Case T‑301/20

Hengshi Egypt Fiberglass Fabrics SAE and Jushi Egypt for Fiberglass Industry SAE

European Commission

Judgment of the General Court (First Chamber, Extended Composition), 1 March 2023

(Dumping – Imports of certain woven or stitched glass fibre fabrics originating in China and Egypt – Implementing Regulation (EU) 2020/492 – Definitive anti-dumping duty – Calculation of the normal value – Article 2(5) of Regulation (EU) 2016/1036 – Manifest error of assessment – Injury – Calculation of the undercutting margin)

EU law – Interpretation – Methods – Interpretation in the light of the international agreements concluded by the European Union – Interpretation of Regulation 2016/1036 in the light of the 1994 GATT Anti-Dumping Agreement – Account taken of the interpretation adopted by the Dispute Settlement Body

(General Agreement on Tariffs and Trade 1994; Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade (1994 Anti-Dumping Agreement), Art. 2.2.1.1; European Parliament and Council Regulation 2016/1036, Art. 2(5))

(see paragraphs 23-25)
Common commercial policy – Protection against dumping – Dumping margin – Determination of the normal value – Recourse to the constructed value – Account taken of production costs – Calculation of the costs on the basis of accounting registers – Derogation – Costs linked to the production and sale of the product subject to the investigation not reasonably reflected in those registers – Burden of proof borne by the institutions – Judicial review – Scope

(European Parliament and Council Regulation 2016/1036, Art. 2(5))

(see paragraphs 26-29)
Common commercial policy – Protection against dumping – Dumping margin – Determination of the normal value – Recourse to the constructed value – Account taken of production costs – Calculation of the costs on the basis of accounting registers – Costs determined in the context of an intra-group relationship – Adjustment to reflect arm’s length conditions – Whether permissible – Criteria – Account taken of costs of other producers or exporters in the same country and, in the alternative, any other reasonable basis

(European Parliament and Council Regulation 2016/1036, Art. 2(5), first and second subparagraphs)

(see paragraphs 31-42, 77-88)
Common commercial policy – Protection against dumping – Dumping margin – Determination of the normal value – Based on the prices paid or payable in the ordinary course of trade – Account taken of all the relevant factors and all the particular circumstances relating to the sales in question – Discretion of the institutions – Judicial review – Manifest error of assessment – Burden of proof

(European Parliament and Council Regulation 2016/1036, Art. 2)

(see paragraphs 46-51)
Common commercial policy – Protection against dumping – Anti-dumping proceeding – Rights of the defence – Right to be heard – Scope

(Charter of Fundamental Rights of the European Union, Art. 41; European Parliament and Council Regulation 2016/1036)

(see paragraphs 55-58)
Common commercial policy – Protection against dumping – Dumping margin – Determination of the normal value – Recourse to the constructed value – Discretion of the institutions – Limits – Obligation to carry out a diligent and impartial examination of all the relevant circumstances – Scope – Account taken of evidence produced in a parallel anti-subsidy investigation – Conditions

(European Parliament and Council Regulation 2016/1036, Art. 2)

(see paragraphs 60-68)
Acts of the institutions – Statement of reasons – Obligation – Scope – Regulation imposing anti-dumping duties

(Art. 296 TFEU)

(see paragraphs 72-75)

Résumé

Following a complaint, the European Commission adopted Implementing Regulation 2020/492 imposing definitive anti-dumping duties on imports of certain woven and/or stitched glass fibre fabrics (‘GFF’) originating in China and Egypt. ( 1 )

Hengshi Egypt Fiberglass Fabrics SAE (‘Hengshi’) and Jushi Egypt for Fiberglass Industry SAE (‘Jushi’), two companies owned by Chinese entities established in the China-Egypt Suez Economic and Trade Cooperation Zone, produce and export GFF to the European Union. Jushi produces and exports, in addition, glass fibre rovings (‘GFR’) to the European Union, which are the main raw material used for the production of GFF.

Taking the view that they had been adversely affected by the anti-dumping duties imposed by the Commission, Hengshi and Jushi brought an action before the General Court for annulment of Implementing Regulation 2020/492. In dismissing that action, the Court provides, first, clarification as to the taking into account, for the purposes of determining the normal value of products subject to an anti-dumping duty, of records of the party subject to the anti-dumping investigation. Secondly, the Court clarifies the extent of the Commission’s duty of diligence, in particular as regards the use, in an anti-dumping investigation, of evidence obtained in the context of a parallel anti-subsidy investigation.

Findings of the Court

In support of their action, the applicants raise, in their first plea, two complaints alleging infringement of the first subparagraph of Article 2(5) of Regulation 2016/1036. ( 2 ) That provision provides that, for the purposes of the determination of the normal value of the products subject to the anti-dumping duty, the costs connected with the production and sale of the products must be calculated on the basis of records kept by the party under investigation, provided that such records are in accordance with the generally accepted accounting principles of the country concerned (first condition) and that it is shown that the records reasonably reflect the costs associated with the production and sale of the product under consideration (second condition). In that regard, the applicants put forward a number of arguments disputing, in essence, the method used by the Commission to construct the normal value of GFF sold by Hengshi.

In the first place, the Court rejects the complaint alleging an error of law and a manifest error of assessment by the Commission, in that it did not set out the cost of GFR included in Hengshi’s records in order to calculate the cost of production of GFF, on the ground that the purchase price of that raw material had not been set at arm’s length.

In that regard, the Court notes, first, that the first subparagraph of Article 2(5) of the basic regulation does not preclude the Commission from disregarding the costs reported in the records of the party under investigation where the price of the raw material used for the manufacture of the product under consideration is not at arm’s length. However, when the Commission considers that it must disregard those costs and replace them with another price deemed reasonable, the Commission is required to rely on direct evidence, or at least on circumstantial evidence pointing to the existence of the factor for which the adjustment was made.

In the present case, the Commission found that the prices at which Hengshi purchased GFR from Jushi were consistently and substantially below the prices at which Jushi sold the same product to independent customers operating on the Egyptian market. Given the significant difference between those prices, the Commission rightly concluded that the prices paid by Hengshi to Jushi could not be considered at arm’s length and that therefore it was appropriate that the prices should be adjusted.

In addition, the fact that Jushi had achieved a profit margin on its sales of GFR to Hengshi does not lead to an automatic conclusion that a transaction was made at arm’s length.

Next, the Court rejects the applicants’ line of argument that the second condition set out in the first subparagraph of Article 2(5) of the basic regulation does not concern the reasonableness of the costs, but rather the ‘reliability’ of the records of the party under investigation. Such an interpretation would ultimately prevent recourse to the constructed normal value, in particular where the production costs are affected by a particular market situation.

Lastly, the finding that Article 2(5) of the basic regulation does not contain an express provision concerning the reasonableness of the costs incurred between related parties is not sufficient to demonstrate that it was the intention of the EU legislature to exclude that circumstance when applying that provision.

In the second place, the Court rejects the complaint alleging a manifest error of assessment by the Commission in the comparison of the sales prices of GFR charged by Jushi to Hengshi and independent domestic customers respectively. On that point, the applicants complained that the Commission had failed to take into account all the relevant factors relating to the sales at issue such as, in particular, the customs duties paid by Jushi in respect of sales of GFR to independent domestic customers. In the absence of evidence of payment in the anti-dumping investigation, according to the applicants, it was for the Commission to use on its own initiative evidence of payment of those customs duties which it had in its parallel anti-subsidy investigation on GFR ( 3 ) or, at the very least, to ask them to produce that evidence in the anti-dumping investigation.

In that regard, the Court notes that while it is true that the Commission must conduct the anti-dumping investigation diligently and take into consideration all the relevant circumstances in determining the normal value, the fact remains that it is reliant on the voluntary cooperation of the parties under investigation to provide it with the necessary information. In the present case, it was therefore for the applicants to submit the evidence which they considered relevant for the purposes of the investigation. Since they did not submit, in the anti-dumping investigation, the slightest evidence in relation to the customs duties paid by Jushi in respect of sales of GFR, they cannot benefit from their own negligence by criticising the Commission for failing to take that factor into account.

Furthermore, it follows from the first subparagraph of Article 29(6) of Regulation 2016/1037 ( 4 ) that the Commission cannot, on its own initiative, rely, in an anti-dumping investigation, on evidence produced in a parallel anti-subsidy investigation. Therefore, it was for the applicants to waive the guarantee provided for by that article and to request that such evidence be admitted also in the anti-dumping investigation.

In the light of those considerations, the Court concludes that the Commission did not infringe the first subparagraph of Article 2(5) of the basic regulation and rejects the two complaints of the first plea raised by the applicants. The Court also rejects the other complaints of the first plea and the second plea relied on by the applicants in that action and, consequently, the action in its entirety.

( 1 ) Commission Implementing Regulation (EU) 2020/492 of 1 April 2020 imposing definitive anti-dumping duties on imports of certain woven and/or stitched glass fibre fabrics originating in the People’s Republic of China and Egypt (OJ 2020 L 108, p. 1).

( 2 ) Regulation (EU) 2016/1036 of the European Parliament and of the Council of 8 June 2016 on protection against dumped imports from countries not members of the European Union (OJ 2016 L 176, p. 21; ‘the basic regulation’).

( 3 ) That investigation culminated in Commission Implementing Regulation (EU) 2020/870 of 24 June 2020 imposing a definitive countervailing duty and definitively collecting the provisional countervailing duty imposed on imports of continuous filament glass fibre products originating in Egypt, and levying the definitive countervailing duty on the registered imports of continuous filament glass fibre products originating in Egypt (OJ 2020 L 201, p. 10).

( 4 ) Regulation (EU) 2016/1037 of the European Parliament and of the Council of 8 June 2016 on protection against subsidised imports from countries not members of the European Union (OJ 2016 L 176, p. 55).