29 Jan 2016
Commission Weighs Issue of Anti-Dumping Tariffs on Chinese-Origin Shoes Ahead of Court Ruling on Clarks and Puma
It has been reported that European trade officials are fearing the upcoming Court of Justice judgement on Clarks and Puma, which is expected in early February. The worry for them is that the Court may award Chines-origin shoe importers reimbursements of millions of euros in anti-dumping duties.
Clarks and Puma initiated proceedings independently before the national courts in the UK and Germany respectively, seeking a reimbursement of anti-dumping duties which had been imposed on imports of footwear originating in the Chinese mainland and Vietnam.
Depending on the outcome, the upcoming decision from the EU’s highest court can be of significance for Chinese exporting producers. In case of a ruling in favour of the importers, as in the previous “Brosmann case“, exporting producers from mainland China whose goods are subject to anti-dumping duties in the EU and who wish to challenge such duties on procedural grounds or on the basis of inconsistency with WTO law, may find that they have a stronger position.
Footwear traders will recall that in the Brosmann case, dating from February 2012, the EU Court of Justice had annulled the anti-dumping duties imposed on their footwear imports, of up to 16.5%. In its decision, the Court had highlighted the failure of the European Commission to investigate a shoemaker’s request to be granted “Market Economy Treatment” (MET). Companies granted this status are deemed to operate independently from the state, meaning that they would typically face lower anti-dumping duties.
The Court’s Advocate General Yves Bot issued a non-binding opinion in September 2015 on the Clarks and Puma proceedings, arguing in favour of these two companies, that the anti-dumping duties should be deemed invalid. He deplored the Commission’s failure to once again fulfil its obligation to review the request for MET, which was also confirmed by the Court in Brosmann. Yves Bot went beyond the Brosmann judgement, contending that the EU was wrong to ignore requests from the companies for “individual treatment”.
The Commission is currently said to be preparing a reopening of its original anti-dumping decision regarding Clarks and Puma, hoping to maintain the tariffs, but without going against a judgement that would be unfavourable to it, from the Court. It is, in any event, considered unlikely by the Commission that all the imposed duties would end up being reimbursed.
According to the Commission’s interpretation of the 2012 ruling in Brosmann, retroactively reviewing MET requests would require partially revisiting the old anti-dumping decision in order to review the relevant MET claims. Once the relevant claims are readdressed, the EU regulator would then amend the duties imposed on Clarks and Puma, as necessary.
However, it is the Commission’s assumption that most, if not all, MET claims will be rejected. According to the Commission, it is very rare for a Chinese company to be given MET as the state’s influence is wide-ranging.
It is not the first time that the Commission is willing to use this approach. In 2013, the regulator sought to claw back reimbursed duties linked to Chinese-origin shoes made by Seasonable Footwear, Lung Pao Footwear and Risen Footwear, as well as Brosmann. The Member States which at the time had to endorse trade defence measures, rejected the Commission’s plans in 2013, contending that it was too late to reopen the case as the duties had already been paid back.
In the present case, the Commission hopes to win the approval from EU Member States to reopen the proceedings, as reimbursements to Clarks and Puma have still not been made.
Exporters from Hong Kong will be interested in the exact wording of the Court of Justice’s final judgment in this case, as it may have important implications on their possibility to challenge illegal duties on imports imposed by the EU.
In his opinion, the Court’s Advocate General Yves Bot suggested that the invalidity of a measure is not an exceptional circumstance that would suspend the three-year time limit to claim reimbursement of duties. If upheld by the Court, this means that importers should be encouraged to start reimbursement proceedings within the legal time limit, also when there is no ruling yet on the invalidity of the regulation imposing duties.
In addition, it remains to be seen to what extent the Court of Justice will accept that private parties, like importers or exporters, can rely directly on infringements of WTO law before the EU courts. Recent trends in the EU case law suggest that the Court is becoming less and less inclined to accept so-called ‘direct applications’, referring to the fact that other WTO members, including the most important commercial partners of the EU, have concluded that WTO rules cannot be relied upon to review the legality of their rules of domestic law.