On 30 June 2005, the EU's Official Journal published the notice of initiation of an anti-dumping proceeding concerning imports of certain footwear with protective toecap originating in the Chinese mainland and India. Hong Kong traders with interests in the mainland will certainly be concerned to learn that the initiation of another anti-dumping investigation, against leather footwear, is also imminent.

The product scope of the anti-dumping proceeding initiated on 30 June 2005 is as follows: certain footwear with uppers of rubber or plastics (excluding waterproof footwear with outer soles and uppers of rubber or of plastics, the uppers of which are neither fixed to the sole nor assembled by stitching, riveting, nailing, screwing, plugging or similar processes) or with uppers of leather or composition leather, having a protective toecap, normally declared within CN codes 6402 30 00, 6403 40 00, ex 6402 19 00, ex 6402 91 00, ex 6402 99 10, ex 6402 99 31, ex 6402 99 39, ex 6402 99 50, ex 6402 99 91, ex 6402 99 93, ex 6402 99 96, ex 6402 99 98, ex 6403 19 00, ex 6403 30 00, ex 6403 51 11, ex 6403 51 15, ex 6403 51 19, ex 6403 51 91, ex 6403 51 95, ex 6403 51 99, ex 6403 59 11, ex 6403 59 31, ex 6403 59 35, ex 6403 59 39, ex 6403 59 50, ex 6403 59 91, ex 6403 59 95, ex 6403 59 99, ex 6403 91 11, ex 6403 91 13, ex 6403 91 16, ex 6403 91 18, ex 6403 91 91, ex 6403 91 93, ex 6403 91 96, ex 6403 91 98, ex 6403 99 11, ex 6403 99 31, ex 6403 99 33, ex 6403 99 36, ex 6403 99 38, ex 6403 99 50, ex 6403 99 91, ex 6403 99 93, ex 6403 99 96, ex 6403 99 98, ex 6405 10 00, ex 6405 90 10 and ex 6405 90 90.

The description is likely to be footwear comprising traditional safety footwear worn in factories, but can also include hiking boots, Wellington boots and other types of shoes with a hardened toe cap. As the Chinese mainland is still not deemed by the EU to be a market economy country, Brazil is planned to be used as the market economy country for the purposes of establishing normal value in respect of the mainland. In view of the apparent large number of parties, the Commission may decide to apply sampling.

All interested parties should request a questionnaire or other claim forms no later than 10 July 2005. They must present their views and submit questionnaire responses by 9 August 2005, unless otherwise specified. Should any party wish to comment on the appropriateness of Brazil as a market economy third country, they should do so by 10 July 2005. Duly substantiated claims for market economy status and/or for individual treatment must reach the Commission by 15 July 2005.

As regards the envisaged sampling for exporters/producers in the Chinese mainland, and importers, the notice requests all such parties to submit information, as specified in the notice of initiation, by 15 July 2005. Such information includes: contact details; details on turnover; whether an individual margin will be claimed (in the case of exporters/producers); activities of their company and related companies regarding the product concerned; number of employees (in the case of importers); any other relevant information; and an indication as to whether sampling would be agreed to which would imply replying to a questionnaire and accepting an on-the-spot investigation of the response. All other information relevant for the selection of the sample must reach the Commission by 21 July 2005. The questionnaire replies from sampled parties must reach the Commission within 37 days from the date of the notification of their inclusion in the sample. The investigation will be concluded within 15 months from the date of initiation (i.e., from 25 June 2005). Provisional measures may be imposed no later than 9 months from the date of initiation. For a copy of the notice of initiation, traders should click on the following link:
http://europa.eu.int/eur-lex/lex/LexUriServ/site/en/oj/2005/c_159/c_15920050630en00070014.pdf

The other case, initiation of which is imminent, concerns leather shoes from China and Vietnam. The description is likely to include footwear with uppers of leather in three categories: unisex shoes, men's footwear and women's footwear. The general CN code for the product concerned is expected to fall within 6403 20 00, ex 6405 1000, and about 30 "ex" CN codes under CN 6403. Official initiation is expected soon, most likely before the end of July.

Against the background of anti-dumping investigations whether begun, or expected, against imports of Chinese footwear, Hong Kong traders might be interested to know about the advantages of cooperating with the European Commission, and the context of claims for so-called market economy treatment or status (MES), or individual treatment (IT). Also, the issue of price undertakings, which may be contemplated as a solution to avoid duties, will be touched upon briefly below.

Any company wishing to maximise its chances to have the lowest rate of duty possible in an anti-dumping investigation will have to consider cooperating with the Commission. However, in mainland China, which has not been recognised by the EU as being a market economy country, this is only the first step. In order to obtain a lower rate of duty, cooperating Chinese exporting producers will also have to demonstrate to the Commission that they are operating under market economy conditions. If the Commission is satisfied that this is the case, it will grant the company MES.

The Commission will determine the dumping margin of companies that have been granted MES by comparing these companies' domestic sales and export sales to the Community. Companies which are not granted MES can claim IT. The MES and IT claims are submitted at the same time. If the MES is refused, the Commission will consider the IT claim. A company will be granted IT if it can demonstrate that it operates independently from the State. For companies which are granted IT, the Commission calculates the dumping margin on the basis of a comparison of their export sales to the Community and the domestic sales of a company located in a so-called "analogue" country. In practice, the prices on the domestic market of the analogue country are usually significantly higher than Chinese prices, which results in high dumping margins.

Cooperating exporting producers which are not granted MES or IT are all applied the same rate, which is generally based on a comparison between the weighted average normal value established for the analogue country and the weighted average of the export price of all these cooperating exporting producers. However, the Commission has considerable discretion as to methodology when the duty is not calculated on the basis of the data of a specific company. Non-cooperating producers are applied the residual rate, which is generally higher than the rates of cooperating companies.

Once it becomes clear that the investigation will lead to the imposition of duties, the companies concerned might want to consider price undertakings in order to avoid the imposition of such duties against their exports. Undertakings are a form of anti-dumping measure where an exporting producer undertakes to increase its export prices of the product concerned to the Community to non-dumped or non-injurious levels.

Undertakings are negotiated with the Commission late in the anti-dumping investigation, when the duty rates have been calculated on the basis of the cooperating exporting producers' dumping or injury margins. It can be negotiated with respect to both provisional and definitive duties. Undertakings can also be negotiated after the imposition of the definitive duties.

The acceptance by the Commission of an undertaking leads to the non-application of provisional or definitive anti-dumping duties to the imports of the product concerned manufactured by the company benefiting from the undertaking. The Commission enjoys wide discretion in accepting or rejecting undertakings offered by exporting producers.

An undertaking will only be accepted if the Commission is satisfied that the injurious effect of the dumping will be eliminated by the undertaking and that compliance with the undertaking can adequately be monitored. As a general rule, the Commission will not accept undertakings from exporters which did not cooperate or did not sufficiently cooperate in the investigation, or which did not produce or export the product concerned during the period of investigation.

The content of undertakings is rather detailed and the Commission imposes stringent conditions, in particular with respect to the scope of the undertaking and the reporting obligations of the companies concerned. Regarding mainland China, the Commission will refuse undertakings to companies which were not granted MES or IT. The Commission's policy is to accept either pure price undertakings or price undertakings up to an annual volume threshold (quantities imported in excess of the annual volume threshold are subject to the anti-dumping duty).

In light of the above, price undertakings would only be an option for companies which cooperated in the anti-dumping investigation and for which the Commission has found dumping. Each company will have to assess whether a price undertaking is a better solution than paying the duties. Indeed, in certain cases, especially where the prices of raw materials fluctuate significantly, a minimum price may not be an appropriate solution. Companies which did not cooperate will be applied the residual rate of duty with no possibility to request an undertaking. Companies which are found not to dump will of course have no interest in requesting a price undertaking.