4.884 If the exporters did request the DCD to do its margin calculations on the basis of models, the Panel asked the parties to clarify what was the DCD�s response to that request. 4.885 Argentina answered that its reply to this question was implicit in its reply to the previous question.

4.886 The Panel recalled that, independently of whether the exporters asked for a model-based comparison of normal value and export prices, the record suggested that prices of tiles vary significantly, even within a single size category, on account of differences in processing (polished/unpolished), quality, and colour (for instance, Bismantova�s price list submitted to the Panel as Exhibit EC-5 C). The DCD itself recognized (in page 28 of the Final Dumping Determination) that the exporters� sales information revealed considerable price differences in products of equal size and lower sales prices for the larger sizes than for the smaller sizes. On account of this situation, the Panel asked the parties whether they were of the view that the requirement to adjust for physical differences affecting price comparability could be met in this investigation by comparing normal values and export prices corresponding to the same size category.

4.887 Argentina replied to this question in the affirmative. In the circumstances of this case, the only way in which a price comparison could be made was to take the size as a basis for comparison.

4.888 The Panel asked Argentina whether it was of the view that the infinite number of physical differences made adjustment beyond size impracticable, and that Article 2.4 would recognize an exception in this respect. Additionally, was Argentina�s view that the exporters failed to support such an adjustment by not providing sufficient data? The Panel further asked Argentina, if the data were considered inadequate, to what extent was such inadequacy based on the confidential nature of the information supplied, and were the exporters informed thereof?

4.889 Argentina replied that, while the physical differences made it almost impossible to carry out an adjustment, this is not an exception to Article 2.4, but a reasonable application in a specific case of the obligation contained therein, particularly given the irrelevance of the information supplied to that end by the exporters. However, the fact that the exporters did not provide sufficient information also contributed to the impossibility of making other adjustments for physical characteristics. The inadequacy of the information was not due to its confidentiality, but to its insufficiency.

4.890 The Panel recalled Argentina�s statement to the effect that the exporters did not object to the DCD�s adjusting only for size, and not for quality or other physical differences affecting price comparability. The Panel asked the EC whether it agreed with this characterization of the evidence. The Panel further asked the parties to comment on the relevance this fact could have under Article 2.4. In other words, the Panel asked, if the investigating authorities have reason to believe that certain physical differences, in fact, affect price comparability, and if the record contains evidence sufficient to make such an adjustment, would the acceptance by the exporters of the adjustments actually made relieve the authorities of the need to make further adjustments?

4.891 Argentina replied that the relevance of that fact under Article 2.4 is that the criterion used was the only possible criterion for analysing the like product in all of its sizes, and this is why the exporters accepted the DCD�s approach. Moreover, given the facts of this case, the question is a hypothetical one, since the record did not contain evidence sufficient to make other adjustments that would permit a fair comparison.

4.892 Argentina addressed the three questions by the Panel transcribed below at once.

4.893 The Panel recalled that the EC argued in its first written submission (at para. 77) that the DCD did adjust normal value in order to reflect the physical differences between polished and unpolished tiles. However, the DCD�s report raised this issue exclusively in the context of margin calculations for one of the exporters (Caesar), and, even in this case (see page 29 of the Final Dumping Determination), it suggested that the information on home prices provided by the exporter concerned was rejected by the DCD on the grounds that that home sales of polished tiles could not be compared to export sales of unpolished tiles. The Panel asked the parties to clarify whether the adjustment concerned was made.

4.894 The Panel recalled that, for initiation purposes, it appeared that the DCD calculated normal value according to price quotations for unpolished, first quality tiles and that this estimate of normal value, adjusted on account of the evidence provided during the course of the proceedings, was also used for calculating normal value for the final determination. The Panel asked Argentina to indicate whether the pricing data used for calculating normal value for the final determination corresponds in effect to unpolished, first quality tiles, or was this pricing data expanded at some point to cover all kinds of tiles. In either case, the Panel further asked Argentina, could the Panel be provided with the relevant references in either the report or in the administrative record?

4.895 The Panel also recalled that it appeared that the DCD calculated the export price for the final determination on the basis of unit prices, drawn from official import records. The Panel asked Argentina whether this export price referred to unpolished, first quality tiles or rather to all kinds of tiles. In either case, the Panel further asked Argentina, could the Panel be provided with the relevant references in either the report or in the administrative record?

4.896 To these questions, Argentina provided the following reply.

4.897 To begin with, it should be pointed out that during the investigation at issue, the implementing authority always considered, in its various determinations, the unpolished product.

4.898 Evidence of this can be found in the administrative record in the various technical reports referring to the determinations, which reveal that the implementing authority considered information relating to the unpolished product and discarded any information relating to flags and paving tiles of fine earthenware porcellanato, polished.

4.899 Regarding the recognition of the differences in value, in order to illustrate precisely how the documentation supplied to the implementing authority was treated, specific reference is made to the case of the Italian manufacturing export company Caesar. As stated in the report on the final determination of the margin of dumping in the relevant Annex, in that case information was provided on the relevant adjustment to be made and, as stated, it was considered in the treatment of the information.

4.900 At the same time, Argentina reiterates that the export price considered in the various determinations corresponds to the unpolished product only, whether the analysis was conducted on the basis of the information provided by official sources or on the basis of information provided by the various firms involved in the proceedings.

4.901 Thus, the entire dumping analysis was conducted on the basis of the information in the record of the proceedings in respect of unpolished porcellanato.

4.902 Finally, the fact that the product considered was the unpolished product is reflected in the decision contained in the final resolution introducing the definitive anti-dumping measure.

(d) Arguments of Argentina in its second written submission relating to the EC�s claim under Article 2.4 of the AD Agreement

4.903 In its second written submission, Argentina made the following arguments relating to the EC�s claim under Article 2.4 of the AD Agreement.

4.904 Argentina submits that it acted in accordance with Article 2.4, since the DCD made a fair comparison taking account of the physical characteristics (the diversity of the investigated tiles) in the light of the �particular circumstances� (infinite number of models, colours, designs etc.) and opted for a factor, size, which reflected the greatest universality and applied to the greatest quantity of imports of the product under investigation.

4.905 Indeed, the size is the element which provided the best possibility of making the adjustments, since it formed part of the segmentation decided upon at the opening of the investigation and, as stated in paragraphs 103 et seq. of Argentina�s first written submission, it enabled the authority to make the most comprehensive �fair comparison on the merits of the case� (infinite number of models, colours, etc.).

4.906 At the same time this �fair comparison� on the basis of the size of the tiles is consistent with the Article 2.4 obligation, which mentions �physical characteristics�. Or are the differences in size perhaps not a physical characteristic of the tiles that should be taken into consideration?

4.907 Moreover, this reasoning on the part of the authority is consistent with the definition of the like product that includes the different sizes of tiles, and at the same time makes it possible to carry out the adjustment for 99.29 per cent of the imports. It is difficult to see how it would be possible to carry out a more comprehensive �fair comparison� using a different criterion, one which covers the remaining 0.71 per cent of the imports that do not fall within any of these three size categories.

4.908 It should be stressed that what the DCD in fact did was to make a fair comparison on the basis of the physical characteristics of the models in keeping with the obligation to carry out a �fair comparison� on the basis of the physical characteristics which the Appellate Body understands as an essential obligation under Article 2.4 (�Article 2.4 sets forth a general obligation to make a �fair comparison� between export price and normal value. This is a general obligation that, in our view, informs all of Article 2, but applies, in particular, to Article 2.4.2 which is specifically made �subject to the provisions governing fair comparison in [Article 2.4]�. Moreover, Article 2.4 sets forth specific obligations to make comparisons at the same level of trade and at, as nearly as possible, the same time. Article 2.4 also requires that �due allowance� be made for differences affecting �price comparability�. We note, in particular, that Article 2.4 requires investigating authorities to make due allowance for �differences in � physical characteristics�. Moreover, Article 2.4 contains the specific obligation to make the comparisons at the same level of trade and at as nearly as possible the same time. It adds that �due account shall be made � for differences which affect price comparability�. We note, in particular, that Article 2.4 requires the investigating authority to make due allowance for �differences in � physical characteristics� �. Appellate Body Report, European Communities � Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India, WT/DS141/AB/R, adopted 12 March 2001, at para. 59, emphasis added by Argentina).

4.909 Additionally, Argentina would ask the panel, in considering this point, to consider the standard of review applied within the framework of the AD Agreement, as stipulated in Article 17.6 thereof.

4.910 As the Agreement speaks of deference to the investigating authority, the evaluation of the facts that the authority conducted cannot be considered inconsistent with the Agreement. The conclusion reached in the light of the facts of the case (diversity of models, colours, etc.) that the size of the tiles was the main physical characteristic that permitted the segmentation of the product for the purposes of making a fair comparison cannot be qualified as �biased� or �unobjective�.

4.911 As stated in paragraphs 96 to 101 of Argentina�s first written submission, it is the standard of deference established in Article 17.6(i) and 17.6(ii) of the AD Agreement that gives the authority the discretion to decide on the method by which it makes the comparison. This has been recognized in a number of past cases which upheld the �principle of deference� with respect to the methodology applied by the investigating authorities in anti-dumping cases (� � the Panel was not faced with a choice among multiple �permissible� interpretations which would have required it, under Article 17.6(ii), to give deference to the interpretation relied upon by the by the European Communities�, Appellate Body Report, European Communities � Anti Dumping Duties on Imports of Cotton-Type Bed Linen from India, adopted 12 March 2001, WT/DS/141/AB/R, at para. 65).

4.912 In this case, the authority�s criterion for making a �fair� comparison was �homogenization� which, as mentioned, ultimately amounts to a standardization based on certain parameters which by their nature reflect a certain universality within the product investigated.

4.913 As mentioned in paragraph 87 of Argentina�s first written submission, there were 78 manufacturers of porcellanato, each of which produced dozens of different varieties which, in their turn, could be discontinued at any time or replaced by similar articles with a different product code or trade name. The above applied to each supplier. This is why the implementing authority decided to establish as a basis for comparison the most representative dimensions in terms of the volume exported, since this was the only variable that applied to all of the articles from all of the suppliers and was not affected by market considerations from one supplier to the other.

4.914 On this basis, the DCD �reasonably� analysed the facts, applying to them the obligations set forth in the actual text of the agreement and without having to introduce criteria such as a posteriori adjustment which are not specifically provided for in the text of Article 2.4.

(e) Arguments of Argentina in its second oral statement relating to the EC�s claim under Article 2.4 of the AD Agreement

4.915 In its second oral statement, Argentina made the following arguments relating to the EC�s claim under Article 2.4 of the AD Agreement.

4.916 Argentina refutes the EC�s statement in paragraph 76 of its second written submission, since Exhibit ARG-22 makes it clear that the supporting documentation provided by the exporters was not sufficiently explanatory for the authority to be able to make a fair comparison owing to differences in the physical characteristics of the different models.

4.917 Similarly, the differences revealed by Exhibit ARG-22 illustrate the diversity of models and colours. Taking account of the information supplied during the proceedings with respect to the physical characteristics, the investigating authority, in conformity with Article 17.6(i), concluded that the size of the tiles was the prevailing factor � physical characteristic � for the purposes of making a fair comparison. This cannot be qualified as a �biased� or �unobjective� evaluation in the light of the facts of the case.

4.918 Hence Argentina has argued, and continues to argue, that the difference in size is a physical characteristic which has real effects on prices.

4.919 This is consistent with the Appellate Body�s statement in European Communities � Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India that Article 2.4 requires that �due allowance� be made for differences affecting price comparability. The size of the tiles is precisely the difference which has a great impact on price comparability. The implementing authority is required to make due allowance for these differences, and the DCD did so in the present case on the basis of the duly adopted segmentation.

4.920 The EC apparently does not accept that a comparison should have been made on the basis of size, as if this were not a physical characteristic of the tiles.

4.921 As stated in one of Argentina�s reply to a question by the Panel following the first meeting, and in confirmation of what has already been said, the implementing authority examined information relating to the unpolished product and discarded any information relating to flags and paving tiles of fine earthenware porcellanato, polished.

4.922 As regards Caesar, which only sold polished porcellanato on its domestic market, a fair adjustment was duly made, as recorded in the report on the final determination of the margin of dumping, and this was considered during the investigation.

4.923 Argentina does not understand why the EC asserts, in paragraph 79 of its second written submission, that due allowance must be made for all the differences in physical characteristics when the Article 2.4 obligation is subject to or limited by the particular circumstances surrounding the subject of the investigation. Indeed, the relevant part of the article stipulates that �� Due allowance shall be made in each case, on its merits, for differences which affect price comparability �� .

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

4.924 Argentina 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:

4.925 The Panel asked Argentina whether it was of the view that were other physical differences affecting price comparability apart from size. The Panel further asked Argentina what was the basis for the DCD�s assumption that, by adjusting for size, it had adjusted for other physical differences affecting price comparability.

4.926 Argentina replied that the DCD�s approach was to resort to the basic and elementary physical characteristic of product size (20 x 20, 30 x 30, 40 x 40, etc.). This classification was not questioned at any time during the proceedings and it enabled the implementing authority to make a proper and irrefutable comparison.

4.927 There were probably other physical differences that affected price comparability, but the implementing authority, on the basis of the evidence in the record of the proceedings, considered that the physical characteristic that affected price comparability was the physical size or dimensions.

4.928 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. If this was so, the Panel further 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.

4.929 Argentina replied that the investigation of adjustments, for example, for physical characteristics, involves evaluating whether such adjustments, if they affect price comparability, should be made. If so, they should only be made where the implementing authority has evidence. With respect to the calculation by model, when the same models are sold in both markets in the same proportions, no adjustments are necessary.

4.930 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.

4.931 Argentina replied that the classification applied by the DCD on the basis of the mentioned criterion was defended during the various stages of the investigation and is based on a technical report on the feasibility of initiating an investigation which was provided to the Panel as Exhibit ARG-25. Moreover, the report in Exhibit EC-10 by the representative of the Italian exporting firms in Argentina recognizes this segmentation:

Regarding non-confidential invoices, I suggest to select some invoices of each segment (20 x 20, 30 x 30, etc.) with prices closer to the weight average of the segment.

4.932 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?

4.933 To this question, Argentina provided the following reply.

4.934 The meeting held by the DCD technical staff was not a formal meeting, and the report by the legal representatives of the Italian exporting firms in Argentina falls outside this technical sphere.

4.935 Argentina notes, however, that the Argentine authority does not know what is behind the thinking of the exporting firms. Argentina reiterates that any comparison made must be based on technical criteria, supported by documentation which reflects the arguments made during the proceedings.

4.936 During the investigation, the authority communicated its conclusions through a series of technical reports reflecting the technical criteria used. Thus, the comparison and classification criteria were duly examined by the authority, and the parties involved had the opportunity to familiarize themselves with them and contribute evidence in support of their respective positions. In other words, the classification used throughout the investigation did not give rise to any comments, and as the investigation proceeded, the classification was effectively endorsed.

4.937 As stated in the previous reply, it has been clearly shown that the exporters were informed that the criterion that the implementing authority would continue to use for the purposes of calculating the margin of dumping, based on the information supplied, would be the physical dimensions of the product at issue.

4.938 Finally, it would have been inconceivable for the DCD to have used another criterion, considering that the exporters themselves, in their replies to the questionnaire (in the different Annexes) stated that the information was not available according to code, model or type. What kind of adjustment did the EC expect the DCD to make?

4.939 Argentina refers the Panel to Exhibit ARG-24 which contains the following documentation.

4.940 Casalgrande: File No. 061-010304/98 of 10 December 1998 � folio 876.

- Annex IV. Information on producer/exporter market. �Information not available by model, code or type, but overall information is available concerning gres porcellanato.�

- Annex V. Summary of producer/exporter sales. �Information not available by model, code or type, but overall information is available concerning gres porcellanato.�

- Annex VI. Summary of producer/exporter sales. �Information not available by model, code or type, but overall information is available concerning gres porcellanato.�

4.941 Caesar: File No. 061-010305/98 of 10 December 1998 � folio 879.

- Annex IV. Information on the producer/exporter market. �This type of information is not available by model, code or type. The information provided refers to porcellanato in general.�

- Annex V. Summary of producer/exporter sales. �This type of information is not available by model, code or type. The information provided refers to porcellanato in general.�

- Annex VI. Summary of producer/exporter sales. �This type of information is not available by model, code or type. The information provided refers to porcellanato in general.�

4.942 Marazzi: File No. 061-010306/98 of 10 December 1998 � folio 880.

- Annex IV. Information on the producer/exporter market. �This type of information is not available by model, code or type. The information provided refers to porcellanato in general.�

- Annex V. Summary of producer/exporter sales. �This type of information is not available by model, code or type. The information provided refers to porcellanato in general.�

- Annex VI. Summary of producer/exporter sales. �This type of information is not available by model, code or type. The information provided refers to porcellanato in general.�

4.943 Bismantova: File No. 061-010307/98 of 10 December 1998 � folio 881.

- Annex IV. Information on the producer/exporter market. �This type of information is not available by model, code or type. The information provided refers to porcellanato in general.�

- Annex V. Summary of producer/exporter sales. �The description of the model/code/type is provided in Sections B and C. The information provided in this table corresponds to the total amounts of sales made.�

Continuation: Section 4.944

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