Foshan City Nanhai Golden Step Industrial v Council (Commercial policy) [2010] EUECJ T-410/06 (04 March 2010)

Judgment Legal context Article 1(1) and (2) 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), as amended, ('the basic regulation') provides: '1. An anti-dumping duty may be applied to any dumped product whose release for free circulation in the Community causes injury. 2. A product is to be considered as being dumped if its export price to the Community is less than a comparable price for the like product, in the ordinary course of trade, as established for the exporting country.' As regards the determination of dumping, Article 2 of the basic regulation prescribes the rules applicable for the purpose of a comparison between the normal value of the product in question and the export price; the dumping margin, according to Article 2(12) of the basic regulation, is the amount by which the normal value exceeds the export price. Article 2(1), first and second subparagraphs, (3) and (6) of the basic regulation reads as follows: '1. 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. However, where the exporter in the exporting country does not produce or does not sell the like product, the normal value may be established on the basis of prices of other sellers or producers. ... 3. Where there are no or insufficient sales of the like product in the ordinary course of trade, or where because of the particular market situation such sales do not permit a proper comparison, the normal value of the like product shall be calculated on the basis of the cost of production in the country of origin plus a reasonable amount for selling, general and administrative costs and for profits, or on the basis of the export prices, in the ordinary course of trade, to an appropriate third country, provided that those prices are representative. ... 6. The amounts for selling, for general and administrative costs and for profits shall be based on actual data pertaining to production and sales, in the ordinary course of trade, of the like product, by the exporter or producer under investigation. When such amounts cannot be determined on this basis, the amounts may be determined on the basis of: (a) the weighted average of the actual amounts determined for other exporters or producers subject to investigation in respect of production and sales of the like product in the domestic market of the country of origin; (b) the actual amounts applicable to production and sales, in the ordinary course of trade, of the same general category of products for the exporter or producer in question in the domestic market of the country of origin; (c) any other reasonable method, provided that the amount for profit so established shall not exceed the profit normally realised by other exporters or producers on sales of products of the same general category in the domestic market of the country of origin.' As regards the conditions for the grant of market economy treatment ('MET'), Article 2(7)(b) of the basic regulation provides: 'In anti-dumping investigations concerning imports from ... the People's Republic of China ..., normal value will be determined in accordance with paragraphs 1 to 6, if it is shown, on the basis of properly substantiated claims by one or more producers subject to the investigation ..., that market economy conditions prevail for this producer or producers in respect of the manufacture and sale of the like product concerned...' Article 2(8) and (9), first subparagraph, of the basic regulation provides: '8. The export price shall be the price actually paid or payable for the product when sold for export from the exporting country to the Community. 9. In cases where there is no export price ... [it] may be constructed on the basis of the price at which the imported products are first resold to an independent buyer, or, if the products are not resold to an independent buyer, or are not resold in the condition in which they were imported, on any reasonable basis.' As regards the determination of injury, Article 3(2), (3) and (6) of the basic regulation provides: '2. A determination of injury shall be based on positive evidence and shall involve an objective examination of both (a) the volume of the dumped imports and the effect of the dumped imports on prices in the Community market for like products; and (b) the consequent impact of those imports on the Community 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 Community. 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 Community 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 these factors can necessarily give decisive guidance. ... 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, this shall entail a demonstration that the volume and/or price levels identified pursuant to paragraph 3 are responsible for an impact on the Community industry as provided for in paragraph 5, and that this impact exists to a degree which enables it to be classified as material.' According to the final sentence of Article 9(4) of the basic regulation, '[t]he amount of the anti-dumping duty shall not exceed the margin of dumping established but it should be less than the margin if such lesser duty would be adequate to remove the injury to the Community industry'. Article 20(1), (2), (4) and (5) of the basic regulation provides: '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. Requests for such disclosure shall be made in writing immediately following the imposition of provisional measures, and the disclosure shall be made in writing as soon as possible thereafter. 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. ... 4. Final disclosure shall be given in writing. It shall be made, due regard being had to the protection of confidential information, as soon as possible and, normally, not later than one month prior to a definitive decision or the submission by the Commission of any proposal for final action pursuant to Article 9. Where the Commission is not in a position to disclose certain facts or considerations at that time, these shall be disclosed as soon as possible thereafter. Disclosure shall not prejudice any subsequent decision which may be taken by the Commission or the Council but where such decision is based on any different facts and considerations, these shall be disclosed as soon as possible. 5. Representations made after final disclosure is given shall be taken into consideration only if received within a period to be set by the Commission in each case, which shall be at least 10 days, due consideration being given to the urgency of the matter.' Background to the dispute and the contested regulation The applicant, Foshan City Nanhai Golden Step Industrial Co., Ltd, is a footwear-producing company established in China. Imports of footwear from China falling within certain categories of the combined nomenclature were subject to a quantitative quota regime which lapsed on 1 January 2005. Following a complaint lodged on 30 May 2005 by the Confédération européenne de l'industrie de la chaussure ('CEC'), the European Commission initiated an anti-dumping proceeding concerning imports of certain footwear with uppers of leather originating in China and Vietnam. The notice of initiation of that proceeding was published in the Official Journal of the European Union of 7 July 2005 (OJ 2005 C 166, p. 14) ('the notice of initiation'). On 23 March 2006, the Commission adopted Regulation (EC) No 553/2006 imposing a provisional anti-dumping duty on imports of certain footwear with uppers of leather originating in the People's Republic of China and Vietnam (OJ 2006 L 98, p. 3) ('the provisional regulation'). According to recital 9 to the provisional regulation, the investigation of dumping and injury covered the period from 1 April 2004 to 31 March 2005 ('the investigation period'). The examination of factors relevant for the assessment of injury covered the period from 1 January 2001 to 31 March 2005 ('the period considered'). In light of the need to establish a normal value for the products of the Chinese and Vietnamese exporting producers which could not be granted MET, a verification to establish normal value on the basis of data from an analogue country, in this case the Federative Republic of Brazil, took place at the premises of three Brazilian companies (recital 8 to the provisional regulation). It follows from recital 57 to the provisional regulation that, for the purposes of determining dumping, the Commission used the sampling technique provided for in Article 17 of the basic regulation. To that end, it took a sample consisting of 13 Chinese exporting producers representing over 20% of the Chinese export volume to the Community. According to recital 8(c) to the provisional regulation, the applicant is the fifth company on the list of Chinese exporting producers forming part of the sample. As regards the export price, the Commission stated at recital 130 to the provisional regulation that where export sales to the Community were made through unrelated trading companies, export prices were established on the basis of the prices of the product when sold for export to the trading companies by the producers concerned in accordance with Article 2(8) of the basic regulation (see paragraph 5 above). According to recital 131 to the provisional regulation, the comparison between normal value and export price was made on an ex-factory basis. For the purpose of ensuring a fair comparison between the normal value and the export price, due allowance in the form of adjustments was made for differences affecting prices and price comparability in accordance with Article 2(10) of the basic regulation (recital 132 to the provisional regulation). As regards injury, the Commission examined, in particular, the undercutting of the import prices. To that end, c.i.f. Community frontier import prices, plus customs duties, were adjusted upwards in order to reflect costs incurred in the Community by the importers, such as those relating to design, selection of raw material, etc., and were compared with Community ex-works prices at the same level of trade. That comparison resulted in an undercutting margin of 12.8% for footwear originating in China (recitals 167 and 168 to the provisional regulation). By letter of 7 April 2006, the Commission sent the applicant, pursuant to Article 14(2) and Article 20(1) of the basic regulation, respectively, a copy of the provisional regulation and a document containing information on the details underlying the essential facts and considerations on the basis of which the anti-dumping duties were imposed. The Commission invited the applicant to submit any comments which it might have on those documents by 8 May 2006. By email of 27 April 2006, the applicant objected that the information in the general disclosure document was incomplete; the applicant placed particular emphasis on the data relating to the price adjustments made for the purpose of calculating dumping and undercutting/underselling. The applicant reiterated those objections in its written observations on 8 May 2006. By email of 16 May 2006, the applicant emphasised, in particular, that the adjustment of its export price by 15% to reflect research and development costs understated the actual research and development costs incurred since it failed to take into account the significant costs and margins of the trading companies through which certain Chinese producers dispatch their production to the European market. By letter of 7 July 2006, the Commission sent the applicant, pursuant to Article 20(2) to (4) of the basic regulation, a final disclosure document setting out the essential facts and considerations on which the proposal to impose definitive anti-dumping duties was based. In section H of that document, the Commission set out its considerations concerning the definitive anti-dumping measures which would be proposed to the Council of the European Union. As regards the type of measures, the Commission stated, first, that undertakings given by producers not to sell at below the price level which would have eliminated the significant injury sustained by the Community industry did not constitute appropriate measures and, second, that it was appropriate to apply a delayed duty system (paragraphs 278 to 291 of the final disclosure document). As regards the delayed duty system, the Commission observed that the volume of imports had had a significant injurious effect on the Community industry as from 1 January 2005, the date on which the quota regime lapsed (see paragraph 10 above). During the first quarter of 2005, which was included in the investigation period (see paragraph 13 above), the Community industry underwent, proportionally, the most significant decline during the period considered with respect to a number of economic indicators such as profitability, sales prices, market share, sales, employment and production. In those circumstances, the Commission paid special attention to the quantitative element of dumping in establishing whether there was injury. It thus considered that only imports in excess of a certain volume were injurious and that, therefore, intervention in the form of ad valorem duties was not necessary to ensure fair competition. Therefore, anti-dumping duties should be applied only to quantities of imported products in excess of a certain annual volume. In the present case, such a delayed duty system would be adequate to remove the injury in so far as it would take the quota effect into consideration and would balance the concerns of the interested parties. The proposed anti-dumping duties should therefore apply to imports from China in excess of 140 million pairs of shoes per annum. That volume reflected the Commission's assessment on imports from China in 2005 and took account of the quantities imported in 2004 (paragraphs 285 to 287 and 291 of the final disclosure document). Therefore, the Commission proposed the imposition of a definitive anti-dumping duty, equal to the injury elimination level, on imports in excess of 140 million pairs of shoes per annum originating in China. That margin was fixed at the level of the underselling margin, namely 23% (paragraph 293 of the final disclosure document). By letter of 10 July 2006, the Commission supplemented the final disclosure document with a number of considerations concerning the applicant's situation and relating to the grant of MET, the calculation of normal value and the calculation of injury. As regards the calculation of normal value, the Commission stated that it would use the data from the applicant's accounts in order to determine the cost of manufacturing. However, in order to determine selling costs, general and administrative costs and profit margin, the Commission used data from two other Chinese undertakings which had made representative domestic sales and had been granted MET in the context of recent investigations. That calculation resulted in a dumping margin of 9.7%. As regards the calculation of injury, the Commission stated in the letter of 10 July 2006 that it was unable to take into account, for the purpose of determining the c.i.f. Community frontier price and, accordingly, the undercutting/underselling margins, the profit margin of the trading company which shipped the applicant's products to the Community market, because that company had not cooperated in the investigation. Furthermore, there was no need to take that profit margin into account, since the Commission had adjusted downwards the normal value established on the basis of data from Brazil in order to deduct the costs incurred by that trading company (marketing, research and development, etc.). The Commission invited the applicant to submit its comments by 18 July 2006. The applicant submitted its comments, in particular by letter of 18 July 2006, and disputed both the construction of the normal value and the determination of the c.i.f. Community frontier price, which, it maintained, should be increased by the profit margin achieved by the trading company which shipped the applicant's production to the Community market. In addition, the applicant complained that the Commission had not disclosed to it either the figures that served as the basis for the calculation of its selling costs, general and administrative costs and profit margin or the business sectors in which the undertakings from which those figures came were active. By letter of 28 July 2006, the Commission sent the applicant an additional final disclosure document. According to its first two paragraphs, the purpose of that document was to provide interested parties with information about a change with regard to the envisaged form of the definitive anti-dumping duties. The Commission's Directorate General (DG) 'Trade' had considered the comments submitted by certain interested parties with regard to the originally envisaged delayed duty system (see paragraphs 23 to 25 above). By that document, the Commission gave up the idea of such a system. In its new approach, the Commission stated that the real materially injurious increase in imports took place in 2004 and until the end of the investigation period, and that 2005 had been the first year in which imports of footwear from China were no longer subject to quotas. Furthermore, the Commission established a volume of non-materially injurious imports on the basis of imports from China and Vietnam in 2003, namely 109 million pairs of shoes. Under that new approach, the economic impact of that volume needed to be taken into consideration in establishing the injury elimination level. Consequently, first, the injury elimination level was lowered to take account of the volume of non-materially injurious imports and, secondly, definitive duties were applied as from the first pair of shoes imported. According to that methodology, which provides for four stages set out in that document, the Commission concluded, for imports from China, on the basis of the 'lesser duty rule', that a definitive anti-dumping duty equal to the level required to eliminate injury should be imposed, in this case 16.5%. However, as regards imports of footwear produced by the applicant, the Commission proposed, still in accordance with the 'lesser duty rule', that a duty of 9.7%, that is to say, equal to the applicant's dumping margin, should be imposed. In order to formalise that new proposal, the Commission annexed to its letter of 28 July 2006 the paragraphs which were to be included in the new section H of the final disclosure document and replace those in the corresponding section of the original final disclosure document (see paragraph 23 above). The Commission stated, in the paragraphs 278 and 279 which were to be included in the new section H of the final disclosure document, that only imports above a certain volume threshold prior to the lapsing of the quota regime could cause material injury so that the injury threshold determined on the basis of the results of the investigation period had to reflect the fact that certain import quantities had not caused such material injury. Consequently, the non-materially injurious import quantities had to be reflected in the injury elimination levels. In paragraph 280 of that document, the Commission set out the methodology which had been used. By email of 2 August 2006, the applicant submitted its comments on the additional final disclosure document; however, it observed that neither the time allowed nor the information provided by the Commission for that purpose was adequate. By letter of 22 August 2006, the Commission informed the applicant that the undertakings which were the source of the data relating to selling costs, general and administrative costs and the profit margin were in the chemical and engineering sectors. In that letter, the Commission confirmed that, in spite of the difference between those sectors, the data used were 'reasonable' and 'comparable' to the types of costs incurred by the applicant. On 5 October 2006, the Council adopted Regulation (EC) No 1472/2006 imposing a definitive anti-dumping duty and collecting definitely the provisional duty imposed on imports of certain footwear with uppers of leather originating in the People's Republic of China and Vietnam (OJ 2006 L 275, p. 1) ('the contested regulation'). By the contested regulation, the Council imposed a definitive anti-dumping duty on imports of footwear with uppers of leather or composition leather, excluding sports footwear, footwear involving special technology, slippers and other indoor footwear and footwear with a protective toecap, originating in China and falling within a number of combined nomenclature codes (Article 1 of the contested regulation). Pursuant to Article 3 of the contested regulation, the contested regulation was to remain in force for a period of two years. According to recitals 71 and 72 to the contested regulation, the applicant, which was in the sample of Chinese producers covered by the investigation, was awarded MET. It had been refused MET at the stage of the provisional regulation on the ground that it was not free to determine its sales quantities without significant State interference. However, the applicant subsequently submitted evidence demonstrating that that was not so. According to recital 98 to the contested regulation, normal value for the applicant should be calculated on the basis of the data relating to its domestic sales and cost of production. According to recital 99 to the contested regulation, however, as the applicant had made no domestic sales during the investigation period, normal value could not be established on the basis of its domestic prices, as provided for in the first subparagraph of Article 2(1) of the basic regulation. Furthermore, as no other Chinese producer in the sample had been awarded MET, and the second subparagraph of Article 2(1) of the basic regulation was therefore inapplicable, the institutions were required to construct normal value on the basis of the applicant's manufacturing costs, plus a reasonable amount for selling, general and administrative costs and a reasonable margin of profit in accordance with Article 2(3) of the basic regulation (recitals 100 and 101 to the contested regulation). Since the applicant had made no domestic sales and since no other Chinese producer had been awarded MET, selling, general and administrative costs and profit margin had to be determined on the basis of a reasonable method, in accordance with Article 2(6)(c) of the basic regulation (see paragraph 3 above). To that end, the Commission used the data from other Chinese exporting producers that had obtained MET in other investigations and had made domestic sales in the ordinary course of trade, in accordance with Article 2(2) of the basic regulation (recitals 102 and 103 to the contested regulation). As regards the export price and its comparison with normal value, the Council confirmed, at recitals 123 and 138 to the contested regulation, the findings of the Commission set out at recitals 128 to 133 to the provisional regulation (see paragraphs 16 and 17 above). According to recital 146 to the contested regulation, the dumping margin, expressed as a percentage of the c.i.f. import price at the Community border, was fixed for the applicant at 9.7%. As regards price undercutting, the Commission had to revise downwards the adjustment of import prices (see paragraph 18 above), in light of the fact, in particular, that most importers were unable to provide evidence to substantiate the claim that their research and development costs reached the level applied at the provisional stage. Thus, the Council made a fresh calculation which led to an undercutting margin of 13.5% for footwear originating in China (recitals 180 to 182 to the contested regulation). As regards the level of duty necessary to eliminate the injury caused by imports from China, the Council stated at recitals 296 to 301 in the preamble to the contested regulation, reiterating paragraphs 275 to 280 of the new section H of the final disclosure document attached as an Annex to the additional final disclosure document, that it was appropriate to take account of the particularities of the present proceeding and in particular of the fact that a quota regime had been in force until 1 January 2005. As that quota regime had prevented any material injury being caused to the Community industry, whereas the increase in imports after the lapse of the quota had had a particularly decisive injurious effect on the Community industry, the Council considered that only imports above a certain volume before the lapsing of the quota regime could cause injury. Consequently, the injury threshold determined on the basis of the results of the investigation period had to take into account the fact that certain import quantities had not caused such material injury. That operation, which was based on the value of import volumes in 2003, led, for imports from China, to an injury threshold of 16.5%, whereas a threshold of 23% would have been applied, according to recital 295 to the contested regulation, if the Council had not taken account of the particularities of the present case. However, in accordance with the 'lesser duty rule' (see paragraph 7 above), the level of the definitive duty was fixed, for the applicant, on the basis of its dumping margin, which was below the level of duty required to eliminate injury. Consequently, the rate of the definitive anti-dumping duty applied to the net free-at-Community-frontier price, before customs clearance, was fixed, for footwear produced by the applicant, at 9.7% (recitals 302, 323 and 324 to and Article 1(3) of the contested regulation). Procedure and forms of order sought By application lodged at the Registry of the Court on 21 December 2006, the applicant brought the present action. By document lodged at the Registry of the Court on 2 April 2007, the Commission sought leave to intervene in the present case in support of the form of order sought by the Council. By document lodged at the Court Registry on 5 April 2007, CEC sought leave to intervene in the present case in support of the form of order sought by the Council. By order of 2 August 2007, the President of the Second Chamber of the Court granted the applications to intervene lodged by the Commission and CEC. CEC lodged its statement in intervention on 17 August 2007. As the composition of the Chambers of the Court had been altered, the Judge-Rapporteur was assigned to the Eighth Chamber, to which the present case was therefore assigned. Upon hearing the report of the Judge-Rapporteur, the Court decided to open the oral procedure, and, in the context of measures of organisation of procedure, requested that the applicant and the Council answer two questions in writing. By letters received on 2 February 2009, those parties complied with the measures of organisation of procedure taken by the Court. The parties presented oral argument and replied to the questions put by the Court at the hearing on 20 February 2009. The applicant claims that the Court should: annul the contested regulation in so far as it concerns the applicant; order the Council to pay the costs. The Council contends that the Court should: dismiss the action as inadmissible or unfounded; order the applicant to pay the costs. The Commission claims that the Court should dismiss the action. CEC claims that the Court should: dismiss the action; order the applicant to pay the costs of its intervention. Law In support of its action, the applicant raises four pleas in law, alleging, respectively: breach of Article 2(6)(c) of the basic regulation and breach of its rights of defence in relation to the calculation of its dumping margin; breach of Article 3 of the basic regulation and failure to state reasons; breach of its rights of defence and failure to state reasons with respect to the type of definitive duties applied; error of law and manifest error of assessment concerning the injury suffered by the Community industry. The first plea: breach of Article 2(6)(c) of the basic regulation and breach of the rights of the defence in relation to the calculation of the dumping margin Arguments of the parties The applicant maintains that by using profit margins of two Chinese exporters in quite different sectors from its own for the purpose of determining the applicant's profit margin, the Commission made a manifest error of assessment and infringed Article 2 of the basic regulation. In that regard, the applicant observes that the 9.7% anti-dumping duty applied to its products was established on the basis of its individual dumping margin, in application of the 'lesser duty rule' (see paragraphs 7 and 41 above). In this case, the Commission determined the applicant's profit on the basis of the average of profit levels found during two anti-dumping proceedings relating to the chemical products and engineering products sectors (see paragraph 26 above). Clearly, footwear with uppers of leather does not fall into the same general category as chemical or engineering products, which the Council does not dispute. The Commission acknowledged in its correspondence that those sectors are different from the footwear sector. The institutions made a manifest error of assessment by using profit margins obtained in the two sectors mentioned above. They could have used the applicant's profit margin on export sales (6.7%), the target profit margin of 6% established for the Community industry or the profit margin of at least one other producer in the sample with significant sales on the Chinese market which was not granted MET 'solely on the basis of confusion arising regarding the status of its Articles of Association'. The Commission is required to explain why its findings concerning that company's Articles of Association made its accounts relating to its profit margin on the Chinese market unreliable. Furthermore, the institutions could have used the profit margin of producers not forming part of the sample, if the Court considers, in the context of the actions brought by those companies, that the Commission ought to have examined their claims for MET or individual treatment ('IT'). The argument that the institutions should afford greater importance to the geographic market and, accordingly, rely on sales of different products in China instead of relying on sales of similar products abroad is without substance. The Council has not established that profit margins differ substantially according to the destination of the products. The institutions thus failed to take account of all the relevant circumstances or to appraise the facts of the matter with all due care in order to determine normal value in a reasonable manner. The Commission also infringed the applicant's rights of defence by failing to inform it within a reasonable time that it intended to use the selling costs, general and administrative expenses and profit margin of traders in different sectors and by failing to state to the requisite standard its reasons for rejecting the reasonable method suggested by the applicant. The Commission did not inform the applicant of its decision to use the data of undertakings in the chemical and engineering sectors until 22 August 2006, that is to say, after expiry of the time-limit for submitting observations on the additional final disclosure document. The non-communication of the details concerning selling costs, general and administrative expenses and profit margin on which the Commission based its calculations, in spite of the applicant's requests, also constitutes a breach of its rights of defence. Thus, the Commission failed to place the applicant in a position in which it could effectively make known its views on the correctness, the relevance and the reasonableness of the facts and circumstances alleged and on the evidence presented by the Commission concerning the existence of dumping and injury. The Commission could have communicated that information without revealing the names of the companies which had provided it. Last, the Commission failed to inform the applicant of its view that profit margins for domestic sales may differ from profit margins for export sales, as, according to the Commission, the destination of the products plays a decisive role in that regard and did not communicate any evidence of the existence of such a difference. The applicant asserts that, out of 152 MET/IT claims, the Commission examined only 12, and was thus deprived of relevant data that could have been used for the purpose of calculating the applicant's profit margin. As for the Council's subsidiary argument concerning the dumping margin, in the event that this plea should be upheld (see paragraph 75 below), the applicant emphasises that the Council adduces no evidence capable of substantiating the proposed margin of 2.6%. However, the applicant states that it is prepared to comment on the rate of anti-dumping duty justified by the Council provided that the Council provides details in that regard. The Council, supported by the Commission and CEC, disputes the applicant's arguments. Findings of the Court The alleged breach of Article 2(6)(c) of the basic regulation It must be pointed out at the outset that Article 2(6)(c) of the basic regulation gives the institutions a wide discretion to choose the method by which they will calculate selling costs, general and administrative costs and profit margin in calculating the constructed normal value. In those circumstances, review by the Community Courts relates to whether the relevant procedural rules have been complied with, whether the facts on which the disputed conclusion is based have been accurately stated and whether there has been a manifest error of appraisal or a misuse of powers (Case C-16/90 Nölle [1991] ECR I-5163 , paragraph 12; Case C-26/96 Rotexchemie [1997] ECR I-2817 , paragraph 11; and Case T-413/03 Shandong Reipu Biochemicals [2006] ECR II-2243, paragraph 62). Furthermore, Article 2(6)(c) of the basic regulation provides that that method must be reasonable. Therefore, the Community judicature may find that there is a manifest error of assessment relating to the method chosen only if that method is unreasonable. Consequently, the existence of other reasonable methods which could have been followed does not affect the legality of the method actually chosen as the Community judicature cannot substitute their assessment for that of the institutions in that regard. Furthermore, it is apparent from Article 2(6)(c) of the basic regulation that where the institutions apply that provision in order to calculate a reasonable profit margin they do not have to use data relating to products of the same general category, but must ensure that the profit margin determined according to a reasonable method does not exceed the profit realised on sales of products of the same general category. The applicant is therefore wrong to claim that the use of data relating to the chemical products and engineering products sectors constitutes a breach of Article 2(6)(c) of the basic regulation on the ground that the corresponding products are not in the same general category as shoes. As regards the method used, it must be pointed out that, as the Council states, the choice regarding that method was made in the light of the necessity to establish the profit margins realised on the domestic market. As the applicant's profits were realised on export sales, and the other undertakings in the sample had not been granted MET, the institutions were entitled to take the view that the data relating to their profit margins did not constitute a reliable basis for calculation. Consequently, the institutions had no verified data regarding domestic sales of footwear in market conditions in China. Furthermore, the institutions were also entitled to take the view that the use, suggested by the applicant, of the target profit margin of 6% which the Community industry realised in its own market was not capable of reflecting the profit margin realised by Chinese producers in their domestic market and thus to give preference to the influence of the place of sale of the product on that margin. In those circumstances, it was for the institutions to elaborate, by exercising their wide discretion and having regard to reliable and verifiable data which they were able to obtain, a method with which to calculate a reasonable profit margin. Consequently, the institutions could take the view, within their discretion under Article 2(6)(c) of the basic regulation, that it was more reasonable to use information relating to profits realised on the Chinese market by undertakings which are comparable in size to that of the applicant, do not incur particularly high selling or general costs, and had also obtained MET during recent investigations on products other than footwear and in respect of which the institutions had reliable data, than information relating to profits realised on sales of footwear in completely different markets. The applicant has adduced no evidence to prove that that consideration was vitiated by a manifest error of assessment. Furthermore, given the absence of other information available to the Commission, the method used was the most appropriate available method for the purpose of determining a reasonable profit margin. As regards the applicant's proposal relating to the use of data concerning the Community industry, it must be stated that, as the Council argues, the Community footwear market is not comparable with the Chinese market and that it was distorted by dumped Chinese and Vietnamese imports. The argument that the Commission did not take into account the information submitted by companies which were not part of the sample, and whose MET/IT claims were not therefore examined, cannot be accepted since the applicant does not explain how the decision not to examine those claims is vitiated by illegality. Furthermore, the Court has held in its judgment delivered today in Case T-401/06 Brosmann Footwear (HK) and Others v Council [2010] ECR II-0000, paragraphs 83 to 105, that that decision complied with the basic regulation. Although it is true that, according to Article 2(6)(c) of the basic regulation, the amount for profit established according to another reasonable method must not exceed the profit normally realised on sales of products of the same general category in the domestic market of the country of origin, that provision must not be interpreted as meaning that the institutions are prevented from establishing a profit margin if they do not have a reliable basis for calculating the profit margin realised on sales of products of the same general category. It follows that this part of the first plea must be rejected. The alleged breach of the rights of the defence It must be pointed out at the outset that, in Annex II to its letter of 10 July 2006, the Commission informed the applicant of the average selling costs, general and administrative costs and profit margin, adding that that data came from Chinese undertakings which had made representative domestic sales and had been granted MET. Furthermore, by its letter of 22 August 2006, the Commission informed the applicant of the sectors of the undertakings which were the source of the information relating to selling costs, general and administrative costs and the profit margin. In that letter, the Commission also stated that the use of that data was justified on the grounds that the undertakings concerned were comparable in size to that of the applicant, did not incur particularly high selling or general costs, had also obtained MET during recent investigations, had similar profit margins and that there was no data relating to the domestic sales of the Chinese footwear industry available in the present case. Therefore, it must be held that, by the letter of 22 August 2006, the Commission replied to the applicant's requests for additional information concerning the figures relating to general costs and the profit margin. The applicant cannot in that regard complain that the Commission informed it of the sectors of the undertakings whose data had been used after the expiry of the time-limit set for submitting observations on the additional final disclosure document. It does not follow from Article 20(5) of the basic regulation that the Commission is required to grant to interested parties a minimum period of 10 days to make comments on a letter which it sends in reply to their observations on final disclosure. That would have been the case only if the letter of 22 August 2006 had contained 'essential facts and considerations on the basis of which it [was] intended to recommend the imposition of definitive measures' within the meaning of Article 20(2) of the basic regulation. It must be pointed out that the essential facts and considerations on the basis of which the Commission intended to recommend definitive measures were brought to the applicant's attention in the final disclosure document and in the additional final disclosure document. By contrast, the letter of 22 August 2006 contains only additional explanations. The letter of 22 August 2006 does not contain any amendment or even minor adjustment to the approach followed by the Commission. It must be added that the fact that, in its letter of 18 July 2006, the applicant stated that the profit margin level used by the Commission to determine normal value was too high, having regard to data which is, according to the applicant, reasonable in respect of the footwear industry, shows that it knew that the data in question came from sectors other than the footwear sector. Furthermore, it is apparent from paragraphs 68 to 74 above that the Commission was not required to use data relating to products of the same general category. Consequently, the main argument which the applicant set out in its letter of 18 July 2006 and which it reaffirmed at the hearing, that access to the data in question would have made it possible for it to assess whether that data actually related to products of the same general category, cannot succeed. Furthermore, the applicant's argument that the non-communication of the data underlying the Commission's calculations constitutes breach of its rights of defence cannot be accepted either. There is no need to rule on whether the data is confidential, as pleaded by the Council, since the applicant did not need that data for the purposes of exercising its rights of defence. The applicant itself suggested to the Commission, on the basis of data which it regarded as reasonable and current, average selling costs, general and administrative costs and a profit margin in its alternative calculation of normal value, which is set out in the letter of 18 July 2006 and which should, in the applicant's view, result in no dumping margin being established with respect to it. In any event, there was nothing to prevent the applicant from making comments to the Commission following the letter of 22 August 2006. In that regard, the Court cannot accept the applicant's argument that it could have tried to obtain data to explain the reasons why the profit margins recorded in those sectors were higher than those recorded in the footwear industry if it had been informed of the choice of sectors which were taken into consideration at an earlier stage of the procedure. The applicant has not provided the Court with any evidence to show that it took steps to obtain the required data after receiving the Commission's letter of 22 August 2006. Accordingly, it must be held that there has been no breach of the applicant's rights of the defence. The first plea must therefore be rejected. The second plea: breach of Article 3 of the basic regulation Arguments of the parties The applicant observes that the Commission calculated an individual injury margin resulting from the applicant's exports to the Community market. As regards the determination of its export price for the purpose of calculating injury, the Council, in the contested regulation, ignored the fact that the applicant sells its products to independent trading companies which act as intermediaries between Chinese producers and distributors established in the European market. That omission leads to an export price that is below the real price and, accordingly, to an artificially inflated margin of undercutting/underselling (and therefore of injury). In the applicant's submission, independent trading companies, such as Pagoda, which is an intermediary trader for substantial sales to the Community market for other Chinese and Vietnamese footwear producers and works closely with the applicant concerning the applicant's sales to other markets, bear a significant part of production and marketing costs, particularly in relation to marketing, the organisation of exports and research and development. Those costs, and also the independent trading companies' profit margins, ought to have been taken into account for the purpose of determining the c.i.f. Community frontier price and, accordingly, of calculating the undercutting/underselling and the injury resulting from the applicant's exports. In spite of the fact that the Commission was aware of the role played by the independent trading companies and had detailed figures concerning their profits, the reliability of which was not disputed, it failed to fulfil its obligation to carry out an objective examination of all the relevant material for the purpose of determining injury, in accordance with Article 3 of the basic regulation and Article 3 of the Agreement on the implementation of Article VI of the General Agreement on Tariffs and Trade of 1994 (GATT) (OJ 1994 L 336, p. 103) in Annex 1A to the Agreement establishing the World Trade Organisation ('the WTO') (OJ 1994 L 336, p. 3). As the applicant claimed during the administrative procedure, it is wrong to use, for the purpose of calculating injury, an export price based on the Hong Kong f.o.b. price without adding the relevant costs in order to establish the c.i.f. Community frontier price. Thus, where only insurance and freight costs are added to the Hong Kong f.o.b. price the result is an export price that is lower than the real cost and, in turn, the overvaluation of the undercutting/underselling margin. In the present case, the Commission maintained, without stating reasons for its assessment, that there was no need to take the trading companies' margins into account since the normal value data obtained from Brazil (see paragraph 14 above) had been adjusted downwards in order to deduct the cost elements that that margin was intended to cover (research and development, marketing, etc.). The Commission provided no further detail about the specific cost elements in question, nor did it explain why the normal value data obtained from Brazil were relevant for the purpose of calculating undercutting by the applicant, which was granted MET and is therefore not concerned by the data obtained from that country. The 9.3% adjustment of the export price made by the Council to cover research and development costs is, as the applicant claimed during the administrative procedure, below the 38% profit margin made by Novi, the trading company that introduced the applicant's production to the European market. Furthermore, the purpose of that adjustment is not to take account of the role of the intermediary trading companies. By failing to take into consideration all the costs incurred between the applicant's f.o.b. price and arrival at the Community frontier, and by not taking into account the profit margins of the independent trading companies, such as Pagoda, the Commission therefore miscalculated the undercutting/underselling margin in the applicant's case. A correct calculation would have resulted in the imposition of a lower or even zero anti-dumping duty. The fact that European producers do not use other companies to design models, provide quality control, negotiate prices, arrange logistics, etc., does not justify the failure to take the costs incurred by the applicant in that regard into account when calculating the c.i.f. Community frontier price of its products. In effect, it is only by reference to the c.i.f. price that the existence of undercutting can be determined. The Council's objection of inadmissibility against this plea (see paragraphs 91 and 92 below) is unfounded, as it is based on assertions that cannot be verified without a recalculation on the part of the Commission. The relevant question in that regard is whether an additional trader's margin of around 38% in the applicant's c.i.f. Community frontier price would have led to an injury margin below the applicant's dumping margin, which is quite possible. Furthermore, contrary to the Council's suggestion (see paragraph 92 below), as regards the present plea, the application satisfies the procedural requirements of Article 44 of the Rules of Procedure of the Court. The Council recalls that, under the 'lesser duty rule' (see paragraph 41 above), the level of the definitive duty was set, in the applicant's case, on the basis of its dumping margin (9.7%), which was lower than the level of duty required to eliminate injury (16.5%). Accordingly, the second plea could affect the validity of the contested regulation only if it were shown that the level required to eliminate injury must be lower than the applicant's dumping margin. However, even if Novi's profit margin is taken into account, the underselling and injury margins come to 28% and 20% respectively for the applicant. Accordingly, the second plea is 'ineffective' and 'inadmissible'. The Council also claims that, as regards the second plea, the application fails to meet the procedural requirements laid down in Article 44 of the Rules of Procedure. The applicant has not set out the facts underlying its arguments or explained how the institutions acted unlawfully, but has confined itself to making a number of unsupported assertions. The plea is therefore inadmissible. Furthermore, the Council disputes the merits of the present plea. Findings of the Court It must be borne in mind at the outset that the 'lesser duty rule' means that a producer upon whom anti-dumping duties have been imposed cannot contest them on the ground that the investigation resulted in an exaggerated injury margin if the rate of duty has been fixed at the level of the dumping margin and that dumping margin is below both the injury margin incorrectly adopted and the real injury margin (see, to that effect, Case 250/85 Brother Industries v Council [1988] ECR 5683, paragraph 24). In the present case, as is apparent from the Commission's letter of 10 July 2006, and in particular from the Annex thereto devoted to injury calculation, the undercutting relating to the model the applicant exported to the Community market amounts to 32.3% while the underselling amounts to 66%. The applicant did not dispute either methodology or the figures used for the purposes of that calculation. Furthermore, it is apparent from the arguments in part III of the applicant's letter of 18 July 2006 that the trading companies through which Chinese producers dispatch their production to the European market have a profit margin of 25% to 38%. According to the applicant, that margin should have been added to its c.i.f. Community frontier price, which would have reduced the difference between that price and the Community industry prices and, therefore, the undercutting/underselling margin. It is apparent from the calculations which the Council made in the document attached as an Annex to the rejoinder that, even if it had increased the applicant's c.i.f. Community frontier price by the profit margin of 38% allegedly realised by Novi, the underselling margin would have been established at 20.05% taking into account the non-materially injurious import quantities, that is to say at a level exceeding that of the applicant's dumping margin on the basis of which the definitive duty (9.7%, see paragraph 41 above) was established. In that regard, it must be added that, even having regard to the alternative calculation submitted in the applicant's replies to the Court's written questions, according to which the additional adjustment of 38% is made after the adjustment of 17.30% made in respect of customs duties, research and development, etc., the underselling margin thus established is 15.32%, that is to say a level which is greater that the injury elimination levels. It follows that the second plea must be rejected as ineffective. The third plea: breach of Article 20 of the basic regulation, breach of the rights of defence and failure to state reasons Arguments of the parties The applicant claims that the institutions did not adequately inform it of the new factual analysis concerning the injury sustained by the Community industry or give it the opportunity to comment on that new assessment relating to the form of the definitive duties (see paragraphs 29 and 30 above). Furthermore, the Commission failed to provide an adequate explanation of its reasons for changing its analysis and using different data from those used in its initial proposal. Whereas the Commission considered in the final disclosure document of 7 July 2006 that imports of 140 million pairs of footwear per annum had not caused injury to the Community industry, it significantly reduced that figure to 41.5 million pairs in the additional final disclosure document which it adopted on 28 July 2006 and did so without explaining its reasons for changing that figure, which had the 'perverse effect' of reversing, by a manipulation on the basis of the reference years, the value of the duties imposed between China and Vietnam. As regards their economic rationale, the quotas established by a delayed duty system are intended to deal with import volume pressures which are not, however, deemed to comprise unfair practices, whereas anti-dumping measures are designed to deal with unfair dumping practices. In view of those differences, the period of five days within which the Commission allowed the applicant to submit its comments on the new proposal is inadequate, and the applicant complained of this during the administrative procedure. The contested regulation, recital 301 to which followed the Commission's final proposal, does not contain sufficient reasoning with respect to that discrepancy and does not state the reasons why the institutions followed the new methodology. By contrast, recital 301 to the contested regulation merely reproduces the wording of point 280 of the additional final disclosure document, which does not contain any additional information. Furthermore, the additional final disclosure document does not contain any figures or calculations to support the methodology described at recital 301 to the contested regulation and does not serve to explain the use of different years, values and volumes from those used in the first proposal. In addition, the institutions breached Article 20 of the basic regulation, which requires the disclosure of details underlying the essential facts and considerations on the basis of which the Commission intends to propose the adoption of the definitive measures. The factual assessment underlying the Commission's new approach was not explained or justified. In addition, the Commission breached the applicant's rights of the defence inasmuch as it did not allow it to make its views known effectively on a number of significant matters, such as the reasonableness of the new proposal, the correctness and relevance of the facts and circumstances alleged, the calculations carried out and the evidence put forward by the Commission to support its determinations on dumping and the injury suffered by the Community industry. The two systems are characterised by fundamental differences in the factual analysis on which they are based. Those differences gave rise to radically different consequences for Chinese and Vietnamese producers, without any explanation from the Commission as to how it had arrived at that outcome or any opportunity being given to the parties concerned to exercise their rights of the defence. The Council's attempt to minimise the differences between the two proposals by stating that the system adopted took into account the fact that only imports above certain volume thresholds were injurious entails the imposition of anti-dumping duties on imports which cause no injury, which constitutes a breach of Article 1(1) of the basic regulation. The fact that the applicant was able to make some comments with respect to that system, within a period shorter than the minimum period of 10 days provided for by Article 20(5) of the basic regulation, cannot, moreover, be held against it nor can it compensate for the inadequacy of the information provided by the Commission. The question whether the time given by the Commission was adequate for the purposes of complying with the applicant's rights of defence has to be assessed in the light of the extent of the change in the methodology adopted by the Commission and the lack of data or explanation of the new legal and factual assessment. In that regard, the applicant states that, where the institutions offer no adequate explanation of the methodology and the factual assessment which they are using, the fact that the applicant was able to make some comments is of limited value and does not imply that the requirements of Article 20 of the basic regulation and the general principles of Community or WTO law have been satisfied. In addition, the Commission itself adopted a very restrictive timetable, which precluded any extension to the deadline allowed for submitting comments on the additional final disclosure document. Furthermore, the discussions which took place over many months concerned the delayed duty system and not the system eventually adopted. The applicant submits that as a result of the shortcomings of the additional final disclosure document and of the insufficient period given, it did not have the opportunity to explain to the Commission the reasons why the approach adopted was inappropriate and unreasonable or to put forward its views on the methodology or the figures underlying the proposal contained in that document. Lastly, the applicant adds that, if it had been given an opportunity properly to submit comments on the additional final disclosure document, it would have submitted, first, that the proposed system was tantamount to an infringement of Article 1(1) of the basic regulation in so far as it resulted in the imposition of anti-dumping duties on imports which do not cause injury, secondly, that an individual injury margin should have been calculated for it and, thirdly, that the Commission's final proposal was unreasonable and disproportionate inasmuch as the revised factual assessment, which was not explained or justified, had the 'perverse effect' of reversing the respective burden of the anti-dumping measures as between China and Vietnam. The Council, supported by the Commission and CEC, disputes the applicant's arguments. Findings of the Court By its third plea, first, the applicant claims that the institutions breached Article 20 of the basic regulation on the grounds that the Commission did not communicate the information on which it based the calculations made in the additional final disclosure document and did not allow the applicant a sufficient period consistent with Article 20(5) of that regulation to submit full comments on the Commission's new approach. Secondly, the applicant maintains that the institutions did not set out in the final disclosure document, the additional final disclosure document or the contested regulation the grounds for the methodology which was applied in order to take into account the existence of a volume of imports which caused no injury and which reduced the injury margin instead of exempting the non-injurious imports from the imposition of anti-dumping duties. Those circumstances constitute a breach of the applicant's rights of the defence and a failure to state reasons. It should be noted at the outset that Article 20 of the basic regulation sets out detailed rules relating to the exercise of the right of interested parties, in particular exporters, to be heard. That right constitutes one of the fundamental rights recognised by the Community legal order and includes the right to be informed of the main facts and considerations on the basis of which it is intended to recommend the imposition of definitive anti-dumping duties (see, to that effect, Case C-49/88 Al-Jubail Fertilizer v Council [1991] ECR I-3187 , paragraph 15, and Case T-147/97 Champion Stationery and Others v Council [1998] ECR II-4137, paragraph 55). Accordingly, the applicant's arguments relating to breach of Article 20 of the basic regulation must be interpreted as referring to breach of its rights of the defence, which are guaranteed by the Community legal order and by that provision (see, to that effect, Case T-88/98 Kundun and Tata v Council [2002] ECR II-4897, paragraph 131). In that regard, it must be borne in mind that the undertakings affected by an investigation preceding the adoption of an anti-dumping regulation must be placed in a position during the administrative procedure in which they can 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 assessment of the existence of dumping and the resultant injury ( Al'Jubail Fertilizer v Council , paragraph 109 above, paragraph 17; Case C-458/98 P Industrie des poudres sphériques v Council [2000] ECR I-8147, paragraph 99; Champion Stationery and Others v Council , paragraph 109 above, paragraph 55; and Kundun and Tata v Council , paragraph 110 above, paragraph 132). It must also be pointed out, in this connection, that the fact that final disclosure is incomplete renders the regulation imposing definitive anti-dumping duties unlawful if, as a result of the omission, the interested parties were not in a position to defend their interests effectively. That is inter alia the case where the omission relates to facts or considerations which are different from those used for any provisional measures, to which particular attention must be paid in final disclosure pursuant to Article 20(2) of the basic regulation. That is also the case, on the same grounds, where the omission relates to facts or considerations which are different from those on which the Commission or Council bases a decision subsequent to the communication of the final disclosure document, as is apparent from the last sentence of Article 20(4) of the basic regulation. In the present case, as was pointed out in paragraphs 23 to 25 above, the Commission first advocated, in the final disclosure document, a delayed duty system, based on the fact that only imports in excess of 140 million pairs of shoes per annum caused injury within the meaning of Article 3 of the basic regulation. That assessment was based on the fact that there had been a quantitative quota regime until 1 January 2005, which precluded such injury, and on a calculation of the quantities imported from China in 2005. According to that proposal, a definitive anti-dumping duty was to be imposed on imports originating in China in excess of 140 million pairs of shoes per annum. That duty was equal to the underselling margin, in this case 23%. However, as was stated in paragraphs 28 and 29 above, in the additional final disclosure document the Commission amended its proposal concerning the form of duties necessary to eliminate the injury. That new approach was also based on the fact that there was a volume of imports which does not cause injury within the meaning of Article 3 of the basic regulation. However, in the additional final disclosure document, both the method for calculating that non-materially injurious volume of imports and the impact of that volume on the form of the proposed definitive duties differed from those mentioned in the final disclosure document. More specifically, in the additional final disclosure document, first, the Commission stated that the underselling margin for imports from China was 23%. Secondly, it established that the volume of imports from that country during the investigation period was 38% of the imports from the two countries concerned. That percentage, applied to all the imports from China and Vietnam in 2003 (109 million pairs of shoes), corresponded to some 41.5 million pairs of shoes, a volume which was regarded as non-materially injurious to the Community industry. Thirdly, the Commission took the view that that volume represented 28.26% of imports from China in 2005. Fourthly and lastly, it reduced the injury margin initially established (23%) by 28.26%, which gave rise to a 'weighted' injury margin of 16.5%. It is apparent from the above that the differences between the methodology set out in the final disclosure document and that set out in the additional final disclosure document are the following. First, instead of establishing the annual volume of non-materially injurious imports at the level of imports from China in 2005, the Commission established that annual volume by multiplying the 109 million pairs of shoes imported in 2003 by 38%. That figure represented imports originating in that country as a percentage of all imports from the two countries concerned during the investigation period. Secondly, instead of exempting that annual volume, categorised as non-materially injurious in paragraphs 278 to 280 of the additional final disclosure document, from the application of anti-dumping duty, the Commission chose to take that volume into account by lowering the injury elimination level and by applying anti-dumping duties as from the first pair of shoes imported. In that regard, it must be held that the fact that the Commission amended its analysis after comments made on the final disclosure document by the parties concerned does not, in itself, constitute infringement of the rights of the defence. As is apparent from the last sentence of Article 20(4) of the basic regulation, the final disclosure document does not prejudice any subsequent decision by the Commission or the Council. That provision merely requires the Commission to disclose, as soon as possible, the facts and considerations which are different from those which formed the basis for its initial approach in the final disclosure document. It is through that disclosure that the parties concerned are in a position to understand the grounds which led the institutions to adopt a different view. Consequently, in order to establish whether the Commission complied with the applicant's rights deriving from the last sentence of Article 20(4) of the basic regulation, it must also be ascertained whether the Commission communicated to it the facts and considerations taken into account for the purpose of the new analysis of the injury and the form of measures necessary to eliminate it, in so far as those facts and considerations differ from those taken into account in the final disclosure document (see paragraph 112 above). In that regard, first, the Commission stated in the additional final disclosure document that its new proposal made it possible to avoid distinctions between different types of importers. Secondly, the applicant's argument that it did not have access to the information on the basis of which the Commission adjusted the injury margin from 23% to 16.5% is incorrect. The methodology described in paragraph 115 above concerning the adjustment of the injury margin by allowing for a non-materially injurious volume of imports is set out in the additional final disclosure document. It is true that that document provides no information on the exact volume of imports from China in 2005 which would make it possible to establish that the percentage of 28.26% is in fact correct. However, given that, according to the Commission, 41.5 million pairs of shoes represent 28.26% of all the imports from China in 2005, it may be deduced that those imports amounted to 146.85 million pairs of shoes. That calculation was moreover mentioned by the applicant itself in its email of 2 August 2006 (see paragraph 31 above). It follows from the foregoing that the Commission communicated to the applicant the reasoning which it followed to calculate the injury margin by allowing for a non-materially injurious volume of imports. It also set out all the figures which it considered to be relevant for that purpose, with the result that the applicant's rights of the defence have not been breached in that regard. It must also be pointed out that the applicant's plea, as set out in the application, relates to breach of its rights of defence and not to breach of Article 1(1) of the basic regulation. It follows that the question whether the system adopted in the contested regulation is compatible with Article 1(1) of the basic regulation in so far as it imposes anti-dumping duties on imports below the annual threshold regarded as non-materially injurious has not as such been submitted for review by the Court. The parties agree that the period given expired on 2 August 2006. The Commission breached Article 20(5) of the basic regulation by granting the applicant a period of less than 10 days to comment on the additional final disclosure document (see, to that effect, Champion Stationery and Others v Council , paragraph 109 above, paragraph 80). However, that fact cannot, in itself, lead to annulment of the contested regulation. It is also necessary to establish that the granting of a period shorter than the prescribed period was actually capable of affecting its rights of defence in the procedure in question (see, to that effect, Case T-35/01 Shanghai Teraoka Electronic v Council [2004] ECR II-3663, paragraph 331). In that regard, it must be pointed out that the applicant reiterated the Commission's calculations in its email of 2 August 2006 and that it submitted an alternative calculation which would have led to a different, and, in its opinion, equitable outcome. Therefore, the applicant understood the Commission's reasoning and was also in a position to suggest an alternative approach without requesting an extension to the period given. In those circumstances, it must be held that it was in a position in which it could effectively make known its views. It follows that there was no breach of the applicant's rights of defence. On the same grounds, the applicant's argument alleging failure to state the reasons for the methodology used to calculate the injury elimination level must be rejected. The statement of reasons for the contested regulation must be appraised having regard, in particular, to the information disclosed to the applicant and to the observations which it has made during the administrative procedure (Joined Cases T-33/98 and T-34/98 Petrotub and Republica v Council [1999] ECR II-3837, paragraph 107). In the present case, as pointed out in paragraph 40 above, recitals 296 to 301 to the contested regulation contain the findings which led the Council to adopt the system which was finally implemented. Consequently, in light of the fact that the Commission communicated to the applicant the reasoning which it had followed in calculating the injury margin by taking account of a non-injurious volume of imports and of the fact that it also informed the applicant of all the figures which it regarded as relevant for that purpose (see paragraphs 119 to 121 above), it must be held that the statement of the reasons of the contested regulation is sufficient in law. Therefore the third plea must be rejected. The fourth plea: error of law and manifest error of assessment concerning the injury suffered by the Community industry Arguments of the parties The applicant contends that the injury determination is not based on a sufficient period of normal imports and is not therefore supported by reliable and objective data. Since the investigation period lasted from 1 April 2004 to 31 March 2005, the Commission's conviction that the increase in imports after the lapse of the quota regime had a particularly decisive injurious effect for the Community industry was based solely on a three-month period, namely the first quarter of 2005. The clear indications of significant injury in 2004 to which the Commission refers at paragraph 277 of the new section H of the additional final disclosure document do not mean that significant injury was actually caused in 2004. The fact that no significant injury was caused in 2004 is borne out by the fact that imports increased only slightly in that year by comparison with 2003 and is confirmed by paragraph 285 of the final disclosure document. Contrary to the Council's assertion, the function of quantitative quotas is not to provide protection against dumped imports. Furthermore, analysis of injury factors for 2003 is irrelevant, since, as the Commission has acknowledged, there was no injurious dumping in 2003. The first three months of 2005 were the initial period of an open market which for more than 12 years had been subject to a regime of strict quantitative quotas. As the Commission observed in the final disclosure document, that period following the lapse of the quota regime was artificially distorted by expectations linked with that event. The contested regulation is therefore based on data relating to a short period which could not provide reliable material owing to the lifting of the quotas. It follows that the Council has breached Article 3(2) of the basic regulation. The Council, supported by the Commission and CEC, disputes the applicant's argument. Findings of the Court First, it must be pointed out that the adoption of anti-dumping duties is not a penalty for earlier behaviour but a protective and preventive measure against unfair competition resulting from dumping practices. In order to be able to determine the anti-dumping duties appropriate for protecting the Community industry against dumping, it is therefore necessary to carry out the investigation on the basis of information which is as recent as possible ( Industrie des poudres sphériques v Council , paragraph 111 above, paragraphs 91 and 92, and Case T-138/02 Nanjing Metalink v Council [2006] ECR II-4347, paragraph 60). Therefore, where the institutions find that imports of a product which has until then been subject to quantitative restrictions increase after those restrictions have lapsed, they may take that increase into account for the purposes of their assessment of the injury sustained by the Community industry. Secondly, as the Council observes, the Commission's assessment in paragraph 283 of the final disclosure document that the volume of imported products increased after the lapse of the quota regime does not establish that the institutions based their decision solely on that quantitative aspect in finding that there was injury. Lastly, as is apparent from recitals 162, 168 to 170, 187 to 206 and 216 to 240 to the contested regulation, the institutions took into account a number of factors, concerning the injury and the causal connection, relating not only to the last quarter of the investigation period, but also to the period considered. It follows that the fourth plea must also be rejected. In those circumstances, the action must be dismissed in its entirety. Costs Under Article 87(2) 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. As the applicant has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by the Council. In accordance with Article 87(4) of the Rules of Procedure, the Commission and CEC must bear their own costs. On those grounds, THE GENERAL COURT (Eighth Chamber) hereby: 1. Dismisses the action; 2. Orders Foshan City Nanhai Golden Step Industrial Co., Ltd to bear its own costs and to pay those incurred by the Council of the European Union; 3. Orders the European Commission and Confédération européenne de l'industrie de la chaussure (CEC) to bear their own costs. Martins Ribeiro Papasavvas Dittrich Delivered in open court in Luxembourg on 4 March 2010. [Signatures] Table of contents Legal context Background to the dispute and the contested regulation Procedure and forms of order sought Law The first plea: breach of Article 2(6)(c) of the basic regulation and breach of the rights of the defence in relation to the calculation of the dumping margin Arguments of the parties Findings of the Court The alleged breach of Article 2(6)(c) of the basic regulation The alleged breach of the rights of the defence The second plea: breach of Article 3 of the basic regulation Arguments of the parties Findings of the Court The third plea: breach of Article 20 of the basic regulation, breach of the rights of defence and failure to state reasons Arguments of the parties Findings of the Court The fourth plea: error of law and manifest error of assessment concerning the injury suffered by the Community industry Arguments of the parties Findings of the Court Costs * Language of the case: English. 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