6.10.1 Any selection of exporters, producers, importers or types of products made under this paragraph shall preferably be chosen in consultation with and with the consent of the exporters, producers or importers concerned. 6.10.2 In cases where the authorities have limited their examination, as provided for in this paragraph, they shall nevertheless determine an individual margin of dumping for any exporter or producer not initially selected who submits the necessary information in time for that information to be considered during the course of the investigation, except where the number of exporters or producers is so large that individual examinations would be unduly burdensome to the authorities and prevent the timely completion of the investigation. Voluntary responses shall not be discouraged". (emphasis added)

6.88 We consider also relevant in this respect Article 9.4 of the AD Agreement which provides as follows:

"When the authorities have limited their examination in accordance with the second sentence of paragraph 10 of Article 6, any anti-dumping duty applied to imports from exporters or producers not included in the examination shall not exceed:

(i) the weighted average margin of dumping established with respect to the selected exporters or producers or,

(ii) where the liability for payment of anti dumping duties is calculated on the basis of a prospective normal value, the difference between the weighted average normal value of the selected exporters or producers and the export prices of exporters or producers not individually examined,

provided that the authorities shall disregard for the purpose of this paragraph any zero and de minimis margins and margins established under the circumstances referred to in paragraph 8 of Article 6. The authorities shall apply individual duties or normal values to imports from any exporter or producer not included in the examination who has provided the necessary information during the course of the investigation, as provided for in subparagraph 10.2 of Article 6". (emphasis added)

6.89 The first sentence of Article 6.10 of the AD Agreement sets forth a general rule that the authorities determine an individual margin of dumping for each known exporter or producer of the product under investigation. The second sentence of Article 6.10 permits an investigating authority to deviate from the general rule by permitting the investigating authorities to "limit their examination either to a reasonable number of interested parties or products by using samples . . . or to the largest percentage of the volume of the exports from the country in question which can reasonably be investigated", in cases where the number of exporters, producers, importers or types of products involved is so large as to make such a determination impracticable. Article 9.4 provides that, where the authorities have limited their examination in accordance with the second sentence of Article 6.10, the anti-dumping duty applied to imports from exporters or producers not included in the examination shall not exceed an amount calculated on the basis of the margins of dumping for exporters or producers that were included in the examination. Finally, in cases where the authorities have limited their examination under Article 6.10, subparagraph 2 of Article 6.10 provides that the authorities shall nevertheless determine an individual margin of dumping for any exporter not initially selected who submits the necessary information in time for that information to be considered, except where the number of exporters is so large that individual examination would be unduly burdensome to the authorities and prevent timely completion of the investigation.

6.90 In our view, the general rule in the first sentence of Article 6.10, that individual margins of dumping be determined for each known exporter or producer of the product under investigation, is fully applicable to exporters who are selected for examination under the second sentence of Article 6.10. While the second sentence of Article 6.10 allows an investigating authority to limit its examination to certain exporters or producers, it does not provide for a deviation from the general rule that individual margins be determined for those exporters or producers that are examined. To the contrary, Article 9.4 provides that, where the authorities limit their examination under Article 6.10, the anti-dumping duty for exporters or producers that are not examined shall not exceed a level determined on the basis of the results of the examination of those exporters or producers that were examined. That Article 9.4 does not provide any methodology for determining the level of duties applicable to exporters or producers that are examined in our view confirms that the general rule requiring individual margins remains applicable to those exporters or producers. We find further confirmation in Article 6.10.2, which requires that, in general, an individual margin of dumping must be calculated even for the producers/exporters not initially included in the sample, if they provide the necessary information and if to do so is not unduly burdensome. If even producers not included in the original sample are entitled to an individual margin calculation, then it follows that producers that were included in the original sample are so entitled as well.⁹³ Indeed, the parties appear to agree that Article 6.10 of the AD Agreement requires that as a rule an individual margin of dumping has to be determined for each exporter with regard to the product subject to investigation.⁹⁴

6.91 Argentina argues, however, that, for substantive reasons relating to the reliability of the information as well as the absence of information with regard to sales by certain exporters included in the sample, it was simply not possible for the DCD to determine a margin of dumping for each exporter individually.

6.92 In considering Argentina's assertion, we first note that there is no explanation in the DCD�s Final Determination or in any other document on the record as to why, in this case, it was not possible to determine an individual margin for each exporter that was investigated. We consider that the DCD failed to provide any evaluation of the facts on the record that could have formed the basis for such a conclusion. We consider that on this basis alone we could have concluded that the DCD failed to perform an objective and unbiased evaluation of the facts which, under the applicable standard of review, we are asked to review. Nevertheless, for the sake of completeness, we will continue our analysis and address the arguments presented by the parties in their submissions to the Panel.

6.93 We first observe that neither the DCD in its Final Determination nor Argentina in its submissions to the Panel provides any reasons why, with regard to the information provided by one exporter, Casalgrande, for which no discrepancies were noted, it was not possible to determine an individual margin of dumping.

6.94 We examined the arguments presented by Argentina with regard to the other three exporters included in the sample, Bismantova, Caesar and Marazzi. We find that there were no valid reasons for not determining an individual margin of dumping under Article 6.10 for each of these companies for the product subject to the investigation. Argentina argues that in the case of Bismantova it was not possible to determine an individual margin of dumping because, for a certain size of tiles, up to 93 per cent of its domestic sales were made to a related party. Caesar, as the EC acknowledges, only reported domestic sales information concerning tiles of the size 40 x 40 cm, and did not provide any data on domestic sales of tiles of the two remaining size categories, 20 x 20 cm and 30 x 30 cm. Argentina submits that it was for this reason that the DCD could not determine an exporter-specific margin of dumping for this exporter. According to the DCD�s Final Determination, a third exporter, Marazzi, only provided lists of average prices without specifying total volumes sold or the total value of the sales. It was therefore not possible to determine an individual margin of dumping for this exporter either, Argentina contends.

6.95 We understand Argentina�s argument to be that, in the absence of reliable and useful information with regard to each of the size categories of the product subject of the investigation, no individual margin of dumping could be calculated for each exporter for the product under investigation, i.e. ceramic tiles in all sizes.

6.96 We consider however that while it may have been the case that Bismantova made an important part of its sales to a related party, this should not have impeded the DCD from determining an individual margin of dumping for this exporter. The issue of domestic sales to a related party may lead, in certain cases, to the use of a constructed normal value or third country export price under Article 2 of the AD Agreement.⁹⁵ The question of sufficient domestic sales in the ordinary course of trade does not, in our view, stand in the way of an individual margin of dumping determination under Article 6.10 of the AD Agreement, be this based on normal value information consisting of prices of sales made in the home market, on third country export prices, or a construction of the normal value as defined in Article 2.2 of the AD Agreement.⁹⁶ The basis of the normal value determination has no bearing on the ability to calculate an individual dumping margin for the producer whose normal value is in question.

6.97 With regard to the two other exporting firms, Caesar and Marazzi, we also fail to see why it was not possible for the DCD to determine an individual margin of dumping for each exporter. Based on the facts on the record, we understand that Caesar only exports tiles of the size 40 x 40 cm to Argentina and therefore only reported similar size domestic sales. In accordance with the DCD�s own analysis concerning the requirement of making a fair comparison between normal value and export price by adjusting for size, it appears the DCD would have had to base its determination in any event on the information provided with regard to this one size category of 40 x 40 cm. Marazzi provided lists of average prices without any specification of the total amount sold or the total value of the sales. The DCD does not explain how this impeded it from determining an exporter-specific margin of dumping for Marazzi. If the DCD was dissatisfied with the information provided, it could have requested the exporter to provide additional and more specific information. It chose not to do so.

6.98 In effect, Argentina�s argument in defence of the DCD�s failure to determine an individual margin of dumping for all three exporters seems to be based on the fact that the DCD did not possess sufficient information for each size category to determine a separate margin of dumping for each producer for each of the size categories. The product subject to investigation was ceramic tiles �en todas sus medidas�, i.e. in all sizes, or in other words, irrespective of size, and not ceramic tiles of 20 x 20 cm, 30 x 30 cm and 40 x 40 cm.⁹⁷ As a consequence, the DCD was required to determine an individual margin of dumping for each exporter with regard to this product as a whole and not just a section of the product or a certain size category. As the Appellate Body stated in the EC �Bed Linen case:

"Having defined the product as it did, the EC was bound to treat that product consistently thereafter in accordance with that definition. � We see nothing in Article 2.4.2 or any other provision of the AD Agreement that provides for the establishment of �the existence of margins of dumping� for types or models of the product under investigation. � Whatever the method used to calculate the margins of dumping, in our view, these margins must be, and can only be, established for the product under investigation as a whole".⁹⁸

6.99 In our view, it is important not to confuse the usefulness of grouping (by size, model, type) for the purpose of making a fair comparison under Article 2.4 and the requirement under Article 6.10 to determine an individual margin of dumping for the product as a whole. We consider that the use of types or models is a valid method of ensuring a fair comparison between normal value and export price under Article 2.4. We see nothing in the Appellate Body Report in the EC � Bed Linen case that suggests otherwise so long as the investigating authority goes on to determine a margin of dumping for the product as a whole. The product under investigation in the case before us is ceramic tiles of any size, and the authority was thus required to establish an individual dumping margin for each exporter for this product as a whole and not for each size category. Nor was the DCD entitled to invoke any problems it encountered with regard to the use of such models, such as lack of information concerning a certain size category, as a reason for not determining an individual margin of dumping for the product as a whole, in this case ceramic floor tiles of any size from Italy. Therefore, even if the DCD was entitled to disregard data concerning certain size categories for one reason or another, this should not have stopped the DCD from determining an individual margin of dumping for each of the exporters included in the sample for the product subject to the investigation.

6.100 Even if Argentina had been entitled to determine margins of dumping with respect to each of three sizes of tile rather than with respect to the product subject to investigation as a whole, we believe the DCD was not justified in not determining an individual margin for each exporter for each of the three sizes of tiles. In our view, even if the DCD were to have doubted the reliability of the information for one or two size categories in the case of Bismantova because of the significant quantity of sales made to a related party, this should not have impeded the DCD from determining an exporter specific margin of dumping for at least the one or two remaining size categories for which the DCD did not identify any problems. Similarly, in the case of Caesar, which only exported one size of tiles, this exporter should have at least received an individual margin for that size based on the information submitted.

3. Conclusion

6.101 We conclude that the DCD should have determined an individual margin of dumping for each of the four exporters included in the sample. Our conclusion holds, whether the product as defined by the DCD was in fact ceramic tiles in all their sizes or whether it consisted of three different categories of tiles distinguished from each other on the basis of size. We therefore find that the DCD acted inconsistently with Article 6.10 of the AD Agreement by not determining an individual margin of dumping for each of the four exporters included in the sample.

6.102 Argentina raises as a final defence the concept of harmless error, and argues that the EC failed to demonstrate that the Italian exporters were prejudiced by the failure to determine an individual margin of dumping. In its answers to questions from the Panel, Argentina asserts that the concept of harmless error � i.e., an error that does not cause injury or affect the rights of one of the parties99 � has been accepted in WTO law. Argentina refers in particular to the Report of the Appellate Body in the Korea � Dairy Safeguards case.¹⁰⁰

6.103 We note, however, that the Appellate Body Report in the Korea � Dairy Safeguards case, to which Argentina refers in support of its argument, dealt with the question of whether the request for establishment met the requirements of Article 6.2 of the DSU. The issue before the Appellate Body was whether Article 6.2 of the DSU was complied with or not. The Appellate Body, in deciding that question, concluded that one element to be considered was whether the defending Member was prejudiced in its ability to defend itself by a lack of clarity or specificity in the request for establishment. The Appellate Body did not address the question whether, once it had been established that a provision of the Agreement is violated, it needs in addition to be demonstrated that this violation had prejudiced the rights of the complaining party.¹⁰¹ Thus, we do not agree that this Appellate Body decision supports Argentina�s argument that the concept of harmless error has been accepted in WTO law.

6.104 Quite the contrary is true. Article 3.8 of the DSU provides that:

"In cases where there is an infringement of the obligations assumed under a covered agreement, the action is considered prima facie to constitute a case of nullification or impairment. This means that there is normally a presumption that a breach of the rules has an adverse impact on other Member parties to that covered agreement, and in such cases, it shall be up to the Member against whom the complaint has been brought to rebut the charge".

6.105 Article 3.8 of the DSU thus provides that there is a presumption that benefits are nullified or impaired � i.e., there is a presumption of �harm� � where a provision of the Agreement has been violated. Article 3.8 of the DSU also provides for the possibility that the Member found to have violated a provision may rebut the presumption. In light of the presumption of Article 3.8 of the DSU, the EC having established that Argentina has acted in a manner inconsistent with the AD Agreement, it is up to Argentina to show that the failure to determine an individual dumping margin has not nullified or impaired benefits accruing to the EC under the Agreement. Argentina has failed to adduce any evidence in this respect. Accordingly, we find that the presumption of nullification or impairment of benefits caused by the violation of Article 6.10 of the AD Agreement has not been rebutted by Argentina.¹⁰²

F. CLAIM 3: ARTICLE 2.4: THE NEED TO MAKE ADJUSTMENTS FOR DIFFERENCES IN PHYSICAL CHARACTERISTICS

1. Arguments of the parties

6.106 The EC submits that the DCD failed to make due allowance for all the physical differences between the various models of porcellanato exported to Argentina and those sold domestically.¹⁰³ The EC argues that although the DCD acknowledged that differences in physical characteristics, not adjusted for, could have had a significant impact on price, it nevertheless, without any justification, rejected the exporters� request for a model-to-model comparison and failed to apply any alternative method for making due allowance for differences in physical characteristics affecting price comparability, thereby violating Article 2.4 of the AD Agreement. The EC argues that by failing to make the necessary adjustments, Argentina failed to make a fair comparison between normal value and export price as required by Article 2.4 of the AD Agreement.

6.107 Argentina submits that the DCD made due allowance for differences in physical characteristics affecting price comparability by distinguishing three types of ceramic tiles based on the one variable common to all models and types sold: size. Argentina argues that with 78 Italian producers selling a variety of models with different colours and designs, the DCD was justified to take into account the one parameter common to all models and on that basis the DCD distinguished three size categories. Argentina asserts that the exporters did not present any convincing reasons to invalidate the segregation of products on this basis and never objected to the determination of a margin of dumping per size category.

6.108 Argentina submits that, in light of the standard of review applicable to anti-dumping disputes set out in Article 17.6 of the AD Agreement, deference should be given to the national authority�s methodology if it is based on a reasonable interpretation of the text of the Agreement. Argentina submits that Article 2.4 requires that the authority make due allowance for differences in physical characteristics in each case on its merits. Argentina argues that in this case, concerning a large variety of tiles of different colours and with so many different designs, the DCD distinguished between three different types of tiles based on the one physical characteristic common to all: size. This homogeneous standard used by the DCD, Argentina submits, is a reasonable basis for making due allowance for differences in physical characteristics affecting price comparability and the DCD�s determination should therefore be upheld by the Panel.

6.109 Argentina emphasizes that when the DCD requested the exporters to identify the product by model/type or code the exporters merely referred to a catalogue containing an enormous number of models without any further explanation. In Argentina�s view, this made any a posteriori adjustments, if at all required, practically impossible for lack of information. Argentina argues that the exporters also failed to give any market information per model or type of tiles and never submitted any concrete proposals for adjustments. Therefore, Argentina argues, the DCD�s decision to distinguish the products on the basis of size was a reasonable and objective decision especially in light of the confidential nature and incomplete character of the information.

2. Analysis by the Panel

6.110 The EC�s claim concerns the scope of the requirement of Article 2.4 of the AD Agreement to make due allowance for differences in physical characteristics affecting price comparability.

6.111 Article 2.4 of the AD Agreement provides as follows:

"A fair comparison shall be made between the export price and the normal value. This comparison shall be made at the same level of trade, normally at the ex-factory level, and in respect of sales made at as nearly as possible the same time. Due allowance shall be made in each case, on its merits, for differences which affect price comparability, including differences in conditions and terms of sale, taxation, levels of trade, quantities, physical characteristics, and any other differences which are also demonstrated to affect price comparability.7 In the cases referred to in paragraph 3, allowances for costs, including duties and taxes, incurred between importation and resale, and for profits accruing, should also be made. If in these cases price comparability has been affected, the authorities shall establish the normal value at a level of trade equivalent to the level of trade of the constructed export price, or shall make due allowance as warranted under this paragraph. 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". (emphasis added)

7 It is understood that some of the above factors may overlap, and authorities shall ensure that they do not duplicate adjustments that have been already made under this provision.

6.112 We recall our findings on claims 1 and 2 that the DCD was not justified in disregarding in large part the exporters� information and erred in failing to determine an exporter-specific margin of dumping. We are asked to rule now whether the DCD made due allowance for the physical differences affecting price comparability between the products sold in the domestic market and the products exported to Argentina. We recall that our task is to review the determination of the DCD and examine whether the DCD properly established the facts and whether it evaluated those facts in an objective and unbiased manner.

6.113 Article 2.4 places the obligation on the investigating authority to make due allowance, in each case on its merits, for differences which affect price comparability, including differences in physical characteristics. 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. We believe that the requirement to make due allowance for such differences, in each case on its merits, means at a minimum that the authority has to evaluate identified differences in physical characteristics to see whether an adjustment is required to maintain price comparability and to ensure a fair comparison between normal value and export price under Article 2.4 of the AD Agreement, and to adjust where necessary.

6.114 We note that the DCD determined the export price of the product under investigation on the basis of information provided by the petitioner, as well as official import statistics. We note that these import statistics related to all products exported from Italy and not just to products of those four producers included in the sample. The DCD further calculated two normal values for each size, one based on petitioner and importers� information, a second one based on the two aforementioned sources together with information from the exporters. In general, the information on the record suggests that ceramic tiles may be distinguished on the basis of a number of characteristics, such as dimensions (length and width), colour, degree of processing (polished/unpolished), and quality, and that the price of the products differs as a function of these differences in physical characteristics. The record indicates that the DCD collected information concerning first-quality, unpolished tiles. The DCD also distinguished the product on the basis of differences in size within the various models of tiles sold on the domestic market and exported to Argentina.

^{93 As the Panel in EC � Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India (�EC � Bed Linen�) stated:}

^{"the fact that Article 2.4.2 refers to the existence of margins of dumping in the plural is a general statement, taking account of the fact that, as is made clear in Article 6.10 and 9 of the AD Agreement, individual dumping margins are determined for each producer or exporter under investigation, and for each product under investigation" (emphasis added). Panel Report, EC � Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India (�EC � Bed Linen�) EC � Bed Linen, WT/DS141/R, adopted as reversed in part by WT/DS141/AB/R, 12 March 2001, para. 6.118.}

<sup>94 Argentina�s answers to questions from the Panel at the first meeting, question 17; EC�s answers to questions from the Panel at the first meeting, question 17.

95 This is not to say that in this case we believe there existed such a need for the use of third country export price or to construct the normal value under Article 2.2.

96 We believe that the provisions of Article 2 concerning the determination of dumping and Article 6.8 AD Agreement concerning facts available are intended to allow the investigating authority to complete the data with regard to a particular exporter in order to determine a dumping margin in case the information provided is unreliable or necessary information is simply not provided. It is precisely because of Articles 2 and 6.8, among others, that it will remain possible to determine an individual margin of dumping for each exporter on the basis of facts.

97 Final Dumping Determination, p. 2. Exhibit EC-2.

98 Appellate Body Report, EC � Bed Linen, para. 53.

99 Argentina�s answers to questions from the Panel at the first meeting, para. 31, p. 23.

100 Argentina�s answers to questions from the Panel at the first meeting , para. 31, p. 23.

101 Appellate Body Report, Korea � Dairy Safeguards, para. 127: �Along the same lines, we consider that whether the mere listing of the articles claimed to have been violated meets the standard of Article 6.2 must be examined on a case-by-case basis. In resolving that question, we take into account whether the ability of the respondent to defend itself was prejudiced, given the actual course of the panel proceedings, by the fact that the panel request simply listed the provisions claimed to have been violated.�

102 We note that our view is similar to that of the Panel in the case of Guatemala � Cement (II), (Panel Report, Guatemala � Cement (II), paras. 8.22 and 8.111-112), and Panel Report, Guatemala � Anti-Dumping Investigation Regarding Portland Cement from Mexico (�Guatemala � Cement (I)�), WT/DS60/R, adopted as reversed on other grounds by WT/DS60/AB/R, 25 November 1998, para. 7.42.

103 By way of example, the EC refers to a 100 per cent price difference between two types of unpolished 30 x 30 cm tiles, which was found in a price list relied upon by the DCD (Exhibit EC-5D) which the EC submits suggests that other factors apart from size impacted prices.</sup>

Continuation: Section 6.115

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