4.759 To this question, the EC provided the following reply. 4.760 As noted by the Panel, the Final Dumping Determination is unclear about whether the requested adjustment was granted. During the consultations, the Argentinean authorities informed the EC that the adjustment had been granted, but did not disclose the details of the calculation.

4.761 Caesar was the only exporter which requested an adjustment for differences in physical characteristics between polished and unpolished tiles. Caesar made this request because one of the models exported to Argentina was unpolished, while the model sold under the same name in Italy was polished.

4.762 Exhibit EC-17 contains a copy of the relevant section of Caesar�s questionnaire response where the adjustment was requested. The amount of the adjustment estimated by Caesar was omitted in the non-confidential version. The EC considers that this amount was not capable of summarization.

4.763 The other exporters did not request an adjustment for differences between polished and unpolished tiles because the models sold in Italy were identical in all respects to those exported to Argentina. Thus, a model-to-model comparison would have been sufficient to ensure a fair comparison.

(d) Replies of the EC to the questions made by Argentina, following the first meeting of the Panel with the parties, that relate to the EC�s claim under Article 2.4 of the AD Agreement

4.764 The EC replied to the questions made by Argentina relating to the EC�s claim under Article 2.4 of the AD Agreement as follows.

4.765 Argentina asked the EC how it could make an argument for undertaking price comparisons by model and at the same time express the view that �fair comparison� requires taking into consideration every physical characteristic.

4.766 The EC replied that there was no contradiction. In the present case, a model-to-model comparison would have been the most accurate and the simplest method to make due allowance for all the differences in physical characteristics. The EC referred Argentina to the EC�s answer to a question made by the Panel (question No. 2) following the first meeting.

4.767 Argentina asked the EC whether it was of the view that a �fair comparison� could be made on the basis of the information contained in the catalogues that the exporters submitted and were provided to the Panel as Exhibit ARG-22.

4.768 The EC replied that its answer to this question was reflected in paragraphs 82-83 of its second written submission.

(e) Arguments of the EC in its second written submission in support of its claim under Article 2.4 of the AD Agreement

4.769 In its second written submission, the EC made the following arguments supporting its claim under Article 2.4 of the AD Agreement.

4.770 Argentina admits, and indeed emphasises, the existence of numerous differences in physical characteristics, in addition to those relating to the size of the tiles. Nevertheless, it argues that to take them into account would have complicated �enormously� the task of the DCD.

4.771 This defence is clearly without merit. Article 2.4 does not allow investigating authorities to disregard differences in physical characteristics that affect price comparability simply because it would be too difficult to take them into account. Moreover, the difficulties invoked by Argentina could have been easily avoided if the DCD had made a model-to-model comparison, as requested by the exporters.

4.772 Argentina further contends that DCD�s decision to make �due allowance� only for the differences in size is reasonable and within the limits of the �deference� accorded to the investigating authorities by Article 17.6 of the AD Agreement, because size is the most �universal� characteristic of tiles.

4.773 This argument is thoroughly misguided. Article 2.4 leaves some discretion to the investigating authorities with respect to the choice of the precise method for making �due allowance� for differences in physical characteristics affecting price comparability. Thus, in particular, the investigating authority can choose whether to make �due allowance� by making a model-to-model comparison, or by making adjustments to the normal value and/or the export price prior to the comparison. In practice, nevertheless, the authority�s discretion is limited by the fact that the second method is extremely cumbersome where the investigation concerns a product which is sold in many different, multi-featured models.

4.774 In contrast, Article 2.4 leaves no discretion to the investigating authorities for choosing whether or not to make �due allowance�. The only �permissible� interpretation of Article 2.4 is that it requires to make �due allowance� for all the differences in physical characteristics that affects price comparability.

4.775 In its first oral statement, Argentina implies that the exporters agreed in advance, or at least did not object, to the DCD�s decision to make allowance exclusively for the differences in size. That is not true.

4.776 Argentina also argues in its first oral statement that the exporters failed to provide the necessary information to make adjustments for other differences in physical characteristics. More specifically, Argentina contends that, when answering the questionnaire�s request to supply the technical specifications of the products, it was not sufficient for the exporters to refer to the specifications contained in the brochures attached to the response (Argentina also argues, at para. 71 of its first oral statement, that the DCD could not make adjustments because the exporters failed to provide the information requested in Annex IV on a �model/code/type� basis. That Annex, however, requested information on production, production capacity, stocks, exports and imports. That information is not directly relevant for making adjustments for differences in physical characteristics. At any rate, this is the first time that this supposed deficiency is raised by the Argentinean authorities). Argentina, nevertheless, does not explain why. Moreover, this is the first time that the Argentinean authorities complain that the exporters� response to that section of the questionnaire was not complete.

4.777 In any event, it must be recalled that the exporters did not request the DCD to make adjustments (with the exception, in the case of Caesar, of the differences between polished and unpolished models) but rather to make a model-to-model comparison. That comparison would have made unnecessary to make any adjustments before comparing the normal value with the export price. Had the DCD informed the exporters that it would not make a model-to-model comparison, the exporters could have submitted requests for adjustments and supplied supporting evidence.

(f) Arguments of the EC in its second oral statement in support of its claim under Article 2.4 of the AD Agreement

4.778 In its second oral statement, the EC made the following arguments in support of its claim under Article 2.4 of the AD Agreement.

4.779 Argentina contends that the decision to calculate the dumping margin by comparing the normal value of each of the three size categories defined by the DCD to the export price for the same category was taken by the DCD at the opening of the investigation (�a la apertura de la investigaci�n�).

4.780 However, if such decision was taken, it was never communicated to the exporters. It is not mentioned in the Resolution opening the investigation. Nor is there any trace of that decision in the questionnaire. As already explained, the questionnaire required the exporters to provide the information on a �model/type/code� basis, and not by size category.

4.781 Argentina asserts repeatedly that the �segmentation� made by the DCD (to borrow the term used by Argentina) was �accepted� or at least �not objected� by the exporters. This is simply untrue, and Argentina has provided no evidence whatsoever to support those assertions.

4.782 In their questionnaire responses the exporters made a clear request to the DCD to make a model-to-model comparison. That request was renewed at the meeting with the case-handlers of 11 May 1999. The DCD never informed the exporters that such request had been rejected.

4.783 Argentina cites the report of the meeting with the case-handlers of 11 May 1999 as evidence that the exporters would have acquiesced to the segmentation decided by the DCD. However, the passage cited by Argentina is no more than a suggestion made by the representative of the exporters in Argentina to the effect that the sample of invoices requested by the DCD should include examples of the three size categories. The exporters have never questioned that size is an important differentiating characteristic, or that the main size categories are those defined by the DCD. In view of that, it was sensible to suggest that the sample of invoices, so as to be comprehensive, should include examples of each of those size categories. But from this it does not follow that the exporters had renounced to the model-to-model comparison requested in the responses. The exporters understood that the sample of invoices had been requested by the DCD with the exclusive purpose of verifying the information reported in the responses, and that the dumping calculation would be made by using all the transactions reported in the responses. Furthermore, the report of the meeting also alludes to the need to provide non-confidential versions of the conversion tables between models. Yet the submission of those tables would have been totally unnecessary if the exporters had not envisaged that the DCD would make a model-to-model comparison.

4.784 Argentina further argues that the request to make a model-to-model comparison was first �suggested� by the EC before this Panel. But this assertion is contradicted in the very next paragraph of Argentina�s second written submission, where Argentina is forced to admit that, in fact, the questionnaire responses showed the �interest� (�inter�s�) of the exporters in a model-to-model comparison.

4.785 Argentina goes on to argue that the DCD could not make the requested model-to-model comparison because the exporters failed to provide necessary information. However, this is mere assertion: Argentina nowhere specifies what additional information was required for this purpose.

4.786 Moreover, the exporters were never informed during the investigation of these alleged deficiencies. Nor were these deficiencies mentioned in the Final Dumping Determination.

(g) Replies of the EC to the second set of questions by the Panel relating to the EC�s claim under Article 2.4 of the AD Agreement

4.787 The EC replied to the second set of questions by the Panel relating to the EC�s claim under Article 2.4 of the AD Agreement as follows.

4.788 The Panel asked the EC to confirm that all the information submitted by the exporters related to first-quality, unpolished tiles.

4.789 To this question, the EC provided the following reply.

4.790 The EC can confirm that all the sales reported in the exporters� responses related to first-quality, unpolished tiles, with the exception of some of the domestic sales made by Caesar, which related to polished tiles.

4.791 On the other hand, the EC is not in a position to confirm whether the petitioners� information and import statistics relied upon by the DCD related also to unpolished, first quality tiles. As already explained, of the eight invoices submitted by the petitioner, four correspond to sales of polished tiles, and another to a sale of tiles of 12.5 cm x 25 cm. It is still unclear to the EC whether those five invoices were included by the DCD in the dumping calculation.

4.792 If so, the Panel asked the EC to explain what other physical differences affecting price comparability the EC believed existed for which adjustments should have been made.

4.793 To this question, the EC provided the following reply.

4.794 The following was a non-exhaustive list of other factors affecting price comparability (the EC stated that all the prices mentioned below were for models of 30 x 30 cm of first quality shown in Casalgrande�s Price List for October 1998 attached to Casalgrande�s questionnaire response).

4.795 Colour: tiles of darker colours such as black, green, blue and red are more expensive to produce than those of lighter colours and are sold at higher prices. By way of example, according to Casalgrande�s Price List for October 1998, the price for the model UNICOLOR BIANCO A was 33.000 Lit/m2, whereas the list price of the model UNICOLOR BLU, which is identical in all respects to the BIANCO A except the colour, was 47.000 Lit/m2 (i.e. 42 per cent more expensive).

4.796 Thickness: thicker tiles require more materials and manufacturing work and are more expensive. Thus, for instance, Casalgrande�s list price for the model SAHARA of 9 mm (of the series GRANITO I) was 33.000 Lit/m2, while the list price for the SAHARA of 11/12 mm was 46.000 Lit/m2 (i.e. a 39 per cent difference).

4.797 Raw material and production process: some models undergo further manufacturing processes, often involving the addition of special raw materials (e.g. special salts), in order to acquire an appearance resembling that of certain types of stone, such as granite or marble (e.g. the series GRANITO I, GRANITO II, MARMORIZZATO, ARDESIA, VENATI or TIBURTINO in Casalgrande�s catalogue). These models are generally more expensive than the basic ones. Thus, by way of example, the list price of the marble-looking model ARDESIA BIANCO is 42.000 Lit/m2 (27 per cent more than the price of the basic model UNICOLOR BIANCO A). However, a basic model of an expensive colour (e.g. UNICOLOR BLU) can be more expensive than a non-expensive model of one of the special series (e.g. the model SAHARA, of the series GRANITO I).

4.798 Surface: many models are available in versions with special surfaces (e.g. anti-slip) presenting small reliefs. In Casalgrande�s catalogue these surfaces are designated with names such as SECURE, ROCCIA, CARBO, PAVE or PROFIL. Those versions are more expensive. Thus, for example, the price list of Casalgrande�s model SAHARA ROCCIA is 35.000 Lit/m2, i.e. 6 per cent more expensive than the standard version of SAHARA.

4.799 If the adjustments for physical differences are only granted upon good cause shown, the Panel asked the parties whether the calculation of the dumping margin by model should not be subject to the same requirement.

4.800 To this question, the EC provided the following reply.

4.801 The application of Article 2.4 is subject to the same requirements regarding the burden of proof, regardless of the method followed by the investigating authority to make �due allowance�.

4.802 The evidence before the DCD demonstrated beyond doubt that the differences in physical characteristics between models (other than in size) had an impact on their price and, therefore, affected price comparability.

4.803 The DCD has never disputed this. Thus, in the Preliminary Dumping Determination, the DCD noted that:

� se debe mencionar que cada empresa posee una gran variedad de l�neas de modelos del producto en estudio, con significativas variaciones de precios entre ellos. Esta circunstancia determina una complejidfad adicional en el an�lisis en curso.

4.804 Similarly, in the Final Dumping Determination stressed that:

Del an�lisis de la informaci�n de ventas en el mercado interno italiano (listados de ventas) se ha observado una gran disparidad del producto de iguales medidas y precios de venta inferiores en las medidas de mayor tama�o en relaci�n a las de menor tama�o. As�, se pudo observar casos en que el �procellanto� sin pulir de 40 cm x 40 cm presenta precios de venta inferiores a los precios de venta del �porcellanato� de 20 cm x 20 cm, o al de 30 cm x 30 cm., como tambi�n precios de venta de la medida 30 cm x 30 cm inferiores a los de la medida 20 cm x 20 cm.

4.805 Before this Panel, Argentina has not argued that the physical differences between models (other than in size) do not affect price comparability, but rather that there are so many differences that to take all of them into account would have complicated �enormously� the task of the DCD.

4.806 Thus, in the EC�s view, the issue before the Panel is not a factual one (i.e. whether the differences between the models affect price comparability), but rather one of legal interpretation, namely whether, as alleged by Argentina, the �deference� to which the investigating authoirty is entitled under Article 17.6(ii) means that the investigating authority can, for reasons of administrative convenience, limit itself to make �due allowance� for just one of the differences affecting price comparability.

4.807 Furthermore, the EC would recall that the last sentence of Article 2.4 provides that:

The authorities shall indicate to the parties in question what information is necessary to ensure a fair comparison and shall not impose an unreasonable burden of proof on those parties.

4.808 In its second written submission, Argentina suggested that the DCD could not make a model-to-model comparison because the exporters failed to provide necessary information. However, this was mere assertion. Three of the exporters sold the exported models under the same name and product code in both markets. Thus, no additional information was required in order to make a model-to-model comparison. The other exporter, Bismantova, used different names in each market. Nevertheless, it submitted a tabla de comparaci�n in order to allow the DCD to make a model-to-model comparison.

4.809 At any rate, the exporters were never informed during the investigation of the alleged deficiencies. Nor are those deficiencies mentioned anywhere in the Final Dumping Determination.

4.810 If this was so, the Panel asked the parties whether the calculation of the dumping margin by model would be necessary when the same models are sold in both markets in the same proportions.

4.811 To this question, the EC provided the following reply.

4.812 If the normal value is calculated by comparing the weighted average normal value to the weighted average export price (see Article 2.4.2 of the AD Agreement), and if the same models happened to be sold in both markets in precisely the same proportions, there would be no need to make due allowance for differences in physical characteristics, either by making a model-to-model comparison, or by way of adjustments. However, in practice, the model-mix of the export sales is very unlikely to coincide exactly with that of the domestic sales in any given investigation.

4.813 In the case at hand, the information contained in Annexes VII and VIII evidences that the model mix of the export sales was not the same as that of the domestic sales, which rendered it necessary to make due allowance for the differences in physical characteristics between models.

4.814 The Panel recalled that in a reply to question posed by the Panel following the first meeting, Argentina stated that: �Upon opening the investigation, the DCD decided on the segmentation of the product according to the universal criterion that offered the greatest homogeneity, i.e. porcellanato in its different sizes, establishing three categories: 20 x 20, 30 x 30 and 40 x 40�. The Panel asked Argentina to direct the Panel to the evidence on the record showing that the DCD had made this determination from the moment of initiating the investigation. In addition, the Panel recalled that, in its reply to the same question, the EC argued that the exporters requested that a model-to-model comparison be made. The Panel also asked the EC to direct the Panel to the evidence on the record that demonstrated that the exporters explicitly requested such a comparison.

4.815 To this question, the EC provided the following reply.

4.816 The EC refers the Panel to the relevant sections of Casalgrande�s and Bismantova�s questionnaire responses provided as Annexes EC-15 and EC-16, respectively, which describe the approach followed by those exporters in responding to Annexes VII and VIII. A model-to-model comparison is inherent in that approach.

4.817 Moreover, as explained above, Bismantova submitted a tabla de comparaci�n between the exported and domestic models, with the express indication that it was provided in order to �facilitate the comparison of identical types with different names� (the original Spanish reads as follows: �facilitar la comparaci�n de los tipos id�nticos con nombres diferentes�).

4.818 Casalgrande sold the exported models under the same name and product code in both markets. Thus, the submission of a tabla de comparaci�n was not required. Nevertheless, Casalgrande provided a table comparing the weighted average export price to the weighted average domestic price for the same model. That table evidences clearly that the exporters envisaged that the DCD would make a model-to-model comparison.

4.819 The exporters reiterated their request for a model-to-model comparison at the meeting of 11 May 1999. The case-handlers seemed to agree. Indeed, as recorded in Exhibit EC-10, they requested that Bismantova waive the confidentiality of the tabla de comparaci�n between domestic and export models included in Bismantova�s questionnaire response. On 4 June 1999 Bismantova agreed to that request. Ecolatina�s cover letter recalled expressly that �by using that table [the DCD] can make the necessary comparisons�.

4.820 Finally, the EC would recall that in its second written submission Argentina admits that the questionnaire responses showed the �interest� (�inter�s�) of the exporters in a model-to-model comparison.

4.821 The Panel recalled that, according to Exhibit EC-10 (at page 2), the local counsel to the exporters in Argentina suggested to the counsel to the exporters in Brussels to provide the DCD invoices with prices �closer to the weight average of the segment�. The Panel asked the parties whether this statement suggested that the representatives of the exporters were aware of the fact that the DCD would calculate the normal value for any size category on the basis of all of the home prices available for that size category, irrespective of the model to which those prices referred to. The Panel further asked the parties to comment on the implications of this statement, if any. Did this suggest that the exporters were aware of the fact that their information was going to be compared per size rather than per model?

4.822 To this question, the EC provided the following reply.

4.823 The EC reiterates that the DCD never informed the exporters of the alleged decision to compare the normal value and export price information per size rather than per model. Exhibit EC-10 does not prove the contrary.

4.824 Rather, the opposite is true. Exhibit EC-10 confirms that, after the meeting of 11 May 1999, the exporters continued to expect that the DCD would make a model-to-model comparison. Exhibit EC-10 mentions that Bismantova should waive the confidentiality of the conversion table (tabla de comparaci�n) between domestic and export models and that the other exporters should submit similar tables (Mr. Cyrulnik, the author of the document provided as Exhibit EC-10, made an error when he suggested that the other three exporters should submit also conversion tables between domestic and export models. As already explained, the other exporters sold all the models under the same name and code in both markets. Thus, unlike in the case of Bismantova, a conversion table was not necessary in order to allow the DCD to make a model-to-model comparison). Yet the submission of those tables would have been totally pointless if the exporters had acquiesced to the DCD�s alleged decision not to make a model-to-model comparison.

4.825 The passage quoted by the Panel contains a personal suggestion of Mr. Cyrulnik, the author of the document, and not something that was discussed, let alone agreed, with the case-handlers. Mr. Cyrulnik�s suggestion is not mentioned in Mr. Di Gianni�s report to the exporters of 19 May 1999 and was not followed by the exporters.

4.826 The meaning of Mr. Cyrulnik�s suggestion is, in any event, rather obscure. To begin with, the quoted passage refers to the selection of �non-confidential invoices�. Yet the preceding paragraph correctly states that the supporting invoices had to be provided on a confidential basis only.

4.827 Also, it is far from clear to which �segments� alludes Mr. Cyrulnik. The EC recalls that each model is sold in different sizes. In their responses, the exporters reported separately the sales of each size category within a given model. Casalgrande went even further by calculating itself the weighted average domestic price and the weighted average export price for each size category within each model. Thus, Mr. Cyrulnik could have been referring to the weighted average for the size �segment� within each model rather than to the weighted average for all the tiles of the same size, regardless of the model, as implied in the Panel�s question.

Continuation: Section 8.828

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