1 April 2016
EU to Re-examine Anti-dumping Duties on Footwear
On 17 March 2016, the European Commission issued a notice stating that it will examine market economy treatment as well as individual treatment claims filed by non-sampled exporting producers of certain footwear with uppers of leather from mainland China and Vietnam in respect of which there are pending national procedures. The notice follows a judgment of the EU Court of Justice, based on a request for a preliminary ruling of two national courts, that found that the regulation laying down the anti-dumping duties on certain footwear with uppers of leather from mainland China and Vietnam was invalid to the extent that the European Commission did not examine claims relating to market economy treatment and individual treatment submitted by exporting producers that were not sampled.
In 2006, Council Regulation 1472/2006 was adopted which imposed a definitive anti-dumping duty on imports of certain footwear with uppers of leather originating in the Chinese mainland and Vietnam. Regulation 1472/2006 imposed an anti-dumping duty of 16.5% for companies established in mainland China (with the exception of the company Golden Step, which was subject to an anti-dumping duty of 9.7%) and a duty of 10% for companies established in Vietnam.
C & J Clark International Ltd (“Clarks”), a manufacturer and retailer of footwear based in the UK, submitted a claim to the UK customs authorities arguing that the said anti-dumping duty was invalid due to the failure of the Commission to make all necessary examinations during the investigation. Clarks therefore requested the repayment of anti-dumping duties paid for importing footwear into the EU between 2007 and 2010 amounting to approximately €60 million. After Clarks’ claim was rejected, it lodged an appeal to the Tax Chamber of the UK First-Tier Tribunal, which, having had doubts about the validity of the anti-dumping regulation, issued a request for a preliminary ruling to the EU Court of Justice.
Similarly, the German sportswear manufacturer Puma asked the German customs authorities for repayment of anti-dumping duties paid, amounting to €5.1 million, for importing footwear. Puma also argued that the anti-dumping duty imposed by Regulation 1472/2006 was invalid due to the failure of the Commission to make all necessary examinations during the investigation. Again, when the claim was initially rejected, Puma appealed to the Finance Court of Munich, which also asked the EU Court of Justice for a preliminary ruling.
In a judgment of 4 February 2016, Hong Kong shoe exporters may recall that the EU Court of Justice handled the requests from the UK First-Tier Tribunal and the Finance Court of Munich jointly (Cases C-659/13 and C-34/14). The Court of Justice found that the contested anti-dumping regulation and Implementing Regulation 1294/2009 (which extended the anti-dumping duties for another 15 months) were invalid insofar as the European Commission did not examine the market economy treatment and individual treatment claims submitted by exporting producers in the Chinese mainland and Vietnam that were not sampled, contrary to the requirements of the Basic Anti-dumping Regulation.
The Court held that it should be noted first of all that the Basic Anti-Dumping Regulation provides that, where the number of traders concerned by an anti-dumping investigation is large, the investigation may be limited to a reasonable number of parties, by using statistically valid samples. The final selection of the parties included in such samples is a matter for the Commission. However, according to the Basic Anti-Dumping Regulation, an individual dumping margin must be calculated for any exporter or producer not included in the sample which so requests, except where the number of them is so large that individual examinations would be unduly burdensome and would prevent completion of the investigation in good time.
The Court held that the determination of a product’s normal value, which is essential for establishing the existence of dumping, should generally be based on the prices that independent customers must pay in the exporting country in the ordinary course of trade. However, for imports coming from mainland China and Vietnam, the normal value is only determined in accordance with the aforementioned rule when one or more producers establish that for them market economy conditions prevail. This procedure enables producers from non-market economy countries to be treated according to their individual situation. Companies that are granted market economy treatment typically face lower anti-dumping duties.
In this context, the Court held that, where market economy treatment claims are addressed to the Council and the Commission, it is incumbent upon them to assess whether the evidence supplied by the producers concerned is sufficient to show that the requisite criteria are fulfilled. Furthermore, the Council and the Commission are obliged to adjudicate upon a claim for market economy treatment made by any producer established in a non-market economy country which is a member of the WTO at the date of the initiation of an anti-dumping investigation, including where they have recourse to sampling as provided for in the Basic Anti-Dumping Regulation.
The Court found that in this case the Council and Commission had failed to assess the claims for market economy status by exporting producers from mainland China and Vietnam that were not sampled.
Further, certain Chinese and Vietnamese exporting producers covered by the investigation claimed individual treatment on the basis of the Basic Anti-Dumping Regulation. However, the Commission, whose position was confirmed in this regard by the Council, decided, in the same way and on the same grounds as in the case of the claims for market economy treatment, to adjudicate only upon the claims for individual treatment of the exporting producers sampled.
However, the Court stated that the Basic Anti-Dumping Regulation provides that an individual anti-dumping duty is to be specified for suppliers established in a non-market economy country, if they also have the status of exporter, where they demonstrate on the basis of properly substantiated claims that they meet the criteria justifying such individual treatment. That individual anti-dumping duty will then be applied to them instead of the anti-dumping duty set countrywide which would have been applicable to them in the absence of such a claim. Accordingly, the Council and the Commission are, in principle, bound to examine claims for individual treatment which are addressed to them and to adjudicate upon those claims, as they must in the case of claims for market economy treatment.
The Court held, therefore, that the fact that the Council and the Commission did not adjudicate upon the claims for individual treatment submitted by the Chinese and Vietnamese exporting producers not sampled constituted an infringement of the Basic Anti-Dumping Regulation.
The Court therefore found Regulation 1472/2006 to be invalid in respect of these two aspects.
After the issuance of a preliminary ruling, a matter is reverted back to the national courts that have requested it, which then have to issue judgments that follow the ruling of the EU Court of Justice. In this case, the courts in Germany and the UK will have to decide on the reimbursement to Clarks and Puma in the context of the invalidity of the regulation laying down the anti-dumping duties.
However, on 12 March 2016, it was reported that the Commission, in anticipation of the judgment of the Court of Justice, had already reviewed and consequently rejected market economy treatment claimed by the producers linked to Clarks and Puma. The Commission was planning on notifying national authorities that, after they have issued rulings on reimbursements, they should contact the Commission before actually reimbursing the parties. The Commission will then review any claims filed for market economy treatment or individual treatment and communicate to the national courts the amount that the courts should reimburse. This strategy of the Commission was criticised since the Commission’s instructions could clash with the national courts’ rulings.
Then, on 17 March 2016, the Commission published a notice in the EU’s Official Journal on the implementation of the judgment in joint cases C-659/13 and C-34/14. In the notice the Commission informs all interested parties that it will examine market economy treatment as well as individual treatment claims filed by non-sampled exporting producers of certain footwear with uppers of leather from mainland China and Vietnam, where that is necessary in the light of pending national procedures. The notice states that interested parties are invited to contact the Commission, within 15 days of the publication of the notice in the Official Journal, at the following email address: TRADE-AD499-Footwear-Court@ec.europa.eu.