JUDGMENT OF THE COURT OF FIRST INSTANCE (Fourth Chamber,Extended Composition)

17 December 1997 (1)

(Anti-dumping duties — Injury — Right to a fair hearing)

In Case T-121/95,

European Fertilizer Manufacturers Association (EFMA), an association registeredunder Swiss law, established in Zurich (Switzerland), represented initially byDominique Voillemot and Hubert de Broca and subsequently by DominiqueVoillemot and Olivier Prost, of the Paris Bar, with an address for service inLuxembourg at the Chambers of Loesch and Wolter, 11 Rue Goethe,

applicant,

v

Council of the European Union, represented by Yves Crétien and Antonio Tanca,of its Legal Service, acting as Agents, assisted by Hans-Jürgen Rabe and GeorgM. Berrisch, Rechtsanwälte, Hamburg and Brussels, with an address for service in Luxembourg at the office of Alessandro Morbilli, Director General of the LegalDepartment of the European Investment Bank, 100 Boulevard Konrad Adenauer,

defendant,

supported by

Commission of the European Communities, represented by Nicholas Khan, of itsLegal Service, acting as Agent, with an address for service in Luxembourg at theoffice of Carlos Gómez de la Cruz, of its Legal Service, Wagner Centre, Kirchberg,

intervener,

APPLICATION for annulment of Article 1 of Council Regulation (EC) No 477/95of 16 January 1995 amending the definitive anti-dumping measures applying toimports into the Community of urea originating in the former USSR andterminating the anti-dumping measures applying to imports into the Community ofurea originating in the former Czechoslovakia (OJ 1995 L 49, p. 1),

THE COURT OF FIRST INSTANCE

OF THE EUROPEAN COMMUNITIES (Fourth Chamber, ExtendedComposition),

composed of: K. Lenaerts, President, P. Lindh, J. Azizi, J.D. Cooke and M. Jaeger,Judges,

Registrar: B. Pastor, Principal Administrator,

having regard to the written procedure and further to the hearing on 28 May 1997,

gives the following

Judgment

Facts of the case

1.

    The applicant, European Fertilizer Manufacturers Association (EFMA), which wasformed by the merger of several associations including CMC-Engrais (CommonMarket Committee of the Nitrogen and Phosphate Fertilizer Industry), is a tradeassociation governed by Swiss law which represents the common and generalinterests of its members, who are producers of fertilizers.

2.

    Following a complaint lodged by CMC-Engrais in July 1986, the Commission gavenotice in the Official Journal of the European Communities of the initiation of anti-dumping proceedings concerning imports into the Community of urea originatingin Czechoslovakia, the German Democratic Republic, Kuwait, Libya, Saudi Arabia,the USSR, Trinidad and Tobago and Yugoslavia (OJ 1986 C 254, p. 3) and openedan investigation pursuant to Council Regulation (EEC) No 2176/84 of 23 July 1984

on protection against dumped or subsidized imports from countries not membersof the European Economic Community (OJ 1984 L 201, p. 1).

3.

    Those proceedings led to the adoption of Council Regulation (EEC) No 3339/87of 4 November 1987 imposing a definitive anti-dumping duty on imports of ureaoriginating in Libya and Saudi Arabia and accepting undertakings given inconnection with imports of urea originating in Czechoslovakia, the GermanDemocratic Republic, Kuwait, the USSR, Trinidad and Tobago and Yugoslavia andterminating these investigations (OJ 1987 L 317, p. 1). The undertakings acceptedby that regulation were confirmed by Commission Decision 89/143/EEC of 21February 1989 (OJ 1989 L 52, p. 37).

4.

    By letter of 29 October 1992, the applicant requested a partial review of thoseundertakings, relating to the former Czechoslovakia and the former Soviet Union.

5.

    The Commission obtained information on imports into the Community of ureaoriginating in the former Czechoslovakia and the former Soviet Union and, in thelight of its conclusions, considered that it had sufficient evidence of changedcircumstances to justify initiating a review of the undertakings. The Commissiontherefore opened an investigation pursuant to Article 14 of Council Regulation(EEC) No 2423/88 of 11 July 1988 on protection against dumped or subsidizedimports from countries not members of the European Economic Community (OJ1988 L 209, p. 1, hereinafter 'the basic regulation‘) concerning the CzechRepublic, the Slovak Republic, the Republics of Belarus, Georgia, Tajikistan andUzbekistan, the Russian Federation and Ukraine (OJ 1993 C 87, p. 7).

6.

    Since the review proceedings had not yet been completed when the measures wereabout to expire, the Commission decided, in accordance with Article 15(4) of thebasic regulation, that the measures concerning urea originating in the formerCzechoslovakia and the former Soviet Union should remain in force pending theoutcome of the review (OJ 1994 C 47, p. 3).

7.

    The investigation into dumping covered the period from 1 January to 31 December1992 (hereinafter 'the investigation period‘).

8.

    In order to establish the normal value of the urea produced in the former SovietUnion (Russia and Ukraine), Australia was suggested by the applicant as referencecountry, in accordance with Article 2(5)(a)(i) of the basic regulation. However, theEuropean Fertilizer Importers Association (EFIA), an organization taking part inthe investigation, objected to the use of a reference country and proposed that theactual costs in the countries affected by the proceedings should be used. EFIA alsosubmitted, at a later stage of the procedure, that Canada was the most suitablereference country.

9.

    The Commission, after choosing Australia as provisional reference country,considered that it was not the most suitable choice, because inter alia of its isolationfrom world markets and of its domestic sale prices which were higher than thoseprevailing in Europe. The Slovak Republic (hereinafter 'Slovakia‘), which hadalready been investigated, was considered and then adopted as reference country.

10.

    On 10 May 1994 the Commission sent the applicant and all the parties concerneda disclosure letter setting out its conclusions from the investigation together withthe principal facts and considerations on the basis of which it intended torecommend the introduction of definitive measures. In the letter the Commissionexplained why it had chosen Slovakia rather than Australia or Canada as referencecountry, its calculation of the normal value (in Slovakia), its comparison betweenthe normal value (ex-works for Slovakia) and export prices (national frontier levelfor Russia and Ukraine), and finally its estimate of injury. It explained in particularwhy it found it appropriate to set a profit rate of 5% for Community producers andmake an adjustment of 10% of the price of urea from the former Soviet Union incalculating the level of the proposed duty. As to the 10% adjustment, it stated inparticular that the circumstances, first, that Russian urea tended to deteriorateduring transport and, second, that importers of Russian urea were not always ableto offer security of supply equivalent to that offered by Community producersresulted in a price difference between urea of Russian origin and urea ofCommunity origin.

11.

    By letter of 17 May 1994, the applicant asked the Commission to send it theevidence collected during the investigation relating to the 10% adjustment for thedifference in quality between urea from the former Soviet Union and ureaproduced in the Community.

12.

    By fax of 18 May 1994, the Commission replied that the adjustment was an averageestimation on the basis of information obtained from the various importers, tradersand distributors involved in trade in urea originating in Russia and in theCommunity.

13.

    By letter of 30 May 1994, the applicant submitted comments to the Commission onthe disclosure letter. It also asked for further details on the ground that thedisclosure letter did not give full information as regards dumping.

14.

    The Commission provided the applicant with additional information by letter of 10June 1994.

15.

    The representatives of the applicant and the Commission met on 18 July 1994 todiscuss the various conclusions and observations, and the applicant submittedadditional observations to the Commission by letters of 28 July, 9 August, 21 and26 September and 3 October 1994.

16.

    Following a further meeting in October 1994, the applicant submitted its finalcomments by letter of 26 October 1994 inter alia on the comparison betweennormal value and export prices, the 10% adjustment, and the 5% profit margin.

17.

    On 16 January 1995, the Council adopted Regulation (EC) No 477/95 amendingthe definitive anti-dumping measures applying to imports into the Community ofurea originating in the former USSR and terminating the anti-dumping measuresapplying to imports into the Community of urea originating in the formerCzechoslovakia (OJ 1995 L 49, p. 1, hereinafter 'the contested regulation‘). It waspublished in the Official Journal on 4 March 1995.

18.

    As the injury elimination threshold was lower than the dumping margin establishedfor Russia, the definitive anti-dumping duty was set at the level of the injuryelimination threshold, in accordance with Article 13(3) of the basic regulation.

19.

    Article 1 of the contested regulation provides:

'1.    A definitive anti-dumping duty is hereby imposed on imports of urea fallingwithin CN codes 3102 10 10 and 3102 10 90 originating in the Russian Federation.

2.    The amount of the duty shall be the difference between ECU 115 per tonneand the net, free-at-Community-frontier price, before customs clearance, if thisprice is lower.

3.    Unless otherwise specified, the provisions in force concerning customs dutiesshall apply.‘

Procedure

20.

    Those were the circumstances in which the applicant, by application lodged at theRegistry of the Court of First Instance on 12 May 1995, brought the present action.

21.

    By application lodged at the Court Registry on 23 October 1995, the Commissionsought leave to intervene in the proceedings in support of the form of order soughtby the Council.

22.

    By order of 21 November 1995, the President of the Fourth Chamber, ExtendedComposition, of the Court granted leave to intervene.

23.

    By letter of 2 October 1996, the applicant requested the Court to be allowed toplead in French at the hearing.

24.

    That request was dismissed by order of the Court, Fourth Chamber, ExtendedComposition, of 24 January 1997 (Case T-121/95 EFMA v Council [1997] ECRII-87).

25.

    Upon hearing the Report of the Judge-Rapporteur, the Court of First Instance,Fourth Chamber, Extended Composition, decided to open the oral procedurewithout any preparatory inquiry. However, a number of questions and requests toproduce documents were addressed to the parties.

26.

    The applicant, by letter lodged at the Court Registry on 17 April 1997, and theCouncil and the Commission, by letters lodged on 30 April 1997, replied to thosequestions and produced certain documents.

27.

    The parties presented oral argument and answered the questions put to them bythe Court at the hearing on 28 May 1997.

Forms of order sought

28.

    The applicant claims that the Court should:

—    annul Article 1 of the contested regulation;

—    order that the anti-dumping duty imposed by that regulation be maintaineduntil the competent institutions adopt the more stringent measures neededto comply with the judgment requested; and

—    order the Council to pay the costs.

29.

    The Council, defendant, contends that the Court should:

—    dismiss the application;

—    order the applicant to pay the costs.

30.

    The Commission, intervener, contends that the Court should:

—    dismiss the application.

The claim for annulment

31.

    The applicant puts forward three pleas in law in support of its claim for annulmentof Article 1 of the contested regulation. The first plea alleges, in effect, aninfringement of the basic regulation in the choice of Slovakia as reference country.The second plea alleges, first, an infringement of the basic regulation in that the

normal value and the export prices were compared at two different stages, namelyat ex-works level and frontier level, and, second, a breach of the duty to givereasons in that the contested regulation does not explain why the comparison wasmade at different stages. In the alternative, it claims that the comparison wasvitiated by a manifest error of assessment. The third plea relates to thedetermination of injury: the applicant argues, first, that by making an adjustmentto the price of urea produced in Russia in order to compensate for allegeddifferences in quality, the Council both made a manifest error of assessment andfailed to respect the right to a fair hearing. Second, in setting too low a profitmargin for Community producers, the Council made a manifest error of assessmentand again infringed the applicant's right to a fair hearing.

32.

    Since the anti-dumping duty was set in the present case at the level of the injuryelimination threshold, the third plea, concerning the determination of injury, mustbe considered first.

The plea of incorrect determination of the injury

33.

    The applicant submits that the Council made two errors in determining the injury:it wrongly applied a 10% adjustment for differences in quality between Russianurea and Community urea, and it wrongly determined a 5% profit margin for theCommunity producers.

The 10% adjustment for the difference in quality between urea originating inRussia and urea produced in the Community

— Arguments of the parties

34.

    This limb of the plea falls into two parts. First, by applying an adjustment of 10%for differences in quality when comparing the prices of urea imported from Russiaand urea produced in the Community, the Community institutions made a manifesterror of assessment. Second, by so doing, they also infringed an essential proceduralrequirement, in that the applicant never had an opportunity to submit observationson the evidence used by the Commission to justify that adjustment.

35.

    The applicant submits to begin with that there is no difference in quality betweenurea produced in Russia and urea produced in the Community. There wastherefore no reason to suppose exceptional deterioration of Russian urea duringtransport to the Community at the time. On this point, it refers to two items ofevidence: a table of chemical and physical comparative analysis of Russian urea andCommunity urea, of 30 May 1994, which it drew up on the basis of samplesanalysed by various laboratories, and two faxes from Sinochem UK Ltd to theapplicant, which were transmitted to the Commission on 9 August and

26 September 1994. According to the applicant, the table shows that there was nodifference between Russian and Community urea, and the faxes confirm that pricesof urea imported into China were similar, whether it came from Russia, the MiddleEast, Indonesia or the European Community.

36.

    As to the Council's assertion that the urea tends to deteriorate because of loading,unloading and storage, the applicant submits that the Council produces no evidenceeither that urea from Russia is subject to more loading and unloading movementsthan urea produced in the Community, or that the storage of Russian urea involvesdifferent operations from those required for storage of urea produced in theCommunity.

37.

    The applicant then states that Russia is the largest exporter of urea to China, whichis the world's largest importer of urea. In its opinion, since exports of urea fromRussia to China involve transport over long distances which are at least equivalentto the distance between Russia and the European Union, it is clear that Russia isable to export urea over long distances without it deteriorating.

38.

    It challenges the Council's assertion that the determination of a price adjustmentto compensate for differences in the quality of products is primarily based on anassessment of consumer perception. It points out that urea is a chemical productwhich always has the same composition, whether it comes from Russia or theEuropean Community. Moreover, determination of quality differences on the basisof information on sales is unrealistic because of the highly subjective nature ofconsumer perception and because the information used relates only to one momentin time. Furthermore, as Russian-produced urea and Community-produced ureahave the same physical and chemical properties, farmers — that is, consumers ofurea — do not and could not distinguish between them.

39.

    Next, the applicant does not accept that importers of urea from Russia are notalways able to guarantee security of supply equivalent to that offered byCommunity producers. It submits that the urea production capacity in Russia is somuch higher than the total volume of sales that the question of security of supplyshould never arise. In support of its argument, it refers to a press release fromFerchimex published in the periodical Agrochim-Business (1/91) in July 1991.

40.

    In this connection, the applicant further submits that, contrary to the Council'sallegations, there has not been any problem with gas supply in Russia. It refers onthis point to a report produced in 1992 by British consultants (British SulphurConsultants) entitled 'Fertilizer Supply from the Commonwealth of IndependentStates‘ (hereinafter 'the British Sulphur report‘) and an article published inFertilizer Week (Volume 7 No 16) on 6 September 1993.

41.

    Moreover, the applicant rejects the method used by the Council to arrive at the10% adjustment level, in particular the fact that that level represents 'the middle

ground between the figure put forward by the Community producers and theamount requested by EFIA‘ (point 66 of the contested regulation).

42.

    It submits that EFIA's observations concerning the adjustment are of no relevance,as they are not based on any evidence. There is a general principle in anti-dumpinglaw that a party seeking an adjustment must prove that its claim is justified.Consequently, EFIA should have been subject to a higher burden of proof, sinceit benefited from the adjustment.

43.

    The applicant adds that for its part it vigorously opposed that rate of adjustmentin its correspondence following the disclosure letter, and that the two pieces ofevidence it produced to the Commission (see paragraph 35 above) were neverchallenged by the Commission or the Community importers or the Russianproducers and exporters.

44.

    The applicant argues, second, that the Community institutions infringed itsfundamental right to a fair hearing.

45.

    It states that it was not in a position to make comments on the accuracy of theCommission's conclusions as to the 10% adjustment until after receipt of thedisclosure letter, namely, at a time when the Commission had already fixed thatrate. Similarly, the fax of 18 May 1994 (see paragraph 12 above) is irrelevant,because it was sent eight days after the disclosure letter. The applicant maintainsthat it never had access to the documents which the Commission used to fix therate.

46.

    The applicant also submits that EFIA did not participate in the procedure beforethe disclosure documents were sent. It was therefore only after the Commission hadalready proposed the 10% adjustment that EFIA sent a request (on 31 May 1994)to the Commission to set an even higher adjustment rate to compensate for qualitydifferences. The Commission thus could not have based its conclusion as to a rateof 10% on information from the importers.

47.

    In any event, if EFIA made evidence available to the Commission, the applicantwas entitled to see it. It submits, citing the judgments in Case C-49/88 Al-JubailFertilizer v Council [1991] ECR I-3187 and Case C-69/89 Nakajima All Precision vCouncil [1991] ECR I-2069, that no limit on the institutions' duty of disclosurecould be applicable in this case, in that the information supplied by the importerswas relevant to the defence of its interests and the Commission never stated thatthe information was confidential under Article 8 of the basic regulation or providedany meaningful non-confidential summary (Article 7(4)(a) of the basic regulation).

48.

    The Council asserts, first, that it never claimed that there are chemical differencesbetween Russian urea and urea produced in the Community; the difference inquality is the result of other factors. It states that, during the investigation, visits to

the premises of Community importers of Russian-produced urea enabled theCommission's officials to find that the quality of the urea caused serious problemsfor the importers when it arrived in the Community. The quality of the productsometimes deteriorated so much because of the long journey and frequent handlingthat the importers were no longer able to sell it to farmers.

49.

    The Council observes that a price adjustment for quality differences is, at least inthe present case, essentially a question of consumer perception. If consumersbelieve (rightly or wrongly) that Russian urea is of inferior quality to that producedin the Community, and are thus not willing to offer a higher price, the questionwhether a quality difference actually exists is quite irrelevant.

50.

    It observes that it is irrelevant in the present case whether the true cause of theprice differences is an objective difference in quality or a subjective perception byconsumers. The price adjustment was intended to make it possible to calculate thetarget price, and the existing quality difference between Russian urea and ureaproduced in the Community meant that Community producers could obtain fortheir product a price at least 10% above the target price. That price levelcorresponds to the Community producers' production cost plus a reasonable profitmargin, which the Council fixed at 5%, and is the price level which makes itpossible to eliminate the injury caused by the dumped Russian imports. It furthersubmits that if the Community institutions had not made the 10% adjustment forquality differences, they would have fixed the target price (and consequently theduty) at a higher level than that necessary to eliminate the injury caused by thedumped imports, which would have been contrary to Article 13(3) of the basicregulation.

51.

    Moreover, the Council rejects the table of comparative chemical and physicalanalyses of Russian-produced and Community-produced urea submitted by theapplicant to show that there are no chemical differences between them. It considersthat the analyses do not support the applicant's arguments. The way in which thesamples were selected is not clear, and how representative they are is thus open todoubt. Moreover, the samples of Russian urea tested on the spot had notundergone the frequent handling and transshipment which led the institutions toconclude that an adjustment should be made.

52.

    As to the other evidence relied on by the applicant, namely the faxes fromSinochem to the applicant which are used in order to show that Russian urea andCommunity urea are sold at the same price in the People's Republic of China, theCouncil observes that it was stated in the first fax that only a very small quantityof urea had been exported to China in recent years.

53.

    Moreover, in its letter of 30 April 1997 in reply to a written question of the Court,the Council explained that the tendency of Russian urea to deteriorate resultedfrom improper handling during transport, the length and conditions of transport,the fact that Russian urea, unlike urea of Community origin, is transported in bulk

rather than in bags and requires more frequent handling, and the fact that Russianurea is not coated with an anti-caking agent, as urea produced in the Communitygenerally is.

54.

    The Council rejects the applicant's assertion that urea produced in the Communityis transported in the same way as Russian urea. It submits that urea produced inthe Community in the majority of cases leaves the factory by lorry with a minimumamount of handling before it reaches the end user, whereas urea produced inRussia is loaded and unloaded several times between the factory and the end userin the Community, and that it therefore considers it inevitable that Russian ureatends to deteriorate during transport.

55.

    Second, with regard to the question of security of supply, the Council points outthat the importers themselves informed the Commission of the supply difficultiesand that that information was confirmed in the article in Fertilizer Week of 6September 1993 (Volume 7 No 16). It adds that that information proves that therewere also quality differences which affected prices.

56.

    The Council submits that the Ferchimex press release, referred to by the applicantin support of its argument on delivery guarantees (see paragraph 39 above), is ofno probative value. It submits that it is merely an advertisement by a company, andthat the fact that the company stresses the delivery guarantee suggests that thesupply of urea from Russia generally causes problems. The Council adds that itnever stated that importers of Russian urea could never guarantee the samesecurity of supply; it stated that they could not always guarantee that security ofsupply. It considers, finally, that the conclusion drawn from the article in FertilizerWeek, namely that there had not been any problems with gas supplies in Russia,is incorrect, and that the conclusion on the same subject drawn from the BritishSulphur report is an attempt to mislead the Court.

57.

    Third, with regard to the method used to arrive at the 10% adjustment, the Councilbegins by rejecting the applicant's argument that there is a general principle in theanti-dumping legislation that a party which claims an adjustment must prove thatits claim is justified. Assuming that the applicant relies in this respect on Article2(9)(b) of the basic regulation, the Council observes that that provision relates onlyto the comparison between the normal value and the export price for the purposeof calculating the dumping margin, and so does not prevent the Communityinstitutions from making an adjustment if they consider that to be justified on thebasis of the information they have gathered during the investigation.

58.

    The Council asserts that this also follows from the nature of an anti-dumpinginvestigation, which is only an administrative procedure in which the Communityinstitutions seek to determine whether anti-dumping measures should be imposedin a given case. Consequently, the provisions which put the burden of proof on one

party (such as Article 2(9)(b) of the basic regulation) are relevant only with respectto relations between the Community institutions and that party.

59.

    It is therefore immaterial, according to the Council, which party bears the burdenof proof.

60.

    The Council submits, moreover, that it is very difficult to quantify an adjustmentmade to take account of consumer perception of quality differences, and theCommunity institutions must necessarily have a comparatively wide margin ofdiscretion when fixing the level of such an adjustment. It considers that the bestinformation on which to base such an adjustment is not scientific evidence on thedegree of differences in quality but information on sales.

61.

    The Council then addresses the applicant's argument that the Communityinstitutions infringed its right to a fair hearing during the investigation. It begins bynoting that during anti-dumping investigations the obligation of the Communityinstitutions to disclose information to the undertakings concerned is limited if, interalia, the information must be regarded as confidential (see the Al-Jubail Fertilizerjudgment cited above).

62.

    It observes that the Commission informed the applicant in the disclosure letter of10 May 1994 that it intended to make a 10% adjustment and gave the reasons whyit considered that adjustment appropriate. The Commission also providedadditional information in a fax dated 18 May 1994, and the question was discussedwith the applicant at the meeting on 18 July 1994. The Council states that at thatmeeting the Commission's approach was explained and the applicant was informedthat the Commission had learnt from an importer that in one transaction a rebateof 19% had been asked for, and given, for quality differences. The Council stressesthat the Commission could not disclose the corresponding evidence to theapplicant, since that information was clearly confidential (see Article 8 of the basicregulation).

63.

    Finally, the Council submits that the applicant's assertion that EFIA participatedin the procedure only after receiving the disclosure letter is incorrect. It submitsthat the conclusion which the applicant draws from that assertion, namely that theCommission did not base its finding that a 10% price difference was justified oninformation from the importers, is consequently wrong.

— Findings of the Court

64.

    The question whether an adjustment should be made for quality differencesinvolves the appraisal of complex economic situations. Judicial review by this Courtmust therefore be limited to verifying whether the procedural rules have beencomplied with, whether the facts have been accurately stated and whether there has

been a manifest error of assessment or a misuse of powers (see, inter alia, CaseC-174/87 Ricoh v Council [1992] ECR I-1335, paragraph 68).

65.

    According to point 64 of the contested regulation,

'... a certain difference in price existed between Community-produced urea andthat from the former USSR as a result of the imported product's inferior qualityand finish. Its tendency to deteriorate during transport, combined with the fact thatimporters cannot always offer the same security of supply as the Communityproducers, leads naturally to lower prices. While these differences are difficult toevaluate in monetary terms, it has been concluded that such a difference exists andthat a 10% adjustment in value is considered to be appropriate‘.

66.

    It follows from that passage that the Council did not base the adjustment intendedto compensate for the quality differences between urea from the Community andurea from Russia on the condition of the latter when it leaves the factory in Russia.The difference in quality is due to the fact that urea exported from Russia tendsto deteriorate during transport and that security of supply is not always ensured.That does not relate to the original condition of the Russian urea. Consequently,the applicant's arguments are immaterial in so far as they concern the physical andchemical composition of the urea when it leaves the Russian factory.

67.

    Furthermore, the Council's explanation on this point must be accepted.

68.

    The question of a price adjustment for quality differences is essentially a questionof consumer perception, since what matters for determining an adjustment in thecontext of determining the injury in an anti-dumping investigation is the price whichthe consumer is prepared to pay for the dumped products compared with productsof Community manufacture, not the objective differences between them.

69.

    Moreover, the applicant has not produced evidence to disprove the fact that ureafrom Russia was improperly and more frequently handled during transport thanurea produced in the Community, and that, unlike Community urea, it wastransported in bulk rather than in bags and was not coated with an anti-cakingagent.

70.

    As to the question of security of supply, it appears from the documents in the casethat the Commission was informed during the investigation by the importersthemselves that they were not always able to guarantee security of supplyequivalent to that of Community producers, and that that information wasconfirmed by an article in Fertilizer Week of 6 September 1993 (Volume 7 No 16).

71.

    It follows that the applicant's arguments to the effect that the institutions made amanifest error of assessment by taking into consideration the fact that Russian ureatended to deteriorate during transport and that importers of Russian urea were not

always able to guarantee security of supply equivalent to that of Communityproducers must be rejected.

72.

    As to the method used to arrive at the 10% adjustment, the applicant submits thatthe burden of proof is on the importers to show that there is a difference in quality.

73.

    That argument cannot be accepted.

74.

    It is for the Commission as investigating authority to determine whether theproduct being dumped causes injury when put into free circulation in theCommunity. The Commission must ascertain whether there has been significantprice undercutting compared with the price of a like product in the Community(see Article 4(2)(b) of the basic regulation), and in so doing it must use theinformation available at the time without imposing the burden of proof on one ofthe parties (see Article 7(7)(b) of the basic regulation).

75.

    Moreover, the applicant provided, inter alia, information intended to show that thephysical and chemical composition of Russian urea is the same as that of ureaproduced in the Community. Since that information is of altogether secondaryimportance in determining a specific level of adjustment, it must be concluded thatthe applicant did not in fact provide any evidence on which a precise level ofadjustment could be determined.

76.

    As regards the calculation of the adjustment, the contested regulation states:

'(65)    Whilst admitting that the Community producers' product commanded ahigher price, EFMA considered that the level of the adjustment was too high.Moreover, they argued that the conclusions drawn were without basis given the lackof factual supporting evidence.

EFIA also contested the level of the adjustment, but on the grounds that it wasinsufficient given the significantly inferior state of the Russian product on arrivalat the end user in the Community. They argued that this poorer quality had to becompensated for by lower prices.

(66)    In view of the inconclusive and conflicting information received by theCommission, it was concluded, based on the information available, that a 10%adjustment level was both reasonable and appropriate. It also constituted themiddle ground between the figure put forward by the Community producers andthe amount requested by EFIA.

(67)    Allowing for these differences, the level of undercutting of the Communityproducers' prices was found to be approximately 10% for urea of Russian origin.‘

77.

    To support its conclusion that a 10% adjustment was reasonable and appropriate,the Council, particularly in its letter of 30 April 1997 in reply to a written questionof the Court, summarized the relevant issues in the case as follows:

—    the Community producers agreed that an adjustment of the order of 5%might be acceptable in respect of the difference in quality between Russianurea and urea produced in the Community;

—    the Community importers asked for an adjustment of the order of 15% inthat respect;

—    an importer stated that it had made a claim for 19% of the purchase priceof a consignment because of its poor quality;

—    an Australian producer which cooperated in the investigation declaredduring the verification visit of the Commission's officials to its premises thata price difference of 10% to 15% between its prilled urea and that from theformer Soviet Union would be perfectly justified.

78.

    The Council confirmed at the hearing that it had no other information available forassessing the level of the adjustment. It further stated that it was difficult to reacha conclusion in view of the hypothetical nature of the operation in monetary terms.

79.

    The Court observes that the question of the appropriate level of adjustmentdepends essentially on an assessment of consumer perception. If importers buyRussian urea only if it costs 10% less than urea produced in the Community, theCommunity industry is in danger of losing its market share or having to reduce itsprices if the price of the Russian product falls to such an extent that the pricedifference exceeds 10%, whatever the similarity or difference between the twoproducts.

80.

    Moreover, assessment of that difference between Russian and Community urea inmonetary terms is, as the Council submits, altogether hypothetical, given thatRussian urea is being dumped on the Community market. That also means that itwas not possible to produce evidence on the point, apart from the opinions of theCommunity producers and importers which were available to the institutions.

81.

    It follows that the institutions made their decision on the basis of an evaluation ofall the information gathered during the investigation.

82.

    Accordingly, the Court considers that the institutions did not exceed their marginof discretion in that regard.

83.

    Finally, the Court must consider the applicant's argument that its right to a fairhearing was infringed, in that it did not have access to information on the methodused by the Commission to arrive at the 10% adjustment.

84.

    It is settled case-law that the right to a fair hearing is respected if the undertakingconcerned has been afforded the opportunity during the administrative procedureto make known its views on the correctness and relevance of the facts andcircumstances alleged (see Al-Jubail Fertilizer, paragraphs 15 and 17, and NakajimaAll Precision, paragraph 108).

85.

    In the present case the applicant, by letter of 17 May 1994 in response to thedisclosure letter, asked for additional information on the 10% adjustment. TheCommission replied in its letter of 18 May 1994: 'The 10% adjustment ... is anaverage estimation of information obtained from different importers-traders-distributors involved in the trade of Russian as well as Community-produced urea.‘

86.

    Moreover, at the meeting on 18 July 1994 (see paragraph 15 above) theCommission informed the applicant that it had been told by an importer that inone transaction a rebate of 19% had been asked for and given on the ground ofdifferences in quality.

87.

    It is therefore clear that the applicant was informed during the anti-dumpingproceedings of the principal facts and considerations on which the institutions basedtheir conclusions. The only additional factor provided in this respect by the Council,during the written procedure before the Court, is the statement by the Australianproducer mentioned in paragraph 77 above. However, as that information is merelyconfirmatory and did not form part of the statement of reasons in the contestedregulation, its non-disclosure cannot have deprived the applicant of its right to afair hearing.

88.

    In those circumstances, and having regard to the fact that the Commission wasobliged to assess the level of the adjustment by reference to all the informationcollected during the investigation, the applicant also cannot claim that theinformation it received concerning the adjustment was supplied at too late a stagein the administrative procedure.

89.

    Accordingly, the applicant's right to a fair hearing was not infringed.

90.

    It follows from all the foregoing that the first limb of the plea must be rejected.

The profit margin of 5% for assessment of loss of profit

— Arguments of the parties

91.

    In relation to the profit margin for Community producers the applicant advances,in effect, two arguments. First, it considers that the profit margin of 5% before taxused to evaluate the loss of profit is too low. Second, it submits that theCommunity institutions were in breach of an essential procedural requirement inthat they never stated the methodology used to arrive at that figure.

92.

    The applicant first challenges the figure of 5% for the profit margin calculated bythe Community institutions, on the basis that that figure is insufficient to producethe necessary capital for the fertilizer industry to operate and to ensure the newinvestment needed to maintain plant and equipment and bring them intocompliance with new environmental standards. It states that during the investigationand in all its correspondence with the Commission it always claimed that a figureof 10% was more reasonable. It relies on an analysis of 3 May 1995 by GrandeParoisse (one of its members) to show that the figure of 5% is inadequate.

93.

    With the reply the applicant submitted a report produced in November 1995 byZ/Yen Ltd entitled 'Profitability Requirement Review — European Urea FertilizerIndustry‘ (hereinafter 'the Z/Yen report‘), giving an analysis of the fertilizerindustry in Europe, which it refers to in support of its argument that the profitmargin is too small.

94.

    The applicant also submitted in the reply the results of a survey on profitabilitywhich it had carried out among the Community producers in order to ascertain thereliability of the information disclosed by the Commission. The applicant explainsthat it asked them individually on a strictly confidential basis for a copy of theirresponses to the Commission's questionnaire on profitability. In the applicant'sopinion, the results of the survey are difficult to reconcile with the Commission'sassertions regarding the profit margin of the Community producers.

95.

    Second, the applicant submits that if there was a method of calculation, theCommunity institutions never disclosed or explained it to the applicant. It wastherefore unable to make comments either on the level of profit margins generallyor on the basis of its assessment, so that its right to a fair hearing was infringed(see the Al-Jubail Fertilizer judgment, paragraph 17).

96.

    The Council states first that to determine the profit margin the Communityinstitutions took into account the factors they generally use, and that in the presentcase the factors taken into account were clearly explained in point 73 of thecontested regulation.

97.

    It observes that in order to determine the profit margin the Commission must takeinto account various factors relating to the overall financial situation of the industry,such as normal and fair competition in the market, the efficiency or inefficiency ofindividual undertakings, comparative advantages, and the increase or decrease indemand. They must be taken into account in order to determine the profit which

could reasonably be achieved in the absence of dumped imports. The Council statesthat that is what the Commission did in the present case.

98.

    With respect to the results of the questionnaire on profitability sent to theCommunity producers, the Council submits that a substantial number ofCommunity producers (representing about 40% of total sales by Communityproducers) considered that the level of profitability was less than 10%, and thatthey stated this either in their replies to the Commission's questionnaire or duringthe verification visits to their premises by Commission officials. The Council statesthat for reasons of confidentiality it is unable to disclose the names of thosecompanies or provide the corresponding evidence.

99.

    As to the survey submitted by the applicant concerning the Community producers'replies, the Council for its part submits a table drawn up on the basis of all theinformation received by the Commission during the investigation, which contradictsthe results of the applicant's survey. That is due in particular, it explains, to the factthat the results of the applicant's survey do not take into account the informationobtained during the visits carried out as part of the administrative procedure.

100.

    The Council then submits that no evidence was ever produced by the applicantduring the investigation to support its assertion that Community producers had tomake a profit of 10% before tax to remain competitive. In the Council's opinion,the applicant's submissions contain only vague references to investment said to benecessary to ensure compliance with new environmental standards.

101.

    The Council considers that it was for the applicant to provide during theinvestigation the necessary information to support its claim that a profit margin of10% should be used.

102.

    As to the Z/Yen report, the Council submits that the applicant may not rely on it,for two reasons. First, the Council claims that the Z/Yen report constitutes a newplea in law within the meaning of Article 48(2) of the Rules of Procedure of theCourt of First Instance. The Z/Yen report is related neither to an argument putforward in the application nor to a specific argument raised by the Council in itsdefence or in the contested regulation. The Z/Yen report cannot therefore beregarded as a mere complement to arguments and submissions made in theapplication.

103.

    The Council submits, second, that the applicant may not rely on the report, sinceit could and should have submitted it during the administrative investigation. Onthis point, the Council states that in the disclosure letter the Commission sent theapplicant, it informed it of its intention to use a profit margin of 5% to calculatethe anti-dumping duty and the loss of profit. In the letter the applicant sent theCommission on 17 May 1994, it sought clarification on some points, but not on thedetermination of the profit margin, so that the Commission's explanations musthave been clear.

104.

    Should the Court consider that the applicant may rely on the Z/Yen report, theCouncil submits that in any event it has not the slightest probative value. It submitsin particular that the Z/Yen report does not deal with the question of the profitmargin necessary for the Community industry to eliminate the injury caused by thedumped imports.

— Findings of the Court

105.

    It appears from the contested regulation that in establishing the profit margin of5% the Commission took account of the decline in demand for urea, the need tofinance additional investments in manufacturing facilities and the profit which wasconsidered reasonable in the original anti-dumping investigation concerning thatproduct (see point 73 of the contested regulation).

106.

    The Court therefore holds that the applicant has not adduced any evidence to showthat in so doing the Commission made a manifest error of assessment.

107.

    It appears from the documents in the case and the applicant's reply to a writtenquestion of the Court (letter of 17 April 1997) that the applicant has done no morethan assert during these proceedings that a profit margin before tax of 5% wasmanifestly not sufficient to provide the capital necessary for the fertilizer industryto operate and to ensure the new investment necessary for maintaining plant andequipment and bringing it into compliance with new environmental standards,without producing any evidence in support of those assertions.

108.

    As regards the Z/Yen report, the Court finds that it was submitted after thecontested regulation had been adopted. The Court must ascertain whether theinstitutions based their decisions on correct material facts and whether theassessment of those facts was not manifestly erroneous, in the situation as itappeared at the time of adoption of the contested measure. In the present case, ithas been shown that the applicant did not during the administrative procedureproduce any evidence in support of its assertion that a higher profit margin wasrequired. The institutions were therefore unable to take that factor into accountwhen they adopted the contested regulation. For that reason the Court considersthat the Z/Yen report should not be taken into account in the present proceedings.

109.

    The same applies to the analysis by Grande Paroisse of 3 May 1995, submitted bythe applicant with its application.

110.

    Nor may the applicant rely on the results of the survey on profitability it conductedamong Community producers. There is nothing to contradict the Council'sexplanation that the different results are due to the fact that the applicant's surveydoes not take account of the information obtained during the visits made in thecourse of the investigation. In addition, the applicant itself maintained in its letter

of 17 April 1997 that the Community producers had provided the Commission witha variety of methods for calculating profitability which did not have the samemeaning, and which could be clarified by the Commission during the on-siteverifications at the premises of the Community producers.

111.

    As to the applicant's allegation that its right to a fair hearing was infringed, itsuffices to note that it was in a position to make known its views on theappropriateness of the 5% figure and to show why a pre-tax profit of 10% wasnecessary. It did no more, however, than assert in general terms that a profit of theorder of 10% would be more appropriate, and did not even seek further detailsregarding any particular method for calculating the profit margin.

112.

    The disclosure letter of 10 May 1994 stated: 'The majority of Communityproducers claimed that a minimum pre-tax profit of 15% was required for them toremain competitive. However, this was not substantiated and, being an establishedproduct, this figure is considered to be high.‘ The applicant thus knew during theadministrative procedure that, in the Commission's opinion, it was for the applicantto show why a higher profit margin was necessary.

113.

    Consequently, the applicant's right to a fair hearing was not infringed in theadministrative proceedings.

114.

    It follows from the foregoing that the plea must be rejected in its entirety.

The first and second pleas

115.

    The applicant claims that the Court should annul Article 1 of the contestedregulation and order that the anti-dumping duty imposed by that regulation bemaintained until the competent institutions adopt more stringent measures.

116.

    According to point 106 of the contested regulation, the injury elimination thresholdwas lower than the dumping margin established for Russia. Consequently, inaccordance with Article 13(3) of the basic regulation, the definitive anti-dumpingduty was set at the level of the injury elimination threshold.

117.

    That conclusion, which was moreover stated in the disclosure letter of 10 May 1994,was never contested by the applicant.

118.

    Nor has the applicant challenged the method by which the amount of duty wasfixed, that is to say, an amount equal to the difference between ECU 115 per tonneand the free-at-Community-frontier price before customs clearance, if the latter islower.

119.

    It follows from the foregoing that the institutions quite rightly set the duty at thelevel necessary to eliminate the injury caused by dumped imports from Russia.

120.

    Consequently, even if the applicant were correct in complaining that the institutionsfixed a dumping margin which was too low, it would not be possible in any event for it to obtain annulment of Article 1 of the contested regulation.

121.

    The first and second pleas are thus ineffective, and the claim for annulment ofArticle 1 of the contested regulation must therefore be rejected in its entirety.

122.

    Accordingly, the application must likewise be dismissed in its entirety.

Costs

123.

    Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to beordered to pay the costs if they have been applied for in the successful party'spleadings. Since the applicant has been unsuccessful, and since the Council has

applied for costs, the applicant must be ordered to pay, in addition to its own costs,the costs of the Council. In accordance with Article 87(4) of the Rules ofProcedure, the Commission as intervener must be ordered to bear its own costs.

On those grounds,

THE COURT OF FIRST INSTANCE (Fourth Chamber, ExtendedComposition)

hereby:

1.    Dismisses the application;

2.    Orders the applicant to bear its own costs and to pay the costs of theCouncil;

3.    Orders the Commission to bear its own costs.

Lenaerts Lindh Azizi             Cooke                    Jaeger

Delivered in open court in Luxembourg on 17 December 1997.

H. Jung

P. Lindh

Registrar

President

1: Language of the case: English.