28 Oct 2016
The Footwear Saga Continues: EU Importers Challenge Recent Regulations Due to the EU’s Refusal to Repay Anti-dumping Duties
EU importers have launched new legal challenges to the European Commission’s latest Regulations imposing anti-dumping duties on certain footwear originating in mainland China and Vietnam. They represent a new development in a long-running legal battle that has already lasted for more than a decade.
Hong Kong traders may wish to follow these recent developments as the legal challenges touch upon important legal questions in anti-dumping cases, such as the scope of the Commission’s powers when imposing anti-dumping duties and the retroactive imposition of such duties.
The footwear dispute began in October 2006, when the EU, through Regulation 1472/2006, imposed definitive anti-dumping duties on imports of certain footwear with uppers of leather originating in mainland China and Vietnam. Initially imposed for a period of two years, the anti-dumping duties were extended for an additional period of fifteen months through Regulation 1294/2009. Therefore, the duties expired on 31 March 2011.
Through two actions for annulment, five exporting producers of footwear challenged the definitive anti-dumping duties imposed by Regulation 1472/2006. The Court of Justice, in the cases Brosmann and Aokang (C-249/10 and C-247/10), ruled that the Commission had indeed infringed Article 2(7) of the Basic Anti-dumping Regulation by failing to investigate the producers’ claim for market-economy treatment (MET). On 2 February 2012 and 15 November 2012 respectively, the Court of Justice annulled Regulation 1472/2006 and Regulation 1294/2009 in so far as they related to the five producers who had lodged the appeal. For all other concerned importers of footwear, the victory before the Court of Justice had no impact.
Following the judgments in Brosmann and Aokang, C & J Clark International (Clarks) and Puma asked for the reimbursement of the anti-dumping duties before the UK and German national courts respectively, arguing that Regulation 1472/2006 and Regulation 1294/2009 were invalid. The national courts referred the matter to the Court of Justice for a preliminary ruling, resulting in a second victory against the Commission’s anti-dumping duties on footwear. On 4 February 2016, in Joined Cases C & J Clark International and Puma (C-659/13 and C-34/14), the Court of Justice held that the regulations were invalid – in relation to all concerned exporters and importers – in so far as it infringed Article 2(7)(b) and Article 9(5) of the Basic Anti-dumping Regulation by not investigating the MET and individual treatment (IT) claims.
However, despite the two victories before the Court of Justice – the annulment of Regulation 1472/2006 and 1294/2009 in 2012 and their invalidation in 2016 – the EU has up until now refused to repay the concerned anti-dumping duties. As a result, EU importers of footwear originating in mainland China and Vietnam are persistently continuing their legal battle to obtain a refund of the anti-dumping duties paid by them.
They are facing two obstacles for the repayment of the anti-dumping duties. The first emerged on 18 February 2016, with the publication of Commission Implementing Regulation 2016/223, in which the Commission announced that it would rectify the inconsistencies of the anti-dumping duties as identified by the Court of Justice. The Commission ordered the national customs authorities to forward all requests for repayment to the Commission, after which the Commission would check whether the exporting producer had indeed lodged a MET or IT claim and, if so, would review such claims and inform the national customs authorities on how much they may reimburse. In the meantime, the national customs authorities will have to refrain from deciding on any claims for repayment of the anti-dumping duties.
Two EU importers of footwear, Deichmann and Clarks have recently challenged Regulation 2016/223 in two different actions. Therefore, the EU courts will consider, in two separate cases, whether the Commission can mandatorily involve itself in the process for importers to obtain a repayment of anti-dumping duties from the national customs authorities.
First, in the context of the dispute initiated by Deichmann to obtain the repayment of anti-dumping duties, the Finanzgericht Düsseldorf (Düsseldorf Finance Court) lodged a request for a preliminary ruling to the Court of Justice on 9 May 2016 (C-256/16). The question referred relates to the validity of Regulation 2016/223. Second, Clarks brought an action for annulment against Regulation 2016/223 before the General Court on 11 May 2016 (T-230/16). According to Clarks, the Commission: (i) violated the principle of conferral under Articles 5(1) and 5(2) TEU by proceeding on an incorrect legal basis; (ii) violated Article 266 TFEU by failing to take the necessary measures to comply with the judgment of the Court of Justice in Joined Cases C & J Clark International and Puma; (iii) violated Articles 5(1) and 5(4) TEU by adopting an act that exceeds what is necessary to achieve its objective; and (iv) misused its powers by using its competences for a purpose other than that for which they were conferred upon it.
The second obstacle for the repayment of the anti-dumping duties emerged through the recently adopted Regulations (e.g. 2016/1395, 2016/1647 and 2016/1731), in which the Commission re-imposed the definitive anti-dumping duties on imports of the involved footwear originating in mainland China and Vietnam for a number of named producers (see: the previously named Business Alert-EU, Issue 14/2016). By doing so, the Commission continues to refuse the refund of the anti-dumping duties, circumventing the Court of Justice’s decision on the invalidity of Regulation 1472/2006. These recent Regulations, which retroactively re-impose the anti-dumping duties on certain producers, are likely to be also challenged by Clarks and Puma. They can argue that the Commission does not have the power to retroactively impose anti-dumping duties, as such a legal basis is inexistent in the Basic Anti-dumping Regulation. Indeed, up until today, each time the Commission has rectified the inconsistencies of anti-dumping measures, it has merely done so for the future.
The outcome of the pending cases before the EU courts will be a welcome clarification on the scope of the Commission’s powers when imposing and refunding anti-dumping duties. Interesting legal issues are likely to be addressed, in particular, the question of whether the Commission can retroactively impose anti-dumping duties after the expiry of the initial measure. In this respect, Hong Kong traders should be cognisant of the possibility that the Court will set an important and potentially dangerous precedent.
It should also be borne in mind that even if the EU importers of footwear were to win the pending cases, they will not directly obtain the repayment of the unduly paid duties. Rather such reimbursement will have to be requested through the national customs authorities and national courts. In this respect, the footwear saga looks set to continue for a long time into the future.