Contents
Judgment of the General Court (Ninth Chamber, Extended Composition)21 February 2024note(Dumping — Imports of certain polyvinyl alcohols originating in China — Definitive anti-dumping duty — Implementing Regulation (EU) 2020/1336 — Calculation of the normal value — Significant distortions in the exporting country — Article 2(6a) of Regulation (EU) 2016/1036 — WTO law — Principle of consistent interpretation — Adjustments — Non-refundable VAT — Functions similar to those of an agent acting on a commission basis — Fair comparison of the export price and the normal value — Burden of proof — Article 2(10)(b) and (i) of Regulation 2016/1036 — Non-cooperation — Facts available — Article 18 of Regulation 2016/1036 — Double application — Punitive application — Different production processes — Price undercutting — Market segments — Product control number method — Article 3(2) and (3) of Regulation 2016/1036 — Rights of the defence — Confidential treatment — Articles 19 and 20 of Regulation 2016/1036)In Case T‑762/20,Sinopec Chongqing SVW Chemical Co. Ltd, established in Chongqing (China),Sinopec Great Wall Energy & Chemical (Ningxia) Co. Ltd, established in Lingwu (China),Central-China Company, Sinopec Chemical Commercial Holding Co. Ltd, established in Wuhan (China),represented by J. Cornelis, F. Graafsma and E. Vermulst, lawyers,Wegochem Europe BV, established in Amsterdam (Netherlands), represented by R. Antonini, E. Monard and B. Maniatis, lawyers,vEuropean Commission, represented by G. Luengo, acting as Agent,European Parliament, represented by A. Neergaard, D. Moore and A. Pospíšilová Padowska, acting as Agents,byCouncil of the European Union, represented by H. Marcos Fraile and B. Driessen, acting as Agents, and by N. Tuominen, lawyer,byKuraray Europe GmbH, established in Hattersheim am Main (Germany), represented by R. MacLean and D. Sevilla Pascual, lawyers,and bySekisui Specialty Chemicals Europe SL, established in La Canonja (Spain), represented by A. Borsos and J. Jousma, lawyers,THE GENERAL COURT (Ninth Chamber, Extended Composition),composed of L. Truchot (Rapporteur), President, H. Kanninen, L. Madise, R. Frendo and T. Perišin, Judges,Registrar: I. Kurme, Administrator,having regard to the written part of the procedure,further to the hearing on 14 and 15 December 2022,gives the following
Judgment
1By their action under Article 263 TFEU, the applicants, Sinopec Chongqing SVW Chemical Co. Ltd (‘Sinopec Chongqing’), Sinopec Great Wall Energy & Chemical (Ningxia) Co. Ltd (‘Sinopec Ningxia’) and Central-China Company, Sinopec Chemical Commercial Holding Co. Ltd (‘Sinopec Central-China’), seek the annulment of Commission Implementing Regulation (EU) 2020/1336 of 25 September 2020 imposing definitive anti-dumping duties on imports of certain polyvinyl alcohols originating in the People’s Republic of China (OJ 2020 L 315, p. 1; ‘the contested regulation’), in so far as it concerns them.
Background to the dispute
2Sinopec Chongqing and Sinopec Ningxia are Chinese undertakings which produce polyvinyl alcohols (‘PVA’), while Sinopec Central-China is a Chinese undertaking that is related to Sinopec Chongqing and Sinopec Ningxia and exports the products manufactured by them in particular to the European Union.
3On 18 June 2019, Kuraray Europe GmbH (‘Kuraray’), a PVA producer representing more than 60% of total EU production, lodged a complaint with the European Commission on the basis of Article 5 of 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’). Accordingly, the Commission published a notice of initiation of an anti-dumping proceeding concerning imports of certain PVA originating in the People’s Republic of China (OJ 2019 C 256, p. 4).
4The investigation of dumping and resulting injury covered the period from 1 July 2018 to 30 June 2019 (‘the investigation period’). The examination of trends relevant for the assessment of injury, relating to the information in tables 1 to 11 of the contested regulation, covered the period from 1 January 2016 to the end of the investigation period (‘the period considered’) (recital 39 of the contested regulation).
5Following a number of written exchanges with the applicants and other undertakings covered by its investigation, on 3 July 2020, the Commission sent the applicants the final disclosure provided for in Article 20 of the basic regulation (‘final disclosure’), in which it proposed an anti-dumping duty, based on their dumping margin, of 26.3% for the applicants. Following further written exchanges and a hearing with the Commission on 17 July 2020, the applicants submitted their comments on final disclosure on 20 July 2020. On 24 July 2020, the Commission sent the applicants an additional final disclosure (‘the additional final disclosure’), in which it found, having accepted certain arguments made by the applicants, that the dumping margin could be reduced to 17.3%. On 29 July 2020, the applicants submitted comments on that additional disclosure.
6By the contested regulation, the Commission imposed a definitive anti-dumping duty on imports of certain PVA originating in China and established that the rate of the definitive anti-dumping duty applicable to the net free-at-Union-frontier price, before duty, was to be 17.3% for the applicants.
7In calculating the normal value of the products manufactured by the applicants, the Commission did not rely on the general rule laid down in the first subparagraph of Article 2(1) of the basic regulation, according to which the ‘normal value shall normally be based on the prices paid or payable, in the ordinary course of trade, by independent customers in the exporting country’. It applied Article 2(6a) of that regulation, a provision that was introduced pursuant to Regulation (EU) 2017/2321 of the European Parliament and of the Council of 12 December 2017 amending the basic regulation and Regulation (EU) 2016/1037 on protection against subsidised imports from countries not members of the European Union (OJ 2017 L 338, p. 1) (recitals 86 and 87 of the contested regulation).
8Article 2(6a) of the basic regulation provides as follows:6a(a)In case it is determined, when applying this or any other relevant provision of this Regulation, that it is not appropriate to use domestic prices and costs in the exporting country due to the existence in that country of significant distortions within the meaning of point (b), the normal value shall be constructed exclusively on the basis of costs of production and sale reflecting undistorted prices or benchmarks, subject to the following rules.The sources the Commission may use include:– corresponding costs of production and sale in an appropriate representative country with a similar level of economic development as the exporting country, provided the relevant data are readily available; where there is more than one such country, preference shall be given, where appropriate, to countries with an adequate level of social and environmental protection;– if it considers appropriate, undistorted international prices, costs, or benchmarks; or– domestic costs, but only to the extent that they are positively established not to be distorted, on the basis of accurate and appropriate evidence, including in the framework of the provisions on interested parties in point (c).Without prejudice to Article 17, that assessment shall be done for each exporter and producer separately.The constructed normal value shall include an undistorted and reasonable amount for administrative, selling and general costs and for profits.(b) Significant distortions are those distortions which occur when reported prices or costs, including the costs of raw materials and energy, are not the result of free market forces because they are affected by substantial government intervention. In assessing the existence of significant distortions regard shall be had, inter alia, to the potential impact of one or more of the following elements:– the market in question being served to a significant extent by enterprises which operate under the ownership, control or policy supervision or guidance of the authorities of the exporting country;– state presence in firms allowing the state to interfere with respect to prices or costs;– public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces;– the lack, discriminatory application or inadequate enforcement of bankruptcy, corporate or property laws;– wage costs being distorted;– access to finance granted by institutions which implement public policy objectives or otherwise not acting independently of the state.(c) Where the Commission has well-founded indications of the possible existence of significant distortions as referred to in point (b) in a certain country or a certain sector in that country, and where appropriate for the effective application of this Regulation, the Commission shall produce, make public and regularly update a report describing the market circumstances referred to in point (b) in that country or sector. Such reports and the evidence on which they are based shall be placed on the file of any investigation relating to that country or sector. Interested parties shall have ample opportunity to rebut, supplement, comment or rely on the report and the evidence on which it is based in each investigation in which such report or evidence is used. In assessing the existence of significant distortions, the Commission shall take into account all the relevant evidence that is on the investigation file.’
9In the contested regulation, having found, in particular on the basis of the country report concerning China of 20 December 2017 which it had published pursuant to Article 2(6a)(c) of the basic regulation, that there were ‘significant distortions’, within the meaning of Article 2(6a)(b) of that regulation, in that country (recitals 91 and 171 of the contested regulation), the Commission constructed the normal value in accordance with the method laid down in the first indent of the second subparagraph of Article 2(6a)(a) of the basic regulation. For that purpose, it chose Türkiye as an appropriate representative country (recitals 172 and 222 of the contested regulation). In addition, in accordance with the final subparagraph of Article 2(6a)(a) of the basic regulation, the Commission included in the normal value what it considered to be an undistorted and reasonable amount for administrative, selling and general costs (‘SG&A costs’) and for profits (recital 87 of the contested regulation).
10Furthermore, as regards Sinopec Ningxia, the Commission identified some substantial and serious deficiencies in the data provided in respect of production costs. Accordingly, when constructing the normal value of the products manufactured by Sinopec Ningxia, pursuant to Article 2(6a) of the basic regulation, the Commission applied Article 18(1) of the basic regulation, according to which, in cases in which any interested party ‘refuses access to … necessary information … or significantly impedes the investigation’, the Commission may rely on the ‘facts available’ (‘the facts available within the meaning of Article 18’). The normal value of the products manufactured by Sinopec Ningxia was thus calculated on the basis of information provided by other exporting producers and, for each type of PVA concerned, the Commission used the highest of the constructed normal values of the other exporting producers (recitals 327 to 333 of the contested regulation).
11When comparing the normal value of the products manufactured by the applicants with their export price, the Commission made two adjustments under Article 2(10)(b) and (i) of the basic regulation. First, it increased the normal value ‘for the difference in indirect taxes between export sales from [China] to the Union and the normal value where indirect taxes such as [value added tax] [had] been excluded’ (recital 388 of the contested regulation). Secondly, it reduced the export price because the sales in the European Union of PVA produced by Sinopec Chongqing and Sinopec Ningxia were made through Sinopec Central-China, which had to be considered not as an internal sales department, but rather as a trader (recitals 358 and 373 of the contested regulation). Furthermore, the Commission also made downward adjustments to the export price, deducting insurance costs, transport, handling and loading expenses, credit costs and bank charges (‘the costs at issue’) in order to reduce the export price to an ‘ex-works’ level (recitals 313, 314 and 357 of the contested regulation).
12When determining the injury allegedly suffered by the Union industry, pursuant to Article 3(2), (3) and (6) of the basic regulation, the Commission analysed price undercutting. For that purpose, first, it based its conclusion on its findings that the PVA market was not divided into two distinct segments (recitals 61 to 64 of the contested regulation). Secondly, it used in particular a method consisting of comparing import prices and Union industry sales prices by product type, although it did not find a perfect match for some of them (recitals 432 and 433 of the contested regulation).
Forms of order sought
13The applicants claim that the Court should:– annul the contested regulation in so far as it concerns them;– order the Commission and the companies that have intervened in support of the Commission to pay the costs.
14Wegochem Europe BV (‘Wegochem’), intervening in support of the applicants, claims that the Court should:– annul the contested regulation in so far as it concerns the applicants;– order the Commission to pay the costs, including those incurred by Wegochem.
15The Commission, supported by the European Parliament, the Council of the European Union, Kuraray and Sekisui Specialty Chemicals Europe SL (‘Sekisui’), contends that the Court should:– dismiss the action;– order the applicants to pay the costs.
Law
16In support of the action, the applicants rely on five pleas in law, the first alleging that the application of Article 2(6a) of the basic regulation is inconsistent with the obligations arising from World Trade Organisation (WTO) law; the second alleging infringement of Article 2(10) of the basic regulation and a manifest error of assessment; the third alleging infringement of Article 18(1) and (5) of the basic regulation and Article 6.8 of the Agreement on implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (GATT) (OJ 1994 L 336, p. 103; ‘the anti-dumping agreement’), set out in Annex 1A to the Agreement establishing the WTO (OJ 1994 L 336, p. 3), and of Annex II to the anti-dumping agreement (OJ 1994 L 336, p. 118; ‘Annex II’); the fourth alleging infringement of Article 3(2) and (3) of the basic regulation when establishing price undercutting, and infringement of Article 3(6) of that regulation; and the fifth alleging infringement of the rights of the defence.
First plea in law, alleging that the application of Article 2(6a) of the basic regulation is inconsistent with the obligations arising from WTO law
17The applicants submit that, in the contested regulation, the Commission’s application of Article 2(6a) of the basic regulation was not in conformity with the anti-dumping agreement as interpreted by the decisions of the WTO’s Dispute Settlement Body (DSB). The applicants acknowledge that the anti-dumping agreement does not have direct effect, but argue that, given the commonality between that agreement and the basic regulation, that fact does not affect the obligation, which the Commission infringed in this case, to interpret the abovementioned provision of the basic regulation in a manner consistent with WTO law, including the decisions of the DSB.
18The applicants make clear that the present plea cannot be regarded as a plea of illegality against Article 2(6a) of the basic regulation. They do not challenge that provision as such, but the Commission’s application of it in the contested regulation. The applicants state that it is possible to interpret Article 2(6a) of the basic regulation in a manner that is consistent with WTO law, without such interpretation necessarily being contra legem or leading to that provision being deprived of its substance.
19The Commission, supported by the Parliament, the Council, Kuraray and Sekisui, disputes the applicants’ arguments.
20It must be recalled that, by virtue of Article 216(2) TFEU, where international agreements are concluded by the European Union they are binding upon its institutions and, consequently, they prevail over acts of the European Union. Therefore, secondary EU legislation must be interpreted, as far as possible, in a manner consistent with those agreements, in particular where such legislation is intended specifically to give effect to an international agreement concluded by the European Union (see, to that effect, judgments of 9 January 2003, Petrotub and Republica v Council, C‑76/00 P, EU:C:2003:4, paragraph 57 and the case-law cited; of 18 March 2014, Z., C‑363/12, EU:C:2014:159, paragraphs 71 and 72 and the case-law cited; and of 20 January 2022, Commission v Hubei Xinyegang Special Tube, C‑891/19 P, EU:C:2022:38, paragraph 31 and the case-law cited).
21According to recital 3 of the basic regulation, in order to ensure a proper and transparent application of the rules of the anti-dumping agreement, the language of that agreement should be reflected in EU legislation to the best extent possible. The general international law principle of compliance with treaty commitments (pacta sunt servanda), laid down in Article 26 of the Vienna Convention on the Law of Treaties of 23 May 1969 (United Nations Treaty Series, Vol. 1155, p. 331), means that the Courts of the European Union must, for the purposes of interpreting and applying the anti-dumping agreement, take account of the decisions of the DSB interpreting the provisions of that agreement (see, to that effect, judgment of 20 January 2022, Commission v Hubei Xinyegang Special Tube, C‑891/19 P, EU:C:2022:38, paragraphs 30, 32 and 33 and the case-law cited).
22However, as shown by the use in the case-law referred to in paragraph 20 above of the expression ‘as far as possible’, such case-law cannot be applied in the case of a provision whose meaning is clear and unambiguous and which therefore requires no interpretation. If that were so, the principle that secondary EU law must be interpreted in conformity with EU law would serve as the basis for an interpretation of that provision contra legem, which cannot be permitted (see judgment of 13 July 2018, Confédération nationale du Crédit mutuel v ECB, T‑751/16, EU:T:2018:475, paragraph 34 and the case-law cited; see also, to that effect, judgment of 28 February 2017, Canadian Solar Emea and Others v Council, T‑162/14, not published, EU:T:2017:124, paragraph 151).
23Moreover, it must be noted that the consistent interpretation of acts of the EU institutions in the light of provisions of an international agreement to which the European Union is a party, as defined by the case-law recalled in paragraphs 20 to 22 above, must not be confused with a review of the legality of those acts.
24According to settled case-law, the provisions of an international agreement can be relied on in support of an action for annulment of an act of secondary EU legislation or an exception based on the illegality of such an act only where, first, the nature and the broad logic of that agreement do not preclude it and, secondly, those provisions appear, as regards their content, to be unconditional and sufficiently precise. It is only when both those conditions are met that such provisions may be relied upon before the Courts of the European Union as a criterion in order to assess the legality of an EU act (see judgment of 16 July 2015, Commission v Rusal Armenal, C‑21/14 P, EU:C:2015:494, paragraph 37 and the case-law cited).
25In the present case, since the applicants have declared that they are not raising a plea of illegality and, in any event, they have neither argued nor, a fortiori, demonstrated that the conditions laid down by the case-law referred to in paragraph 24 above are satisfied, they must, if the Court is to be able to uphold the present plea, establish that Article 2(6a) of the basic regulation lacks clarity or contains ambiguities that would have to be resolved by being interpreted in a manner consistent with those rules, and that that interpretation is not contra legem.
26It must be noted that the applicants do not argue that the text of Article 2(6a) of the basic regulation is ambiguous.
27However, in the first place, the applicants submit that, in order for Article 2(6a) of the basic regulation to be applied in a manner consistent with WTO law, it must be interpreted as meaning that, of the three sources of information referred to in Article 2(6a)(a) of that regulation, only the last – using the domestic costs in the exporting country – must be accepted.
28It should be borne in mind that, according to settled case-law, for the purposes of interpreting a provision of EU law, it is necessary to consider not only its wording but also the context in which it occurs and the objectives pursued by the rules of which it is part (see judgment of 2 July 2020, Magistrat der Stadt Wien (European hamster), C‑477/19, EU:C:2020:517, paragraph 23 and the case-law cited).
29As it is, the interpretation of Article 2(6a) of the basic regulation put forward by the applicants effectively excludes the first two sources of information envisaged by Article 2(6a)(a) of that regulation and gives the third a broad scope, in the sense that it should be applied even if it has not been demonstrated that the relevant costs are undistorted.
30First, the interpretation put forward by the applicants cannot be based on the wording of the provision concerned, which lists three options, the third of which is subject to a specific condition. It follows from the use of the term ‘include’ that those three options are not exhaustive, and therefore that the Commission could use sources of information other than those covered by those three options. However, the discretion which the legislature gave the Commission with regard to the use of supplementary sources of information does not mean that the Commission can use a fourth source that is the same as the third apart from there being no need to satisfy the condition that it must be proved that the domestic costs in the exporting country are not distorted.
31Nor, furthermore, is that interpretation supported by the context in which Article 2(6a) of the basic regulation occurs. That provision introduces specific rules that are distinct from those arising from other paragraphs of Article 2 of the basic regulation, in that they apply to cases in which there are significant distortions in the domestic market of the exporting country. Therefore, the words ‘when applying this or any other relevant provision of this Regulation’ in the first subparagraph of Article 2(6a)(a) of the basic regulation do not mean that that provision must, in all cases, be interpreted in such a way as to be consistent with the provisions of the anti-dumping agreement that correspond to other provisions of Article 2 of the basic regulation.
32Lastly, as regards the objectives of Article 2(6a) of the basic regulation, it must be noted that the objective of that provision is to prevent data relating to prices and costs in the exporting country that would be distorted by the significant distortions that exist in the domestic market of that country from being used for the purposes of an anti-dumping investigation. Provision is thus made for data relating to an appropriate representative third country, or for international data, or for domestic costs in the exporting country to be used, provided that it is demonstrated that these are not distorted.
33Consequently, it must be held that, by their argument, which is summarised in paragraph 27 above, the applicants are proposing an interpretation contra legem of Article 2(6a) of the basic regulation, which cannot be adopted.
34In the second place, the applicants maintain that Article 2(6a) of the basic regulation must be interpreted in a manner consistent with Article 2.2 and Article 2.2.1.1 of the anti-dumping agreement.
35First, according to the applicants, instead of permitting a calculation on the basis of the prices in the exporting country, Article 2.2 of the anti-dumping agreement permits the construction of normal value only in three situations, one of which is when a particular market situation (‘PMS’) exists in the exporting country.
36The applicants state that the concept of a ‘PMS’, as interpreted by the decisions of the DSB, does not give unlimited freedom to the authority conducting an anti-dumping investigation (‘the competent authority’), but covers only situations in which comparability between the normal value and the export price is affected. However, a situation characterised by significant distortions following substantial State interventions in the exporting country’s market does not, by itself, mean that the costs incurred by the exporting producers of that country may be disregarded when calculating the normal value and the costs incurred by third-country producers used instead. The Commission has the burden of proving the link between that market situation and price comparability. In this case, however, the applicants submit that that proof has not been provided.
37Secondly, according to the applicants, even if a distortion of input costs were to give rise to a PMS, the method used by the Commission in this case, which imposes an obligation to use input costs from sources not affected by any distortions and to disregard the data on the costs of production reflected in the Chinese exporting producers’ records, is nonetheless inconsistent with Article 2.2.1.1 of the anti-dumping agreement, as interpreted by the decisions of the DSB.
38It should be recalled that, as noted in paragraph 23 above, the applicants’ reliance on the principle of consistent interpretation cannot lead to the Court’s reviewing the legality of Article 2(6a) of the basic regulation in the light of WTO rules without any need to demonstrate that the conditions laid down by the case-law for the exercise of that review are satisfied.
39Furthermore, it follows from paragraph 20 above that, in order for the principle of consistent interpretation to be fully applicable, the provisions of EU law at issue must be intended to give effect to WTO rules.
40It should be recalled that, by Regulation 2017/2321, the EU legislature amended Article 2 of the basic regulation by inserting paragraph 6a and amending paragraph 7.
41According to the case-law, Article 2(7) of the basic regulation, in the version prior to amendment by Regulation 2017/2321, was the expression of the EU legislature’s intention to adopt, in that area, an approach specific to the EU legal order by establishing a special regime of detailed rules for the calculation of normal value for imports from non-market economy countries. Consequently, it has been held that that provision could not be considered to be a measure intended to ensure the implementation in the EU legal order of a particular obligation assumed in the context of the WTO agreements, which did not lay down rules for the calculation of normal value for non-market economy countries (judgment of 5 May 2022, Zhejiang Jiuli Hi-Tech Metals v Commission, C‑718/20 P, EU:C:2022:362, paragraph 88; see also, to that effect and by analogy, judgment of 16 July 2015, Commission v Rusal Armenal, C‑21/14 P, EU:C:2015:494, paragraphs 47 to 50). This Court has stated that, in so far as that provision laid down rules concerning the calculation of normal value that had no equivalents in the WTO agreements, the Commission was not required to interpret it in accordance with the obligations of the European Union in the context of the WTO. If that had been the case, the Commission would have been deprived of the discretion which the legislature had intended to grant it (see, to that effect and by analogy, judgment of 19 September 2019, Zhejiang Jndia Pipeline Industry v Commission, T‑228/17, EU:T:2019:619, paragraphs 111 to 113).
42It must be held that those principles are applicable, by analogy, to Article 2(6a) of the basic regulation.
43In fact that provision establishes a special regime laying down rules for determining normal value in the case of exports from countries whose domestic market has been shown to have significant distortions, as defined in that provision. WTO law does not, however, include specific rules for calculating normal value in such situations.
44Moreover, it is true that recital 2 of Regulation 2017/2321 states that that regulation ‘is without prejudice to establishing whether or not any WTO Member is a market economy or to the terms and conditions set out in protocols and other instruments in accordance with which countries have acceded to the [Agreement establishing the WTO]’, which include the Protocol on the Accession of the People’s Republic of China to the WTO (‘the accession protocol’).
45It is also true that paragraph 15 of the accession protocol contains specific rules for the application of the anti-dumping agreement to imports from China and provides for a transitional period, expiring no later than 15 years after the People’s Republic of China has become a member of the WTO, that is to say, 11 December 2016.
46However, the presence of recital 2 in the preamble to Regulation 2017/2321 does not lead to the conclusion that, by that regulation, the EU legislature wished to create a mechanism that would give effect to paragraph 15 of the accession protocol.
47In any event, assuming that, after the expiry of the transitional period provided for, paragraph 15 of the accession protocol precludes the use, in the context of an anti-dumping investigation, of a method intended to determine the normal value that is not based on Chinese prices or costs for the industry under investigation, it would follow that Article 2(6a) of the basic regulation would not be compatible with that paragraph.
48Given that the applicants have not raised a plea of illegality in respect of Article 2(6a) of the basic regulation in the light of WTO rules, that potential incompatibility would merely confirm that it is impossible to interpret that provision in the manner suggested by the applicants.
49Consequently, it must be concluded that the necessary conditions for the principle of consistent interpretation to be applicable to Article 2(6a) of the basic regulation in the light of WTO rules are not satisfied.
50Accordingly, the first plea in law must be rejected.
Second plea in law, alleging infringement of Article 2(10) of the basic regulation and a manifest error of assessment
51The second plea is in three parts, the first alleging infringement of Article 2(10)(i) of the basic regulation and a manifest error of assessment, the second alleging infringement of the introductory part of Article 2(10) of that regulation, and the third alleging infringement of Article 2(10)(b) of that regulation.
First part
52After noting that all their export sales of PVA to the European Union were made through Sinopec Central-China, the applicants, supported by Wegochem, submit that the Commission, which found that the functions of Sinopec Central-China were not those of an internal sales department but were similar to those of an agent working on a commission basis, erred in making a downward adjustment to the export price relating to those sales on the basis of Article 2(10)(i) of the basic regulation (‘the first adjustment at issue’), corresponding to that company’s SG&A costs and a profit margin for it, based on information from an unrelated trader.
53In the first place, the applicants state that, according to the wording of Article 2(10)(i) of the basic regulation and the relevant case-law, in order to be able to make an adjustment under that provision, the Commission must adduce at the very least consistent evidence showing that a sales company affiliated to a producer carries out functions similar to those of an agent working on a commission basis.
54The applicants state that the Commission cannot shift the burden of proof by considering that such an adjustment is generally warranted once an undertaking sets up a related trading company to perform its export sales functions and that, consequently, it is for the producer which set up that company to show that the adjustment in question is not warranted.
55In the second place, in the applicants’ submission, the factors invoked by the Commission during the procedure which led to the adoption of the contested regulation and in that regulation do not support the conclusion that the first adjustment at issue is warranted in this instance.
56The Commission disputes the applicants’ arguments.
57It contends, in the first place, that there is a general rule that, where an undertaking sets up a related company to carry out business operations which it would otherwise have to entrust to outside traders, an adjustment will be warranted under Article 2(10)(i) of the basic regulation. It is a fact that the related company thus created will carry out functions similar to those of an agent working on a commission basis. It is only as an exception to that general rule that such an adjustment should not be made where the producer and its related distributor responsible for exports to the European Union form a single economic entity. Any exception to a general rule must be interpreted strictly.
58In the second place, the Commission states that it never claimed that any one of the factors on which it relied to make the first adjustment at issue is in itself sufficient to rule out the possibility of Sinopec Central-China being classified as an internal sales department. It claims that it is necessary to carry out an overall assessment of the relevant factors and contends that the factors relied on, taken as a whole, support the conclusion that Sinopec Central-China is an autonomous and independent trading company.
–Applicable rules
59The terms of the relevant provisions of Article 2(10) of the basic regulation are, it should be recalled, as follows:‘A fair comparison shall be made between the export price and the normal value. This comparison shall be made at the same level of trade and in respect of sales made at, as closely as possible, the same time and with due account taken of other differences which affect price comparability. Where the normal value and the export price as established are not on such a comparable basis, due allowance, in the form of adjustments, shall be made in each case, on its merits, for differences in factors which are claimed, and demonstrated, to affect prices and price comparability. Any duplication when making adjustments shall be avoided, in particular in relation to discounts, rebates, quantities and level of trade. When the specified conditions are met, the factors for which adjustment can be made are listed as follows:…(i) CommissionsAn adjustment shall be made for differences in commissions paid in respect of the sales under consideration.The term “commissions” shall be understood to include the mark-up received by a trader of the product or the like product if the functions of such a trader are similar to those of an agent working on a commission basis.’
60It is apparent from the case-law that an adjustment under Article 2(10)(i) of the basic regulation cannot be made where the producer established in a third State and its related distributor responsible for exports to the European Union form a single economic entity (see, by analogy, judgment of 26 October 2016, PT Musim Mas v Council, C‑468/15 P, EU:C:2016:803, paragraph 39).
61The division of production and sales activities within a group made up of legally distinct companies can in no way alter the fact that the group is a single economic entity which organises in that way activities that in other cases are carried on by what is, also from a legal point of view, a single entity (see, by analogy, judgment of 26 October 2016, PT Musim Mas v Council, C‑468/15 P, EU:C:2016:803, paragraph 40 and the case-law cited).
62In those circumstances, recognition of the existence of a single economic entity avoids costs, which are clearly included in the sale price of a product when that sale is carried out by an integrated sales department in the producer’s organisation, no longer being included where the same sales activity is carried out by a company which is legally distinct, even though economically controlled by the producer (see, by analogy, judgment of 26 October 2016, PT Musim Mas v Council, C‑468/15 P, EU:C:2016:803, paragraph 41 and the case-law cited).
63It follows that a distributor that forms a single economic entity with a producer established in a third State cannot be regarded as carrying out functions similar to those of an agent working on a commission basis, within the meaning of Article 2(10)(i) of the basic regulation (see, by analogy, judgment of 26 October 2016, PT Musim Mas v Council, C‑468/15 P, EU:C:2016:803, paragraph 42).
64In the analysis of whether there is a single economic entity between a producer and its related distributor, it is crucial to consider the economic reality of the relationship between that producer and that distributor. In view of the requirement of a conclusion reflecting the economic reality of the relationship between that producer and that distributor, the EU institutions are required to take account of all factors relevant to the determination as to whether or not that distributor carries out the functions of an integrated sales department within that producer (see, by analogy, judgment of 26 October 2016, PT Musim Mas v Council, C‑468/15 P, EU:C:2016:803, paragraph 43 and the case-law cited).
–Proof
65As regards the burden of proof relating to the specific adjustments listed in Article 2(10) of the basic regulation, according to the case-law, this must be borne by the party who wishes to rely on them (see, to that effect and by analogy, judgment of 26 October 2016, PT Musim Mas v Council, C‑468/15 P, EU:C:2016:803, paragraph 83 and the case-law cited).
66Thus, where the EU institutions take the view that it is appropriate to apply a downward adjustment of the export price, on the ground that a sales company affiliated to a producer carries out functions similar to those of an agent working on a commission basis, it is the responsibility of those institutions to adduce at the very least consistent evidence showing that that condition is fulfilled (see, by analogy, judgment of 26 October 2016, PT Musim Mas v Council, C‑468/15 P, EU:C:2016:803, paragraph 84 and the case-law cited).
67It follows that, where the EU institutions have adduced consistent evidence to establish that a distributor affiliated to a producer was carrying out functions similar to those of an agent working on a commission basis, it will have been for that distributor or that producer to adduce evidence that an adjustment under Article 2(10)(i) of the basic regulation was not justified (see, by analogy, judgment of 26 October 2016, PT Musim Mas v Council, C‑468/15 P, EU:C:2016:803, paragraph 85).
68It follows from this that in order for the Commission to be fully entitled to make the first adjustment at issue, it was required to adduce consistent evidence to establish that that adjustment was justified.
69The Commission cannot take the view that an adjustment under Article 2(10)(i) of the basic regulation must in principle be made once an undertaking sets up a related trading company to perform its export sales functions.
70The existence of that general rule, which would effectively shift the burden of proof, has not been established, since the case-law which the Commission cites in that respect is not relevant.
71First, the Commission relies on the judgment of 7 February 2013, EuroChem MCC v Council (T‑459/08, not published, EU:T:2013:66). In paragraph 132 of that judgment, the Court noted that the second sentence of Article 2(10)(i) of 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) was inserted by Article 1(5) of Council Regulation (EC) No 1972/2002 of 5 November 2002 amending Regulation (EC) No 384/96 on the protection against dumped imports from countries not members of the European Community (OJ 2002 L 305, p. 1). In the same paragraph, it was noted that, according to recital 6 of Regulation No 1972/2002, the rationale for the insertion of the sentence in question was to clarify, in line with the consistent practice of the institutions, that adjustments under that provision were also to be made if the parties did not act on the basis of a principal-agent relationship, but achieved the same economic result by acting as buyer and seller. However, it follows from paragraphs 133 and 134 of that judgment that an adjustment must be made if the company responsible for sales which is affiliated with an exporting producer carries out functions which are similar to those of an agent working on a commission basis and that, in order to determine whether that is the case, the respective roles played by the various affiliated companies must be examined. Accordingly, in that judgment, the Court did not recognise the existence of the general rule invoked by the Commission in the present case.
72Secondly, the Commission invokes the judgment of 26 October 2016, PT Musim Mas v Council (C‑468/15 P, EU:C:2016:803, paragraph 39), which does not, however, make any reference to a general rule or to an exception thereto.
73Thirdly, the Commission relies on paragraph 50 of the judgment of 28 October 2004, Shanghai Teraoka Electronic v Council (T‑35/01, EU:T:2004:317), and paragraph 49 of the judgment of 28 June 2019, Changmao Biochemical Engineering v Commission (T‑741/16, not published, EU:T:2019:454). In those judgments, the Court noted that the method of determining the normal value of a product set out in Article 2(7)(b) of 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) and Regulation No 1225/2009, in force, respectively, at the material time, was an exception to the specific rule laid down for that purpose in Article 2(7)(a) of those regulations, the latter provision being, in principle, applicable to imports from non-market-economy countries. However, in the present case, the Commission has not stated nor, a fortiori, has it demonstrated that the non-application of an adjustment under Article 2(10)(i) of the basic regulation where an exporting producer sells its products in the European Union through an affiliated company is an exception to a rule laid down in that regulation, under which that adjustment should, in principle, be made in such circumstances. Accordingly, those judgments support neither the existence of the general rule invoked by the Commission nor the exceptional nature of the non-application of such an adjustment in the case of a single economic entity.
74Fourthly, at the hearing the Commission invoked the judgment of 14 December 2022, Xinyi PV Products (Anhui) Holdings v Commission (T‑586/14 RENV II, not published, EU:T:2022:799, paragraph 57), which, in its submission, confirms that there is a rule under which an adjustment under Article 2(10)(i) of the basic regulation is generally applied when an exporting producer sells its products through an affiliated company. However, it must be noted that, in that judgment, the Court ruled on a situation in which, as was undisputed, the company related to the exporting producer concerned operated in addition to the latter’s internal export department, as is apparent from paragraphs 52 and 57 of the abovementioned judgment. Since the situation in the present case is different, the Commission was wrong to rely on that judgment.
75Nor can the Commission take the view that an adjustment under Article 2(10)(i) of the basic regulation must be made by relying on the fact that Sinopec Central-China is not directly controlled by Sinopec Chongqing and Sinopec Ningxia, as the applicants argued before the Court.
76In that regard, while it is apparent from recital 366 of the contested regulation that the Commission accepts that there is common control, since Sinopec Central-China, Sinopec Chongqing and Sinopec Ningxia are ‘all controlled by the Sinopec Group’, the regulation does not contain a recital dedicated to examining the indirect nature of that control and to the consequences that that might have for what the Commission was required to demonstrate according to the case-law recalled in paragraphs 65 to 67 above.
77In recital 366 of the contested regulation, the Commission also stated that ‘the existence of common control is a necessary prerequisite for the existence of a single economic entity and triggers the analysis of whether the totality of the relevant facts pertaining to the related trader demonstrate the existence of a single economic entity’ and that ‘the purpose is to determine whether the functions carried out by the related trader are similar to those of an internal sales department, or not’.
78The Commission’s approach in the contested regulation must be endorsed, given that it is consistent with the case-law, according to which the capital structure of companies capable of forming a single economic entity is a relevant indicator of the existence of such an entity (see, to that effect, judgment of 10 March 2009, Interpipe Niko Tube and Interpipe NTRP v Council, T‑249/06, EU:T:2009:62, paragraph 179).
79Accordingly, on the basis of that finding, it is necessary to ascertain whether the Commission has adduced sufficient consistent evidence to demonstrate that, notwithstanding the existence of common control, Sinopec Central-China could not be considered to be acting as an internal sales department and, therefore, that it was necessary to make the first adjustment at issue.
–The evidence gathered by the Commission
80The Commission bases its decision on the following evidence:– Sinopec Central-China was looking for customers and established contact with them;– Sinopec Chongqing made direct export sales;– Sinopec Chongqing and Sinopec Ningxia made direct sales in China;– Sinopec Chongqing and Sinopec Ningxia incurred selling costs;– Sinopec Central-China also traded goods made by producers other than Sinopec Chongqing and Sinopec Ningxia.
81It must be determined whether it can be inferred from the evidence referred to above that the Commission has discharged its burden of proof.
82As a preliminary point, it should be noted that the first element listed in paragraph 80 above, concerning the fact that Sinopec Central-China would look for customers and establish contact with them, appeared in the final disclosure. The applicants disputed the relevance of the first element in their comments on final disclosure, arguing that looking for customers and establishing contact with them were activities that an independent trader as well as an internal sales department would carry out. In recital 358 of the contested regulation, the Commission referred to that element without, however, responding to the applicants’ arguments.
83Before the Court, the Commission merely maintained that the first element was relevant, although looking for customers and establishing contact with them are activities that may be performed both by an internal sales department and by a sales agent.
84In those circumstances, the applicants are justified in maintaining that the fact that an entity is engaged in looking for customers and establishing contact with them is not relevant for the purposes of determining whether it is an internal sales department or a sales agent.
85As regards the second element listed in paragraph 80 above, concerning the fact that Sinopec Chongqing made direct export sales, it is apparent from the case-law that the larger the proportion of those direct sales, the more difficult it is to maintain that the related distributor carries out the functions of an internal sales department (see, to that effect, judgments of 10 March 1992, Matsushita Electric v Council, C‑175/87, EU:C:1992:109, paragraph 14, and of 25 June 2015, PT Musim Mas v Council, T‑26/12, not published, EU:T:2015:437, paragraph 69). By contrast, a single economic entity may exist where the producer assumes some of the sales functions that are complementary to those of the distribution company for its products (see judgment of 10 March 2009, Interpipe Niko Tube and Interpipe NTRP v Council, T‑249/06, EU:T:2009:62, paragraph 179 and the case-law cited).
86In the present case, the applicants claim that the export sales made directly by Sinopec Chongqing, rather than through Sinopec Central-China, are merely complementary to the export sales made by Sinopec Central-China and do not concern sales of PVA to customers established in the European Union, but sales of PVA to customers established in the United States, for reasons linked to the US anti-dumping duty system, under which it is possible to benefit from a zero duty only if sales are made directly. The volume of PVA in relation to those direct export sales to the United States, which represent only 10.9% of combined exports to the European Union and United States, is not large enough for it to be concluded that the existence of those direct sales shows that there is no single economic entity.
87In response, the Commission contends that the fact that Sinopec Chongqing made a substantial amount of direct sales to the United States, accounting for 12.1% of its sales to the European Union, shows that it has its own internal sales department. The reason why Sinopec Chongqing made those sales itself is ‘not necessarily determinative’ of the assessment of its economic relationship with Sinopec Central-China. Similarly, it is of little importance that all export sales to the European Union were made through Sinopec Central-China.
88In the first place, it should be noted that, in paragraph 185 of the judgment of 10 March 2009, Interpipe Niko Tube and Interpipe NTRP v Council (T‑249/06, EU:T:2009:62), the Court, in finding that an adjustment under Article 2(10)(i) of Regulation No 384/96 had been wrongly made, accepted in particular that the direct export sales made by one of the applicants in the case giving rise to that judgment were marginal and complementary to those made by the distributor related to those companies. In that respect, the Court noted that those direct sales were destined for the new Member States during a transitional phase and, moreover, that they represented 8% of those companies’ sales to the European Union.
89In the second place, in paragraphs 69 and 70 of the judgment of 25 June 2015, PT Musim Mas v Council (T‑26/12, not published, EU:T:2015:437), the Court found that the existence of direct export sales of 27.08% of total export sales was not such as to rule out the possibility that the distributor related to the producers concerned was carrying out the functions of an internal sales department, but nevertheless constituted an indication that supported other factors and therefore contributed to establishing that there was no single economic entity.
90In the present case, it is common ground that the volume of direct export sales to the United States made by Sinopec Chongqing represented 10.9% of its combined EU and US sales, and 12.1% of its sales in the European Union, if direct sales to the United States are expressed as a percentage of EU sales alone, as opposed to EU and US sales combined. Moreover, at the hearing, the applicants explained that they also exported their PVA to other countries and that those export sales were made through Sinopec Central-China, and the Commission did not contradict them in that respect. Thus, if all export sales were taken into account, the volume corresponding to direct sales made by Sinopec Chongqing represented an even smaller percentage of all of the PVA produced by that company that were sold for export.
91Accordingly, first, it should be stated that the Commission is wrong to maintain that the percentage of the volume of PVA relating to Sinopec Chongqing’s direct export sales is ‘clearly substantial’, in that it is higher than 8%, which was considered marginal in paragraph 185 of the judgment of 10 March 2009, Interpipe Niko Tube and Interpipe NTRP v Council (T‑249/06, EU:T:2009:62). As is apparent from paragraph 88 above, the Court, in that judgment, considered the volume of direct export sales to the European Union made by the exporting producers concerned as a percentage of the total volume of their export sales to the European Union. However, in the present case, the percentage of the volume of direct export sales made by Sinopec Chongqing to the European Union is zero, given that it is Sinopec Central-China that is responsible for all export sales to the European Union of PVA produced by Sinopec Chongqing.
92Secondly, it must be held that, irrespective of the total sales by reference to which the percentage is calculated (see paragraph 90 above), the volume of PVA in direct export sales made by Sinopec Chongqing does not represent a percentage of that total that is even close to the figure of 27.08%, which, in paragraphs 69 and 70 of the judgment of 25 June 2015, PT Musim Mas v Council (T‑26/12, not published, EU:T:2015:437), the Court in that case considered to be an indication that could contribute to establishing that there was no single economic entity (see paragraph 89 above).
93Furthermore, it should be recalled that, in paragraph 68 of the judgment of 25 June 2015, PT Musim Mas v Council (T‑26/12, not published, EU:T:2015:437), the Court also stated that it was not inconceivable that, within such an entity, a related company carries out the functions of an internal sales department by organising and negotiating the producer’s sales without issuing directly all of the invoices relating to those sales, since various reasons may explain the ‘on paper’ involvement of the producer. As it is, in the present case, the applicants explained that Sinopec Chongqing benefited from a zero anti-dumping duty in the United States, and this was not contradicted by the Commission. Moreover, at the hearing, Wegochem, again without being contradicted by the Commission, stated that the group to which it belonged imported PVA produced by the applicants both into the European Union and into the United States, and that, in both cases, that group negotiated with Sinopec Central-China, although the invoices relating to the imports into the United States were issued by Sinopec Chongqing, for the reason given above.
94In the light of the foregoing, it must be concluded that the second element does not constitute conclusive evidence that Sinopec Central-China cannot be classified as an internal sales department.
95With regard to the third element listed in paragraph 80 above, concerning the fact that Sinopec Chongqing and Sinopec Ningxia made direct sales on the Chinese market, the applicants claim that the existence of those direct sales does not preclude Sinopec Central-China from being classified as an internal sales department responsible for export sales. The applicants maintain that they have never claimed that Sinopec Central-China acted as an internal sales department responsible both for sales on the Chinese market and for export sales. They merely claimed that Sinopec Central-China was responsible for export sales. The way in which a producer sells its products on its domestic market is irrelevant for determining the existence of a single economic entity on the export side.
96The Commission contends that the fact that Sinopec Chongqing and Sinopec Ningxia made significant sales on the Chinese market provides supporting evidence that they had internal sales departments which were capable of also serving their export markets, and that Sinopec Central-China operated as an autonomous trading entity.
97It must be stated that the fact that direct sales of PVA were made by Sinopec Chongqing and Sinopec Ningxia on the Chinese market is capable of demonstrating that those companies had the necessary structure for selling their products without using the services of Sinopec Central-China or other, possibly unrelated, companies.
98However, as the applicants argue, it follows from the case-law that export sales and sales on an exporting producer’s domestic market may involve related or unrelated companies, or different internal sales departments (see, to that effect, judgment of 10 March 1992, Minolta Camera v Council, C‑178/87, EU:C:1992:112, paragraphs 2, 9 and 13, and Opinion of Advocate General Mengozzi in Joined Cases Council and Commission v Interpipe Niko Tube and Interpipe NTRP, C‑191/09 P and C‑200/09 P, EU:C:2011:245, points 65 and 66).
99It follows that the third element is not conclusive evidence that might preclude recognition of Sinopec Central-China’s status as an internal sales department.
100As regards the fourth element listed in paragraph 80 above, concerning the fact that Sinopec Chongqing and Sinopec Ningxia incur selling costs, the applicants claim that the selling costs incurred by those companies were incurred only in respect of sales on the Chinese market and, in the case of Sinopec Chongqing, in respect of sales made to the United States.
101The Commission’s response in respect of the fourth element is that the fact that Sinopec Chongqing and Sinopec Ningxia incurred selling costs which were, for Sinopec Ningxia, higher than those incurred by Sinopec Central-China, constitutes further evidence that Sinopec Central-China was autonomous.
102It must be noted that it is not disputed that Sinopec Chongqing and Sinopec Ningxia incurred costs only in relation to sales on the domestic Chinese market and, in the case of Sinopec Chongqing, direct export sales to the United States. Therefore, the fourth element does not change the Court’s assessment of the second and third elements.
103With regard to the fifth element listed in paragraph 80 above, concerning the fact that Sinopec Central-China also traded goods made by producers other than Sinopec Chongqing and Sinopec Ningxia, the applicants submit that Sinopec Central-China’s purchases of PVA produced by unrelated producers represent only 2% of its PVA purchases from Sinopec Chongqing and Sinopec Ningxia. It is only when a related trader achieves a large part of its turnover from the sale of products from unrelated undertakings that the functions of that trader are not comparable to those of an internal sales department. Furthermore, Sinopec Central-China sold PVA produced by unrelated producers exclusively on the Chinese market.
104Wegochem adds that the mere fact that Sinopec Central-China also traded some products manufactured by other producers does not provide any proof that that company operated as an independent trader. For that purpose, the Commission should have determined that those trading activities were sufficiently significant to enable Sinopec Central-China to act independently of the group to which it was related. Accordingly, the Commission should have assessed the significance of Sinopec Central-China’s sales of PVA produced by unrelated companies in terms of its turnover. However, the Commission did not carry out any such assessment.
105The Commission contends that, while it did not assess the significance, as a share of Sinopec Central-China’s total turnover, of the sale of all products purchased by Sinopec Central-China from companies other than Sinopec Chongqing and Sinopec Ningxia, it nevertheless established that sales by Sinopec Central-China of PVA manufactured by other producers represented 10% of Sinopec Central-China’s total sales of PVA to the European Union and were therefore not negligible.
106It should be recalled that, according to the case-law, the proportion of sales made by a distributor related to a producer covering products from unrelated producers is an important factor for the purposes of determining whether that distributor forms a single economic entity with the related producer. Thus, if the distributor achieves a large part of its turnover from the sale of products from unrelated undertakings, that may constitute evidence that the functions of that distributor are not those of an internal sales department (see judgment of 14 July 2021, Interpipe Niko Tube and Interpipe Nizhnedneprovsky Tube Rolling Plant v Commission, T‑716/19, EU:T:2021:457, paragraph 159 and the case-law cited).
107The case-law also makes clear that, for the purposes of determining whether a single economic entity exists, the EU institutions are also entitled to take into account the activities of the related distributor relating to products other than the product that is the subject of the anti-dumping investigation as well as the proportion of sales made by that distributor that related to products from unrelated producers (see, to that effect, judgment of 26 October 2016, PT Musim Mas v Council, C‑468/15 P, EU:C:2016:803, paragraphs 44 to 46 and 49).
108In the present case, it must be noted that the Commission admits (see paragraph 105 above) that it did not carry out the examination envisaged by the case-law referred to above. Accordingly, it cannot rely on the fifth element as relevant evidence that a single economic entity does not exist in this case.
109In any event, even if the Commission had been entitled to confine itself to examining the turnover of Sinopec Central-China generated by its PVA sales, it must be noted that the Commission does not dispute that, as the applicants had already argued in their additional final disclosure comments, the purchases by Sinopec Central-China of PVA produced by unrelated producers represent only 2% of its PVA purchases from Sinopec Chongqing and Sinopec Ningxia. Thus, the turnover of Sinopec Central-China generated by its PVA sales came from PVA almost all of which it had purchased from Sinopec Chongqing and Sinopec Ningxia.
110As to the Commission’s argument that the volume of Sinopec Central-China’s PVA purchases from unrelated producers represents 10% of the total volume of PVA exported by Sinopec Central-China to the European Union during the investigation period, it must be noted that the Commission does not explain how that information would serve to demonstrate that Sinopec Central-China was not acting as an internal sales department. The relevance of that information is undermined by the fact, highlighted in the applicants’ additional final disclosure comments and at the hearing, and not disputed by the Commission, that the PVA which Sinopec Central-China purchased from unrelated producers were not exported into the European Union but were sold, in China, to a related company.
111Consequently, it must be concluded that the fifth element is of no relevance in demonstrating that Sinopec Central-China was performing functions similar to those of an agent working on a commission basis.
112In the light of all of the foregoing considerations in relation to the first to fifth elements, it appears that the second and third elements are not sufficient to constitute a body of consistent evidence that would demonstrate that the functions of Sinopec Central-China were functions similar to those of an agent acting on a commission basis or that would preclude recognition of its status as an internal sales department. In those circumstances, it must be concluded that the Commission has not discharged its burden of proof in accordance with the case-law recalled in paragraphs 65 to 67 above, and therefore that, in finding that Sinopec Central-China was performing functions similar to those of an agent acting on a commission basis, it made a manifest error of assessment.
113Accordingly, the first part of the second plea in law must be upheld.
Second part
114The applicants submit that, in the contested regulation, the Commission infringed the obligation, which arises specifically from the introductory part of Article 2(10) of the basic regulation, to make a fair comparison, at the same level of trade, between the export price and the normal value.
115In order to establish an export price at the ‘ex-works’ level, the Commission made adjustments by deducting the costs at issue from the sales price charged to unrelated customers (see paragraph 11 above).
116By contrast, no such adjustments were made to the normal value constructed by the Commission on the basis of Article 2(6a) of the basic regulation; the normal value was considered to be at an ‘ex-works’ level, without any adjustments having to be made. However, that normal value corresponded to the cost of production, established on the basis of the production factors of the applicants multiplied by the undistorted values in the representative country (Türkiye), plus 17.6% for SG&A costs. That increase was decided on the basis of information which the Commission obtained from a Turkish producer, Ilkalem Ticaret Ve Sanayi A.S. (‘Ilkalem’), but which did not specify what was included in those SG&A costs. Those SG&A costs would normally include the costs at issue.
117The applicants state that, in their final disclosure comments, they alerted the Commission to the fact that, since the costs at issue were a priori included in the SG&A costs forming part of the normal value established by the Commission, there was a strong likelihood that the comparison between the export price and the normal value was not fair.
118The applicants submit that the Commission cannot presume that a normal value constructed in accordance with Article 2(6a) of the basic regulation is automatically at an ‘ex-works’ level.
119Wegochem supports the applicants’ arguments and submits that, in the context of the application of Article 2(10) of the basic regulation, while it is for the party claiming the adjustment to demonstrate that the conditions for granting such an adjustment are satisfied, it is for the Commission to indicate to that party what information is necessary and not to impose on it an unreasonable burden of proof.
120According to Wegochem, in their comments on final disclosure, the applicants made a request for adjustments to the normal value in order to ensure a fair comparison, and duly substantiated that request, in view of the fact that the normal value had been constructed in accordance with Article 2(6a) of the basic regulation and the details of the SG&A costs used by the Commission did not come from them but from the Orbis database, which the Commission had chosen to use, and which provided only an overall value for those costs with no further breakdown. According to Wegochem, the Commission could not require the applicants to provide data relating to a third party that was more detailed than the data available to the Commission itself.
121In any event, Wegochem claims that it is common knowledge that, as a rule, SG&A costs include the costs at issue, as is confirmed in the Orbis database user guide.
122The Commission replies that the burden to substantiate a claim for adjustments, under Article 2(10) of the basic regulation, in order to ensure a fair comparison between the export price and the normal value rests with the party claiming the adjustment. During the procedure which led to the adoption of the contested regulation, the applicants claimed that certain costs which had been deducted from the export price were not deducted from the normal value, but they did not substantiate their request for adjustments. According to the Commission, by alleging infringement of the introductory part of the provision referred to above, the applicants seek to shift the burden of proof.
123The Commission also contends that the applicants should have substantiated their request for adjustments further, despite the fact that, in the present case, the normal value had been constructed in accordance with Article 2(6a) of the basic regulation.
124The wording of the first five sentences of Article 2(10) of the basic regulation is set out in paragraph 59 above.
125In the present case, the Commission decided to make downward adjustments to the export price, based on Article 2(10)(e), (g) and (k) of the basic regulation, to remove from it the costs at issue in order to establish the level of an ‘ex-works’ transaction, in line with its practice, as is apparent from recitals 313, 314 and 357 of the contested regulation and the explanations given by the Commission in response to the written questions put by the Court and at the hearing.
126It must be noted that adjustments to establish the ‘ex-works’ level of the export price are necessary to ensure the ‘fair comparison … between the export price and the normal value’ required by Article 2(10) of the basic regulation only if the normal value is also calculated at the ‘ex-works’ level.
127Therefore, on the basis of the case-law recalled in paragraph 65 above, it was for the Commission, which had chosen to make the comparison at issue at the ‘ex-works’ level, to demonstrate that those adjustments were necessary in order for the comparison of the export price and the normal value to be fair.
128In any event, on the assumption that the burden of proof rested with the applicants, it should be noted that, in their comments on final disclosure, the applicants claimed that the export price used by the Commission did not include the costs at issue, although the normal value had been constructed by including the SG&A costs which, in all likelihood, included the costs at issue, and therefore the comparison could not be fair. They proposed that the Commission should either not deduct the costs at issue from the export price, or apply downward adjustments to the constructed normal value on the basis of data provided by Sinopec Chongqing. Therefore, as Wegochem observes, the applicants essentially asked the Commission to make adjustments in order to ensure that the comparison of the export price and the normal value would be fair, and duly substantiated their request.
129It is true that, according to the case-law, Article 2(10) of the basic regulation, unlike Article 2.4 of the anti-dumping agreement, does not state that the ‘authorities shall indicate to the parties in question what information is necessary to ensure a fair comparison and shall not impose an unreasonable burden of proof on those parties’. However, in so far as the requirements under the latter article relate to the right of the parties to an administrative procedure to be given the information necessary in order to be able to participate in it on an informed basis, and to the intensity of the burden of proof which they must discharge, those requirements form part of the general principles of EU law and, in particular, of the principle of good administration, also set out in Article 41 of the Charter of Fundamental Rights of the European Union. Accordingly, the EU institutions are required to indicate to the party requesting an adjustment the information necessary for that purpose, and not to impose an unreasonable burden of proof on that party (see, to that effect, judgment of 8 July 2008, Huvis v Council, T‑221/05, not published, EU:T:2008:258, paragraphs 77 and 78; see also, to that effect and by analogy, judgments of 10 October 2012, Ningbo Yonghong Fasteners v Council, T‑150/09, not published, EU:T:2012:529, paragraph 124, and of 11 September 2014, Gold East Paper and Gold Huasheng Paper v Council, T‑443/11, EU:T:2014:774, paragraph 166).
130In the present case, the applicants’ comments set out in paragraph 128 above were addressed in recitals 313 and 314 of the contested regulation, which are worded as follows:(313) In their comments on final disclosure, three sampled exporting producers challenged the fact that the Commission removed certain freight expenses from the export price, whilst these expenses (together with handling expenses, etc. and finance expenses such as bank charges) were not removed from the SG&A costs of the producer in the representative country.(314) The Commission disagreed with this claim. The Commission noted that there is nothing indicating that such expenses were included in SG&A costs reported for the producer in the representative country. Furthermore, the sampled exporting producers provided no evidence to the contrary. This claim was therefore rejected.’
131It must be noted that, in so far as the Commission constructed the normal value in accordance with Article 2(6a) of the basic regulation, the data which it used for that purpose, so far as the SG&A costs were concerned, did not come from the applicants but from Ilkalem, which had been chosen by the Commission. On that point, the Commission admits that no further breakdown was readily available for the SG&A costs which it used, which were taken from the Orbis database, and that, as a result, it had communicated to the applicants the information from that database relating to Ilkalem.
132However, as Wegochem submits, the data used by the Commission contain a line for ‘other operating expenses’. The user guide to the Orbis database states that ‘other operating expenses’ means ‘all costs not directly related to the production of goods sold such as commercial costs, administrative expenses, etc. + depreciation of those costs’. In reply to a written question from the Court, the Commission admitted that it did not know whether the costs at issue were included in the ‘other operating expenses’. It must therefore be noted that the abovementioned definition is such that it cannot be ruled out that those ‘other operating expenses’ include the costs at issue.
133In addition, as Wegochem also observes, in the questionnaire sent to exporting producers as part of the investigation which led to the adoption of the contested regulation, the Commission included costs corresponding to the costs at issue in the SG&A costs.
134It follows that the Commission, which did not have a more precise breakdown of Ilkalem’s SG&A costs, could not reasonably require the applicants, when they had raised in their comments on final disclosure the question of the fairness of the comparison between the export price and the normal value, to substantiate their request further by producing data relating to an unrelated party that were more precise than the data held by the Commission.
135Consequently, it must be held that, in recital 314 of the contested regulation, the Commission required the applicants to adduce proof that was unreasonable.
136That conclusion is not called into question by the recent case-law of the Court of Justice to the effect that the mere fact that the normal value was established on the basis of information not derived from the exporting producers concerned is not such as to require a relaxation of the rule on the allocation of the burden of proof, as it stems from Article 2(10) of the basic regulation and the relevant case-law (see paragraphs 65 to 67 above). According to that case-law, the rule, according to which it is for the party requesting an adjustment in respect of one of the factors referred to in that article to demonstrate that that factor is such as to affect prices and price comparability, applies irrespective of the method used to determine the normal value (see, to that effect, judgment of 28 April 2022, Changmao Biochemical Engineering v Commission, C‑666/19 P, EU:C:2022:323, paragraph 151).
137In fact, before concluding that the Commission had not placed an unreasonable burden of proof on the exporting producers concerned, the Court of Justice pointed out that it was apparent from the regulation at issue that the Commission had disclosed the relevant data to them (see, to that effect, judgment of 28 April 2022, Changmao Biochemical Engineering v Commission, C‑666/19 P, EU:C:2022:323, paragraph 152).
138As it is, in the present case, the Commission did not provide the applicants with data that would have enabled them further to substantiate their request for the costs at issue not to be deducted from the export price or for them to be deducted from the normal value.
139In the light of all of the foregoing considerations, the second part of the second plea in law must be upheld.
Third part
140The third part of the present plea comprises two complaints. First, the applicants, supported by Wegochem, dispute the Commission’s decision to adjust the normal value upwards on the basis of Article 2(10)(b) of the basic regulation (‘the second adjustment at issue’) to reflect the difference between the valued added tax (VAT) rate payable and the VAT refund rate upon exportation. Secondly, they claim that, in any event, the level at which that adjustment was set by the Commission was excessive.
–First complaint
141The applicants maintain that although their export sales were eligible for a refund of input VAT, they were not subject to any output VAT, as is clear from their invoices. In addition, according to the applicants, since the normal value was constructed on the basis of data relating to a third country, Chinese VAT is, by definition, not taken into account. The Commission had not provided any evidence to the contrary. Accordingly, it does not matter if the VAT treatment for sales in the domestic market in China is different from the VAT treatment for export sales. The Commission had not explained the reason why the second adjustment at issue was necessary when the normal value had been constructed on the basis of those data.
142The applicants conclude that the second adjustment at issue was not necessary to ensure a tax-neutral comparison between the normal value and the export price. The export price and the normal value are already at the same level of indirect taxation, in that both are expressed on a VAT-exclusive basis.
143The Commission disputes the applicants’ arguments.
144It should be recalled that Article 2(10)(b) of the basic regulation is worded as follows:‘Import charges and indirect taxesAn adjustment shall be made to the normal value for an amount corresponding to any import charges or indirect taxes borne by the like product and by materials physically incorporated therein, when intended for consumption in the exporting country and not collected or refunded in respect of the product exported to the Union.’
145In recitals 387 and 388 of the contested regulation, the Commission set out the reasons why it considered it necessary, in order to ensure that the comparison between the export price and the normal value was fair, that the second adjustment at issue should be made, despite the objections raised in particular by the applicants, in their comments on final disclosure.
146Those recitals state as follows:(387) In their comments on final disclosure, three sampled exporting producers and a Union producer/user claimed that no adjustment should be made for non-refundable VAT. Notably these interested parties argued that the Commission has not explained why such an adjustment is necessary, particularly in light of the fact that the normal value is constructed by (partially) using data from a third country. Also these interested parties claimed that the Commission has not explained why, without VAT adjustment, there would be a difference between the export price and the constructed normal value affecting price comparability. In their view, as the normal price is based on construction, there is no refund of input VAT and thus no adjustment should made for differences in VAT refund.(388) The Commission disagreed with this claim. The Commission made an adjustment under Article 2(10)(b) of the basic Regulation for the difference in indirect taxes between export sales from [China] to the Union and the normal value where indirect taxes such as VAT have been excluded. The Commission does not need to demonstrate that the constructed normal value actually incur VAT that can be fully refunded upon sales on the domestic market, as this is irrelevant. The normal value that was constructed as stated in recitals (335) to (347) and (295) did not include VAT, as the undistorted values in the representative country are used for the calculation of the normal value in the exporting country net of their VAT. The actual situation concerning the VAT treatment of the sales in the domestic market and upon export occurs entirely in [China]. The investigation concluded that in the [investigation period] in [China] the exporting producers incur a VAT liability of 13% or 16% (13% is applicable from April to June 2019 and 16% is applicable for July 2018 to March 2019) at exportation while 5%, 9% or 10% is refunded (5% is applicable from July to August 2018, 9% is applicable from September to October 2018 and 10% is applicable from November 2018 to June 2019). Therefore, in line with Article 2(10)(b) of the basic Regulation, for the difference in the indirect taxation, in this case the VAT that is partially refunded with regard to export sales, the Commission duly adjusted the normal value …’
147Since it is the Commission which took the initiative to make the second adjustment at issue, it was required, in accordance with the case-law recalled in paragraphs 65 to 67 above, to demonstrate that that adjustment was necessary.
148Consequently, it is necessary to determine whether the Commission demonstrated sufficiently the need to make the second adjustment at issue.
149It must be noted that the wording of recital 388 of the contested regulation is not easy to understand.
150However, it must be recalled that, according to the case-law, the requirements to be satisfied by the statement of reasons for EU acts, within the meaning of the second paragraph of Article 296 TFEU, depend on the circumstances of each case, in particular the content of the measure in question, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom it is of direct and individual concern, may have in obtaining explanations. It is not necessary for the reasoning to specify all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of that article 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 (see judgment of 20 January 2022, Commission v Hubei Xinyegang Special Tube, C‑891/19 P, EU:C:2022:38, paragraph 88 and the case-law cited).
151Similarly, in the case of a regulation, the statement of reasons may be limited to indicating the general situation which led to its adoption, on the one hand, and the general objectives which it is intended to achieve, on the other. Consequently, it is not possible to require that the EU institutions should set out the various facts, which may be very numerous and complex, on the basis of which the regulation was adopted, or a fortiori that they should provide a more or less complete evaluation of those facts (see judgment of 20 January 2022, Commission v Hubei Xinyegang Special Tube, C‑891/19 P, EU:C:2022:38, paragraph 89 and the case-law cited).
152It follows that a regulation imposing anti-dumping duties must contain the essential part of the Commission’s reasoning, but need not include specific reasons for each of the numerous factual arguments relied on by the interested parties. The Court may therefore ask the Commission for additional explanations and take them into account when carrying out its review, provided that they are based on material in the Commission’s file (see, to that effect and by analogy, judgment of 20 January 2022, Commission v Hubei Xinyegang Special Tube, C‑891/19 P, EU:C:2022:38, paragraphs 92, 93, 95 and 96 and the case-law cited).
153In the present case, the Commission produced, as Annexes F.6 and F.7 to its replies to the written questions put by the Court, two documents entitled in each case ‘Verification report’, which it had sent to the applicants after two visits to the premises of Sinopec Chongqing and Sinopec Ningxia. It is apparent from page 12 of Annex F.6 and page 8 of Annex F.7 that when a Chinese export company purchases from another Chinese company products which it subsequently wishes to export, it pays the VAT at a rate that was 16% and then 13% during the investigation period. When the products are exported, part of that VAT which has already been paid may be the subject of a partial refund request, at a rate that was first 5%, then 9% and finally 10% during that period. The difference between the input VAT paid on exportation and that refund represents the non-refundable VAT.
154Furthermore, at the hearing, the applicants explained that they were challenging recital 388 of the contested regulation in so far as the Commission asserted that, during the investigation period, there was VAT of 13% or 16% at exportation in China, whereas, according to them, that VAT was applicable to national sales, but not to export sales. The applicants also acknowledged that the only relevant issue was that of the non-refundable VAT.
155In the light of the explanations thus given by the Commission, which the applicants had, recital 388 of the contested regulation must be understood as meaning that the Commission, as it confirmed at the hearing, found that the export price of the applicants’ products included an amount corresponding to the non-refundable VAT, whereas the normal value had been constructed net of VAT, and, moreover, that those circumstances justified an upward adjustment of the normal value, to ensure a fair comparison.
156Consequently, it must be held that the Commission did demonstrate the need to make the second adjustment at issue.
157However, it should be noted that Article 2(10)(b) of the basic regulation does not provide for the normal value of the representative country constructed according to Article 2(6a) of that regulation to be adjusted to take account of the non-refundable VAT affecting the export price in the country in which the dumped imports originate. Thus, the Commission made an error of law as to the legal basis of the second adjustment at issue. However, it should be borne in mind that, according to settled case-law, the annulment of an EU act because the wrong legal basis was used is not justified where that error had no decisive effect on the assessment made by the author of that act (see, to that effect and by analogy, judgments of 18 December 1997, Costantini v Commission, T‑57/96, EU:T:1997:214, paragraph 23 and the case-law cited, and of 9 June 2015, Navarro v Commission, T‑556/14 P, EU:T:2015:368, paragraph 26 and the case-law cited). That principle must be applied in the present case. It should be noted that Article 2(10)(k) of the basic regulation, according to which ‘an adjustment may … be made for differences in other factors not provided for under [Article 2(10)](a) to (j) [of that regulation], if it is demonstrated that they affect price comparability …, in particular if customers consistently pay different prices on the domestic market because of the difference in such factors’, allowed the Commission to make the second adjustment at issue in order to re-establish the symmetry between the normal value and the export price of the product concerned and to ensure a fair comparison between those two values (see, to that effect and by analogy, judgments of 19 May 2021, China Chamber of Commerce for Import and Export of Machinery and Electronic Products and Others v Commission, T‑254/18, under appeal, EU:T:2021:278, paragraph 597).
158In that regard, it should be stated, in response to the argument raised by the applicants at the hearing and by Wegochem in its statement in intervention, that the second condition laid down in Article 2(10)(k) of the basic regulation is satisfied in the present case. While the non-refundable VAT has an upward effect on the export price, it is common ground that no VAT is included in the normal value that was constructed on the basis of information from a third country and which, by virtue of the application of Article 2(6a) of the basic regulation, replaces the price of the product concerned on the domestic market of the exporting country.
159In the light of all of the foregoing, the first complaint put forward by the applicants in support of the third part of the second plea in law must be rejected.
–Second complaint
160The applicants submit that, even if it were necessary to make an adjustment under Article 2(10)(b) of the basic regulation, the adjustment adopted in the contested regulation is inflated, since it disregards the fact that input VAT is calculated on the value of the input materials, whereas the export VAT refund is calculated on the sales value. They illustrate that complaint with a numerical example in which they calculate the amount of non-refundable VAT as being the difference between, on the one hand, the amount resulting from the application of the input VAT rate to the costs of certain inputs used to construct the normal value and, on the other hand, the amount resulting from the application of the VAT refund rate to the export price.
161The Commission disputes the applicants’ arguments.
162It must be recalled that the second adjustment at issue consists in an increase in the normal value constructed, net of VAT, on the basis of Turkish data, by a percentage that will ensure that a fair comparison can be made with the export price, in the light of the fact that the export price includes an amount corresponding to the non-refundable VAT. Thus, contrary to what the applicants seem to claim, the Commission did not apply the input VAT rate to the costs of inputs used to construct the normal value, nor did it subtract from the amount which it would thus have obtained an amount corresponding to the application of the VAT refund rate to the export price. It follows that the arguments of the applicants which are supposed to support the present complaint do not correspond to the facts of the present case, and therefore do not serve to demonstrate that the second adjustment at issue is inflated.
163Consequently, the second complaint put forward by the applicants in support of the third part of the second plea in law must be rejected, as, therefore, must the whole of the third part of that plea.
164In the light of all of the foregoing, it must be concluded that the first two parts of the second plea in law are well founded, while the third part is not.
Third plea in law, alleging infringement of Article 18(1) and (5) of the basic regulation and of Article 6.8 of the anti-dumping agreement and Annex II thereto
165By the present plea, the applicants, having clarified that they did not dispute that the Commission was entitled to determine the normal value for Sinopec Ningxia on the basis of the facts available within the meaning of Article 18 (see paragraph 10 above), raise two complaints. First, they claim that the Commission cannot use as facts available within the meaning of Article 18 data which it obtained as a result of a first application of that article. Secondly, they complain that the Commission subjected them to punitive treatment and that it did not rely on the ‘best information available’ as referred to in Annex II (‘the best information available’), which relates to Article 6.8 of the anti-dumping agreement, a provision that is implemented in EU law by Article 18 of the basic regulation.
First complaint
166The applicants, supported by Wegochem, recall that the facts available within the meaning of Article 18 which were used by the Commission to calculate the normal value for Sinopec Ningxia are those relating to two other groups of Chinese exporting producers which, like them, were in the sample selected by the Commission pursuant to Article 17 of the basic regulation (‘the other exporting producers’), in respect of which the Commission also applied Article 18 of that regulation. According to the applicants, once the Commission has used that provision to calculate the normal value of an exporting producer, the data thus obtained cannot serve as facts available within the meaning of Article 18 allowing the Commission to calculate the normal value of a different exporting producer included in that sample. In support of their argument, the applicants rely, by analogy, on Article 9(6) of the basic regulation, which although not applicable in the present case, shows that a general principle exists.
167The Commission, supported by Kuraray and by Sekisui, disputes the applicants’ arguments.
168It should be recalled that the relevant provisions of Article 18 of the basic regulation, which concerns ‘non-cooperation’, are worded as follows:1. In cases in which any interested party refuses access to, or otherwise does not provide, necessary information within the time limits provided for in this Regulation, or significantly impedes the investigation, provisional or final findings, affirmative or negative, may be made on the basis of the facts available.…5. If determinations, including those regarding normal value, are based on the provisions of paragraph 1, including the information supplied in the complaint, it shall, where practicable and with due regard to the time limits of the investigation, be checked by reference to information from other independent sources which may be available, such as published price lists, official import statistics and customs returns, or information obtained from other interested parties during the investigation.…6. If an interested party does not cooperate, or cooperates only partially, so that relevant information is thereby withheld, the result of the investigation may be less favourable to the party than if it had cooperated.’
169In the contested regulation, the Commission found that Sinopec Ningxia had not provided all the information necessary to calculate the normal value of its products. The Commission therefore applied Article 18(1) of the basic regulation in order to determine that normal value. To that end, it used the normal values of the other exporting producers, which it had established, in part, by applying that same provision.
170Since the applicants rely, by analogy, on Article 9(6) of the basic regulation, it should be recalled that that provision states as follows:6. When the Commission has limited its investigation in accordance with Article 17, any anti-dumping duty applied to imports from exporters or producers which have made themselves known in accordance with Article 17 but were not included in the investigation shall not exceed the weighted average margin of dumping established with respect to the parties in the sample, irrespective of whether the normal value for such parties is determined on the basis of Article 2(1) to (6) or point (a) of Article 2(7).For the purpose of this paragraph, the Commission shall disregard any zero and de minimis margins, and margins established in the circumstances referred to in Article 18.’
171It must be noted that the provisions of Article 9(6) of the basic regulation lay down the rules applicable to exporting producers which may have wanted to be included in the Commission’s sample under Article 17 of that regulation but which ultimately were not. Accordingly, those provisions are intended to protect those exporting producers, which were unable to cooperate with the Commission, including against a lack of cooperation on the part of the exporting producers in that sample. As it is, the situation of the exporting producers included in the sample is so different from that of the exporting producers excluded from it that no analogy can be drawn. Therefore, those provisions do not serve to establish a general principle precluding the Commission from being able to use, as facts available within the meaning of Article 18, data which it has obtained from a first application of that article.
172Moreover, Wegochem is wrong to claim that the applicants’ argument is supported by the Report of the Appellate Body, United States – Anti-dumping measures on certain hot-rolled steel products from Japan (WT/DS 184/AB/R), adopted by the DSB on 23 August 2001. According to paragraph 123 of that report, Article 9.4 of the anti-dumping agreement, which, like Article 9(6) of the basic regulation, concerns the imposition of anti-dumping duties applicable to exporting producers that are not part of the competent authority’s sample, ‘seeks to prevent the exporters, who were not asked to cooperate in the investigation, from being prejudiced by gaps or shortcomings in the information supplied by the investigated exporters’. Rather than support the applicants’ argument, that report confirms that the purpose of those provisions is that indicated in paragraph 171 above.
173Given that the applicants were part of the sample used by the Commission in the present case, they had the opportunity to cooperate with the Commission to ensure that it did not calculate Sinopec Ningxia’s normal value on the basis of the facts available within the meaning of Article 18. Irrespective of the reasons for their inability to provide the Commission with all the information it had requested of them, their situation is not comparable to that of the exporting producers excluded from the sample.
174Accordingly, the first complaint put forward by the applicants in support of the third plea in law must be rejected.
Second complaint
175The applicants, supported by Wegochem, note that, in the contested regulation, in the case of Sinopec Ningxia, the Commission established the normal value for each product type sold by Sinopec Ningxia on the basis of the highest normal value, for the same product type, which it had calculated for the other exporting producers, instead of using the verified information relating to Sinopec Chongqing. The differences between the latter’s production process and that of Sinopec Ningxia is, in their submission, not relevant, as confirmed by the fact that Kuraray’s production process differs from those of the Chinese exporting producers. The Commission had therefore used unreliable facts, which did not constitute the best information available and were not the product of a comparative evaluation. It had thus subjected the applicants to punitive treatment, contrary to WTO law, considering, inter alia, that the dumping margins of the other exporting producers were much higher than that of Sinopec Chongqing.
176Furthermore, the applicants dispute the Commission’s argument, in recital 333 of the contested regulation, that there is no evidence suggesting that Sinopec Ningxia’s normal value per product type is below the highest normal value per product type of the other exporting producers. The data in the Commission’s file show that the normal value it established for Sinopec Ningxia is 50% higher than the normal value for Sinopec Chongqing, even though Sinopec Chongqing’s export price is higher than that of Sinopec Ningxia.
177Wegochem submits that the Commission’s argument, in recital 333 of the contested regulation, as to there being a lack of evidence is meaningless, since the information which the Commission claimed it needed in order not to use the highest of the normal values of the other exporting producers for Sinopec Ningxia is precisely the information which Sinopec Ningxia was unable to produce, and whose absence led to the Commission’s recourse to the facts available within the meaning of Article 18.
178The Commission, supported by Kuraray and Sekisui, responds that its use as facts available within the meaning of Article 18 of the highest of the normal values of the other exporting producers in order to establish the normal value per product type sold by Sinopec Ningxia did not infringe Article 18(6) of the basic regulation. In so doing, it did not penalise the applicants. The Commission explains, first, that it took that approach because there was no evidence suggesting that Sinopec Ningxia’s normal value per product type was below the value which the Commission used and, secondly, that it could not use the average normal value of the other exporting producers, since that would have incentivised exporting producers selectively to refuse to cooperate in all the areas where they were aware that they incurred higher than average costs.
179In addition, the Commission contends that it undertook a comparative evaluation of the data relating to the other exporting producers which used a production process similar to that of Sinopec Ningxia, in so far as all those processes were coal-based. The data relating to Sinopec Chongqing were not adequate, as Sinopec Chongqing’s production process was based on oil use. The Commission thus compared all the facts available to it and used the highest of the normal values of the exporting producers whose production processes were based on coal use. Those normal values constituted the best information available.
180Kuraray states that the fact that its production process is different from those of the applicants is irrelevant. Furthermore, the applicants did not sufficiently develop their arguments in that regard, those arguments thus being inadmissible in that they did not comply with Article 76(d) of the Rules of Procedure of the General Court.
181In order to understand the rationale for Article 18 of the basic regulation, it must be recalled that it is for the Commission, as the investigating authority, to establish that the product concerned has been dumped, that there has been injury and that there is a causal link between the dumped imports and the injury. In so far as there is no provision in the basic regulation which confers on the Commission any power to compel the interested parties to participate in the investigation or to provide information, the Commission is reliant on the voluntary cooperation of those parties in supplying the necessary information. In that context, it follows from recital 27 of the basic regulation that the EU legislature considered it ‘necessary to provide that, where parties do not cooperate satisfactorily, other information may be used to establish findings and that such information may be less favourable to the parties than if they had cooperated’. Thus, the objective of Article 18 of the basic regulation is to enable the Commission to continue with the investigation even though the interested parties refuse to cooperate or do not cooperate satisfactorily. Accordingly, given that they are required to cooperate to the best of their ability, the interested parties must provide all the information that they have which the institutions consider necessary for the purpose of reaching their findings (see, by analogy, judgment of 14 December 2017, EBMA v Giant (China), C‑61/16 P, EU:C:2017:968, paragraphs 54 to 56).
182In addition, according to the case-law, Article 18 of the basic regulation constitutes the implementation, in EU law, of Article 6.8 of, and Annex II to, the anti-dumping agreement and must be interpreted in the light thereof as far as possible (see, by analogy, judgment of 22 May 2014, Guangdong Kito Ceramics and Others v Council, T‑633/11, not published, EU:T:2014:271, paragraph 40 and the case-law cited).
183According to Article 6.8 of the anti-dumping agreement:‘In cases in which any interested party refuses access to, or otherwise does not provide, necessary information within a reasonable period or significantly impedes the investigation, preliminary and final determinations, affirmative or negative, may be made on the basis of the facts available. The provisions of Annex II shall be observed in the application of this paragraph.’
184Annex II is entitled ‘Best information available in terms of paragraph 8 of Article 6’, but does not include a definition of such information.
185Paragraph 7 of Annex II, which sets out in essence the same rules as those laid down in Article 18(5) and (6) of the basic regulation, as referred to in paragraph 168 above, provides as follows:‘If the authorities have to base their findings, including those with respect to normal value, on information from a secondary source, including the information supplied in the application for the initiation of the investigation, they should do so with special circumspection. In such cases, the authorities should, where practicable, check the information from other independent sources at their disposal, such as published price lists, official import statistics and customs returns, and from the information obtained from other interested parties during the investigation. It is clear, however, that if an interested party does not cooperate and thus relevant information is being withheld from the authorities, this situation could lead to a result which is less favourable to the party than if the party did cooperate.’
186It should be noted that Annex II is ‘incorporated by reference into Article 6.8’ of the anti-dumping agreement (Report of the Appellate Body, United States – Anti-dumping measures on certain hot-rolled steel products from Japan (WT/DS 184/AB/R), adopted by the DSB on 23 August 2001 (paragraph 75)) and that the provisions of that annex are mandatory, despite the fact that they are often phrased in the conditional tense (Panel Report, United States – Anti-dumping and countervailing measures on steel plate from India (WT/DS 206/R), adopted by the DSB on 29 July 2002 (paragraph 7.56)).
187According to the Panel Report, Mexico – Definitive anti-dumping measures on beef and rice (WT/DS/295/R), adopted by the DSB on 20 December 2005 (paragraph 7.238), the use of facts available under Article 6.8 of the anti-dumping agreement is not intended to operate as a punishment for those parties that do not provide the information requested of them by the competent authority. Similar considerations appear in the Panel Report, China – Countervailing and anti-dumping duties on grain oriented flat-rolled electrical steel from the United States (WT/DS/414), adopted by the DSB on 16 November 2012 (paragraph 7.391), which states that facts available within the meaning of that article should not be applied in a manner to punish non-cooperation. That report also confirms that, as paragraph 7 of Annex II makes clear, non-cooperation could result in a situation which is less favourable than if there had been cooperation.
188However, it must also be recalled that the Courts of the European Union have previously ruled that when the Commission bases its conclusions on the facts available in situations where the facts submitted are deficient, that institution is not required to explain why the facts available that were used were the best possible, since no such obligation is apparent either from Article 18 of the basic regulation or from the case-law (see, to that effect and by analogy, judgment of 19 March 2015, City Cycle Industries v Council, T‑413/13, not published, EU:T:2015:164, paragraph 132).
189First, it follows that when the Commission uses the facts available within the meaning of Article 18, it is not entitled to penalise an exporting producer on the ground that that exporting producer has not cooperated or has cooperated insufficiently. Secondly, it is possible that even where the Commission has adhered to that principle, the party concerned may find itself in a less favourable situation than it would have been in had it fully cooperated. That last finding is, moreover, consistent with the clear wording of Article 18(6) of the basic regulation. Thirdly, and in any event, the Commission is not required to explain why the facts available that were used were better.
190It should also be noted that, while the Commission does not enjoy an unlimited discretion, according to settled case-law, in the sphere of the common commercial policy and, most particularly, in the realm of measures to protect trade, the EU institutions enjoy a broad discretion by reason of the complexity of the economic and political situations which they have to examine, with the result that the judicial review of that broad discretion must be limited to verifying whether relevant procedural rules have been complied with, whether the facts relied on have been accurately stated, and whether there has been a manifest error in the appraisal of those facts or a misuse of powers (see judgment of 12 May 2022, Commission v Hansol Paper, C‑260/20 P, EU:C:2022:370, paragraph 58 and the case-law cited).
191In addition, the General Court’s review of the evidence on which the EU institutions based their findings does not constitute a new assessment of the facts replacing that made by the institutions. That review does not encroach on the broad discretion of those institutions in the field of commercial policy, but is restricted to showing whether that evidence was able to support the conclusions reached by the institutions. The General Court must therefore not only establish whether the evidence put forward is factually accurate, reliable and consistent but also ascertain whether that evidence contained all the relevant information which had to be taken into account in order to assess a complex situation and whether it was capable of substantiating the conclusions reached (see judgment of 12 May 2022, Commission v Hansol Paper, C‑260/20 P, EU:C:2022:370, paragraph 59 and the case-law cited).
192In the present case, it is common ground that, as is apparent from recitals 327 to 333 of the contested regulation, since the applicants were unable to provide the Commission with the data it considered it needed, the Commission determined the normal value for Sinopec Ningxia on the basis of the facts available within the meaning of Article 18. It used, for that purpose, for each product type, the highest of the normal values of the other exporting producers, which it had established pursuant to Article 18 of the basic regulation with regard to self-produced factors of production, such as steam and electricity generated directly at the exporting producer’s production site, as is shown by the information provided by the Commission in response to a question put by the Court. The Commission did not use, as facts available within the meaning of Article 18, facts relating to Sinopec Chongqing because Sinopec Chongqing’s oil-based production process differed from the coal-based production process of Sinopec Ningxia and those of other exporting producers.
193In the light of those factors, it must be held that once the Commission had taken notice of the undisputed fact (see paragraph 165 above) that the applicants were unable to provide it with the necessary data relating to Sinopec Ningxia, it compared the data which it did have in its possession. Accordingly, the applicants are wrong to accuse the Commission of having failed to carry out a comparative examination of the data it had at its disposal, even though it is apparent from the case-law referred to in paragraph 188 above that it was not required to explain why the facts available that were used were better.
194As to the merits of the choice made by the Commission, it must be stated that, in the exercise of its broad discretion, the Commission was entitled to consider, without making a manifest error of assessment, that the data relating to Sinopec Chongqing were not the most relevant data because Sinopec Ningxia’s production process had greater similarities with those of other exporting producers than with that of Sinopec Chongqing, the latter being the only one to use oil, rather than coal, as a raw material. As the Commission pointed out in recital 332 of the contested regulation, the construction of the normal value is based on factors of production, including raw materials and their use rate.
195That conclusion is not called into question by the other arguments put forward by the applicants.
196First, they rely on the fact that Sinopec Chongqing and Sinopec Ningxia are part of the same group, that those two companies’ sales to the European Union are made through the same related company Sinopec Central-China, and that all those companies’ pricing is similar, both on the Chinese market and on the EU market. The applicants also refer to their comments on final disclosure, in which they had stated that those elements were not called into question by the fact that Sinopec Chongqing’s production process differed from that of Sinopec Ningxia.
197However, first of all, it must be noted that, in the case of construction of the normal value, as in this instance, those companies’ prices in China are not relevant. Next, the construction of the normal value under Article 2(6a) of the basic regulation is independent of the export price. Lastly, it is not manifestly incorrect to take the view that the production process has a bearing on the construction of the normal value according to that provision.
198Secondly, the applicants, supported by Wegochem, submit that the normal values of the other exporting producers cannot be the best information available, since those normal values were established on the basis, partly, of facts available within the meaning of Article 18.
199However, it should be noted that the Commission, faced as it was with the fact that the applicants were unable to provide it with the data required to enable it to construct the normal value for Sinopec Ningxia on the basis of data relating to that company, was required to use the facts available within the meaning of Article 18. To that end, it had to decide which of the data relating to Sinopec Chongqing and to the other exporting producers were the most relevant. While the data relating to the other exporting producers had, in turn, been established partly by applying Article 18 of the basic regulation, the data relating to Sinopec Chongqing concerned a company whose production process differed from that of Sinopec Ningxia to a greater extent than the production processes of the other exporting producers.
200In the present case, it must be held that the Commission, in the exercise of its broad discretion, was entitled to rely on the degree of similarity between the production processes used by the exporting producers to select the relevant facts available. On that point, it must be noted that, by its judgment of today’s date, Inner Mongolia Shuangxin Environment-Friendly Material v Commission (T‑763/20), concerning an action brought against the contested regulation by an exporting producer whose data were used as facts available within the meaning of Article 18 in respect of Sinopec Ningxia, the Court rejected that exporting producer’s plea alleging infringement of Article 18 of the basic regulation. Lastly, as has been held in paragraphs 170 to 174 above, contrary to the applicants’ contention, there is no general principle that would preclude the double application of that article.
201Consequently, the Commission did not make a manifest error of assessment when it chose to use the data of the other exporting producers instead of those of Sinopec Chongqing.
202Thirdly, the applicants invoke paragraph 27 of the judgment of 30 April 2013, Alumina v Council (T‑304/11, EU:T:2013:224). According to that judgment, if normal value cannot be established under Article 2(1) of the basic regulation, its construction in accordance with Article 2(3) and (6) of that regulation is intended to establish a normal value which comes as close as possible to the selling price that a product would have if it were sold in the country of origin or the exporting country in the ordinary course of trade.
203However, the Commission does not exceed its broad discretion if it finds that reliance on data relating to a company whose production process differs from that used by the company whose normal value is to be constructed is not the best means of pursuing the objective referred to by the case-law cited in paragraph 202 above.
204Fourthly, the applicants rely on paragraphs 121 and 137 of the judgment of 3 May 2018, Distillerie Bonollo and Others v Council (T‑431/12, EU:T:2018:251), in claiming that differences in relation to production processes are not relevant.
205As it is, in the judgment of 3 May 2018, Distillerie Bonollo and Others v Council (T‑431/12, EU:T:2018:251), the Court noted that the product concerned had the same characteristics and the same basic uses, irrespective of the production process used, of the two that were relevant. It concluded from this that it was not contrary to Article 2 of the basic regulation to compare the normal value calculated on the basis of data relating to one of the production processes with the export price calculated on the basis of data relating to the other production process.
206In this case, the present plea does not concern the comparison between the normal value and the export price, but the comparison between various data which the Commission was entitled to use, as facts available within the meaning of Article 18, to establish the normal value for Sinopec Ningxia, a comparison following which the Commission was required to choose the most relevant data.
207It follows that it cannot be inferred from the case-law invoked by the applicants that the Commission made a manifest error of assessment by ruling out reliance on the data relating to Sinopec Chongqing because of differences between its production process and that of Sinopec Ningxia.
208Fifthly, the applicants maintain that there is, in WTO law, a general principle according to which the information used should be as close as possible to the exporting producer in question.
209The applicants’ basis for claiming that that general principle exists is paragraph 6.34 of the Report of the Appellate Body, European Union – Anti-dumping measures on biodiesel from Argentina (WT/DS 473/AB/R), adopted by the DSB on 26 October 2016, a paragraph which includes an interpretation of Article 2.2.2 of the anti-dumping agreement, which relates to SG&A costs and to the exporting producers’ profit. As it is, the applicants are unable to explain how it might be possible to interpret by analogy with that provision Article 6.8 of the anti-dumping agreement, which corresponds to Article 18 of the basic regulation, the infringement of which is invoked in the context of the present plea.
210Sixthly, the applicants claim that, since, in the context of its price undercutting analysis, the Commission did not attach any importance to the differences between the production process of Kuraray and that of the applicants, it was not entitled to take the view that the data relating to Sinopec Chongqing’s normal value were not the best information available because of the fact that the latter’s production process was different from that of Sinopec Ningxia. However, it must be noted that the price undercutting analysis is not relevant to the evaluation of normal value. Accordingly, that argument must be rejected as unfounded, and it is not necessary to rule on its admissibility, which is contested by Kuraray (see paragraph 180 above).
211Since it has been found that the Commission was entitled to reject, as relevant data, the data relating to Sinopec Chongqing, and was entitled to use data relating to the other exporting producers, the Court must examine the Commission’s decision to use, for each product type sold by Sinopec Ningxia, the highest of the normal values of the other exporting producers.
212While, in choosing the highest normal value, the Commission necessarily made a comparison between the normal values of the other exporting producers, it is necessary to verify whether, in so doing, as the applicants claim, the Commission penalised them for their lack of cooperation, contrary to the principles recalled in paragraph 187 above.
213In that regard, on the one hand, it is apparent from the case-law that a presumption, even where it is difficult to rebut, remains within acceptable limits so long as it is proportionate to the legitimate aim pursued, it is possible to adduce evidence to the contrary and the rights of the defence are safeguarded (see judgment of 18 July 2013, Schindler Holding and Others v Commission, C‑501/11 P, EU:C:2013:522, paragraph 107 and the case-law cited).
214On the other hand, it is apparent from Article 18 of the basic regulation that it was not the intention of the EU legislature to establish a legal presumption making it possible to infer directly from the non-cooperation of the interested parties that the normal value, per product type, is not below the highest, per product type, of the normal values of the other cooperating exporting producers, and thereby exempting the EU institutions from any requirement to adduce proof. However, given that it is possible, as recognised by the case-law in the realm of measures to protect trade, to make findings, even definitive findings, on the basis of the facts available and to treat a party who does not cooperate or does not cooperate fully less favourably than if it had cooperated, it is equally evident that the EU institutions are authorised to act on the basis of a body of consistent evidence enabling them to choose, from the facts available within the meaning of Article 18 of the basic regulation, the facts that are most relevant. Any other approach would in fact risk undermining the efficiency of the EU trade defence measures each time the EU institutions are faced with non-cooperation in the context of the determination of normal value (see, to that effect and by analogy, judgment of 4 September 2014, Simon, Evers & Co., C‑21/13, EU:C:2014:2154, paragraphs 36 and 37).
215In the present case, in recital 329 of the basic regulation, the Commission in essence stated that, because of substantial and serious deficiencies in the reporting of the cost of production, the normal value for Sinopec Ningxia had been calculated using the information provided by the other cooperating exporting producers. It added that it had used the highest constructed normal value of the other cooperating exporting producers.
216In recital 333 of the contested regulation, having replied to the claims made by an exporting producer included in the sample and an EU producer-user against the methodology used in relation to Sinopec Ningxia, the Commission stated that, ‘since [it had been] unable to verify and therefore use the data supplied by Sinopec Ningxia for the construction of its normal value, there [was] no evidence suggesting that Sinopec Ningxia’s normal value per product type would [have been] below the highest normal value per product type of the other cooperating producers that use[d] similar raw materials’.
217In that regard, the Commission moreover acknowledged during the hearing that, in recital 333 of the contested regulation, it had applied a presumption that Sinopec Ningxia’s normal value, per product type, was not below the highest, per product type, of the normal values of the other exporting producers.
218It should therefore be observed that, in recitals 329 and 333 of the contested regulation, the Commission, following its finding of the applicants’ non-cooperation, applied a presumption that Sinopec Ningxia’s normal value, per product type, is not below the highest, per product type, of the normal values of the other exporting producers.
219In addition, the Commission, when asked at the hearing specifically whether the file contained material that would positively justify the systematic use, for Sinopec Ningxia, of the highest of the normal values of the other exporting producers, replied that the element of the file on which it had relied was the applicants’ lack of cooperation.
220Therefore, it must be held that, in applying the presumption referred to above, the Commission erred in law. According to the Commission’s reasoning, in order to be able to rebut the presumption referred to in paragraph 218 above, the applicants should have provided the Commission with the information the non-production of which specifically represents the factor that triggered the Commission’s use of the facts available within the meaning of Article 18.
221In the light of all of the foregoing considerations, the present plea must be upheld in so far as the Commission calculated Sinopec Ningxia’s normal value by using, for each product type, the highest of the normal values of the other exporting producers, and rejected as to the remainder.
Fourth plea in law, alleging infringement of Article 3(2) and (3) of the basic regulation when establishing price undercutting, and infringement of Article 3(6) of that regulation
222The fourth plea is in three parts, all relating to infringement of Article 3(2) and (3) of the basic regulation. More specifically, those parts concern, first, failure to conduct a segmented price undercutting analysis; secondly, failure to make adjustments to account for quality differences between imported PVA and PVA produced in the European Union; and, thirdly, failure to establish price undercutting for the relevant product as a whole. The applicants also rely on the consequent infringement of Article 3(6) of that regulation.
223Since, in addition to challenging the merits of that plea, the Commission contends that the plea is ineffective, that issue must be examined first of all.
Whether the fourth plea in law is effective
224According to settled case-law, in an action for annulment, a plea in law which, even if it were well founded, would be incapable of bringing about the annulment which the applicant seeks, is considered ineffective (order of 26 February 2013, Castiglioni v Commission, T‑591/10, not published, EU:T:2013:94, paragraph 45, and judgment of 15 January 2015, France v Commission, T‑1/12, EU:T:2015:17, paragraph 73; see also, to that effect, judgment of 21 September 2000, EFMA v Council, C‑46/98 P, EU:C:2000:474, paragraph 38).
225The Commission contends that, in the contested regulation, in addition to examining price undercutting by imports, it found that there was price suppression in respect of PVA sold by the Union industry, as is apparent from recitals 460 to 462, 473 and 490 of that regulation. The applicants had failed to address how its suppression findings would be insufficient to support its conclusion that the dumped imports were causing injury to the Union industry. Thus, the fourth plea, by which the applicants challenge the examination of price undercutting by imports, is, it argues, ineffective.
226The applicants respond that simple statements, not supported by evidence, concerning price suppression cannot remedy the infringements of Article 3(2) and (3) of the basic regulation invoked by the present plea.
227It should be recalled that the terms of the relevant provisions of Article 3 of the basic regulation are as follows:1. Pursuant to this Regulation, the term “injury” shall, unless otherwise specified, be taken to mean material injury to the Union industry, threat of material injury to the Union industry or material retardation of the establishment of such an industry and shall be interpreted in accordance with the provisions of this Article.2.A determination of injury shall be based on positive evidence and shall involve an objective examination of:(a) the volume of the dumped imports and the effect of the dumped imports on prices in the Union market for like products; and(b) the consequent impact of those imports on the Union industry.3. With regard to the volume of the dumped imports, consideration shall be given to whether there has been a significant increase in dumped imports, either in absolute terms or relative to production or consumption in the Union. With regard to the effect of the dumped imports on prices, consideration shall be given to whether there has been significant price undercutting by the dumped imports as compared with the price of a like product of the Union industry, or whether the effect of such imports is otherwise to depress prices to a significant degree or prevent price increases, which would otherwise have occurred, to a significant degree. No one or more of those factors can necessarily give decisive guidance.…5. The examination of the impact of the dumped imports on the Union industry concerned shall include an evaluation of all relevant economic factors and indices having a bearing on the state of the industry …6. It must be demonstrated, from all the relevant evidence presented in relation to paragraph 2, that the dumped imports are causing injury within the meaning of this Regulation. Specifically, that shall entail demonstrating that the volume and/or price levels identified pursuant to paragraph 3 are responsible for an impact on the Union industry as provided for in paragraph 5, and that that impact exists to a degree which enables it to be classified as material.’
228The provisions of Article 3(2), (3) (5) and (6) of the basic regulation are highly similar or identical to those of Article 3.1, Article 3.2 and Article 3.5 of the anti-dumping agreement. Therefore, the principles referred to in paragraphs 20 to 22 apply.
229According to the Report of the Appellate Body, China – Countervailing and anti-dumping duties on grain oriented flat-rolled electrical steel from the United States (WT/DS 414/AB/R), adopted by the DSB on 16 November 2012 (paragraph 137), the elements relevant to the consideration of significant price undercutting may differ from those relevant to the consideration of significant price depression and suppression. Thus, even if prices of subject imports do not significantly undercut those of like domestic products, subject imports could still have a price-depressing or price-suppressing effect on domestic prices.
230Similarly, it is apparent from the Panel Report, Korea – Anti-dumping duties on pneumatic valves from Japan (WT/DS 504/R), adopted by the DSB on 30 September 2019 (paragraph 7.299), that, while the existence of price undercutting by imports is frequently relied on as an element suggesting that the effect of dumped imports is depression or suppression of prices in the importing country industry, the competent authority may properly consider that the effect of dumped imports is price depression or price suppression notwithstanding the absence of undercutting.
231In the present case, the parties are agreed that, in principle, suppression of Union industry prices can occur even if there is no price undercutting by imports.
232However, whereas, according to the Commission, the findings in the contested regulation concerning the existence of Union industry price suppression are independent of those concerning price undercutting by imports, the applicants argue that that suppression is a consequence of that undercutting.
233It should be recalled that recital 490 of the contested regulation reads as follows:‘The analysis of the injury indicators in recitals (398) to (478) shows that the economic situation of the Union industry worsened during the period considered and this coincided with a significant increase of dumped imports from the country concerned, which were found to undercut the Union industry prices during the investigation period and causing significant price suppression, as the Union industry was not able to increase its prices in line with the increase of cost of production.’
234On the basis of the sole conjunction ‘and’ which appears, in some language versions of the contested regulation, between the expressions ‘undercut the Union industry prices during the investigation period’ and ‘causing significant price suppression’, recital 490 of that regulation might be read as meaning that the significant increase in Chinese imports resulted, on the one hand, in price undercutting and, on the other, in a price suppression that is independent of the price undercutting.
235It is appropriate nevertheless to determine whether the contested regulation contains an analysis of the link between that price suppression and the increase in imports that may be based on elements other than those relating to price undercutting.
236In that respect, the Commission invokes recitals 460 to 462 and 473 of the contested regulation.
237It is apparent from recitals 460 to 462 and 473 of the contested regulation that the Commission studied the evolution of Union industry sales prices and found that those prices had increased by 14% during the period considered, whereas the unit cost of production had increased by 24%, because of the increase in the price of the principal raw material used. It noted that the price pressure operated by the Chinese imports had prevented the Union industry from raising its prices further and offsetting that increase.
238It follows that recitals 460 to 462 and 473 of the contested regulation cannot be interpreted as meaning that the suppression of Union industry prices arises from factors other than the undercutting of prices by imports. The reason why, notwithstanding the significant increase in the unit cost of production, the Union industry did not increase its prices commensurately is the pressure exerted by the dumped imports. That pressure flows from the fact that the Chinese exporting producers’ prices are lower than those of the Union industry, which reflects the existence of price undercutting by imports.
239Furthermore, the Commission is wrong to rely on paragraphs 95 to 99 of the judgment of 14 September 2022, Methanol Holdings (Trinidad) v Commission (T‑744/19, under appeal, EU:T:2022:558), and paragraphs 257 to 261 of the judgment of 14 September 2022, Nevinnomysskiy Azot and NAK ‘Azot’ v Commission (T‑865/19, not published, under appeal, EU:T:2022:559). First of all, as regards the first of those judgments, the issue dealt with in the paragraphs on which the Commission relies concerned the admissibility of a complaint raised in the reply, whereas in the present case the fourth plea was raised in the application. Moreover, in both judgments, in the paragraphs immediately following those on which the Commission relies, the Court pointed out that there was a link between, on the one hand, the price undercutting and, on the other, the price depression and suppression. Thus, the Court did not attribute any independent value to the price depression or suppression in its finding of injury to the Union industry.
240In the light of the foregoing, it must be concluded that, contrary to the Commission’s contention, the fourth plea in law is effective, and the question of its merits must therefore be examined.
The merits of the fourth plea in law
–First part
241The applicants submit that, contrary to the Commission’s finding in the contested regulation, the PVA market is divided into two segments. The first segment covers high-quality PVA grades, characterised by narrow viscosity and hydrolysis ranges, a low methanol content, a low ash content and a smaller particle size. Those PVA grades are sold at higher prices. The second segment concerns lower-quality grades, characterised by wide viscosity and hydrolysis ranges, a high methanol content, a high ash content and a larger particle size. Those PVA grades are sold at lower prices.
242The applicants submit that while, in theory, certain industries using lower-quality PVA grades might be able to switch to high-grade PVA, such a switch would not be economically logical. Meanwhile, industries using higher-quality grades of PVA cannot replace them with lower-quality grades.
243Due to the significant differences in prices and quality between the PVA grades pertaining to the abovementioned first and second market segments, those grades are not directly interchangeable on the demand side.
244According to the applicants, since the PVA market is divided into the two segments referred to above, the Commission should have taken their existence into consideration in its price undercutting analysis, particularly given that many Chinese producers were primarily producing PVA pertaining to the low market segment, whereas PVA produced in the European Union were usually in the high market segment.
245In support of their arguments, the applicants rely, inter alia, on the Report of the Appellate Body, China – Measures imposing anti-dumping duties on high-performance stainless-steel seamless tubes (‘HP-SSST’) from Japan (WT/DS 454/AB/R), adopted by the DSB on 28 October 2015 (paragraph 5.181) (‘the HP-SSST report’).
246Following delivery of the judgment of 20 January 2022, Commission v Hubei Xinyegang Special Tube (C‑891/19 P, EU:C:2022:38), the applicants, in response to a written question from the General Court, explained their arguments in the light of the guidance stemming from that judgment, by which the Court of Justice set aside the judgment of 24 September 2019, Hubei Xinyegang Special Tube v Commission (T‑500/17, not published, EU:T:2019:691), which they had invoked in their pleadings. In their view, the present case entails the three exceptional circumstances, as set out in that judgment of the Court of Justice, in which the Commission cannot simply examine price undercutting on the basis of product control numbers (‘PCN’) but is required to carry out an analysis by market segment. First, according to the applicants, the PVA market is divided into two distinct segments; secondly, PVA prices are significantly different depending on the segment; and, thirdly, Union industry sales of PVA products are concentrated in the high-quality PVA segment, whereas imports from China are concentrated in the lower-quality segment.
247The Commission, supported by Kuraray and Sekisui, disputes the applicants’ arguments.
248The relevant provisions of Article 3 of the basic regulation were recalled in paragraph 227 above.
249According to the case-law, the calculation of the price undercutting of imports is carried out, in accordance with Article 3(2) and (3) of the basic regulation, for the purposes of determining the existence of injury suffered by the Union industry by reason of those imports and it is used, more broadly, to assess that injury and to determine the injury margin, namely the injury elimination level (see, by analogy, judgment of 10 April 2019, Jindal Saw and Jindal Saw Italia v Commission, T‑301/16, EU:T:2019:234, paragraph 176). The Commission has a broad discretion for that purpose (see judgment of 20 January 2022, Commission v Hubei Xinyegang Special Tube, C‑891/19 P, EU:C:2022:38, paragraph 36 and the case-law cited).
250The basic regulation does not contain any definition of the concept of ‘price undercutting’ and does not lay down any method for the calculation of that concept (judgment of 20 January 2022, Commission v Hubei Xinyegang Special Tube, C‑891/19 P, EU:C:2022:38, paragraph 73; see also, by analogy, judgment of 10 April 2019, Jindal Saw and Jindal Saw Italia v Commission, T‑301/16, EU:T:2019:234, paragraph 175).
251However, it is apparent from the very wording of Article 3(3) of the basic regulation that the method used to determine possible price undercutting must, in principle, be applied at the level of the ‘like product’, within the meaning of Article 1(4) of that regulation, even though that product may consist of different product types falling within several market segments (see, to that effect, judgment of 20 January 2022, Commission v Hubei Xinyegang Special Tube, C‑891/19 P, EU:C:2022:38, paragraph 74 and the case-law cited).
252Accordingly, the basic regulation does not, in principle, impose any obligation on the Commission to carry out an analysis of the existence of price undercutting at a level other than that of the like product (judgment of 20 January 2022, Commission v Hubei Xinyegang Special Tube, C‑891/19 P, EU:C:2022:38, paragraph 75).
253That interpretation is confirmed by paragraph 5.180 of the HP-SSST report, relied on by the applicants, according to which the competent authority is not required, under Article 3.2 of the anti-dumping agreement, to establish price undercutting for each of the product types under investigation or for the entire range of products constituting the like domestic product (judgment of 20 January 2022, Commission v Hubei Xinyegang Special Tube, C‑891/19 P, EU:C:2022:38, paragraph 76).
254However, as confirmed in paragraph 5.180 of the HP-SSST report, since, under Article 3(2) of the basic regulation, the Commission is required to carry out an ‘objective examination’ of the effect of the dumped imports on prices in the Union industry for like products, it is required to take account in its analysis of price undercutting of all the relevant positive evidence, including, where applicable, evidence relating to the various market segments of the product under consideration (judgment of 20 January 2022, Commission v Hubei Xinyegang Special Tube, C‑891/19 P, EU:C:2022:38, paragraph 77).
255It is also apparent from the case-law that examination of price undercutting on the basis of a method consisting in a PCN-by-PCN comparison (‘the PCN method’) does enable, to a certain extent, account to be taken of the possible segmentation of the market for the product under consideration (see, to that effect, judgment of 20 January 2022, Commission v Hubei Xinyegang Special Tube, C‑891/19 P, EU:C:2022:38, paragraphs 106, 113 and 114).
256The fact remains that, in order to ensure that the analysis of price undercutting is objective, the Commission may, in certain circumstances, be required to carry out such an analysis at the level of the market segments of the product in question, even though the broad discretion enjoyed by that institution, in particular in determining the existence of injury (see paragraph 249 above), extends, at the very least, to decisions on the choice of method of analysis, to the data and evidence to be gathered, to the method of calculation to be used in order to determine the undercutting margin and to the interpretation and evaluation of the data gathered (see, to that effect, judgment of 20 January 2022, Commission v Hubei Xinyegang Special Tube, C‑891/19 P, EU:C:2022:38, paragraph 78).
257Accordingly, the Commission may, in certain exceptional circumstances, be required to carry out an additional analysis of price undercutting consisting of a comparison of the prices in each segment in addition to the application of the PCN method (see, to that effect, judgment of 20 January 2022, Commission v Hubei Xinyegang Special Tube, C‑891/19 P, EU:C:2022:38, paragraph 111).
258Those exceptional circumstances relate to the existence both of a clear segmentation of the market for the product under consideration involving significant variations between market segments (‘the first condition’) and a situation characterised by a high concentration of domestic sales and dumped imports in separate segments (‘the second condition’) (see, to that effect, judgment of 20 January 2022, Commission v Hubei Xinyegang Special Tube, C‑891/19 P, EU:C:2022:38, paragraphs 79 to 81, 110 and 111).
259The arguments put forward by the applicants in support of the present part of the fourth plea must be examined in the light of those considerations and of the considerations concerning the scope of judicial review set out in paragraphs 190 and 191 above.
260In the contested regulation, the Commission stated as follows:‘(60) The information collected during the investigation also showed that some of these grades (sold both by the Union industry and exporting producers) have a broad range of application and, generally, have a lower price. Other more specialised grades designed for applications with narrow specifications … are on average more expensive. These grades are also sold by Union and exporting producers.(61) However, despite a large number of grades, the Commission found that there is no defined segments in the PVA market. Different users can source a number of PVA grades, depending on their required technical specifications. For some users the ash content is the most important element, for others the viscosity, and some are able to use mostly any of the specification. Each user industry can use a different set of PVA grades interchangeably. Even though certain users … are more limited in terms of the number of grades they can use, their grade range still overlaps with other type of users, which are able to source a wider range of grades.(62) For the reasons above, the Commission concluded that all grades compete with each other, at least to a certain extent, and therefore a segment analysis was not warranted nor appropriate in this case …(64) The analysis carried out by the Commission confirmed that the different grades, as explained in recital (61), are interchangeable between each other, at least to a certain extent. Even if it is true that certain users can source only a limited set of grades for their application, these grades do not pertain exclusively to one user’s downstream industry but overlap with the grades sourced by other downstream applications. Moreover, the investigation revealed that the Chinese exporting producers supply grades for all the four main applications of PVA and compete in full with the grades sold by the Union industry.…(78) [The] various grades of PVA share the basic characteristics and their uses are to a large extent identical and interchangeable. The sole ash or methanol content levels do not define, alone, the applications or the price of the product concerned as it is the combination with the other relevant characteristics, such as viscosity and hydrolysis, which defines the grade characteristics, its possible end use and the selling price.(79) The evidence collected in the investigation revealed that, while the average price difference between the PVA grades with “low ash content” versus those with “standard ash content” is about 10%. However, PVA prices can vary up to 40% between PVA grades with the same ash content. In addition, certain allegedly cheaper grades with a “standard” ash content can be up to 27% more expensive than those with “low ash content” grades. Therefore it cannot be concluded, as the interested parties claimed, that the Union market was divided into high-quality PVA (produced by the Union industry) and low-quality PVA (imported from [China]) based on the ash and methanol content, neither that this alleged division is reflected in the prices and the production cost. On the contrary, … several grades with alleged “standard” specifications are also in competition with alleged “high-end” grades of the like product.’
261It follows that the Commission ruled out the existence of any clear segmentation of the PVA market and a high concentration of Union industry sales and dumped imports in two distinct segments.
262In so far as the Commission was required to carry out an objective examination of price undercutting (see paragraphs 254 and 256 above), it is necessary to ascertain whether its findings are sufficiently supported by the documents in the case file of the procedure which led to the adoption of the contested regulation, including those not explicitly referred to in the contested regulation (see paragraph 152 above).
263In the present case, the Court asked the Commission to specify the elements of the case file which enabled it to rule out both the existence of a segmented market and the concentration of imports and Union industry sales in separate segments.
264On that point, the Commission referred to the replies of PVA users to its request for information about their PVA purchases by PCN and to the information supplied to it by Kuraray.
265As regards the lack of clear segmentation, the Commission produced an example of its request for information, although it did not produce the replies received, which were described as confidential. It also lodged an extract from Kuraray’s website. At the hearing, the Commission stated that an earlier version of that extract was included in the case file of the procedure which led to the adoption of the contested regulation, and this was not contradicted by the applicants.
266It must be stated that the extract of Kuraray’s website shows that there are several grades of PVA whose main uses are both in industries that would use high-quality PVA and in industries that would use lower-quality PVA. As the Commission observes, several PVA grades used in the paper and adhesives industries are also used in the emulsion polymerisation and polyvinyl butyral production industries. Consequently, that extract serves to confirm that the PVA market is not clearly segmented.
267Furthermore, it should be noted that, in so far as the first condition relates to the existence of clear segmentation of the product at issue, in order to rule out the possibility of that condition being satisfied, contrary to the applicants’ contention, it is not necessary that all users should be able to purchase all PVA grades and that those grades should therefore be completely interchangeable.
268Thus, it must be held that the first condition is not satisfied in the present case.
269Accordingly, it is not necessary to rule on the second condition, as it may already be concluded that the Commission was not required to carry out an additional analysis of price undercutting over and above that based on the PCN method.
270In any event, as regards the second condition, the following must be noted.
271The case file in the present case includes three tables that were in the case file of the procedure which led to the adoption of the contested regulation, each table relating to one of the three main Chinese exporting producers that cooperated, including the applicants. Displayed in those tables are the quantities of PVA, by PCN, imported into the European Union. However, on grounds of confidentiality, the tables do not show, by PCN, the importance of sales made by Kuraray. A study of the figures in those tables serves to establish that the imports, taken as a whole, cover eight different PCN, in their revised versions, which are not disputed by the applicants, and that the quantities in respect of two of those PCN are equivalent, in each case, to approximately 29% of total imports from those exporting producers, whereas the quantities in respect of six other PCN are, in percentage terms, between 3.24 and 9.54%.
272Consequently, the imports cannot be considered to represent a high concentration and, therefore, even without the data relating to Kuraray’s sales, it must be held that the second condition is not satisfied.
273Since the conditions laid down by the case-law recalled in paragraph 258 are not satisfied, it must be concluded that the Commission was not required to carry out an additional analysis of price undercutting over and above that based on the PCN method.
274In the light of the foregoing considerations, the first part of the fourth plea in law must be rejected.
–Second part
275The applicants submit that the Commission did not properly establish price undercutting because, while it made an adjustment of 10% to account for the lower quality, in terms of ash content, of the PVA imported from China compared to the PVA produced in the European Union, it refused to make other adjustments to reflect the other quality differences between those PVA.
276The Commission, supported by Sekisui, disputes the applicants’ arguments.
277It should be recalled that the relevant recitals of the contested regulation read as follows:(423) Price undercutting of the imports was established on the basis of data of the cooperating exporting producers in the country concerned and domestic sales data provided by the Union industry for the period of investigation …(424) The price comparison was made on a type-by-type basis for transactions at the same level of trade, and after deduction of deferred discounts. When necessary, the import price of the product concerned imported from [China] was duly adjusted when compared with the comparable product type sold by the Union industry.(425) As regards the differences in certain characteristics between the product concerned and the like product … the product types imported from [China] compete with the product types produced and sold by the Union industry. However, as the ash content of the PVA produced and sold by the cooperating exporting producers was overall higher than the ash content of the PVA produced and sold by the Union industry, the Commission considered that an adjustment was warranted to ensure a fair comparison between the Chinese and EU product types on the basis of PCNs. The Commission established the adjustment on the basis of the difference found for PVA imports with high and low ash content from third countries on the basis of information provided by users. The price difference was established at 10%.(426) On this basis, an adjustment of 10% was added to the CIF price of the PVA with high ash content sold by the cooperating exporting producers.…(429) Furthermore, as the methanol content and the packing have a negligible effect on the prices …, the Commission concluded that for undercutting purposes it was appropriate to disregard these characteristics.’
278Before the Court, the Commission explained that, as could be seen from a questionnaire which it had sent to Chinese exporting producers, the PCNs had been established on the basis of five characteristics of PVA, that is to say, their viscosity, their degree of hydrolysis, their ash content, their methanol content and their packaging.
279It follows that the Commission considered it necessary to apply an upward adjustment of 10% to the prices of certain product types imported from China, which corresponded, in terms of viscosity and degree of hydrolysis, to product types sold by the Union industry, because of differences in ash content, which was higher in the former than in the latter. By contrast, it ruled out the possibility of other adjustments being warranted on the basis of differences in respect of methanol content and packaging.
280While the applicants do not challenge the merits of the 10% adjustment applied by the Commission because of differences in ash content, they claim that other adjustments were necessary.
281However, they did not produce any evidence capable of demonstrating that the Commission had made a manifest error of assessment in finding that the differences, in terms of methanol content and packaging, between product types that were comparable in terms of their viscosity and their degree of hydrolysis did not have a significant effect on their prices.
282Accordingly, the second part of the fourth plea in law must be rejected.
–Third part
283The applicants submit that it is apparent from recitals 432 and 433 of the contested regulation and from the information they were able to obtain from the Commission and information provided by other exporting producers that, in its price undercutting analysis, the Commission compared 100% of the PVA imports from China with 82% of the Union industry’s sales of PVA. The Commission found that there was an 82% overlap between the PCNs sold by the Union industry and those sold by the Chinese exporting producers. The Commission thus excluded from its analysis 18% of the sales made by the Union industry. In so doing, the Commission infringed the obligation under Article 3(2) and (3) of the basic regulation to establish price undercutting for the product concerned as a whole.
284The applicants dispute that the contested regulation can be interpreted as meaning that the Commission compared 100% of the Union industry’s sales with 82% of the sales made by the Chinese exporting producers, and rely for this purpose on the price undercutting calculations in relation to the applicants themselves and to the other exporting producers, from which it may be inferred that 100% of the imports were compared with 82% of the Union industry’s sales. In any event, in their view, even if that portrayal of the facts were accepted, the Commission nevertheless infringed Article 3(2) and (3) of the basic regulation, given that it was required to take 100% of the imports into consideration.
285The Commission, supported by Sekisui, disputes the applicants’ arguments.
286It should be recalled that recitals 432 and 433 of the contested regulation read as follows:(432) Wacker and the Chinese exporting producers claimed that 18% of the exports from [China] were not sold by the Union industry since for this quantity no comparable PCNs were found. The parties referred to the judgement [of 24 September 2019, Hubei Xinyegang Special Tube v Commission (T‑500/17, not published, EU:T:2019:691)] in support of their claim that the Commission’s injury analysis was only based on a limited volume of the Union industry’s sales and not the whole like product.(433) First, the Commission noted that this judgment is under appeal before the Court of Justice and therefore cannot be taken as authoritative. Second, the basic Regulation does not require the Commission to carry out the price analysis for each product type separately. Rather, the legal requirement is a determination at the level of the like product. While PCNs are used as the starting point for such assessment, it does not mean that different PCNs are not in competition. Thus, the fact that certain PCNs of the Union industry were not compared to imports does not mean that they do not suffer price pressure from the dumped imports. Indeed, the establishment of price undercutting and underselling by first calculating margins at the level of the PCN is only an intermediary and preparatory step of that required price comparison. That step is not legally mandated, but constitutes the standard practice of the Commission. Third, in cases where sampling is applied it is not surprising that there is not a perfect matching between the imports of the sampled exporting producers and the sales of sampled Union industry. This does not necessarily mean that there are no imports of certain types, but that these types were not exported to the Union by the sampled exporting producers during the investigation period. Finally, … the Commission concluded that all PVA grades competed with each other, at least to a certain extent. Therefore, the 18% of the exports of the sampled exporting producers not sold by the Union industry does not constitute a separate category of the product concerned but competes in full with the remaining grades for which a matching was found. Moreover, the PCNs not sold by the Union industry were product types suitable for application in the adhesives, polymerisation and paper sectors, and therefore equivalent and in direct competition with other product types produced and sold by the Union industry for use in the same applications, even if not used for the quantification of price undercutting.’
287It should be noted that, in recitals 432 and 433 of the contested regulation, the Commission summarised an argument which the applicants had based on the judgment of 24 September 2019, Hubei Xinyegang Special Tube v Commission (T‑500/17, not published, EU:T:2019:691), before going on to reject it.
288It must be recalled that, in paragraphs 68 to 75 of the judgment of 24 September 2019, Hubei Xinyegang Special Tube v Commission (T‑500/17, not published, EU:T:2019:691), the Court held, in essence, that in so far as the Commission had not taken into account, in the analysis of price undercutting, a certain volume of the product under consideration produced by the sampled EU producers, namely 17 of the 66 product types identified, representing 8% of the sales volume of those producers, which were not exported by the sampled Chinese exporting producers, it had failed to take account of all the relevant data in the case at issue, in breach of Article 3(2) and (3) of the basic regulation (see, to that effect, judgment of 20 January 2022, Commission v Hubei Xinyegang Special Tube, C‑891/19 P, EU:C:2022:38, paragraph 22).
289In rejecting the applicants’ argument based on the judgment of 24 September 2019, Hubei Xinyegang Special Tube v Commission (T‑500/17, not published, EU:T:2019:691), the Commission first of all pointed out, in the first sentence of recital 433 of the contested regulation, that that judgment was under appeal.
290Next, in the second to ninth sentences of recital 433 of the contested regulation, the Commission defended the merits of its actions in the regulation that was being challenged in the case that gave rise to the judgment of 24 September 2019, Hubei Xinyegang Special Tube v Commission (T‑500/17, not published, EU:T:2019:691), while also setting out general considerations in relation to the analysis of price undercutting by the PCN method. It is in that context that it stated that ‘certain PCNs of the Union industry [had] not [been] compared to imports’. Accordingly, that part of the sentence cannot be interpreted as an admission by the Commission that, in the present case, it had failed to take account of certain PCNs produced by the Union industry.
291Lastly, in the 10th to 12th sentences of recital 433 of the contested regulation, the Commission examined the circumstances of the present case. It is apparent from that passage that, first, for 18% of PVA exported to the European Union by the sampled Chinese exporting producers, it had not been possible to find any corresponding product type sold by the Union industry and, secondly, because of the fact that all PVA were in competition with each other to a certain extent, the PVA sold by the Union industry were also competing with the 18% of PVA imported from China.
292It follows that the Commission associated an imported product type with each product type sold by the Union industry and that, in the case of imported product types that did not match product types sold by the Union industry, it found that a competitive relationship nevertheless existed. In so doing, the Commission carried out the assessment required by Article 3(2) and (3) of the basic regulation, which consists of examining the effect on the Union industry prices of ‘dumped imports’ (judgment of 20 January 2022, Commission v Hubei Xinyegang Special Tube, C‑891/19 P, EU:C:2022:38, paragraph 161) and analysed price undercutting for the product under consideration as a whole.
293Contrary to the applicants’ contention, that interpretation of recital 433 of the contested regulation is compatible with the explanation given to them by the Commission in the procedure that led to the adoption of the contested regulation, that ‘the matching percentage between the [Union] industry and the sampled Chinese exporting companies is 82%’. While it is apparent from that explanation that a total match could not be established, the Commission’s choice of wording does not make clear whether it was the Union industry or Chinese exporting producers which sold more product types.
294Furthermore, that interpretation of recital 433 of the contested regulation is not affected by the tables produced by the applicants in the annexes to the reply. Those tables show, for each of the exporting producers sampled, including the applicants, the PCNs in respect of which there is a match between imported product types and those sold by the Union industry. Although, for confidentiality reasons, the tables do not display the quantities sold by the Union industry, by PCN, it cannot be inferred from this that only 82% of Union industry sales were taken into account, as the applicants claim.
295Therefore, it must be held that the applicants’ argument that the Commission analysed price undercutting without taking account of all PVA sales by the Union industry has no basis in fact.
296In any event, assuming that the Commission did exclude certain product types sold by the Union industry from the price undercutting analysis, it must be noted that the judgment of 24 September 2019, Hubei Xinyegang Special Tube v Commission (T‑500/17, not published, EU:T:2019:691), was set aside by the Court of Justice, which concluded that the General Court had erred in law in that judgment in holding that, in the context of the analysis of the effects of the dumped imports on the Union industry prices provided for in Article 3(2) and (3) of the basic regulation, and, in particular, in the context of the analysis of price undercutting, the Commission was, in all circumstances, obliged to take account of all the products sold by that industry, including the types of product at issue that were not exported by the sampled producing exporters (judgment of 20 January 2022, Commission v Hubei Xinyegang Special Tube, C‑891/19 P, EU:C:2022:38, paragraph 159).
297As the applicants point out, it follows from paragraphs 138 to 140 of the judgment of 20 January 2022, Commission v Hubei Xinyegang Special Tube (C‑891/19 P, EU:C:2022:38), that, in order for the Commission to be under that obligation, the first and second conditions (see paragraph 258 above) must be satisfied. As it is, contrary to the applicants’ contention, that is not the case here (see paragraphs 265 to 272 above).
298Accordingly, the third part of the fourth plea in law must also be rejected.
299Since all parts of the fourth plea, relating to the infringement of Article 3(2) and (3) of the basic regulation, have been rejected, the applicants also have no basis for claiming that, because of those infringements, the Commission also infringed Article 3(6) of that regulation (see paragraph 222 above).
300In the light of all of the foregoing, the fourth plea in law must be rejected in its entirety.
Fifth plea in law, alleging infringement of the rights of the defence
301The applicants submit that the Commission infringed their rights of defence in that, despite their requests, it failed to provide them with any information with respect to the Union industry’s quantities sold and sales prices by PCN or the price undercutting and underselling margins by PCN (‘the information at issue’). They criticise the Commission for not having provided them with that information at least in the form of ranges of values. In their view, although Article 19 of the basic regulation provides for the confidential treatment of certain information, its application cannot deprive the rights of the defence of their substance. They note that Article 19(2) of the basic regulation provides that interested parties claiming confidentiality of information supplied are required to submit a non-confidential summary of that information or, at the very least, a statement of reasons as to why such summarisation is not possible. Furthermore, according to the applicants, it is irrelevant that the allegedly confidential information relates to a single EU producer.
302The applicants submit that, for the present plea to be well founded, they do not have to show that the outcome of the investigation could have been different; they only need to show that the possibility of a different outcome cannot be totally ruled out. However, without having the information at issue, they could not assess whether there was an absence of price undercutting or underselling for certain PCNs, nor could they assess for which PCNs the Union industry had made most of its sales. That information was therefore essential in order to be able to review the correctness of the undercutting determination, for which it might be appropriate to look at the market shares of the various PCNs in question, and to examine whether the imports had indeed caused injury to that industry.
303The Commission, supported by Kuraray and by Sekisui, disputes the applicants’ arguments.
304For the purposes of examining the present plea, it is appropriate to recall the wording of the relevant provisions.
305Article 19 of the basic regulation provides as follows:1. Any information which is by nature confidential (for example, because its disclosure would be of significant competitive advantage to a competitor or would have a significantly adverse effect upon a person supplying the information or upon a person from whom the person supplying the information has acquired the information) or which is provided on a confidential basis by parties to an investigation shall, if good cause is shown, be treated as such by the authorities.2. Interested parties providing confidential information shall be required to provide non-confidential summaries thereof. Those summaries shall be in sufficient detail to permit a reasonable understanding of the substance of the information submitted in confidence. In exceptional circumstances, such parties may indicate that such information is not capable of being summarised. In such exceptional circumstances, a statement of the reasons why such summarisation is not possible shall be provided.…4. This Article shall not preclude the disclosure of general information by the Union authorities, and, in particular, of the reasons on which decisions taken pursuant to this Regulation are based, or disclosure of the evidence relied on by the Union authorities in so far as is necessary to explain those reasons in court proceedings. Such disclosure shall take into account the legitimate interests of the parties concerned that their business secrets not be divulged.5. The Commission and Member States, including the officials of either, shall not reveal any information received pursuant to this Regulation for which confidential treatment has been requested by its supplier, without specific permission from that supplier.…’
306Article 20 of the basic regulation provides as follows:1. The complainants, importers and exporters and their representative associations, and representatives of the exporting country, may request disclosure of the details underlying the essential facts and considerations on the basis of which provisional measures have been imposed …2. The parties mentioned in paragraph 1 may request final disclosure of the essential facts and considerations on the basis of which it is intended to recommend the imposition of definitive measures, or the termination of an investigation or proceedings without the imposition of measures, particular attention being paid to the disclosure of any facts or considerations which are different from those used for any provisional measures.…’
307Article 6(7) of the basic regulation provides as follows:7. The complainants, importers and exporters … may, upon written request, inspect all information made available by any party to an investigation, as distinct from internal documents prepared by the authorities of the Union or its Member States, which is relevant to the presentation of their cases and not confidential within the meaning of Article 19, and is used in the investigation.…’
308By those provisions, the basic regulation is pursuing two objectives: on the one hand, to allow the interested parties effectively to defend their interests and, on the other hand, to preserve the confidentiality of the information collected in the course of the investigation (judgment of 30 June 2016, Jinan Meide Casting v Council, T‑424/13, EU:T:2016:378, paragraph 96; see also, to that effect, judgment of 1 June 2017, Changmao Biochemical Engineering v Council, T‑442/12, EU:T:2017:372, paragraph 142 and the case-law cited).
309As regards the first objective referred to in paragraph 308 above, it should be recalled that 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 EU law which must be guaranteed even in the absence of any rules governing the proceedings in question. Respect for that principle is of crucial importance in anti-dumping investigations (see judgment of 1 June 2017, Changmao Biochemical Engineering v Council, T‑442/12, EU:T:2017:372, paragraph 139 and the case-law cited).
310In accordance with that principle, the undertakings concerned should have been placed in a position during the administrative procedure in which they could 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 judgment of 1 June 2017, Changmao Biochemical Engineering v Council, T‑442/12, EU:T:2017:372, paragraph 140 and the case-law cited).
311As regards the second objective referred to in paragraph 308 above, it must be recalled that the protection of business secrets is a general principle of EU law. The maintenance of fair competition is an important public interest, the safeguarding of which can justify a refusal to disclose information which reveals business secrets (see, to that effect, judgment of 30 June 2016, Jinan Meide Casting v Council, T‑424/13, EU:T:2016:378, paragraph 165 and the case-law cited).
312In order to reconcile the two objectives in question, in performing their duty to provide information, the EU institutions must act with all due diligence by seeking to provide the undertakings concerned, as far as is compatible with the obligation not to disclose business secrets, with information relevant to the defence of their interests, choosing, if necessary on their own initiative, the appropriate means of providing such information (see, to that effect, judgment of 1 June 2017, Changmao Biochemical Engineering v Council, T‑442/12, EU:T:2017:372, paragraph 141).
313The need to reconcile those objectives also follows from the fact that, according to the case-law, Article 19 of the basic regulation is intended to protect not only the business secrets but also the defence rights of the other parties to the anti-dumping proceeding (see judgment of 15 October 2020, Zhejiang Jiuli Hi-Tech Metals v Commission, T‑307/18, not published, EU:T:2020:487, paragraph 82 and the case-law cited).
314The protection of information covered by business secrecy does not require the exclusion, on principle, of all disclosure to interested parties of the information used during an anti-dumping investigation, irrespective of the circumstances. In particular, it is necessary to consider the particular situation of the interested party with regard to that information and, in particular, the position that that interested party occupies on the market under consideration in relation to the position of the supplier of the information (judgment of 30 June 2016, Jinan Meide Casting v Council, T‑424/13, EU:T:2016:378, paragraph 199; see also, to that effect, judgment of 1 June 2017, Changmao Biochemical Engineering v Council, T‑442/12, EU:T:2017:372, paragraph 159).
315The case-law makes clear that the obligation to respect confidential information cannot deprive the applicant’s rights of defence of their substance (see judgment of 1 June 2017, Changmao Biochemical Engineering v Council, T‑442/12, EU:T:2017:372, paragraph 142 and the case-law cited).
316In the present case, as is apparent from recital 435 of the contested regulation and from a letter which the applicants sent to the Commission on 8 July 2020, the applicants, after receiving final disclosure, requested access to the information at issue.
317By email of 13 July 2020, Kuraray informed the Commission that it was opposed to the disclosure to the applicants of the information at issue, including in the form of ranges instead of exact values. As the Commission stated at the hearing, that email was Kuraray’s response to an email which the Commission had sent to it after receiving the applicants’ letter of 8 July 2020, referred to in paragraph 316 above. Kuraray argued that the information at issue was confidential by nature within the meaning of Article 19(1) of the basic regulation and stated that, since it was the only EU producer sampled by the Commission to sell the product concerned to third parties, the disclosure of further details in respect of the undercutting and underselling calculations would be of a competitive advantage to its competitors and would have a significantly adverse effect on it. Such disclosure, which would reveal information about quantities of PVA sold during the investigation period as well as average prices based on PCNs, would cause irreparable harm to its business operations in the European Union.
318Furthermore, Kuraray contended that the information about price undercutting and underselling already provided to the applicants enabled them to understand the injurious effect of the imports on the Union industry and to exercise their rights of defence. It stated that each exporting producer would be subject to the same level of anti-dumping duties in respect of all of its exports to the European Union of the product concerned, without any distinction based on PCNs.
319By email of 14 July 2020, the Commission informed the applicants that, having assessed their request for access to the information at issue, it had decided to refuse it because the information was confidential under Article 19 of the basic regulation. The Commission’s reasons for its decision are the same as those put forward by Kuraray, set out in paragraph 318 above.
320In recital 436 of the contested regulation, the Commission noted that, in line with Article 19 of the basic regulation, it had not been able to reveal the information at issue, since disclosure of such a level of detail would make it possible, either directly or with the addition of market intelligence, to reconstruct confidential sales or production data of individual EU producers.
321It must be held that, in the light of Article 19(1) and (5) of the basic regulation, the Commission was not authorised to disclose the information at issue to the applicants because of Kuraray’s opposition (see, by analogy, judgments of 30 June 2016, Jinan Meide Casting v Council, T‑424/13, EU:T:2016:378, paragraph 178, and of 19 May 2021, China Chamber of Commerce for Import and Export of Machinery and Electronic Products and Others v Commission, T‑254/18, under appeal, EU:T:2021:278, paragraph 477).
322However, where information cannot be communicated because it is confidential, Article 19(2) of the basic regulation requires the parties which are the source of that information to provide a non-confidential summary of it whenever possible (see, to that effect, judgment of 19 May 2021, China Chamber of Commerce for Import and Export of Machinery and Electronic Products and Others v Commission, T‑254/18, under appeal, EU:T:2021:278, paragraph 483).
323Therefore, the Court must ascertain whether, by failing to take steps to enable the applicants to be provided with the information at issue in the form of non-confidential summaries, within the meaning of Article 19(2) of the basic regulation, the Commission infringed the applicants’ rights of defence.
324To that end, it is necessary to refer, in accordance with the principles recalled in paragraphs 20 to 22 above, to the decisions of the DSB relating to Articles 6.5 and 6.5.1 of the anti-dumping agreement, which correspond, in essence, to Article 19(1) and (2) and the first sentence of Article 19(5) of the basic agreement (see, to that effect and by analogy, judgment of 30 June 2016, Jinan Meide Casting v Council, T‑424/13, EU:T:2016:378, paragraphs 103, 188 and 190).
325According to the Report of the Appellate Body, European Communities – Definitive anti-dumping measures on certain iron or steel fasteners from China (WT/DS 397/AB/R), adopted by the DSB on 28 July 2011 (paragraphs 542 to 544), in respect of information treated as confidential under Article 6.5 of the anti-dumping agreement, Article 6.5.1 of that agreement obliges the competent authority to require that a non-confidential summary of the information be furnished. The sufficiency of the summary provided will depend on the confidential information at issue, but the summary must permit a reasonable understanding of the substance of the information withheld in order to allow the other parties to the investigation an opportunity to respond and defend their interests. Article 6.5.1 of the anti-dumping agreement contemplates the possibility that, in exceptional circumstances, confidential information may not be susceptible of summary. In such exceptional circumstances, a party may indicate that it is not able to furnish a non-confidential summary of the information submitted in confidence, but it is nevertheless required to provide a statement of the reasons why summarisation is not possible. For its part, the competent authority must scrutinise such statements to determine whether they establish exceptional circumstances and whether the reasons given appropriately explain why, under the circumstances, no summary that permits a reasonable understanding of the information’s substance is possible. Summarisation of confidential information will not be possible where no alternative method of presenting that information can be developed that would not, either disclose the sensitive information, or fail to provide a sufficient level of detail to permit a reasonable understanding of the substance of the information submitted in confidence.
326In the present case, when Kuraray opposed the disclosure of the information at issue, including in the form of ranges of values, it must be considered to have refused to comply with the obligation to provide non-confidential summaries of that information and to have relied in that respect on the existence of the exceptional circumstance that it was the only EU producer whose sales had been taken into account by the Commission in the analysis of price undercutting and underselling. The Commission examined Kuraray’s arguments and decided that its stance was well founded, having regard also to the fact, noted in essence in recital 436 of the contested regulation, that Chinese exporting producers would have been able to read the information sought in the light of the market intelligence already available to them.
327Consequently, it must be held that the Commission correctly followed the steps laid down in the relevant provisions in order to strike a balance between the two objectives referred to in paragraph 308 above.
328As to the merits of the Commission’s assessment, it should be noted that, in view of the sensitivity of the information at issue and the exceptional circumstances of this case, the Commission did not make any error in refusing its disclosure.
329The fact that there was no error on the part of the Commission is confirmed by the fact that when the applicants received the email from the Commission refusing their request for access to the information at issue (see paragraph 319 above), they did not bring the matter before the hearing officer, although they could have done so under Article 15 of 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).
330It must be held that, by refraining from bringing the matter before the hearing officer, the applicants accepted the balance struck by the Commission between the objectives in question.
331In any event, it must be recalled that, according to the case-law, although an applicant cannot be required to show that the Commission’s decision would have been different in the absence of the procedural irregularity in question, but simply that such a possibility cannot be totally ruled out, since that party would have been better able to defend itself had there been no irregularity, the fact remains that the existence of an irregularity relating to the rights of the defence can result in the annulment of the measure in question only where there is a possibility that, due to that irregularity, the administrative procedure could have resulted in a different outcome and thus in fact adversely affected the rights of the defence (see judgment of 5 May 2022, Zhejiang Jiuli Hi-Tech Metals v Commission, C‑718/20 P, EU:C:2022:362, paragraph 49 and the case-law cited).
332On that point, first, the applicants maintain that the confusion which arose regarding the percentages of products imported and sold by the Union industry that were examined in the analysis of price undercutting would not have occurred if they had received the information at issue (see the third part of the fourth plea). However, it must be stated that that confusion has no bearing on whether there is a possibility that the procedure conducted by the Commission might result in a different outcome. In any event, if the applicants considered the explanations given by the Commission (see paragraph 293 above) to be ambiguous, they could have asked the Commission for further clarification.
333Secondly, the applicants submit that, in certain circumstances, in order to ensure that the examination of the existence of significant price undercutting at the level of the like product is objective, it may be appropriate to examine the market shares of the various product types in question. In order for an interested party to be able reasonably to argue that those circumstances prevail, it would have to have information about those market shares.
334Since, as is apparent from paragraphs 256 to 258, in certain circumstances, the analysis of price undercutting might have to be conducted by market segment, the possibility cannot a priori be entirely ruled out that if the applicants had been in possession of non-confidential summaries in respect of the information at issue, they would have been able to put forward arguments capable of demonstrating that the circumstances of the case required that such an analysis be carried out.
335However, as is apparent from the examination of the fourth plea, in particular from paragraphs 265 to 272 above, there is nothing in the present case that would require the Commission to carry out an analysis of price undercutting by market segment. Accordingly, the possibility that the procedure might have resulted in a different outcome if the abovementioned summaries had been available to the applicants must be ruled out.
336In the light of all of the foregoing considerations, the fifth plea in law must be rejected.
Conclusions as to the outcome of the action
337Examination of the pleas and parts of pleas invoked by the applicants has shown that the contested regulation must be annulled with regard to the applicants in so far as, in calculating the rate of the anti-dumping duty affecting imports into the European Union of PVA manufactured and sold by the applicants, the Commission made downward adjustments to the export price under Article 2(10)(e), (g), (i) and (k) of the basic regulation.
338The action must be dismissed as to the remainder.
Costs
339Under Article 134(1) of the Rules of Procedure, 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 Commission has essentially been unsuccessful, it should be ordered to bear its own costs and to pay those incurred by the applicants, in accordance with the form of order sought by the applicants.
340Under Article 138(1) of the Rules of Procedure, the Member States and institutions which have intervened in the proceedings are to bear their own costs. Consequently, the Parliament and the Council shall bear their own costs.
341Under Article 138(3) of the Rules of Procedure, the Court may order an intervener other than those referred to in paragraphs 1 and 2 thereof to bear its own costs. In the present case, Wegochem, Kuraray and Sekisui must be ordered to bear their own costs.
Operative part
On those grounds,THE GENERAL COURT (Ninth Chamber, Extended Composition)hereby:
1.Annuls Commission Implementing Regulation (EU) 2020/1336 of 25 September 2020 imposing definitive anti-dumping duties on imports of certain polyvinyl alcohols originating in the People’s Republic of China with regard to Sinopec Chongqing SVW Chemical Co. Ltd, Sinopec Great Wall Energy & Chemical (Ningxia) Co. Ltd and Central-China Company, Sinopec Chemical Commercial Holding Co. Ltd in so far as, in calculating the rate of the anti-dumping duty affecting imports into the European Union of polyvinyl alcohols manufactured and sold by them, the European Commission made downward adjustments to the export price under Article 2(10)(e), (g), (i) and (k) of 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;
2.Dismisses the action as to the remainder;
3.Orders the Commission to bear its own costs and to pay those incurred by Sinopec Chongqing SVW Chemical Co., by Sinopec Great Wall Energy & Chemical (Ningxia) Co. and by Central-China Company, Sinopec Chemical Commercial Holding Co.;
4.Orders the European Parliament and the Council of the European Union to bear their own costs;
5.Orders Wegochem Europe BV, Kuraray Europe GmbH and Sekisui Specialty Chemicals Europe SL to bear their own costs.
Delivered in open court in Luxembourg on 21 February 2024.
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