suspension of Common Customs Tariff duties.

Under the safeguard investigation, the European Commission concluded in 2018 that milled or semi-milled Indica rice originating in Cambodia and Myanmar/Burma was imported in volumes and at prices which caused serious difficulties for the Union industry. Thus, by Regulation 2019/67, ( 1 ) the Commission reintroduced the Common Customs Tariff duties on imports of that rice for a period of three years and introduced a gradual reduction in the rate of the applicable duties.

The General Court, before which the Kingdom of Cambodia and Cambodia Rice Federation brought proceedings, upheld the action for annulment brought against the contested regulation. In its judgment, it interprets, for the first time, Articles 22 and 23 of the GSP Regulation ( 2 ) and, in particular, the concepts relating to ‘Union producers manufacturing like or directly competing products’ and the conditions surrounding proof of the existence of serious difficulties caused to the Union industry.

Findings of the Court

As regards, first of all, the concept of ‘like or directly competing products’ and the definition of the Union industry, the General Court notes as a preliminary point that, in safeguard investigations, both Union producers of ‘like products’ and producers of ‘directly competing’ products must be taken into account.

Next, it states that, in the present case, the Commission took the view, for the purposes of assessing the existence of serious difficulties encountered by Union producers, that milled or semi-milled Indica rice processed from paddy rice produced or grown in the European Union constituted the ‘like or directly competing product’.

In that regard, the Court notes, in the first place, that the Commission is wrong to take the view that ‘like or directly competing products’, within the meaning of Article 22(1) of the GSP Regulation should be subject to the condition of origin of products imported from countries benefiting from tariff preferences, within the meaning of Article 33 of the GSP Regulation and of Delegated Regulation 2015/2446. ( 3 )

The EU legislature refers to the rules of origin only in respect of imported products. Moreover, Article 22(1) and (2) of the GSP Regulation does not state that the analysis of the impact of imports of a product originating in a beneficiary country on the economic or financial situation of Union producers must take into account the origin of the products of those producers and thus limit those Union producers who are entitled to the protection provided for by that provision.

In the second place, the Court considers that milled or semi-milled Indica rice produced in the European Union must be classified as a like product or as a direct competitor of milled or semi-milled Indica rice originating in Cambodia, irrespective of the origin of the raw material from which it was processed.

Milled or semi-milled Indica rice, whatever the origin of that raw material, has the same basic physical, technical and chemical characteristics and has the same use. It is therefore interchangeable or substitutable with other milled or semi-milled Indica rice, both for EU millers and for consumers.

Therefore, the Commission was required, in the analysis of the effects of imports of Indica rice from Cambodia on the prices of the Union industry, to take into consideration all EU millers producing milled or semi-milled Indica rice, irrespective of the origin of the paddy rice that they process.

In so far as the Commission excluded some of the producers from the injury assessment, the Court notes that the incorrect definition of Union producers also vitiated the analysis of the existence of serious difficulties.

In the third place, the Court finds that, by limiting the definition of Union producers to be taken into account for the purposes of assessing injury by reference to the origin of the raw material processed into milled or semi-milled Indica rice, the Commission de facto extended the scope of protection to Union growers, only the latter being actually concerned by rice grown in the European Union. Such an interpretation cannot, however, be justified in the light of the definition of the Union industry set out in recitals 22 and 23 of the contested regulation, which refers expressly only to EU millers.

In the light of the foregoing, the Court finds that the Commission erred in law and made a manifest error of assessment by arbitrarily limiting the scope of its investigation concerning the injury caused to the Union industry solely to millers of milled or semi-milled Indica rice processed from paddy rice grown or harvested in the European Union.

As regards, next, the undercutting analysis, the Court finds that the Commission did not rely on direct evidence or reliable and relevant circumstantial evidence supporting its decision to make adjustments.

First, the geographical spread underlying the ‘undisputed fact’ that competition in milled or semi-milled Indica rice in the European Union took place in northern Europe is therefore not supported by reliable and relevant evidence. The same is true of the Commission’s decision to apply to the entire production of Indica rice in the European Union the uniform rate of EUR 49 per tonne in respect of transport costs, without limiting the adjustment to a certain proportion of sales of milled and semi-milled Indica rice in the European Union which actually requires transport from southern to northern Europe.

Secondly, the evidence on which the Commission relies in order to justify the adjustment of import prices is not sufficiently convincing, or is non-existent, and cannot be regarded as direct evidence or circumstantial evidence, establishing the existence of the factor on the basis of which the adjustment of import prices was made and determining its impact on price comparability.

Thirdly, the Commission has not adduced any direct evidence in support of the adjustment of the undercutting analysis in order to take account of differences in the level of trade and to compare the prices of milled rice sold in bulk with those of rice sold in packages, nor any circumstantial evidence establishing the existence of the factors in respect of which that adjustment was made and determining its impact on price comparability.

As regards, lastly, the Commission’s obligation to disclose the details underlying the essential facts and considerations or the various facts and considerations on the basis of which it takes its decisions, the Court notes that Article 17 of Delegated Regulation No 1083/2013 ( 4 ) does not in any way make that obligation subject to any request from interested parties. That obligation is to be distinguished both from the right of interested parties under Article 16 of Delegated Regulation No 1083/2013 and Article 12(1) of Decision 2019/339 ( 5 ) to request written access to the file during the administrative phase and from the question of the possible intervention of a Hearing Officer in the event of refusal or a dispute concerning the confidentiality of certain documents. Also, the Court notes that Article 17 of Delegated Regulation No 1083/2013 contains no indication that that disclosure is purely indicative. Although that provision thus imposes an obligation on the Commission to disclose the details underlying the essential facts and considerations on the basis of which it takes its decisions, that obligation applies a fortiori with regard to the essential facts and considerations themselves.

( 1 ) Commission Implementing Regulation (EU) 2019/67 of 16 January 2019 imposing safeguard measures with regard to imports of Indica rice originating in Cambodia and Myanmar/Burma (OJ 2019 L 15, p. 5).

( 2 ) Regulation (EU) No 978/2012 of the European Parliament and of the Council of 25 October 2012 applying a scheme of generalised tariff preferences and repealing Council Regulation (EC) No 732/2008 (OJ 2012 L 303, p. 1) (‘the GSP Regulation’).

( 3 ) Commission Delegated Regulation (EU) 2015/2446 of 28 July 2015 supplementing Regulation No 952/2013 of the European Parliament and of the Council as regards detailed rules concerning certain provisions of the Union Customs Code (OJ 2015 L 343, p. 1).

( 4 ) Commission Delegated Regulation (EU) No 1083/2013 of 28 August 2013 establishing rules related to the procedure for temporary withdrawal of tariff preferences and adoption of general safeguard measures under Regulation (EU) No 978/2012 of the European Parliament and the Council applying a scheme of generalised tariff preferences (OJ L 2013 L 293, p. 16).

( 5 ) Decision (EU) 2019/339 of the President of the European Commission of 21 February 2019 on the function and terms of reference of the hearing officer in certain trade proceedings (OJ 2019 L 60, p. 20).