COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 23.10.1998 
COM(1998) 573 final 
Proposal for a 
COUNCIL REGULATION (EC) 
amending Regulation (EC) No 1567/97 concerning a definitive 
anti-dumping duty on imports of leather handbags originating 
in the People's Republic of China 
(presented by the Commission) 

EXPLANATORY MEMORANDUM 
1. Attached is a proposal for a Council Regulation amending Regulation (EC) 
No 1567/97 concerning a definitive anti-dumping duty on imports of leather 
handbags originating in the People's Republic of China. 
2. The investigation has shown in particular that individual duties should be 
instituted for a number of companies that were found to be eligible for 
individual treatment. 
Proposal for a 
COUNCIL REGULATION (EC) 
amending Regulation (EC) No 1567/97 concerning a definitive 
anti-dumping duty on imports of leather handbags originating 
in the People's Republic of China 
THE COUNCIL OF THE EUROPEAN UNION, 
Having regard to the Treaty establishing the European Community, 
Having regard to Council Regulation (EC) No 384/96 of 22 December 1995 on 
protection against dumped imports from countries not members of the 
European Community1, as last amended by Regulation (EC) No 905/982, and in particular 
Article 11(3) thereof, 
Having regard to the proposal submitted by the Commission after consulting the 
Advisory Committee, 
Whereas: 
I. PREVIOUS PROCEDURE 
(1) By Regulation (EC) No 1567/973, the Council imposed a definitive 
anti-dumping duty on imports of leather handbags, falling within 
CN code 4202 21 00, originating in the People's Republic of China. 
The measures consist of an ad valorem anti-dumping duty of 38% applicable to 
all exporters except for the companies Jane Shilton (Pacific) Ltd. (0.0%) and 
Picard International Ltd. (7.7%). 
II. REVIEW 
(2) On 13 September 1997, the Commission published a notice in the 
Official Journal of the European Communities*, inviting Chinese exporters of 
leather handbags to submit information in order to establish whether there was 
sufficient evidence warranting the initiation of an interim review of Regulation 
(EC) No 1567/97 limited to the issue of individual treatment of exporters. On the 
basis of the information received following the publication of that notice, the 
Commission considered that there were sufficient grounds warranting, 
exceptionally, the initiation of an early interim review of the existing measures 
limited to the aspect of individual treatment. 
1 OJ L 56, 6.3.1996, p. 1. 
2 OJL 128, 30.4.1998, p. 18. 
3 OJL208, 2.8.1997, p. 31. 
4 OJC 278, 13.9.1997, p. 4. 
(3) Consequently, by a notice published in the Official Journal of 
the European Communities* the Commission, after consulting the 
Advisory Committee and in accordance with Article 11(3) of Regulation (EC) 
No 384/96 (hereinafter referred to as the 'Basic Regulation'), initiated a review of 
the anti-dumping measures in force and commenced an investigation. The review 
was limited to the aspect of whether the cooperating exporters qualified for 
individual treatment in respect of their export price, in which case individual 
dumping and injury margins could be established for these exporters. 
(4) The Commission officially advised the authorities of the exporting country. 
Furthermore, it gave the parties directly concerned the opportunity to make their 
views known in writing and to request a hearing. 
(5) The Commission sent questionnaires to the parties known to be concerned and 
received detailed information from the following companies with respect to 
exports to the Community of leather handbags produced by themselves or by 
companies related to them in the People's Republic of China: 
The Well Leatherware Manufactory Limited, Hong Kong*; 
The IP Handbag Connections Limited, Hong Kong* (in respect of 
IP Handbag Industrial Ltd.); 
Lucci Creation Limited, Hong Kong* ; 
South Sea Leatherwares Limited, Hong Kong* (in respect of 
Shundi South Sea Leather Handbag Factory Ltd. and Nam Chow Leather 
Products Co. Ltd.); 
Colleen Handbags Manufacturer Limited, Hong Kong* (in respect of 
Shenzhen Colleen Handbag Co. Ltd.); 
Crownwick Enterprises Limited, Hong Kong (in respect of Shenzhen 
Crownwick Leatherwares Co. Ltd.); 
C-Duck Leather Goods Company Limited, the People's Republic of China; 
Lai Wah Industries Limited, Hong Kong*; 
W.K. Maxy Industries Limited, Hong Kong* (in respect of 
W.K. Maxy Industries Ltd. and W.K. Maxy Leather Goods Industries 
Zhongshan Co. Ltd.); 
Wideland Trading Company, Hong Kong*; 
Sitoy (H.K.) Handbag Fty. Limited, Hong Kong* (in respect of Dongguan 
Sitoy Leather Products Factory Ltd.); 
Superior Leather Limited, Hong Kong (in respect of Ever Trust Leather 
Products Shenzhen Co. Ltd.); 
5 OJC 378, 13.12.1997, p. 8. 
C&S Company Limited, Kyongki-Do, South Korea (in respect of Kunshan 
C&S Leather Products Co. Ltd.); 
Taiwan Yamani Inc., Taipei, Taiwan (in respect of Yamani Continental Inc.). 
(6) The Commission sought and verified all information it deemed necessary for 
purposes of its investigation and carried out on-the-spot verifications at the 
premises of the companies indicated in recital 5 with an asterisk. 
(7) In addition, the following importers, located in the Community, cooperated in the 
investigation and their replies were verified on the spot: 
Plastimoda S.p.A., Italy, 
Medici Grimm KG, Germany. 
(8) Since the scope of the investigation was limited to the issue of individual 
treatment, and in order to enable the Commission to expedite its investigation, it 
was considered appropriate, exceptionally, to use for the review the same 
investigation period as that for the initial investigation, that is 1 April 1995 to 
31 March 1996 (hereinafter referred to as 'the investigation period') so as to 
compare export price and normal value within the same time period (as required 
by Article 2(10) of the Basic Regulation). 
III. PRODUCT UNDER CONSIDERATION 
(9) The product under consideration is the same as that described in Article 1 of 
Regulation (EC) No 1567/97, that is handbags with outer surface of leather, 
of composition leather or patent leather, whether or not with a shoulder strap, 
including those without handle, designed primarily to contain small objects 
for personal use such as keys, purses, make-up and cigarettes, regardless of 
their size and form and currently classifiable under CN code 4202 21 00 
(hereinafter referred to as 'leather handbags'). 
In this respect, it should be clarified that so-called backpacks and shopping bags 
are considered to be 'handbags' and thus covered by the investigation (and by the 
measures imposed) if they fit the aforesaid description, regardless of the particular 
size and form these products may have. So-called belt-bags, that is bags which are 
not designed to be carried by hand and/or on shoulders, are not covered by 
the investigation. 
IV. DUMPING 
1. Normal value 
(10) Since the investigation is limited to individual treatment, that is an issue 
concerning the determination of an individual dumping margin on the basis of a 
comparison of the exporter's individual export prices with the normal value 
established in the analogue country, the normal value as established in the initial 
investigation in Indonesia - selected as analogue country in accordance with 
Article 2(7) of the Basic Regulation - has been retained. 
This was considered appropriate, even more so as the investigation period of the 
review coincides with that of the initial investigation, that is to say the export 
prices and normal value compared were effectively established for the same time 
period, as required by Article 2(10) of the Basic Regulation. 
2. Export price 
(a) Individual treatment 
(11) All exporters cooperating in the investigation requested individual treatment 
pursuant to Article 9(5) of the Basic Regulation. 
Consequently, it was verified whether those companies sufficiently demonstrated 
that they enjoyed a degree of legal and factual independence from the authorities 
in the People's Republic of China, comparable to that which would prevail in a 
market economy country, so as to ensure that, if those companies were to be 
granted individual treatment, no genuine risk would ensue that exports from 
companies subject to a higher anti-dumping duty rate would be channelled 
through them. To this end, the Commission addressed detailed questions to those 
companies regarding ownership, management and control of production and 
commercial policies. 
(12) The companies which submitted questionnaire responses in the present 
investigation were incorporated in the Hong Kong Special Administrative Region 
(which is not part of the customs territory of the People's Republic of China) or 
outside the People's Republic of China but exported to the Community leather 
handbags manufactured at operations in the People's Republic of China 
controlled by them. Those operations were either entities without a legal identity 
of their own, producing handbags on the basis of so-called 'processing with 
foreign materials' agreements, or legal entities in their own right under 
Chinese law, structured as so-called 'Sino-foreign cooperative joint ventures' or 
'wholly-owned foreign enterprises'. 
(13) It was found that some of the exporters were subject to a restriction in the 
People's Republic of China concerning the proportion of the output which may be 
sold on the Chinese domestic market. However, that restriction, which appeared 
not to be strictly enforced by the Chinese authorities, had to be assessed in the 
concrete economic context within which each of these companies were operating 
in the People's Republic of China, in order to appraise whether the authorities in 
that country would have sufficient leverage to induce these companies into 
channelling exports of other Chinese manufacturers subject to a higher 
anti-dumping duty rate. This leverage hinges on the level of investment at risk in 
the People's Republic of China relative to turnover. The level of investment in 
turn mainly depends on the characteristics of the manufacturing process used for 
the products concerned. 
In this respect, it should be pointed out that the manufacturing of leather handbags 
is a particularly labour-intensive and hardly automated industry. The value of the 
assets deployed at the manufacturing facilities in the People's Republic of China 
was found to be very small, particularly when compared with the turnover 
generated. The limited machinery used consists of light and relatively 
conventional equipment, such as sewing and stitching machines, which in many 
cases had moreover been fully depreciated. 
In the light of these findings, it is considered that the authorities in the People's 
Republic of China would not have sufficient leverage to effectively influence the 
commercial behaviour of the exporters concerned, considering also that the costs 
and procedures involved to close down the manufacturing operations are very 
limited. Consequently, it was concluded that this restriction is not an obstacle to 
granting individual treatment since it does not create a genuine risk of 
circumvention via possible channelling (see recital 11). 
(14) In the course of the present investigation an exporter came forward which had 
cooperated in the initial investigation and was granted individual treatment and a 
zero duty rate in Regulation (EC) No 1567/97, as it was found not to have 
dumped. It informed the Commission about a change in the structure of its 
operations which took place after the investigation period and as a result of which 
the legal entity identified as the "exporter" in Regulation (EC) No 1567/97 was 
found to have changed. Upon submitting the appropriate evidence requested by 
the Commission, it was found that the new legal entity continues to satisfy all 
requirements for individual treatment and that therefore the zero duty rate has to 
be attributed to it. 
(b) Determination of the export price 
(15) In accordance with Article 2(8) of the Basic Regulation, where exports were made 
to unrelated importers in the Community, the export prices were established on 
the basis of the prices actually paid or payable for export to the Community. 
Where exports were made to a related importer in the Community or a 
compensatory arrangement existed between the importer and the exporter, 
the export price was established, in accordance with Article 2(9) of the 
Basic Regulation, on the basis of resale prices to the first independent buyer 
adjusted to take account of all costs incurred between importation and resale, 
including customs duties and a 5% profit on turnover, that is the average profit of 
the unrelated importers which cooperated in the initial investigation. 
3. Comparison 
(16) In accordance with Article 2(10) and (11) of the Basic Regulation, the weighted 
average normal value was compared with the weighted average export price at 
FOB level In order to make a fair comparison between normal value and export 
price, adjustments claimed made for differences in physical characteristics, import 
charges, level of trade, transport, insurance, handling charges, packing costs, 
credit, discounts and warranty were granted, provided it could be demonstrated 
that they affected prices and price comparability. 
(17) A number of exporters claimed, pursuant to Article 2(10)(a) of the 
Basic Regulation, that an adjustment should be made to take into account 
differences in physical characteristics between the leather handbags produced in 
Indonesia, on the basis of which normal value was computed, and the exported 
leather handbags produced in the People's Republic of China, used to calculate 
export prices. Where it was found that the outer surface of leather handbags 
exported from the People's Republic of China to the Community was of a type of 
leather of a significantly lower quality (split or suede leather and patchwork 
leather) than that of the handbags used to establish normal value in Indonesia 
(genuine leather), the normal value was adjusted to reflect the impact of such 
difference on the market value of the leather handbags. 
4. Dumping margins 
(18) The dumping margins expressed as a percentage of the CIF Community frontier 
value of the imports were found to be as follows with respect to the exporters 
eligible for individual treatment: 
- C-Duck Leather Goods Company Ltd.: 0.0%; 
- Wideland Trading Company: 0.0%; 
- Lucci Creation Ltd.: 0.0%; 
- Kunshan C&S Leather Products Co. Ltd. : 0.0%; 
- Yamani Continental Inc.: 0.0%; 
- IP Handbag Industrial Ltd. : 0.0%; 
- W.K. Maxy Industries Ltd. and W.K. Maxy Leather Goods Industries 
Zhongshan Co. Ltd. : 0.0%; 
- Lai Wah Industries Ltd. : 3.1 %; 
- Shenzhen Colleen Handbag Co. Ltd.: 4.2%; 
- The Well Leatherware Manufactory Ltd.: 6.5%; 
- Shenzhen Crownwick Leatherwares Co. Ltd.: 12.4%; 
- Shundi South Sea Leather Handbag Factory Ltd and Nam Chow Leather 
Products Co. Ltd.: 39.0%; 
- Ever Trust Leather Products Shenzhen Co. Ltd.: 45.2%; 
- Dongguan Sitoy Leather Products Factory Ltd.: 58.3%. 
It should be noted that the names of some of the companies above differ from 
the ones listed in recital 5 in those instances where the manufacturing of the 
product concerned takes place at companies in the People's Republic of China 
which have their own legal identity according to Chinese law and which 
must therefore be considered to be the exporter for purposes of the 
present investigation. 
V. AMENDMENT OF THE MEASURES BEING REVIEWED 
(19) In accordance with the lesser-duty-rule as set out in Article 9(4) of the 
Basic Regulation, it was also examined whether, for each company eligible for 
individual treatment, the amount of the duty based on the injury margin would be 
lower than the duty based on the dumping margin. The methodology used to 
calculate injury margins was the same as that in the initial investigation. In all 
cases the injury margins were found to be higher than the dumping margins and 
the duty rates should therefore be based on the dumping margins found. 
It was submitted that the duty rates established in the present investigation should 
take retroactive effect as from the date of entry into force of Regulation (EC) 
No 1567/97. This argument could not be accepted in view of the prospective 
nature of measures adopted purusant to review investigations and also as this 
would result, for those exporters which receive as a result of the present 
investigation a lower duty rate than the residual duty, in an unwarranted bonus for 
their non-cooperation in the initial investigation. 
(20) Given the relatively low volume of exports of the companies which should 
receive individual treatment, as compared with the total volume of exports 
from the People's Republic of China of the product concerned to the Community, 
it was concluded that a change of the country-wide duty rate specified in 
Regulation (EC) No 1567/97 was unnecessary. 
(21) The interested parties were informed of the facts and considerations on the basis 
of which it was intended to amend Regulation (EC) No 1567/97, and were given 
an opportunity to comment. This comments were taken into account and, where 
appropriate, the findings were modified accordingly. 
(22) Given the above, the Council concludes that Regulation (EC) No 1567/97 should 
be amended. 
(23) This review does not affect the date on which Regulation (EC) No 1567/97 will 
expire, pursuant to Article 11(2) of the Basic Regulation, 
HAS ADOPTED THIS REGULATION: 
Article 1 
Article 1(3) of Regulation (EC) No 1567/97 is hereby amended as follows: 
1. In the first indent, the words 'Jane Shilton (Pacific) Ltd.' are replaced by 
'Zengcheng Jane Shilton Leather Goods Company Ltd.'. 
2. The following indents are added: 
"- C-Duck Leather Goods Company Ltd.: 0.0% (Taric additional code: 8961); 
Wideland Trading Company: 0.0% (Taric additional code: 8961); 
Lucci Creation Ltd.: 0.0% (Taric additional code: 8961 ); 
Kunshan C&S Leather Products Co. Ltd.: 0.0% (Taric additional code: 8961); 
9 
Yamani Continental Inc.: 0.0% (Taric additional code: 8961); 
- IP Handbag Industrial Ltd.: 0.0% (Taric additional code: 8961 ); 
- W.K. Maxy Industries Ltd. and W.K. Maxy Leather Goods Industries 
Zhongshan Co. Ltd.: 0.0% (Taric additional code: 8961); 
Lai Wah Industries Ltd. : 3.1 % (Taric additional code: 8310); 
Shenzhen Colleen Handbag Co. Ltd: 4.2% (Taric additional code: 8311); 
The Well Leatherware Manufactory Ltd.: 6.5% (Taric additional code: 8451); 
Shenzhen Crownwick Leatherwares Co. Ltd.: 12.4% (Taric additional 
code: 8452); 
Shundi South Sea Leather Handbag Factory Ltd. and Nam Chow Leather 
Products Co. Ltd.: 39.0% (Taric additional code: 8453); 
Ever Trust Leather Products Shenzhen Co. Ltd.: 45.2% (Taric additional 
code: 8454); 
Dongguan Sitoy Leather Products Factory Ltd.: 58.3% (Taric additional 
code: 8455)." 
Article 2 
This Regulation shall enter into force on the day following that of its publication in the 
Official Journal of the European Communities. 
This Regulation shall be binding in its entirety and directly applicable in all 
Member States. 
Done at Brussels, For the Council 
The President 
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ISSN 0254-1475 
COM(98) 573 final 
DOCUMENTS 
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Catalogue number : CB-CO-98-577-EN-C 
ISBN 92-78-39750-4 
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