EU General Court annuls duties because of mistake in injury assessment

By Hein Hobbelen, Thomas Verellen

04-2019

On 10 April 2019, the General Court partially annulled anti-dumping and anti-subsidy duties on imports of ductile cast iron tubes and pipes from India into the EU.[1] The judgments highlight the importance of treading carefully when assessing alleged price undercutting by importers. As the judgments demonstrate, a mistake in the undercutting calculations can even lead to annulment of the regulation and thus the termination of duties.

Since March 2016, imports of the above-mentioned tubes and pipes from India have been subject to anti-dumping and countervailing duties. In June 2016, Jindal Saw Limited ("Jindal"), one of the importers for whom specific dumping and subsidy margins had been calculated, challenged the validity of the measures before the European courts.

Jindal's winning argument related to the injury assessment, which is a key element of any anti-dumping or anti-subsidy investigation. The assessment is crucial since, to impose duties, the Commission must not only establish that dumping or subsidisation has occurred, but also that it has caused injury to Union industry. Union industry plays a central role in this assessment, since the Commission will typically have to rely on data provided by that industry when assessing whether or not to impose duties. 

More specifically, Jindal had argued that the Commission had made a mistake in assessing the presence of predatory pricing (which is an important indicator of injury). In Jindal's view, the Commission had wrongly equated prices charged by sales representatives of Union producers to EXW ("Ex Works") prices.

The Court agreed with Jindal. It held that, rather than having compared prices "at the same level of trade", as is required under EU trade defence rules, the Commission had compared prices charged by sales representatives of the Union producers to independent customers with those charged by the importers at the CIF ("Cost, Insurance & Freight") level.

In doing so, the Commission had inflated the prices of the Union producers and thus increased the gap between those prices and the prices charged by the importers. Consequently, the Court concluded that "it cannot be considered that the undercutting calculation was made by comparing prices at the same level of trade."

Crucially, this error had significant repercussions for the Commission's broader assessment: as the Commission had relied heavily on the presence of price undercutting by the importer when making the case that dumping and subsidisation had caused injury to Union industry, it could no longer be established with sufficient certainty that the injury suffered by Union producers was actually caused by the dumped and subsidised imports.

At the very least, it could not be excluded that the injury might have been lower than the level established by the Commission. Either scenario, the Court concluded, was sufficient to call into question the legality of the regulations and led the Court to annul  the regulations in so far as they concerned Jindal.

Once again, and despite its continued reaffirmation of the importance of the Commission's "broad discretion" in the area of trade defence policy, the General Court seems to enter into the minutiae of the Commission's injury assessment. Complainants better take note: to increase the likelihood of success of a complaint, they are well advised  from the outset to reflect thoroughly on the appropriate way to calculate price levels when making the case that importers have been undercutting or underselling.

The Commission can appeal against the General Court's ruling before the European Court of Justice. If it does, existing duties will remain in place pending the appeal.



[1] Judgment in Jindal Saw Ltd, T-300/16, EU:T:2019:235 and Judgment in Jindal Saw Ltd, T-301/16, EU:T:2019:234.