17 July 2019
Chinese Company Loses Anti-dumping Appeal; Important Issues Raised That Could Have Impact on Other Cases
On 28 June 2019, the General Court of the EU dismissed the application lodged by Chinese sweetener producer Changmao Biochemical Engineering against dumping tariffs imposed by the EU on its products. The EU’s first-tier Court ruled that the European Commission correctly used domestic prices as a basis for comparison in its investigation which led to the imposition of tariffs. The judges also sided with the Commission in the decision not to grant market economy treatment to Changmao.
Since July 2016, the European Commission has imposed anti-dumping measures on imports of Chinese aspartame which is, according to Commission, priced below fair market value. Dumping occurs, in particular, if the price of a product when exported is less than the price of that product in the market of the exporting country, i.e. its normal value. As a result of the imposed measure, Changmao’s exports of aspartame into the EU face tariffs of 55.4 percent. Subsequently, the Chinese producer lodged an application with the General Court on 21 October 2016, asking the judges to cancel the tariffs on the basis of several arguments.
At the time of the original anti-dumping investigation, the EU basic anti-dumping Regulation (the “basic Regulation”) stipulated that in the case of imports from non-market-economy countries, such as mainland China, the normal value of the product shall be determined on the basis of the price or constructed value in a market economy analogous third country. Alternatively, it had to be determined based on the price from such third country to other countries. If this were not possible, the price payable in the EU for the like product could be used as a basis.
The Chinese sweetener producer claimed that the European Commission wrongly relied on EU industry data instead of third country data for the determination of the normal value of the product concerned. In the case at hand, the third country data would have been taken from a Japanese producer who agreed to cooperate. Following verification, however, the Commission found that these records were not reliable.
The EU’s General Court, which is located in Luxembourg, found that the Commission did not infringe the basic Regulation since the information available at the time of choice was not reliable and was likely to lead to an inappropriate and unreasonable choice of analogue country. The judges also dismissed the claim that the Commission failed to show that it had taken due care to search for analogue countries. In view of the rarity of aspartame producers in similar countries and the difficulty of finding a producer willing to cooperate with it, all due care was taken in the search for an appropriate analogue country, the General Court said.
The Chinese sweetener producer also argued that the Commission had wrongly decided not to extend to it the so-called market economy treatment. This treatment, laid down in the basic Regulation applicable at the time, allowed producers operating under market-economy conditions in countries such as mainland China, to obtain treatment corresponding to their individual situation, rather than to the overall situation of the country in which they are established. To that end, companies had to have, among others, general accounts independently audited and in line with international accounting standards.
In Changmao’s view, the Commission misinterpreted the criteria for granting market economy treatment by considering that accounting records had to be in line with international standards. The producer argued that only the audit should be in line with these standards and not the accounting documents themselves. However, the General Court disagreed, saying that such an approach “could result in the grant of market economy treatment with regard to an undertaking whose accounting records are not sufficiently reliable”. It would also have been contrary to the principle of strict interpretation of exceptions to general rules, according to the Court’s decision.
Finally, Changmao argued that the European Commission should have considered the differences in production process and packaging between Changmao and EU companies, which affect price comparability, by making appropriate cost adjustments. Under EU law, the party which seeks to benefit from those adjustments must prove that they are justified. In this case, the General Court said that the Chinese producer had not demonstrated that the respective differences in costs translated into differences in prices. Therefore, the judges ruled, the applicant could not complain that the Commission had refused to make the adjustments requested for the purposes of determining the dumping margin.
It remains to be seen whether the judgment will be appealed further, before the EU’s highest-tier court.