Report for the Hearing in Case C-49/88

I — Facts and procedure

1. In July 1986 the Commission received a complaint lodged by the CMC-Engrais (Common Market Committee of the Nitrogen and Phosphate Fertilizer Industry) on behalf of producers of urea whose collective output accounts for substantially all Community production of the product in question. The complaint contained evidence of dumping and of material injury resulting therefrom, which was considered sufficient to justify the initiation of a proceeding.

2. The product allegedly being dumped is a nitrogen compound from the group of ‘amides’ with the chemical formula CO(NH2)2. It is synthetically produced by the action of ammonia and carbonic acid. Its nitrogen content is in general 45-46%. Its physical form is usually pilled or granulated, sometimes liquid. Urea is mainly used as a nitrogen fertilizer. The product falls under Common Customs Tariff sub-headings ex 31.02 B and ex 31.02 C and corresponds to Nimexe codes ex 31.02 15 and ex 31.02 80.

3. On 11 October 1986 the Commission initiated an anti-dumping proceeding concerning imports of urea originating in Czechoslovakia, the German Democratic Republic, Kuwait, Libya, Saudi Arabia, the USSR, Trinidad and Tobago and Yugoslavia (Official Journal 1987 C 254, p. 3).

4. On 8 May 1987 the Commission adopted a regulation imposing a provisional anti-dumping duty on imports of urea originating in Saudi Arabia (Official Journal 1987 L 121, p. 11). The provisional antidumping duty was ‘equal to the amount by which the duty per tonne net, free-at-Community-frontier, before duty, is less than ECU 133’.

5. On 4 November 1987 the Council adopted a regulation imposing a definitive anti-dumping duty of 40% on imports of urea from Saudi Arabia (Official Journal 1987 L 317, p. 1).

II — Written procedure and conclusions of the parties

The application of Al-Jubail Fertilizer Company (‘SAMAD’) and Saudi Arabian Fertilizer Company (‘SAFCO’) was lodged at the Court Registry on 16 February 1988.

By order of 8 June 1988 the Court granted the Commission leave to intervene in Case 49/88 in support of the conclusions of the defendant.

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.

The applicants claim that the Court should:

1) Declare Article 1 of Regulation No 3339/87 void in so far as it imposes an anti-dumping duty on the applicants;

2) Order the Council to bear the costs.

The Council claims that the Court should:

1) Dismiss the application;

2) Order the applicants to pay the costs.

The Commission claims that the Court should:

1) Accept the conclusions of the Council;

2) Dismiss the application;

3) Order the applicants to pay the costs, including the costs of the intervention.

III — Submissions and arguments of the parties

Procedural guarantees

1. The applicants begin by explaining that Al-Jubail Fertilizer Company (‘SAMAD') and Saudi Arabian Fertilizer Company (’SAFCO') manufacture urea in Saudi Arabia. The two companies are each joint ventures with a common shareholder, Saudi Basic Industries Corporation (‘SABIC’)a company set up in 1976 by the Saudi Government for the purpose of establishing basic industries which utilize and upgrade the Kingdom's natural resources. In addition to being a producer, SAFCO acts as an agent for SAMAD on sales in Saudi Arabia and to some other countries, including the EEC. They claim that no urea manufactured by SAFCO has ever been exported to the EEC. The applicants maintain that the disclosure of information was insufficient to enable them to exercise their rights. Owing to the insufficient disclosure of information, they were not in a position to assess fully the basis of the conclusions of the Community institutions in the investigation. Therefore, they were not allowed to exercise their right to be heard. The applicants observe that, on several occasions prior to the imposition of provisional anti-dumping duties, they orally requested disclosure of the basis upon which the Commission intended to take action. The request was repeated in writing on 20 March 1987. The letter in question mentioned that several importers had heard that the EEC intended to impose the highest anti-dumping on imports from Saudi Arabia and pointed out that, given the relevant price levels of urea from the various exporting companies, it would be an obvious error to do so. The letter also mentioned that grounds of urgency could not justify the refusal to disclose information to the applicants as there had been no exports from Saudi Arabia to the EEC in almost 10 months. The applicants claim that they were denied a right to be heard, inter alia, with regard to the following specific issues: (a) Throughout the proceedings, the applicants put forward their view, based on EEC import statistics and evidence in the Commission's file, that their price levels were higher than for most other sources of urea. The Commission never suggested to the applicants that this view was incorrect. Indeed, the last communication on this matter specifically mentioned the submissions of the applicant and did not refute them. Nevertheless, the Council of Ministers, with no prior disclosure of its findings, adopted a totally new form of duty based on the assumption that a higher level of duty would be necessary with regard to imports of urea from Saudi Arabia than that applicable to imports of urea from most other countries. (b) According to the applicants the Commission staff failed to respond to questions concerning the injury determination, thereby denying those concerned any possibility on effectively commenting on their finding. (c) They maintain that, in making an allowance for warehousing, the Commission staff used a figure lower than that submitted by the applicants. Despite specific requests to explain this figure, no explanation was given. Therefore, the applicants are not in a position to challenge specifically that part of the determination because they do not know the justification for it. (d) The applicants claimed an allowance for differences in level of trade arising from the fact that most urea in Saudi Arabia was sold to farmers while in Europe most urea was sold to traders or companies which processed the urea into another product. They argue that throughout the proceedings the Commission staff took the position that the allowance should be rejected for various reasons, but never suggested that there was no difference in the level of trade. The abovementioned Council Regulation No 3339/87 stated, however, that the allowance was rejected because most sales in Saudi Arabia and Europe were made to end-users, so that there was no difference in levels of trade. As that conclusion and its basis were never communicated to the applicants, the applicants argue that they were denied the opportunity to comment on the manifestly incorrect suggestion that sales to farmers, on the one hand, and to a factory or traders, on the other hand, were sales to end-users at the same level of trade. (e) Throughout the proceedings, discussions about the claim for an allowance for differences in quantities under Article 2(10)(b) of Council Regulation No 2176/84 of 23 July 1984 (Official Journal 1984 L 201, p. 1) focused on the interpretation of that provision. According to the applicants, the Commission staff stated several times that there was no need for any additional allowance because account had been taken of differences in quantities by applying quantity discounts to the sales on which they had been granted. The applicants filed a submission showing that the interpretation of the Commission staff was the exact opposite of the interpretation arising from the language of the regulation, the interpretation of identical language in the antidumping legislation of another country, and the interpretation advocated in a publication by senior officials of the EEC Anti-Dumping Division. As a result of that submission, the Community institutions changed their rationale but not the result. Under the new rationale, the Council suggested that evidence had been insufficient. During the course of the proceedings, however, the sufficiency of the evidence was not questioned. Accordingly, the applicants were given no opportunity to show that the evidence had been sufficient or to supplement the evidence. The applicants still do not know in what respects the evidence was considered insufficient. Specifically, the applicants assert that there was no disclosure concerning the change in the form of the relief between provisional and definitive determinations. Council Regulation No 3339/87 was published on 7 November 1987. At that time the applicants were informed for the first time that the floor-price duty had been changed to an ad valorem duty set at 40%. In the regulation imposing provisional duties, the Commission adopted a floor price of ECU 133. That price level was considerably higher than the prices in Saudi Arabia during the investigation period. Therefore, it was contrary to the requirement set out in Article 13(3) of Regulation No 2176/84 that the amount of anti-dumping duties ‘shall not exceed the dumping margin provisionally estimated or finally established’. Rather than correcting this manifest error in the provisional determination, the Community institutions adopted a totally different form of duty with a much more burdensome impact on importers of Saudi Arabian urea. They adopted the new duty without giving any opportunity to the applicants to comment on it. The applicants claim that the ad valorem duty adopted by the Council of Ministers has the nonsensical result of applying a higher rate of duty if a company raises its prices. In other words, the less injury that would be caused by the company's prices, the more duty it would have to pay. According to the applicants, the extremely high level of duty and its ad valorem form have the effect of totally excluding Saudi Arabian urea from the EEC. No purchaser would be willing to pay a 40% premium for a commodity like urea. In conclusion, the applicants take the view that, by failing to respond to the comments and questions of the applicants, despite assurances that it would do so, the Commission denied the applicants an opportunity to be effectively heard. Furthermore, the adoption of a completely different and much more burdensome form of duty without any prior disclosure and opportunity to comment resulted in a denial of the applicants' fundamental right ‘to be informed of the facts and considerations on the basis of which the authority is minded to act’. The Community institutions failed to make ‘every effort... to provide the applicant with information relevant to the defence of its interests’ (see judgments in NTN Toyo Bearing Company [1979] ECR 1185 and Timex [1985] ECR 861). According to the applicants, the denial of the right to be heard with regard to the basis and form of the relief has been compounded by the failure of the Community institutions to provide an adequate statement of reasons for the change in the form of duty. It has also resulted in the adoption of measures based on manifest errors. The applicants claim that Regulation No 3339/87 should be declared void because the Community institutions failed to comply with fundamental procedural rules by giving insufficient or, for some issues, no disclosure of the basis on which they intended to take action.

2. The Council contends that, throughout the proceedings, there was a constant and extensive exchange of information between the Commission and the applicants. Up to and including the letter from the applicants' lawyers dated 21 August 1987 there seems to be little dispute about the exchange of information as far as observance of the procedural guarantees is concerned. The Council considers irrelevant the applicants' argument that they requested disclosure of information concerning the basis on which the Commission intended to take provisional action. Article 7(4)(c)(iii) of Council Regulation (EEC) No 2176/84 provides only for the disclosure of information prior to the submission by the Commission of any proposal for final action. The Council contends that the disclosure provided for in Article (4)(b) and (c) of Regulation No 2176/84 relating to the contested regulation was granted. The Council further submits that the first written request to consult the non-confidential file under Regulation No 2176/84 was made by the letter dated 30 January 1987. Whether or not there had been previous requests by telephone is, in its opinion, irrelevant, because requests for access to the files must be made in writing, in accordance with Article 7(4)(a). The Council claims that the Commission proposed a date for consultation of the files as early as 5 February 1987, and the applicants consulted the non-confidential files on 12 February 1987. The Council therefore takes the view that there was no violation of procedural guarantees with regard to the consultation of the non-confidential file. It is, according to the Council, a different question whether the disclosure was sufficient and allowed the applicants to defend their rights adequately since, in this respect, the parties appear to be in fundamental disagreement as to the facts. It points out that the Commission replied to the applicants' submission of 21 August 1987 by letter dated 8 September 1987. The Council notes, however, that the letter from the Commission dated 8 September 1987 was not the last communication between the parties. Further meetings with the applicants took place with the Commission on 2 and 5 October 1987. During the meeting of 5 October 1987, numerous points were discussed in detail. The main purpose of the meeting was the discussion of an undertaking to be offered by the applicants. In the course of that meeting, the Council contends, the applicants were informed that if no undertaking acceptable to the Commission was offered, it was intended to impose an ad valorem duty of 40% on the urea exported by the applicants to the Community, and that this ad valorem duty was significantly lower than the dumping margin established for the applicants. The Council therefore takes the view that the assertion by the applicants that they were informed of the form of the duty only through the publication of the contested regulation in the Official Journal is factually incorrect. Consequently, it suggests that there appears to be no violation of procedural guarantees with regard to the alleged failure to disclose information or the violation of the right to be heard. The Council further submits that there can have been no doubt in the applicants' mind after the meeting of 5 October 1987 that the Community institutions would impose a definitive anti-dumping duty on imports of urea originating in Saudi Arabia, and that this duty would take the form of an ad valorem duty of 40%. It is the purpose of a disclosure under Article 7(4) to inform the interested parties, upon request, of the essential facts and considerations on the basis of which it is intended to recommend the imposition of definitive duties. In the Council's opinion the disclosure given by the Commission fully complied with Article 7(4). Finally, the Council notes that the alleged impact of the difference in the form of duty is not as dramatic as the applicants claim. The applicants, in its opinion, deliberately overlook the possibility of obtaining a refund if the requirements of Article 16(1) of the aforesaid Regulation No 2176/84 are met. In fact, if the applicants were to raise their prices it would seem likely that the duty then collected would exceed the actual dumping margin. In that case, a refund may be possible. Taking the possibility of obtaining refunds into consideration, the ad valorem duty paid would not be so different from a floor-price duty. Turning to the alleged non-disclosure concerning the determination of the injury, the Council refers to the Commission's letter dated 8 September 1987, in which it is stated that ‘more detailed information with regard to the calculation with the price undercutting is at your disposal, if you so wish’. No further request by the applicants in this respect was ever received by the Commission. Therefore the Council considers that the Commission staff gave sufficient information in reply to the questions raised by the applicants. The Council claims that the same applies to the allowance for warehousing. The Council concludes that the Commission at all times responded adequately to the applicants' requests and gave sufficient disclosure of the basis on which the Commission intended to recommend the imposition of definitive uses, and of the basis of which the Council finally adopted the contested regulation.

Statement of reasons for the duty imposed

1. The applicants state that Article 190 of the Treaty requires that regulations, directives and decisions of the Council and the Commission shall state the reason on which they are based. They point out that the Commission regulation imposing provisional anti-dumping duties established a floor price. The regulation stated that ‘the amount of the duty shall be equal to the amount by which the price per tonne net, free-at-Community-frontier, before duty, is less than ECU 133’. The Council Regulation adopted a totally different method of imposing anti-dumping duties. According to the applicants the change is fundamental and greatly increases the burden of the duties on potential imports of urea from Saudi Arabia. It represents a complete change in the operative portion of the regulation. Regulation No 3339/87, however, provides no statement at all of the reasons for the decision to adopt an ad valorem duty rather than a floor price. Accordingly, it violates the provisions of Article 190 of the EEC Treaty. For that reason, Regulation No 3339/87 should be declared void.

2. In the Council's opinion, the imposition of a provisional duty by the Commission and the imposition of a definitive duty by the Council are two separate acts. The Council in the case of the contested regulation did not ‘change’ the relief from one form of the duty to another. By means of the contested regulation, the Council imposed a definitive duty for the first time, in the form of an ad valorem duty. The fact that the Commission had considered it necessary to prevent injury being caused to the Community industry during the proceeding and thus imposed a provisional duty does not bind the Council in any way. The Council points out that, as is clearly provided by Article 12(1) of Regulation No 2176/84 a definitive anti-dumping duty must be imposed where the facts as finally established show that there is dumping during the period under investigation and injury caused thereby, and that the interests of the Community call for Community intervention. Whether or not a provisional duty has been imposed by the Commission is irrelevant for the imposition of definitive duties. In addition, the question whether a provisional duty which has been imposed by the Commission is to be definitively collected, may be decided by the Council ‘irrespective of whether a definitive antidumping duty ... is to be imposed’ (Article 12(2)(a) of Regulation No 2176/84). As far as the rate of duty is concerned, the only link between the two regulations is the maximum amount of provisional duty that may be collected; the duty collected may not exceed the amounts secured by way of provisional duty, nor may it exceed the amount of the definitive duty. The measures must therefore include a statement of reasons, and the reasons must be given separately. The imposition of definitive duties is not merely a confirmation or an amendment of the provisional duties. It would thus not be sufficient, for the purpose of ensuring that the contested regulation complies with Article 190 of the Treaty, to cite the reasons given for the imposition of the provisional duties, leather, all relevant aspects have to be reconsidered and the decision introducing a definitive duty will often set out new reasons. In the Council's opinion, it would be an undue burden to repeat all considerations stated in the Commission regulation imposing the provisional duty, to discuss the changes that have occurred, and then to give the reasons for imposing a definitive duty. As the contested regulation must be, and is, self-sufficient in giving the reasons for imposing the definitive duty, the only question is whether the reasons given for the definitive duty satisfy the requirements of Article 190. The Council considers that the requirements of Article 190 of the Treaty with regard to an adequate statement of reasons for imposing an ad valorem duty have been fulfilled. As is evident from paragraph 45 of the contested regulation, the amount of the duty necessary to eliminate the injury suffered by the Community industry was calculated, in particular, on the basis of the selling price necessary to cover the cost of production incurred plus a reasonable profit margin of 2.5%. In the preliminary determination on the basis of which the provisional duties were imposed, the Commission found it appropriate to determine the amount of the duty at such a level that a break-even level on the basis of the costs of production could be reached. According to the Council the rate of duty applied in the contested regulation was based on an entirely new calculation and on the basis of the final determination of the facts. It was considered appropriate, in order to remove the injury, to impose an anti-dumping duty on an ad valorem basis, and — based on the new calculation — at a different level of duty. It is evident from the contested regulation that the statement of reasons did disclose in a clear and unequivocal fashion the reasoning followed by the Council in such a way as to make the persons concerned aware of the reasons for the measures and thus enable them to defend their rights, and to enable the Court to exercise its supervisory jurisdiction. Part III of the application clearly shows that the applicants have been enabled to defend their rights on the basis of the reasons given in the contested regulation, as they challenge numerous points of that regulation in detail. Similarly, the Council is of the opinion that the reasons given in the contested regulation are sufficient for the Court to exercise its supervisory jurisdiction.

3. The Commission in general agrees with the defence of the Council. Nevertheless, it wishes to submit arguments on inter alia the nature of the duty imposed. The Commission points out that there are essentially three kinds of anti-dumping duties in the practice of the Community: (i) a rate of duty expressed as a percentage of the price of the goods at the frontier of the Community (an ad valorem duty); (ii) a rate of duty expressed as a fixed sum of money per unit imported (normally expressed in ECU); (iii) a ‘minimum price duty’, that is, a duty equal to the amount by which the price at the Community frontier falls below a specified price. According to the Commission all forms of duty are subject to the basic rule that they may not exceed the margin of dumping or the amount necessary to eliminate injury, whichever is the less: Article 13(3) of Regulation No 2176/84. All three kinds of duty are based primarily on the two findings concerning the margin of dumping and the level of injury. The amount of duty payable under each of the three approaches, on the basis of the average export price used to calculate the appropriate rate of the duty, will be the same. The price, after duty, resulting from each of the three kinds of duty, on the basis of the average export price calculated by the institutions, will be the same under each of the three kinds of duty. It is the same price as the price specified in an undertaking by the exporter in question, if an undertaking is offered and accepted. The Commission explains that the three kinds of duty cause different results, if the exporter's price alters over time or if the exporter's prices vary from one transaction to another, at any given time. It sets out the main differences and the main considerations which lead it to impose orrecommend different types of duty. A percentage rate of duty is convenient to apply, and not easy to evade by incorrectly stating the price at the Community frontier. It is the kind of duty which is appropriate in particular where there is a large range of dumped goods and where new models with different prices are being produced frequently; in such a situation no minimum price or fixed sum per unit could be used. An ad valorem duty is therefore the ‘normal’ kind of anti-dumping duty, and the choice of an ad valorem duty does not need special explanation. It goes on to explain that a duty expressed as a fixed sum per unit is convenient to apply and impossible to evade by incorrectly stating the price at the Community frontier. However, it may not be appropriate if the duty is to apply to a range of goods having significantly different prices. Lastly, a minimum price duty appears at first sight to be the most appropriate form for an antidumping duty once the after-duty price needed to prevent injury to Community industry has been calculated. However, it is the most easily evaded of the three kinds of duty, because a fraudulent importer can escape paying the duty by overstating the price at the Community frontier. According to the Commission all those features are inherent in the nature of the duties and they do not need to be explained each time that an anti-dumping regulation is adopted.

Alleged manifest errors of appraisal in imposing a 40% duty

1. The applicants assert that the relatively high duty on urea from Saudi Arabia is manifestly inconsistent with the evidence. The decision that a higher level of duty would be necessary to relieve injury from Saudi Arabian urea rather than urea from Libya, Czechoslovakia and the German Democratic Republic, is manifestly incorrect and inconsistent with the evidence on the record. EEC import statistics, the antidumping complaint filed by the European urea producers and the replies given by the importers in the questionnaire all demonstrate that Saudi Arabian urea was priced consistently higher than that from other countries. Despite the clear evidence of the EEC's own customs statistics, the Community institutions have chosen to place a considerably higher duty on Saudi Arabian urea than on urea from other sources. The applicants further claim that the antidumping complaint reveals a greater margin of price-undercutting by all the other urea-supplying countries which were investigated than was the case with Saudi urea. The replies to the questionnaire show that Libyan urea was priced lower than Saudi Arabian urea. Some importers of Libyan urea have included the prices which they paid in their non-confidential questionnaire replies. According to the applicants it is clear that Libyan urea was priced much lower than urea from Saudi Arabia. Despite that, the Community institutions chose to impose duties at a higher rate on the product from Saudi Arabia. By failing to disclose the basis on which it intended to take action, the Community institutions have denied the applicant an opportunity to correct this manifest error. The applicants maintain that the Community institutions failed to consider evidence which was available to them. They took no account of imports from Canada at lower prices than imports from Saudi Arabia, despite the fact that they involved larger quantities than those from other countries investigated. European production costs had declined during the investigation period. Imports from non-member countries at lower prices than imports from Saudi Arabia increased following the investigation period, and producers of urea in Italy were purchasers of imported urea. Thus, according to the applicants, the refusal of the Community institutions to consider any imports by complainants after the investigation period cannot be justified by the statement that it would be contrary to Article 7(l)(c) to consider facts after the investigation period. The relatively high duty on urea from Saudi Arabia is manifestly inconsistent with the evidence available. They take the view that Regulation No 3339/87 is based on manifest errors of appraisal and should therefore be annulled.

2. The Council states that, in setting the levy of duty imposed on urea from Saudi Arabia, the Commission used export price data supplied by Saudi Arabian exporters. The data was verified to the extent possible by Commission staff. The pricing data is more accurate for purposes of determining the appropriate level of duty than are average unit values derived from import statistics, or from unverified pricing data alleged in the complaint. That method of calculation is, in the Council's opinion, in conformity with standard Commission practice. Whenever they are available, the Commission uses pricing data supplied by the parties cooperating in the proceeding, and those data are verified by the Commission staff. To the extent that data are not made available to the Commission, however, the Commission has the authority to make its determinations on the basis of the facts and best evidence available, in accordance with Article 7(7)(b) of Regulation No 2176/84. For all countries except Libya and Yugoslavia, where insufficient data was supplied, the data used to determine export prices were the prices supplied by each country's exporters. For imports from Libya and Yugoslavia, the best available information was used. In the case of Libya, that information came from Eurostat statistics. To determine the levy of duty, the Council explains that the average export price during the reference period was compared with the price level necessary to eliminate the injury. The same methodology was used for all countries under investigation. Accordingly, the duty-level for Saudi Arabian urea was based on the facts of record, as verified, in conformity with well-established Commission practice. That evidence showed that Saudi Arabian prices were the second-lowest of all countries investigated. The Council submits that the Community institutions' decision not to investigate imports from Canada in no way affects the appropriateness of levying duties on dumped Saudi Arabian urea. It further states that the use of an average unit cost-of-production, based on costs during the reference period, is sound Commission practice. The applicants have presented no reasons for making an exception to that practice in this case. The price level needed to prevent injury, which determines the amount of the anti-dumping duty, is a weighted average. Just as the dumping margin is a weighted average, based on sales during the reference period, so it is reasonable, in the Council's view, to use weighted average production costs based on data during the reference period in determining the price level needed to offset any injury. The institutions did not select the point during the reference period which showed the highest cost-of-production, although that might have been appropriate to ensure that the injury suffered was removed. The institutions' policy of not considering imports or prices after the reference period for purposes of determining the levy of duty that is needed to remove or prevent injury is a sound one. If the Commission were to determine the level of duty needed on the basis of the facts at the time the duty was imposed, exporters engaged in dumping could easily raise prices for a relatively short period of time while the investigation is being carried out by the Commission, so as to avoid any liability for their practices. They would then be free to continue their dumping as soon as the Council issued its regulation imposing definitive duties, which would then be at a lower level. The Council contends that the ‘injury margin’ should be determined by examining the reference period, in just the same way as the dumping margin is determined. If the exporters have raised their prices in the meantime, and if the duty they pay exceeds the actual dumping margin, refunds may be applied for (Article 16 of Regulation No 2176/84). In addition, the exporters may ask for a review in accordance with Article 14 of Regulation No 2176/84 if the circumstances (such as their export prices) have changed so as to warrant a review of the situation.

3. The Commission claims that the policy of the institutions is in general not to take into account developments since the reference period, because if recent developments always had to be considered the investigation would never end. That argument applies equally to events not under the control of the exporters. It would be inappropriate to take account of some developments occurring since the end of the reference period, and not others. To take all developments into account would mean, in effect, extending the reference period and bringing it up to date. It might often be difficult or impossible to do so, since companies themselves do not always have fully up-to-date information on all aspects of a reference period which have to be considered. Moreover, having raised their prices, exporters might easily lower them again (unless they had given undertakings). Exporters' prices are sometimes raised after an anti-dumping investigation begins. Events occurring since the reference period which are favourable to exporters can then be taken into account, if appropriate, in refund applications or in a review of the measures adopted.

Alleged misinterpretation of the relevant rules and incorrect statement of the relevant facts

1. The applicants claim that several statements of fact set out in Council Regulation No 3339/87 with respect to imports from Saudi Arabia are extremely misleading. The Community institutions, by suggesting that a higher rate of duty would be necessary to relieve injury allegedly caused by imports from Saudi Arabia than that caused by imports from other countries, created the impression that Saudi Arabia was extremely aggressive in its pricing policy. As is demonstrated in the third ground of annulment, that finding is based on manifest errors of appreciation and is totally inconsistent with the evidence on the record available to the applicants. The applicants maintain that Saudi Arabian exporters have not followed an aggressive pricing policy in the EEC market. Indeed, rather than follow prices down in a declining market as most other sources of urea did, the applicants chose to withdraw from the European market until prices had recovered. It is important to recall that, at the time when the Council of Ministers decided that a 40% duty was necessary to relieve injury on imports of urea from Saudi Arabia, there had been no exports from that source in the previous 17 months. Turning to the level of trade, the applicants state that most sales of urea in Saudi Arabia were made directly to farmers. In the EEC, however, sales were made to trading companies and an industrial purchaser which used urea as a raw material in the manufacture of glue. It is obvious that there will be normal price differences between sales to the ultimate consumer and sales to resellers or industrial processors of the product, as such sales are at different levels of trades. The applicants have requested an allowance for differences in level of trade on the basis of Article 2(10)(c) of Regulation No 2176/84. They point out that there is only one industrial purchaser of urea in Saudi Arabia which uses urea to manufacture other products. All other sales are at a different level of trade from that of export sales. It was recognized that the situations are different and the price was reduced by the board of directors on 5 July 1986. There were no orders for industrial use in Saudi Arabia until after the investigation period. The absence of such sales should not be a reason to reject the allowance, however. A level-of-trade allowance would not apply to those sales in Saudi Arabia to the industrial purchaser but to sales which are at a different level of trade. There is a difference in the level of trade between domestic and export sales, and the board resolution provides an objective basis for measuring the effect of the differences on the domestic market. The applicants maintain that, by treating sales of urea to farmers in Saudi Arabia and sales to a glue factory in Italy as being at the same level of trade and refusing to grant an allowance, the Community institutions created an artificially high dumping margin. As far as quantity differences are concerned, exports of urea to the EEC were all transacted in lots of several thousand tonnes. The Commission chose to include in the normal value sales which were not comparable, including sales in quantities as small as 0.43 tonnes. Those large differences in quantities between domestic and export sales affect the comparability of the prices. For this reason, the applicants requested that account be taken of the difference, by selecting for the determination of normal value only those domestic sales which were comparable to the export sales pursuant to Article 2(3)(a) of Regulation No 2176/84 or by applying an allowance for differences in quantities pursuant to Article 2(10)(b). The suggestion that no convincing evidence was provided does not properly reflect the facts. There was no indication at any time during the proceedings that evidence was insufficient. Throughout the proceedings, all discussion focused on the interpretation of Article 2(10)(b), with the Commission staff suggesting that there was no need for an allowance when quantity discounts were actually deducted from the sales on which they were applied. In the applicants' view the interpretation of Article 2(10)(b) adopted by the Commission staff throughout the proceedings was inconsistent with the express language of the regulation. They argue that, if the conditions are met, the prices of all sales must be adjusted to reflect the prices which would have been charged in the domestic market if sales had been made in quantities comparable to those of export sales. If the adjustment is not granted, then the discounts will be reflected only in the actual sales on which they have been granted. That interpretation was communicated to the Commission staff in the letter of 21 August 1987. The applicants find it striking that, for the purposes of the definitive determination, the Community institutions did not change their result but merely changed their justification for reaching that result. The suggestion that no convincing evidence was supplied is simply incorrect. Under Article 2(10)(b)(i) it is necessary to have a difference in quantities between domestic and export sales, and price discounts for quantity sales must be freely available on the domestic market. No mention of any alleged insufficiencies in evidence was made to the applicants. Indeed, the Commission suggested that they had already taken due account of quantity differences ‘fully in conformity with Article 2(10)(b)’. If the evidence had been insufficient and if the Commission staff's interpretation of Article 2(10)(b) had been correct, then no account would have been taken of the differences. It was only after the staff's interpretation had been rebutted by legal arguments that the sufficiency of the evidence was questioned. The first indication that evidence had been insufficient was communicated in the publication of the definitive determination. Accordingly, Regulation No 3339/87 should be declared void.

2. With regard to the differences in quantities, the Council contends that, on the basis of the information verified by the Commission, it was considered appropriate to take account of differences in quantities by using a weighted average normal value, based on all sales. As many small deliveries benefit from the same quantity discount, since they are made under a contract covering a large amount, it was considered that by using a weighted average for determining normal value some account was taken of the differences in quantities. The Council states that the applicants did not at any time submit to the Commission a request, and the necessary evidence, for an adjustment exceeding the amount that was already taken into consideration by using the weighted average prices for determining normal value. If a discount is already taken into account in determining the normal value, the same discount cannot serve for a second time as an allowance to be made for the same values. Knowing that the Commission was taking this attitude, the applicants should have, and could have, submitted a specific request, accompanied by sufficient evidence showing that an (additional) allowance should be made, and the amount to be fixed. The Council submits that, in view of the previous contacts which the applicants had with the Commission's staff, the position of the Commission was entirely clear and it would have been possible for the applicants to submit such evidence to justify their claim for an allowance. Finally, and for the convenience of the Court, the Council submits that even if the highest possible allowances that had been claimed had been granted, the dumping margin for the applicants would have been 51.81% instead of 55%. It is therefore incorrect to suggest that by refusing to grant the allowance claimed by the applicants, the Community institutions have created an artificially high dumping margin (see paragraph 91 of the application). In any event, a dumping margin of 51.81% instead of 55% would not have resulted in a lower anti-dumping duty. Turning to differences in the level of trade, the Council points out that Regulation No 2176/84 provides for an allowance for differences of level only to the extent that they have not been taken into account in any of the other differences in conditions and terms of sale. In addition, an allowance can be made only where a remaining difference in the level of trade, if any, would affect price comparability.

3. With regard to the argument concerning the level of trade, the Commission states that it is always necessary to distinguish between arguments about discounts for quantities (which may exist irrespective of the nature of the customers who buy in large quantities) and the level of trade (which depends on the type of customer). The distinction must be kept in mind even though, in practice, different kinds of customers often buy in different quantities, and may obtain different quantity discounts. If an allowance is given for differences in quantities, the same allowance should not be given again under the heading ‘level of trade’. Article 2(10)(c) of Regulation No 2176/84 recognizes the point, by stating ‘in so far as no account has been taken of them otherwise’. Level-of-trade issues concern the type of customer, rather than the use which each customer makes of the goods he buys. As to quantity differences, the Commission recalls that the Council has already pointed out that what the applicants describe as a sale of 0.43 tonnes was in fact a small delivery forming part of a much larger sale. The Commission contends that, if, in an anti-dumping case, all sales in the domestic market during the reference period are of small quantities not benefiting from a quantity discount, and if all export sales are of quantities large enough to benefit from the discount, and, further, if the conditions of Article 2(10)(b) are fulfilled, then an allowance must be given covering all the sales. If the some of the export sales, or some of the domestic sales, are in quantities large enough to qualify for the discount and others are not, the situation is slightly more complicated. Normally a weighted average of all the prices in question is made, so as to produce a provisional price to which adjustments can be made. As the Council pointed out, such a weighted average already necessarily takes some account of whatever quantity discounts are given. According to the Commission the only question which therefore remains is whether enough evidence has been produced to justify giving an additional quantity discount; however, as the Council explained, insufficient evidence was submitted.

M. Diez de Velasco

Judge-Rapporteur

1 Language of the case: English.