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EU’s Highest Court Annuls Duties Imposed on Two Chinese Fastener Producers

Eight years after the initial imposition of the anti-dumping duties on fasteners from mainland China, the EU Court of Justice – in its judgment released on 5 April 2017 – annulled the anti-dumping duties imposed on Chinese fastener producers Changshu City Standard Parts Factory and Ningbo Jinding Fastener.

The legal issue at stake was whether EU trade investigators could exclude certain export transactions from the calculation of the dumping margin, due to the absence of matching products produced and sold by the producer in the analogue country.

During the anti-dumping investigation on fasteners, the normal value for the exporting producers in mainland China was established on the basis of data from an analogue country, due to the fact that the exporting producers were not granted market economy treatment. While the European Commission used India as the analogue country, not all types of fasteners exported by the Chinese producers were produced and sold by the Indian producer. As a result, the Commission excluded from the dumping calculation the transactions relating to the types of fasteners which were exported by producers in mainland China, but for which no matching type was produced and sold by the Indian producer.

Changshu City Standard Parts Factory and Ningbo Jinding Fastener challenged the exclusion of the export transactions, arguing that such exclusion negatively affected the dumping margin as calculated by the Commission. After a negative judgment from the EU’s General Court on 29 April 2015, which rejected the applicants’ legal action, the EU Court of Justice, on 5 April 2017, ruled in their favour.

The Court of Justice held that the EU’s basic anti-dumping Regulation “cannot be interpreted as allowing export transactions to the European Union relating to certain types of the product under consideration to be excluded from the calculation of the dumping margin” and that the EU institutions are, quite to the contrary, “required to take into account all those transactions for the purposes of that calculation”.

The Court of Justice added that the dumping margin is to be calculated on the basis of the definition of “the product under consideration” as put forward by the EU institutions at the time the investigation is initiated, “without any possibility of excluding any type or model of that product from the calculation”. In the scenario where a producer in the analogue country (in this case India) neither produces nor sells a certain product type, the Court held that “the EU institutions may either decide to exclude that product type from the definition of ‘the product under consideration’ or construe the normal value for that product type so as to take into consideration export transactions of that same product type for the purposes of calculating the dumping margin.”

The Court of Justice concluded that the General Court had made an error of law by holding that the EU institutions were entitled to exclude from the calculation of the dumping margin export transactions relating to certain types of the product under consideration because there were no “comparable prices” for those product types. As a result, the Court set aside the judgment of the General Court and annulled the EU Regulation imposing the anti-dumping duties in so far as it relates to Changshu City Standard Parts Factory and Ningbo Jinding Fastener.

The legal challenge against the EU anti-dumping duties on fasteners originating in mainland China dates from 2009, when the duties came into force by means of Regulation 91/2009 of 26 January 2009.

Some six months later, on 31 July 2009, mainland China requested WTO consultations with the EU over Regulation 91/2009, arguing that the imposition of the anti-dumping duties violated several of the EU’s WTO obligations. On 28 July 2011, the WTO’s Dispute Settlement Body adopted the WTO Appellate Body and Panel Report in the case EC – Fasteners, confirming that the EU had indeed infringed a number of provisions of WTO law. In order to determine how Regulation 91/2009 should be brought into conformity with the recommendations and rulings of the WTO Dispute Settlement Body, the European Commission initiated a review of the duties imposed by Regulation 91/2009.

Following such review, the Council of the EU adopted Regulation 924/2012 on 4 October 2012. This Regulation reduced the anti-dumping duty to 38.3% for Changshu City Standard Parts Factory and maintained the duty at 64.3% for Ningbo Jinding Fastener. More importantly, however, the Council excluded certain export transactions from the calculation of the dumping margin.

On 24 December 2012, Changshu City Standard Parts Factory and Ningbo Jinding Fastener lodged an action for annulment of Regulation 924/2012 at the General Court. The General Court rejected their actions on 29 April 2015, ruling in favour of the EU and stating that the European Commission’s decision to exclude the export data from the dumping calculation did not warrant the annulment of the anti-dumping duties. Changshu City Standard Parts Factory and Ningbo Jinding Fastener subsequently lodged an appeal against the judgment of the General Court on 9 July 2015. On 5 April 2017, the EU Court of Justice ruled in their favour.

The Chinese companies’ triumph in these court proceedings can be seen as both positive and important. The case could have ramifications for other exporters to the EU market that are caught in the same or similar situations, in connection with anti-dumping investigations and – more specifically – dumping calculations where an analogue country is used.

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