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European Commission Re-imposes Definitive Anti-dumping Duty on Shoes Originating in Mainland China

On 18 August 2016, the European Commission adopted Implementing Regulation 2016/1395 (the Implementing Regulation), which re-imposes a definitive anti-dumping duty on imports of certain footwear with uppers of leather, originating in mainland China and produced by a number of named companies. Hong Kong’s shoe traders will be aware that the adoption of the Implementing Regulation is the latest development in a legal battle that has been going on for over a decade.

The fact that the European Commission has now, in a rare move, re-imposed the anti-dumping duties, which had previously been annulled by a judgment of the EU Court of Justice, highlights the determined stance being taken in the EU to combat supposedly low-priced foreign goods.

The background is as follows: following months of political controversy, the European Commission had, on 23 March 2006, imposed provisional anti-dumping measures on imports of footwear with leather uppers from mainland China and Vietnam, excluding sports footwear, footwear involving special technology, slippers and other indoor foot- wear and footwear with a protective toecap.
Next, on 5 October 2006, which is one day before the provisional measures were set to expire, the Council of the European Union imposed definitive anti-dumping duties on those products. The rate of the definitive anti-dumping duty amounted to 16.5% for all Chinese mainland companies, except for one (Golden Step), which had been granted market economy treatment (MET), and was therefore subjected to a lower rate of 9.7%.

Initially, it was provided that these definitive anti-dumping measures would apply for just two years. However, following an expiry review, the Council further extended the measures for fifteen months, until 31 March 2011.

A number of exporting footwear producers challenged the definitive anti-dumping measures before the EU General Court, which ended up dismissing their claims. But, on appeal, the EU Court of Justice sided with the footwear producers. According to the EU Court of Justice, the European Commission had infringed the Basic Anti-dumping Regulation by failing to investigate the producers’ claims for MET, even though they had not been included in the sample of companies used as a basis for the calculation of the anti-dumping duties. The examination of their claim for MET could have led to the imposition of lower rates. Consequently, the anti-dumping measures were annulled with regard to the producers who had lodged the appeal. 

In the aftermath of these judgments, two importers of the footwear concerned, namely C&J Clark International Ltd and Puma SE, claimed the repayment of the anti-dumping duties they had paid, before the national Courts of the UK and Germany. The national Courts referred the matter to the EU Court of Justice, which held that the definitive anti-dumping measures were invalid in general. This contrasts with the previous judgments, in which the EU Court of Justice annulled the measures only in relation to the exporting producers who had lodged the appeal.

In addition to the failure to investigate the producers’ claims for MET, the EU Court of Justice also held that the failure to investigate the producers’ claims for Individual Treatment (IT) infringed the Basic Anti-dumping Regulation.

The European Commission, apparently not discouraged, announced it would rectify the inconsistencies of the anti-dumping measures with the Basic Anti-dumping Regulation, as identified by the EU Court of Justice. To that end, the European Commission announced it would carry out the analysis of the MET and IT claims of the exporters that sold to Puma and Clark. Furthermore, national customs authorities, which received similar requests for re-imbursement by importers, were invited to forward those requests.

In the newly adopted Implementing Regulation, it is noted that the European Commission investigated the MET and IT claims of the exporting producers from mainland China, who had submitted such claims in the original investigation, and whose goods had been imported into the EU by Clark and Puma. In that regard, the European Commission stressed that the burden of proof lies with the producer that claims the MET or IT, and that the Commission is only under an obligation to assess whether the evidence adduced by the producer is sufficient to show that the criteria for MET or IT are fulfilled.

In order for an MET claim to be successful under the Basic Anti-dumping Regulation, it must be shown that the following conditions prevail for the producer in respect of the products concerned:

  • Its decisions on prices, costs and inputs are made in response to market signals reflecting supply and demand, without significant state interference;
  • It has one clear set of basic accounting records which are independently audited in line with international accounting standards and are applied for all purposes;
  • Its production costs and financial situation are not subject to significant distortions carried over from the former non-market-economy system;
  • It is subject to bankruptcy and property laws which guarantee legal certainty and stability; and
  • The exchange rate conversions are carried out at the market rate.

In order for an IT claim to be successful under the Basic Anti-dumping Regulation, the following conditions must be met:

  • In the case of wholly or partly foreign owned firms or joint ventures, exporters are free to repatriate capital and profits;
  • Export prices and quantities, and conditions and terms of sale are freely determined;
  • The majority of the shares belong to private persons; state officials appearing on the board of directors or holding key management positions shall either be in minority or it must be demonstrated that the company is nonetheless sufficiently independent from State interference;
  • Exchange rate conversions are carried out at the market rate; and
  • State interference is not such as to permit circumvention of measures if individual exporters are given different rates of duty.

The European Commission concluded, in the Implementing Regulation, that none of the producers concerned were able to demonstrate that they met all the criteria required for MET or IT. As a result, the definitive anti-dumping duties are re-imposed on the thirteen producers, which are listed in Annex II to the Implementing Regulation. The rate of the re-imposed duties amounts, once again, to 16.5%.

The Implementing Regulation does not extend to producers from Vietnam, in relation to whom an investigation is still ongoing.

Hong Kong traders wishing to consult the full text of the Implementing Regulation can click on the following link: Regulation 2016/1395.

Content provided by Picture: HKTDC Research
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