[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 27.11.2009

COM(2009)655 final

Proposal for a

COUNCIL REGULATION

imposing a definitive anti-dumping duty on imports of certain footwear with uppers of leather originating in Vietnam and originating in the People's Republic of China, as extended to imports of certain footwear with uppers of leather consigned from the Macao SAR, whether declared as originating in the Macao SAR or not, following an expiry review pursuant to Article 11(2) of Council Regulation (EC) No 384/96

EXPLANATORY MEMORANDUM

1) CONTEXT OF THE PROPOSAL |

GROUNDS FOR AND OBJECTIVES OF THE PROPOSAL This proposal concerns the application of Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community, as last amended by Council Regulation (EC) No 2117/2005 of 21 December 2005 (‘the basic Regulation’) in the proceeding concerning imports of certain footwear with uppers of leather originating in Vietnam and originating in the People's Republic of China, as extended to imports of certain footwear with uppers of leather consigned from the Macao SAR, whether declared as originating in the Macao SAR or not. |

General context This proposal is made in the context of the implementation of the basic Regulation and is the result of an investigation carried out in line with the substantive and procedural requirements laid out in the basic Regulation. |

Existing provisions in the area of the proposal Council Regulation (EC) No 1472/2006[1] of 5 October 2006 imposing a definitive anti-dumping duty and collecting definitely the provisional duty imposed on imports of certain footwear with uppers of leather originating in the People's Republic of China and Vietnam. Council Regulation (EC) No 388/2008[2] of 29 April 2008 extending the definitive anti-dumping measures imposed by Regulation (EC) No 1472/2006 on imports of certain footwear with uppers of leather originating in the People’s Republic of China to imports of the same product consigned from the Macao SAR, whether declared as originating in the Macao SAR or not. |

Consistency with other policies and objectives of the Union Not applicable. |

2) CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT |

CONSULTATION OF INTERESTED PARTIES |

Interested parties concerned by the proceedings have had the possibility to defend their interests during the investigation in line with the provisions of the basic Regulation. |

Collection and use of expertise |

There was no need for external expertise. |

Impact assessment This proposal is the result of the implementation of the basic Regulation. The basic Regulation does not foresee a general impact assessment but contains an exhaustive list of conditions that have to be assessed. |

3) LEGAL ELEMENTS OF THE PROPOSAL |

Summary of the proposed action The request was lodged by the European Confederation of the Footwear Industry (CEC, 'the applicant'), on behalf of producers representing a major proportion of the total Community production of the product concerned. Having determined that sufficient evidence existed for the initiation of the reviews, the Commission initiated the case on 3 October 2008[3]. The investigation showed that there is a likelihood of continuation of injury for the short/medium term, until the process of adjustment of the Community industry has been completed. The duration of the measures should therefore be limited to 15 months. It is proposed that the Council adopts the attached proposal for a Regulation, which should be published in the Official Journal of the European Union at the earliest convenience. |

Legal basis Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community, as last amended by Council Regulation (EC) No 2117/2005 and in particular article 11 (4) thereof. |

Subsidiarity principle The proposal falls under the exclusive competence of the Community. The subsidiarity principle therefore does not apply. |

Proportionality principle The proposal complies with the proportionality principle for the following reasons. |

The form of action is described in the basic Regulation and leaves no scope for national decision. |

Indication of how financial and administrative burden falling upon the Community, national governments, regional and local authorities, economic operators and citizens is minimized and proportionate to the objective of the proposal is not applicable. |

Choice of instruments |

Proposed instruments: Council Regulation. |

Other means would not be adequate because the basic Regulation does not foresee alternative options. |

4) BUDGETARY IMPLICATION |

THE PROPOSAL HAS NO IMPLICATION FOR THE COMMUNITY BUDGET. |

Proposal for a

COUNCIL REGULATION

imposing a definitive anti-dumping duty on imports of certain footwear with uppers of leather originating in Vietnam and originating in the People's Republic of China, as extended to imports of certain footwear with uppers of leather consigned from the Macao SAR, whether declared as originating in the Macao SAR or not, following an expiry review pursuant to Article 11(2) of Council Regulation (EC) No 384/96

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 Community (the 'basic Regulation') and in particular Articles 9(4) and 11(2) thereof,

Having regard to the proposal submitted by the Commission after consulting the Advisory Committee,

Whereas:

A. PROCEDURE

1. Measures in force

1. On 5 October 2006, the Council, by Regulation (EC) No 1472/2006[4] (the 'original Regulation'), imposed a definitive anti-dumping duty on imports of certain footwear with uppers of leather originating in the People's Republic of China ('PRC' or 'China') and Vietnam (the 'countries concerned'). The established duty levels were ranging from 9.7% to 16.5% in case of the PRC and 10% in case of Vietnam. Measures were imposed for a period of two years. The investigation that led to these measures will be referred to as the 'original investigation'.

2. By Regulation (EC) No 388/2008 ([5]) (the 'extending Regulation'), the Council extended the anti definitive anti-dumping duty on imports of certain footwear with uppers of leather originating in the PRC to imports consigned from the Macao Special Administrative Region ('SAR'), whether declared as originating in the Macao SAR or not. The extension followed an anti-circumvention investigation carried out pursuant to Article 13(3) of the basic Regulation.

2. Present Investigation

2.1. Request for review

3. The request was lodged by the European Confederation of the Footwear Industry (CEC, 'the applicant'), on behalf of producers representing a major proportion, in this case more than 35%, of the total Community production of certain footwear with uppers of leather.

4. In the framework of the standing test several national associations of footwear producers in EU Member States expressed their views vis-à-vis the opening of the expiry review and requested that their names be kept confidential for fear that their member companies could face retaliation from some customers. Some other parties questioned why the names and the positions of the opposing and supporting associations have been kept confidential. The Commission asked the associations explicitly again whether they could agree to a disclosure of their name and position. Four associations agreed to disclose their names and positions, whereas the others opposed, referring once more to their fear for retaliation against their member companies. The Commission took the view that there indeed was a significant possibility of retaliation in the form of lost sales for these producers and accepted that names should not be disclosed.

5. Some parties argued that the Commission should not have initiated an expiry review investigation as article 3 of the original Regulation states that it shall be in force for a period of 2 years as of its entry into force. Recital (326) of the original Regulation, however, explains that, notwithstanding the shorter duration of the measures, the rules of Article 11 of the basic Regulation will apply mutatis mutandis. In line with this recital, the text of the notice of impending expiry[6] stated that the measures would expire on 7 October 2008 unless a review was initiated in accordance with the rules of article 11(2) of the basic Regulation. Since an expiry review of the anti-dumping measures has indeed been initiated, the anti-dumping measures remain in force pending this review.

6. The request for the expiry review was based on the grounds that the expiry of the measures would be likely to result in a continuation or recurrence of dumping and injury to the Community industry.

2.2. Initiation

7. Having determined, after consulting the Advisory Committee, that sufficient evidence existed for the initiation of an expiry review, the Commission announced, by a notice of initiation published in the Official Journal of the European Union[7] on 3 October 2008 (the 'Notice of initiation'), the initiation of an expiry review pursuant to Article 11(2) of the basic Regulation.

8. The investigation of likelihood of continuation or recurrence of dumping and injury covered the period from 1 July 2007 to 30 June 2008 ('review investigation period' or 'RIP'). The examination of the trends relevant for the assessment of a likelihood of a continuation or recurrence of injury covered the period from 1 January 2006 up to the end of the RIP (the 'period considered'). Reference was also made where appropriate to the year 2005 and to the investigation period used in the original investigation which covered the period from 01 April 2004 to 31 March 2005 ('original investigation period' or 'OIP').

3. Parties concerned by this investigation

9. The Commission officially advised the applicant, the Community producers mentioned in the request, any other known Community producers, known importers and their associations, known retailers/distributors and their associations, known consumer organisations, the known exporting producers in the countries concerned as well as their associations and the authorities of the countries concerned of the initiation of the expiry review.

10. Interested parties were given an opportunity to make their views known in writing and to request a hearing within the time limits set in the Notice of initiation.

11. All interested parties who so requested and showed that there were particular reasons why they should be heard, were granted a hearing.

4. Sampling

12. In view of the large number of exporting producers in the countries concerned, of Community producers and of importers involved in the investigation, the application of sampling was envisaged in the Notice of initiation in accordance with Article 17 of the basic Regulation.

13. In order to enable the Commission to decide whether sampling would be necessary and, if so, to select a sample, exporting producers and representatives acting on their behalf, Community producers and importers were requested to make themselves known and to provide information as specified in the Notice of initiation.

4.1. Sampling for exporting producers in the People's Republic of China and Vietnam

4.1.1. The People's Republic of China

14. A total of 58 companies or groups of related companies ('groups') in the PRC came forward and provided the requested information within the given deadline. These 58 companies or groups produced and/or exported the product concerned to the Community market during the investigation period and expressed a wish to be included in the sample. They were regarded as co-operating companies and were considered for inclusion in the sample. The level of cooperation from the PRC, i.e. the percentage of exports to the EU by the Chinese cooperating companies as compared to all Chinese exports to the EU, was around 22 %.

15. The sample was selected in agreement with the Chinese authorities, on the basis of export volumes and geographical spread of the co-operating companies. The seven sampled companies represented around 56% of the exports to the EU of the 58 co-operating companies, and 13 % of the total exports to the EU from the PRC. They all replied to the questionnaires within the given deadlines.

16. Certain non-sampled Chinese exporters claimed that since they had not been selected to be in the sample, they were not in a position to defend their interests. However, it is part of the principle of sampling that a representative number of exporting producers is selected and that the results of the assessment of this sample can be regarded as representative also for other co-operating exporters. It is further noted that all interested parties were able to participate in the investigation and to submit their views. This argument was therefore rejected.

4.1.2. Vietnam

17. A total of 51 companies or groups in Vietnam came forward and provided the requested information within the given deadline. These 51 companies or groups produced and/or exported the product concerned to the Community market during the investigation period and expressed a wish to be included in the sample. They were regarded as co-operating companies and were considered for inclusion in the sample. The level of cooperation from Vietnam, i.e. the percentage of exports to the EU by the Vietnamese cooperating companies as compared to all Vietnamese exports to the EU, was around 82 %.

18. The sample was selected in agreement with the Vietnamese authorities, on the basis of export volumes. The three sampled companies represented around 27% of the EU exports of the 51 co-operating companies, and 22 % of the total EU exports from Vietnam. They all replied to the questionnaires within the given deadlines.

4.2. Sampling of Community producers

19. The procedure to obtain the information necessary for the selection of the sample of Community producers was as follows. The CEC acting on behalf of all complainants confirmed that all complaining producers were ready to cooperate and participate in the sampling exercise. Given the detailed and extensive information available on file (emanating i.a. from the complaint, standing exercise, and CEC submissions), it was not necessary to send a sampling form to individual complaining producers. In addition, the notice of initiation invited any producer to make themselves known should the wish to cooperate in the proceeding. In addition to the complainants, a further five companies made themselves known after initiation and requested to be included in the sampling exercise. All of these were sent sample forms requesting information already at hand for the complainants. Only two of the five companies supplied sample returns. These two companies were however not retained as they were excluded from the definition of the Community industry (see recital (198)).

20. Community production of product concerned is largely concentrated in three Member States holding around 2/3 of all production. The rest is spread over the remaining Member States. As seen in recitals (202) and onwards, the Community producers business models are characterised by differences mainly in product/quality range, distribution channels and whether clustering of activities and subcontracting parts of the manufacturing process within or outside the Community takes place.

21. On the basis of the information obtained, the Commission selected a sample based on the largest representative volumes of production and sales within the Community which could be investigated within the time available. However as detailed above, this is not an entirely homogenous industry and in order to assess representativeness of the selected companies, the producers' geographical spread amongst Member States[8], as well as the segment to which their products belong were also taken into consideration. As a result 8 Companies operating in four member States were selected. The selected companies also represent all the major business models present in the Community, in terms of how the product is manufactured, of how the product is distributed, and of product specialisation. Regarding product specialisation, the companies selected included production across all major price segments (low range, mid range, high range) as well as across all gender and age segments (ladies, men, unisex, children footwear). Regarding product distribution, the companies selected included all major levels of distribution (to wholesalers, to retailers, as well as direct retailing). Regarding production, the companies selected included full in-house manufacturing in all key stages of the production process as well as companies which had outsourced parts of such manufacturing process (both in and outside the Community).

22. The 8 producers selected in the sample were thus considered to be representative of the overall producers in the Community, and represented 8.2% of the production of the complaining Community producers and 3.1% of the total Community production. Pursuant to art. 17(2) of the basic Regulation, CEC was consulted on the selection of the sample and did not raise any objections.

23. The investigation revealed that one of the sampled Community producers progressively discontinued production in the Community during the RIP, taking its full manufacturing activity outside the Community. It should be noted that the weight of the company was not such as to have any significant impact, at least from a quantitative point of view, on the situation of the sampled companies as a whole—including their representativeness. The quantitative findings on injury would not have been materially different should this company have been excluded. In this context, and given that (i) it had produced in the Community during the RIP, and that (ii) it subcontracts large part of the production , a business model which, according to many parties, is important in the Community, it was decided not to formally exclude this company from the sample. This further ensures that, qualitatively, the sample represents as adequately as possible the reality of the sector. Furthermore, considering that an expiry review requires an analysis of continuation/recurrence of injury, this may help in better predicting how the situation on the Community market could develop if the measures were not continued. However, evidently only data pertaining to its activity as Community producer were used.

24. The Community institutions have considered whether, given that the Community production and sales of this company during the RIP were found to be lower than initially reported at sample stage, the Community industry's production and sales as a whole should have been reduced similarly—i.e., the resulting impact on the sample should be transposed to the entire population. However, it was found that the error appears to have been made in good faith by this Company who mistakenly counted outsourcing to a country in the Community vicinity as Community production. In that light, firstly, it is noted that the sample is used primarily to assess those injury indicators which cannot be reasonably obtained for the Community industry as a whole. Production and sales have been obtained at an aggregated level for the Community industry, and therefore the argument is not relevant. In addition, the information on file, including that compiled in parallel via the additional analysis of national associations performed in this investigation, does not indicate any need for such an adjustment. Finally, for argument's sake, if the full production and sales figures for the Community industry in the RIP were reduced to transpose the sample's lower figures, this would neither affect the representativeness of the sample nor the general conclusions regarding injury.

25. Various interested parties claimed a breach of the Article 17 of the basic Regulation, alleging that the sample of Community producers was not representative in terms of the percentage of production covered, in terms of production range, sales prices, ratio between production and sales, geographical spread as well as profitability and performance. It was also held that the sample did not take into account the large number of producers that have outsourced production to third countries.

26. These allegations were carefully analysed and in view also of the complexity of this case, additional questionnaires were sent, processed and verified on-spot not only for individual companies, but also for national associations. In this context, the number of companies selected in the sample had to be limited to what could be reasonably investigated within the time available, i.e. 8 companies.

27. Furthermore, given that the Community industry is highly fragmented in this case, it is unavoidable that the companies in the sample cover a relatively small portion of the overall Community production. This fragmentation, together with the fact that the larger producers were selected to be in the sample, implies that further increasing the number of companies would in any event not have had a significant impact on the proportion of the sample as compared to the overall Community production.

28. As explained above in recital (21), the Commission took geographical spread into account when selecting the sample. In is underlined that, by nature, a sample does not have to reflect the exact geographical spread (nor the exact distribution or breakdown of any other criterion) of the entire population in order to be representative. It suffices that, as is the case for the current sample, which includes four Member states, it reflects the relevant proportions of the major manufacturing countries involved. Any other approach would have been administratively impracticable, particularly if several different criteria have to be taken into account in order to ensure representativeness. In fact, this claim would imply in fine that a sample would be sufficiently representative only if it contained the full population. The investigation has thus underlined that the sample which covers four Member states, including the three with the by far biggest production, is largely representative of the Community production as a whole, in particular when taking into account production that is based on tolling arrangements and therefore should be accounted for in the Member state of the company ordering the tolling service.

29. The sampled companies also included a cross-section of product ranges which reflected the relevant orders of magnitude of Community production. In addition, the product ranges involved correspond to those of Chinese and Vietnamese exports.

30. Concerning sales prices, it was also argued that the average sales prices of the sample were not representative in relation to the sales prices indicated in the review request. In this context it should be noted however that, contrary to this claim, the investigation has shown that average sales prices of the sample are consistent with the prices reported in the request. In any event, even if this would not have been the case, the average sales prices of a sample would not have to be exactly the same as those reported in the request, as long as they are found to reflect the sales prices of the population of producers as a whole.

31. Regarding representativeness in terms of ratio between production and sales, it is recalled that in the sector as a whole production is typically made to order and strongly reflects fashion trends. Therefore, stock is not a very telling indicator, and production closely approximates sales. This has been confirmed at complaint stage and also during the investigation for sampled companies and for the Community industry as a whole.

32. In addition to the considerations as outlined above, it is recalled that in any event Article 17 of the basic Regulation sets out that investigations may be limited to samples which are either statistically valid, or which constitute the largest representative volume of production, sales, or exports which can be reasonably investigated. It is clear from the wording of this provision that there is no quantitative indication or threshold as to what constitutes the level of the representative volume. The only indication is that such volume may be limited to what can reasonably be investigated within the time available.

33. For the reasons explained above, the claims made by the various parties were rejected and the legal validity of the sample is hereby confirmed since the sample is representative and was selected in full compliance with Article 17 of the basic Regulation.

4.3. Sampling of Community importers

34. Based on the information available, 139 importers were contacted. 22 unrelated importers replied to the sampling form, out of which 21 agreed to be included in the sample. According to the data they submitted, these 21 importers accounted for 12 % of imports of the product under review from the PRC and 40% of those imports from Vietnam (in the RIP).

35. The five largest importers (Clarks, Puma, Adidas, Nike and Timberland) accounted for about 18% of the imports concerned as they all reported significant imports from both countries. It was therefore considered that a sample composed of these five companies would be representative within the meaning of Article 17(1) of the basic Regulation, i.e. in terms of volume of imports.

36. However, in order to better reflect the geographical spread of importers and the differences in the types of footwear types imported, three other importers were selected in addition. In this respect, from the sampling returns it appeared that many of the importers that replied operated on a much smaller scale in terms of volume and they imported less known/fashionable brand shoes or higher value shoes. The business model and traded product segments of these smaller importers appeared to be distinct from the largest importers and these smaller importers could altogether account for an important share of the imports concerned. It was therefore considered important to have these importers also represented, as these companies' economic reality might be different from those of the large importers mentioned in recital (35) above.

37. On these grounds, a sample of eight importers including the five largest importers and three smaller importers was selected. They represent around 10 % of imports from the PRC and around 34 % of imports from Vietnam.

38. All co-operating importers which had indicated their willingness to cooperate were given an opportunity to comment on the selection of the sample. Questionnaires were sent for completion to the sampled companies. Seven of the sampled importers replied within the given deadlines. In view of its non-cooperation, the eighth sampled importer eventually had to be excluded from the sample.

5. Verification of information received

39. The Commission sought and verified all the information it deemed necessary for the purpose of the determination of the continuation or likelihood of recurrence of dumping and injury and the Community interest. Information submitted by the following companies was verified on-spot:

5.1. Exporting producers in the People's Republic of China

- Yue Yuen Industrial (Holdings) Ltd., Hong Kong

Production company:

Zhongshan Pou Yuen Manufactory, Guandong Province

Trading companies:

Idea Co. Ltd, Macao

The Look Co. Ltd, Macao

Gold Plenty Co. Ltd, Macao

- Guangzhou Panyu Pegasus Footwear Co. Ltd., Guangdong Province

- HuaJian Industrial (Holding) Co. Ltd., Hong Kong and its production company Dongguan HuaBao Shoes Co. Ltd, Guandong Province

- Zhejiang Aokang Shoes Co. Ltd., Zhejiang Province

- Foshan City Nanhai Golden Step Industrial Co. Ltd., Guangdong Province

- Jianle Footwear Industrial Co. Ltd, Fujian Province

- General Footwear/Gentfort Shoes Co.Ltd, Guangdong Province

5.2. Exporting producers in Vietnam

- Pou Yuen Industrial Holdings Limited, Hong Kong

Production companies:

Pouyuen Vietnam Company Limited, Ho Chi Minh City

Pou Sung Vietnam Company Limited, Dong Nai Province

Pou Chen Vietnam Enterprise Company Limited, Dong Nai Province

Trading companies:

Betsey Trading Limited

Sinnamon Trading Limited

Sky High Trading Limited

Fitbest Enterprises Limited

- Golden Star Co. Ltd, Haiphong City.

- Shyang Hung Cheng Industrials Co Ltd, Binh Duong Province

5.3. Community Industry Producers and national associations of producers

- Associação Portuguesa dos Industriais de Calçado, Componentes, Artigos de Pele e seus Sucedâneos (APICCAPS) (Portugal)

- Federación de Industrias del Calzado Español (FICE) Spain

- Associazione Nazionale Calzaturifici Italiani (ITALY)

- British Footwear Association LTd (Great Britain)

- Fachverband der Lederverarbeitenden Industrie (Austria)

- Fédération Française de la Chaussure (France)

- HDS Hauptverband der Deutschen Schuhindustrie e.V. (Germany)

- Polish Chamber of Shoe and Leather industry (Poland)

- Verification visits were also carried out at the premises of the 8 sampled Community producers, located in four different Member States. As was the case in the original investigation the sampled Community producers as well as other cooperating Community producers requested, on the grounds of the provisions of Article 19 of the basic Regulation that their identities be kept confidential. They claimed that the disclosure of their identity could lead to a risk of significant adverse effects. Certain complainant Community producers supply customers in the Community that also source their products from the PRC and Vietnam, thus benefiting directly from these imports. Those complainants are therefore in a sensitive position since some of their clients may have evident reasons to oppose their lodging or supporting a complaint against alleged injurious dumping. For these reasons they considered that there was a risk of retaliation by some of their clients, including the possible termination of their business relationship. The request was granted as it was sufficiently substantiated.

- The representatives of certain exporting producers as well as unrelated importers claimed that they could not properly exercise their right of defence because the identity of the complainants had not been disclosed. They argued that, in those circumstances, they could not verify that the companies included in the sample were truly representative. In the alternative, these parties held that should confidentiality nevertheless be warranted, full disclosure of the individual company figures should in such case be given.

- In this context it is recalled that the production volume of the sample, broken down by countries, was made available for inspection to all interested parties. As concerns the argument that all information but for the identity of the company should be disclosed it should be noted that such disclosure could indirectly reveal the identity of the sampled company. The usual practice of disclosure of non limited versions of the questionnaire responses was therefore maintained (i.e. containing indexed data) also in this case. In view of the foregoing it must be concluded that the right of defence of parties was adequately preserved and the claim was therefore rejected.

5.4. Unrelated importers

- Achten Beheer BV, Waalwijk, The Netherlands

- Adidas AG, Herzogenaurach, Germany

- C&J Clark’s International Limited, Street, Somerset, United Kingdom

- Footex International BV, Hazerswoude-dorp, The Netherlands

- Nike European Operations BV, Laakdal, Belgium

- Puma AG Rudolf Dassler Sport, Herzogenaurach, Germany

- Timberland Europe BV, Enschede, The Netherlands

5.5. Producers in the analogue market

- Henrich & Cia Ltda, Dois Irmãos, Brazil

- Werner Calçados Ltda, Très Coroas, Brazil

- Industria de Calçados West Coast Ltda, Ivoti, Brazil

6. Rights of parties

40. Certain parties raised objections throughout the proceeding concerning alleged impairment of their rights of defence. They claimed that, as regards the sampled Community producers, the information contained in the file open for inspection by interested parties was incomplete and not provided on time.

41. In this respect it should be underlined that a version of a party's response for inspection by interested parties (an 'open response') was provided by all the sampled companies without undue delays and in line with the time limits accorded to other parties in the investigation. When an open response is submitted to the Commission, it may however only be inserted in the open file, once possible confidentiality issues have been resolved as provided for under article 19 of the basic Regulation. It has also to be noted that the Commission has a duty to insert information in the open file in good time for parties to exercise their rights. This duty has been duly fulfilled in this case.

42. As regards the completeness of the open responses, it should be noted that it is a normal part of investigations that parties make additional submissions over time in which they provide additional information. These are added to the non-confidential file as soon as any confidentiality issues are resolved. This process, whereby the contributions made by all interested parties are progressively integrated into the body of evidence used to arrive at findings and into the non-confidential file, can not be confused with files being incomplete.

43. Given the complexity of this case, parties' access was facilitated as follows. Firstly, electronic access was afforded to interested parties, whereby they could obtain upon request a full copy of all documents on file on a CD-ROM. In addition, the electronic documents were accompanied by a clear index allowing (i) for easy access to the many documents presented in this case and (ii) for a dated record of documents on file. Furthermore, a series of notes for the file inserted into the open file responded to queries which might have an impact on the rights of defence of parties.

44. The foregoing allowed parties to have enhanced access and to make extensive comments throughout the investigation, which were then addressed by the Commission as appropriate. The claims as concerns the lack of completeness and timeliness of the open file made by the various parties must therefore be rejected.

45. One interested party also claimed that the Commission had discriminated importers and exporters by offering more favourable treatment to the complaining Community producers in the investigation. In particular it was claimed that importers and exporters, unlike producers were not afforded confidentiality. It was also claimed that the complainants were given more favourable treatment as they were not requested to submit sample forms at the initiation of the proceeding and that too much flexibility as concerned deadline and standard of responses were given to the complainant while an exporter in the same situation would have been assessed on the basis of best facts available under article 18 of the basic Regulation.

46. In this context it should be noted that the granting of confidentiality to the identity of the Community producers supporting the complaint was based on a duly motivated request in accordance with article 19 of the basic Regulation. No such request was submitted by exporters or by importers nor did any events occur or any information come to the fore in the course of the investigation suggesting that the interests of exporters or importers would be impaired as a consequence of the disclosure of their identity. Considering that the situation of the Community producers in this context was fundamentally different from that of the exporters and importers, the claim of discrimination cannot be sustained.

47. As concerns the selection of the sample, it is referred to recital (19) above. The situation for exporters and importers was quite different from that of the complaining producers, as no detailed information was on file regarding the former. Therefore, the completion of the sample form was a necessity both in order to verify the parties' willingness to cooperate but also in order to obtain the basic information needed for the selection of the sample. Thus the claim of discrimination has to be rejected.

48. As concerns the flexibility afforded to Community producers in the context of information collected through questionnaires in the scope of the investigation and the use of article 18 of the basic Regulation it should be noted that considering that the same approach was consistently used for exporters and importers as well as for Community producers, there could be no grounds for any claim of discrimination. The unsubstantiated allegation is thus rejected.

49. With regard to the choice of the analogue country, some parties submitted that short deadlines, timing and mode of transmission of the questionnaires discriminated Indian and Indonesian companies. In this respect it is noted that the sending of questionnaires to India and Indonesia could only be completed at the end of December 2008, after the relevant addresses of producers were obtained. The Commission made sure that companies in these countries were given the same time for replying as the ones in Brazil. Regarding the actual transmission of the questionnaires, the Commission used registered mail in all cases, as well as e-mail whenever possible. Therefore the above claims have to be rejected.

50. Some parties claimed that information regarding the analogue country was put on the open file with undue delays and that this constituted an impairment of their rights of defence. The Commission notes that in the present investigation, most of the first non-confidential replies to the questionnaires by companies in the analogue country were found to be deficient, and therefore new, appropriate open versions had to be requested. Once received, they were put on the open file without undue delays. In the meantime, the Commission included in the open file summary information on the companies consulted and the replies received. These claims therefore have to be rejected.

B. PRODUCT CONCERNED AND LIKE PRODUCT

1. Product concerned

51. The product concerned by this review is the same as the product defined in the original Regulation, i.e. certain footwear with uppers of leather or composition leather, excluding sports footwear, footwear involving special technology, slippers and other indoor footwear and footwear with a protective toe-cap, originating in the People's Republic of China and Vietnam ('the product concerned'), currently falling within CN Codes 6403 20 00, ex 6403 51 05, 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 05, ex 6403 59 11, ex 6403 59 31, ex 6403 59 35, ex 6403 59 39, ex 6403 59 91, ex 6403 59 95, ex 6403 59 99, ex 6403 91 05, 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 05, ex 6403 99 11, ex 6403 99 31, ex 6403 99 33, ex 6403 99 36, ex 6403 99 38, ex 6403 99 91, ex 6403 99 93, ex 6403 99 96, ex 6403 99 98 and ex 6405 10 00.

52. The definitions of Art 1(2) of the original Regulation apply in the present investigation. According to those definitions‘sports footwear’ shall mean footwear within the meaning of subheading note 1 to Chapter 64 of Annex I of Commission Regulation (EC) No 1031/2008;‘footwear involving special technology’ shall mean footwear having a CIF price per pair of not less than EUR 7.5, for use in sporting activities, with a single- or multi-layer moulded sole, not injected, manufactured from synthetic materials specially designed to absorb the impact of vertical or lateral movements and with technical features such as hermetic pads containing gas or fluid, mechanical components which absorb or neutralise impact, or materials such as low-density polymers and falling within CN codes 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 91, ex 6403 99 93, ex 6403 99 96, ex 6403 99 98,‘footwear with a protective toecap’ shall mean footwear incorporating a protective toecap with an impact resistance of at least 100 joules (1) and falling within CN codes: CN codes: ex 6403 51 05, 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 05, ex 6403 59 11, ex 6403 59 31, ex 6403 59 35, ex 6403 59 39, ex 6403 59 91, ex 6403 59 95, ex 6403 59 99, ex 6403 91 05, 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 05, ex 6403 99 11, ex 6403 99 31, ex 6403 99 33, ex 6403 99 36, ex 6403 99 38, ex 6403 99 91, ex 6403 99 93, ex 6403 99 96, ex 6403 99 98 and ex 6405 10 00;‘slippers and other indoor footwear’ shall mean such footwear falling within CN code ex 6405 10 00.

2. Like product

53. The like product subject to the present expiry review is, as defined in the original investigation, certain footwear with uppers of leather, whether produced and sold on the domestic market, in the analogue market, and/or exported to the Community from the PRC and Vietnam.

2.1. Product comparability

54. Certain parties argued that the like product sold in the Community was not comparable to the product concerned exported from the PRC and Vietnam. It was found however that the product sold in the Community (in this review) was comparable to the product concerned exported from the countries concerned. In particular, it was found that the physical and technical characteristics and uses, as well as the channels of distribution of the product concerned were similar and have not changed since the original investigation. This argument was therefore rejected.

55. Certain parties also argued that the system used to compare product types sold by the various co-operators in the investigation was inappropriate because it was not specific enough to guarantee a fair comparison. However, the system used (PCN system) allowed for the comparison of up to 600 different categories or product types organised into five main criteria, namely style of footwear, type of consumer, type of footwear, material of outer sole and presence of lining. Moreover, this PCN system was already used in the previous investigation. No substantiated reasons have been put forward to show why it should be amended. Therefore the same PCN system that was used in the original investigation was applied in the present expiry review investigation. This argument was therefore rejected.

56. Certain parties alleged that the Commission changed its methodology as compared to the original case by changing the definition of the product control numbers (PCN's) in the course of the investigation. This allegation is however not correct. Rather, in the course of the investigation, it became apparent that certain parties had wrongly interpreted and applied the PCN structure for certain product types. In order to ensure a consistent approach, the footwear models in question were therefore re-classified and attributed to the proper PCN heading wherever this was found necessary. Thus, wherever the Commission identified inaccurate information given by the parties concerned it had to rectify this. Such rectification can therefore neither be considered as a change in methodology, nor as a change of content of the PCN. On the contrary, the need to respect the PCN methodology was the very reason why the rectification had to be carried out. Therefore the argument had to be rejected.

2.2. Requests for exclusions

57. Several interested parties made claims similar to those received in the original investigation. They argued that certain types of footwear, within the scope of the like product, e.g. hiking shoes, bowling shoes, white water canoeing shoes, special technology shoes, horse riding shoes and special sizes shoes, were too different to belong to the same category. A further claim was that the value threshold of 7.5 EUR per pair applicable to STAF shoes should be reduced. It is recalled that in the original investigation this value threshold had been reduced from 9 EUR to 7.5 EUR per pair.

58. In this respect, an expiry review does not allow for a change in the scope of the product under measures. Such change could be considered if a party were to make a substantiated request under Article 11(3) of the basic Regulation. Therefore the above claims had to be rejected.

C. LIKELIHOOD OF A CONTINUATION OR RECURRENCE OF DUMPING

1. General

59. In accordance with Article 11(2) of the basic Regulation, it was examined whether dumping was likely to continue or recur upon a possible expiry of the measures in force against the PRC and Vietnam.

60. The volumes and prices of imports from the two countries concerned have developed as shown in the table below. Chinese imports were subject to quotas until 1 January 2005 and imports increased substantially after this date and were at high levels in 2006. In 2007 and in the RIP import volumes have stabilised after a decrease compared to 2006. As a result of the anti-circumvention investigation the measures were extended to the imports of Macao SAR which were subject to registration as from September 2007.

61. Imports from Vietnam were not subject to the quotas and were at high levels in the OIP. Imports volumes then decreased up to 2007 before rising again in the RIP.

62. These figures show that, contrary to the arguments made by some interested parties, imports from the countries concerned remained at high levels in the RIP. Their combined market share in the RIP is 28.7% and is thus significantly higher than the levels seen in the OIP (23.2%). Although their respective market shares have fluctuated since the OIP, they remained overall substantial, as each of the countries had more than 10% market share in the RIP.

63. Based on Eurostat figures, the average import prices from both countries concerned rose between the OIP and 2006. Since then, prices have stabilised for the PRC and fallen for Vietnam.

64. As Eurostat data are necessarily general and, while covering the product concerned, do not give indications of possible changes in product mix, an analysis was therefore undertaken to examine price trends of the seven sampled companies for the PRC and the three sampled companies for Vietnam. Overall, for the sampled companies in the two countries, it was found that prices of imports decreased over the period from 2006 to the RIP.

Table 1 |

Total import volumes and values from countries under investigation |

O IP | 2005 | 2006 | 2007 | RIP |

Volume (1000 pairs) |

China | 63 403 | 183 568 | 157 560 | 123 016 | 125 052 |

Market share | 8.8% | 22.9% | 21.6% | 17.8% | 18.5% |

Vietnam | 102 625 | 100 619 | 79 427 | 62 503 | 68 852 |

Market share | 14.2% | 12.6% | 11.0% | 9.1% | 10.2% |

Values (Euro) |

China (Eurostat) | 7.2 | 7.5 | 8.4 | 8.4 | 8.5 |

Vietnam (Eurostat) | 9.2 | 9.5 | 10.2 | 9.7 | 9.5 |

Source - Comext adjusted as necessary using statistics available to the Commission to exclude products which are not the product concerned .

Table 2 |

Total import volumes and values of sampled companies |

O IP | 2005 | 2006 | 2007 | RIP |

Volume (1000 pairs) |

China (sample) | n.a. | n.a. | 11 381 | 12 787 | 13 759 |

Market share | 1.5% | 1.8% | 2.0% |

Vietnam (sample) | n.a. | n.a. | 14 400 | 15 250 | 14 500 |

Market share | 2% | 2.2% | 2.2% |

Values (Euro) |

China (sample) | n.a. | n.a. | 12.6 | 10.7 | 10.3 |

Vietnam (sample) | n.a. | n.a. | 11.4 | 10.8 | 10.6 |

2. Dumping of Chinese and Vietnamese imports during the RIP

2.1. Normal value

2.1.1. Analogue country

65. According to Article 2(7) of the basic Regulation, in case of imports from non-market-economy countries and to the extent that MET could not be granted, for countries specified in Article 2(7)(b) of the basic Regulation, normal value has to be established on the basis of the price or constructed value in an appropriate market economy third country.

66. For the purpose of establishing normal value for the PRC and Vietnam, the Commission indicated in the Notice of initiation its intention to use Brazil as analogue country which was used as an appropriate analogue country in the original investigation. The Commission invited the interested parties to comment thereon.

67. Comments were received from several categories of interested parties, such as complainants, cooperating exporting producers, their representative associations, their national authorities as well as representatives of importers suggesting that Thailand, India or Indonesia would be a more suitable analogue country than Brazil. The Commission examined these proposals in the light of the criteria applied for the analogue country selection.

68. In this respect, the Commission established that the market size for leather footwear in the RIP could be estimated at 189 million pairs for Brazil, 800 million pairs for India, 109 million for Indonesia and only 6 million for Thailand. In view of the very small size of the Thai market and the availability of other options, the Commission did not further investigate Thailand as a potential analogue country.

69. Consequently, the Commission sought co-operation from footwear producers in Brazil, India and Indonesia, following the requests of the parties. Questionnaires were sent to companies in the three countries and meaningful responses were received from five Brazilian, one Indian and five Indonesian producers.

Representativeness of domestic sales and product range

70. The Commission examined the representativeness of the companies that responded as regards their domestic sales

71. As regards Brazil, the three investigated companies had domestic sales of the like product in the investigation period representing around 17% of Chinese and around 19% of Vietnamese sampled exports.

72. As regards India, only one company came forward, which reported domestic sales of the like product in the investigation period representing around 5% of Chinese and around 6% of Vietnamese sampled exports.

73. As regards Indonesia, the five cooperating companies had domestic sales of the like product representing around 2% of Chinese and around 2% of Vietnamese sampled exports.

74. Brazil was thus the country with the most representative volume of domestic sales in the investigation period.

75. The Commission subsequently examined how many footwear types in respect to those exported by China and Vietnam were covered by the domestic sales in the three countries concerned.

76. Domestic sales of the co-operating Brazilian and Indonesian producers covered in the RIP a wide product range, matching a significant number of PCNs exported from China and Vietnam. In the case of India, the sole co-operating producer reported domestic sales in the RIP matching only 1 PCN exported by China and Vietnam.

Competition in the potential analogue countries

77. According to the data collected by the Commission, all three countries examined have an important number of producers which ensures that there is a high level of competition between domestic operators on their respective markets. Brazil has some 7,800 leather footwear producers, 1,500 of which can be considered of a size sufficiently comparable to Chinese/Vietnamese companies. India is reported to have some 3,000 producers. For Indonesia, the number of producers is estimated to be 212. The three countries have substantial exports (estimated around 64 million pairs for Brazil, 67 million for India and 27 million for Indonesia). Brazil was found to have a higher domestic consumption of leather shoes per capita (1) compared to India (0.7) and Indonesia (0.5).

78. As regards imports into the countries examined, they reached in the RIP a market share of ±2% in Brazil, ±1% in India and ±1.5% in Indonesia.

79. Based on the above elements, the Commission considered that Brazil was the most suitable choice of analogue country. In particular, Brazil was found to have the most representative volume of domestic sales in footwear with uppers of leather. In addition, Brazilian cooperating companies produce a wide range of products, largely matching those of China and Vietnam. Indonesian cooperating producers, who had also a wide range of products, had much lower domestic sales, while Indian domestic sales, although at substantial volumes, were of a very limited range.

Comments by interested parties

Product comparability

80. Several parties claimed that Brazil should not be used as analogue market, because it specialises only in women's footwear. They argued that this could be demonstrated by the questionnaire replies of the Brazilian cooperating companies and by the fact that Brazil exports mostly women's shoes.

81. However, the investigation showed that more than half of the total domestic sales reported by the cooperating Brazilian companies were men's' shoes. During the verification visits the Commission made to the Brazilian producers, it was found that while the two smaller companies were indeed more specialised in women's footwear, the largest one sold predominantly men's footwear on the domestic market. Domestic market sales were hence made in sufficient quantities for women's as well as men's footwear types. As regards the argument that Brazil’s exports are mainly women’s footwear, the Commission does not consider that the pattern of a country's exports necessarily corresponds to that of products sold on its domestic market.

82. Some parties submitted that questionnaire responses showed that Brazil specialises in sandals which therefore cannot be compared to the footwear types exported from China and Vietnam, which cover a larger variety. The examination by the Commission did not confirm this claim, but showed that Brazilian producers sold a wide range of footwear types, which translated at PCN-level into a more than 50% matching rate with the models exported by the Chinese and Vietnamese companies in the samples.

83. Some parties argued that Brazil could not be used as analogue country for children footwear, because it has a very small production of this type of shoes. The Commission notes that it is not unusual that an analogue country does not produce all sub-types of the like product. However, this does not prevent that a fair comparison of normal value can be established by making proper adjustments for this type. As indeed none of the Brazilian cooperating producers manufactured children's footwear, the normal value for this type was calculated, as in the original investigation, by appropriately adjusting the normal value calculated for adults' shoes. It is therefore concluded that Brazil could be used as analogue country for all types of leather footwear, including children's shoes.

84. Some parties submitted that footwear produced in Brazil uses high quality leather and has therefore higher prices than China and Vietnam. It would therefore not be comparable to the footwear originating in the two countries under investigation. Some other interested party on the contrary submitted that the Brazilian prices needed to be properly adjusted because the leather of Brazilian footwear was of lower quality than the leather used in China and Vietnam. The Commission examined this matter and found that in terms of prices and quality there was no difference in the leather used for footwear produced in Brazil and that used for footwear produced in China and Vietnam. It is recalled in this context that an adjustment to the normal value was applied in the original case, because leather used by the Brazilian analogue country producers was found to be of lower quality and sold at lower prices as compared to the leather used by the sampled producers in the export countries. In the current review investigation, producers in Brazil (and most producers in the export countries) are different from those that co-operated with the original investigation. In turn, the different mix in companies resulted in different leather input costs.

85. Some parties expressed the view that Brazilian and Vietnamese products are not comparable, arguing that Brazil exports expensive high-end footwear while Vietnam exports low-priced products, but did not submit substantiating evidence on this. The Commission notes that in any event Vietnamese products would have to be compared to products sold on the Brazilian domestic market, not to those exported from Brazil. The Commission did not find any evidence that the footwear originating in Vietnam or sold in Brazil was limited to a specific market segment.

Competition on the Brazilian market

86. Some parties submitted that Brazil had increased its tariffs on footwear from 20% to 35% as of January 2008 and argued that this rendered Brazil a highly protected market with reduced competition. They also argued that the market share held by imports in Brazil was too low with respect to consumption. The Commission examined these claims. It was found that Brazil indeed raised its tariffs from 20% to 35% in the beginning of 2008, i.e. in the middle of the RIP. However, the Commission also found that the value of the Brazilian currency vis-à-vis the US Dollar increased significantly over the RIP, and particularly after the tariff increase was introduced by Brazil. More precisely, the value of the Brazilian Real strengthened by up to 19% (i.e. a greater increase than the increase in tariffs) compared to the beginning of the RIP. As a consequence, the rise in the value of the Brazilian currency with respect to the US Dollar offset to a large extent the effect of the tariff rise on import prices. Moreover, the Commission did not find any evidence that the raise in tariffs was reflected in a substantial increase of domestic prices, nor that it hindered imports. In fact, the Commission established that, despite the tariff increase, imports of leather shoes into Brazil in the first half of 2008 (i.e. after the tariff rise) increased considerably as compared to the first half of 2007. Thus, there was no effective impact of the tariff increase on the Brazilian market.

87. Some parties submitted that Brazil is not an open market for footwear because imports of footwear into the country are hampered by non-automatic licensing. The Commission found that Brazil applies non-automatic licensing on imports of footwear, but notes this does not appear to have constituted a barrier to imports in view of the aforementioned import increase. In addition, the Commission established that Indonesia also applies non-automatic licensing regarding imports of footwear. The Commission notes that non-automatic import licensing is a WTO compatible practice. The Commission therefore concludes that there exist no grounds for regarding the non-automatic import licenses applied by Brazil as an import restriction which could lead to a conclusion that Brazil is a non-open market.

88. Some parties argued that the significant rise in the value of the Brazilian Real in the recent years affected competitiveness in Brazil negatively, or that a drop of the Real by 25% since the RIP affected Brazil's international competitiveness negatively. These arguments were not supported by substantiating evidence, but in any event, developments after the RIP cannot be considered pertinent in the choice of the analogue country.

89. Following the above, the Commission found no evidence that the overall conditions of competition on the Brazilian market have changed significantly since the original investigation so as to make Brazil unsuitable as an analogue country.

Differences in socio-economic development

90. It was argued by several parties that India or Indonesia are more appropriate choices for an analogue market, because Brazil does not possess similarities to China and Vietnam in terms of economic development, or per capita GNP.

91. It should be noted that by definition, a non-market-economy country or an economy in transition does not have the same economic characteristics as a market-economy country. It is not unusual that such difference in economic development exists between an analogue country and a non-market-economy country or an economy in transition. This applies also to the difference in income per capita which is also an indicator of economic development. This, however, does not prevent Brazil to be chosen as analogue country as long as it is deemed more appropriate with regard to the other factors taken into consideration.

Differences in cost structure

92. Several interested parties stressed the fact that labour costs are higher in Brazil than in Vietnam and China and that India, Indonesia or Thailand whose labour costs are more comparable and which would thus be more appropriate analogue countries. It was submitted that due to higher wages, labour costs in Brazil amount to 50-70% of the cost of production as opposed to 30% in China.

93. In that respect, a country with a different level of economic development may indeed be chosen as analogue country for a non-market-economy country or an economy in transition. Similarly, labour costs which are an indicator for the economic development of a country cannot be considered as a relevant criterion in isolation. In any event, as regards the part of labour cost in the overall cost of production, the Commission established at the verification on site that labour costs in Brazil are less than 40% of the total production cost and therefore much closer to the relevant Chinese level than alleged.

94. It was also argued by several parties that Brazil is not appropriate for establishing normal value, because Brazilian companies bear costs for design and research and development, which in the case of China and Vietnam are at the expense of their customers abroad. The Commission found that this difference in cost structure may be plausible, since exporters in the countries concerned sold the product concerned to former Community manufacturers in the EC which still support the above mentioned components of the cost of production and sell the product under their own brand name. However, this is not a reason to reject Brazil as a suitable analogue country as adjustments can be made for such costs when establishing normal value (see recital (118) et seqq.).

95. Some parties submitted that unlike China and Vietnam ex-factory prices in Brazil include marketing expenses, special taxes, and credit and delivery costs. In addition, overhead costs in Brazil were alleged to be higher, due to the smaller size of Brazilian companies. Here too, the Commission considers that this is not a reason to reject Brazil as a suitable analogue country, as adjustments can be made for such allowances in the calculation of normal value (see recital (118) et seqq.).

96. Some parties alleged that Asian countries have better access to raw materials than Brazil, in particular leather. The Commission examined the documentation submitted. It is shown indeed that leather production has progressed faster in Asia, but this has to be seen in the light of the increase in Asian production of leather goods. Latin American countries account for slightly more than 15% of the world production of leather shoes and close to 15% of the world production of raw leather. Asian countries produce more than 50% of leather shoes in the world but less than 40% of the world’s raw leather. It can thus be concluded that, despite differences in absolute figures of leather production, Latin American countries have a higher self-sufficiency compared to Asian countries and therefore easier access to raw leather.

Other claims made by parties

97. Some interested parties argued that Brazil is not an appropriate reference country, because Brazilian footwear is not a substitute for Chinese and Vietnamese footwear, since after the imposition of anti-dumping duties by the EC, imports into the EC originating in Brazil did not go up while those from India and Indonesia increased. In this respect, imports into the EC from India and Indonesia did increase after anti-dumping duties were imposed. However, the Commission observes that commercial operators remain free regarding their choice of suppliers, and, as examined later under the injury analysis, in this case they preferred to source their products from neighbouring countries to China and Vietnam. This does not render Brazil inappropriate as analogue country. Moreover, an analogue country serves to establish normal value. Whether or not it exports to the EC is not relevant for this purpose. Therefore, this argument was rejected.

98. Some parties argued that Brazil cannot be a comparable market to Vietnam, because Vietnam is export oriented while Brazil sells mainly domestically. The Commission cannot accept the relevance of this argument. Vietnam is clearly more export-oriented than Brazil however it is not evident how this could affect the normal value calculated in Brazil, which by definition relates to Brazilian production costs and domestic sales.

99. Several parties raised the argument that Brazilian export prices are lower than the domestic ones. For some of the parties this indicates that export prices rather than domestic ones should be used for establishing normal value. Other parties argued that this constitutes evidence that Brazilian exporters are dumping and submit that Brazil would therefore be inappropriate as analogue country. First the Commission observes that export prices are not relevant in this case, since sufficiently representative and profitable domestic prices are available. Second, the allegation that Brazilian export prices are dumped has not been substantiated and in any event cannot be confirmed or denied without a proper investigation of this issue.

100. Some interested parties claimed that Brazil is inappropriate as analogue country because Brazilian producers receive government support for exports. The Commission first notes that this kind of support would affect primarily export prices which, as mentioned above, are not relevant for the present investigation. The Commission nevertheless examined the evidence submitted by the parties and found that the support referred to related to export promotion programmes, similar to the ones that can be found in many other countries, with the objective to make products better known abroad, by publicity campaigns and participation in international trade fairs. The Commission found no indication that support for export promotion in Brazil was benefitting to domestic sales of shoes.

101. Several parties raised the fact that Brazil has initiated an anti-dumping investigation into footwear originating in China, for which Italy was used as analogue country, and claimed that Italian and Brazilian companies colluded to maximise dumping findings in the review investigation carried out by the EC. However there was no substantiation to these allegations, and no other related evidence. The Commission therefore rejects this argument.

Conclusion as regards the choice of analogue country

102. In light of the above, it was concluded that Brazil was the most appropriate analogue country.

103. A large number of interested parties alleged that selecting Brazil as the analogue country would be determinant for a finding of dumping and that dumping would not be found if one of the other countries was selected. For argument's sake, the Commission therefore checked what the result would have been if Indonesia was selected, which, although not the best option as demonstrated above was the only tenable alternative to Brazil.

104. The results are given in the relevant section below, and confirmed that the choice of analogue country in this case, between the tenable options available, was not determinative of the results of the dumping calculations.

105. Brazil was therefore selected as the analogue country.

2.1.2. Determination of normal value in the analogue country

106. Following the choice of Brazil as an analogue country, normal value was calculated on the basis of the data verified at the premises of the co-operating Brazilian producers.

107. The domestic sales of these producers were found to be representative compared to the volume of exports to the Community by the exporting producers in the PRC and Vietnam. It was also examined whether the domestic sales could be regarded as having been made in the ordinary course of trade, by establishing the proportion of profitable sales to independent customers. The investigation showed that the sales at prices equal to or above the unit cost represented more than 80 % of the total sales volume of each producer. Therefore, the normal value was based on actual domestic prices, calculated as a weighted average of the prices of all domestic sales of a product type made during the RIP, irrespective of whether these sales were profitable or not.

2.1.3. Normal value for Golden Step

108. In the case of Golden Step, the normal value was determined on the basis of the company’s own data on domestic sales and cost of production. This data was verified at the premises of the company.

109. The Commission first established that Golden Step made no domestic sales during the RIP. Therefore, normal value could not be established on the basis of its domestic prices, as provided by Article 2(1), subparagraph 1, of the basic Regulation. Accordingly, another method had to be applied.

110. Given that no domestic prices could be used to establish normal value, a constructed normal value had to be calculated based on the costs of the producer in question. Consequently, in accordance with Article 2(3) of the basic Regulation, normal value was constructed by adding to the manufacturing costs of the exported shoe model, adjusted where necessary, a reasonable amount for selling, general and administrative (‘SG&A’) expenses and a reasonable margin of profit.

111. In this respect, SG&A and profit could not be determined in accordance with Article 2(6)(a) of the basic Regulation on the basis of actual amounts determined for other exporting producers in the country concerned because no other Chinese exporting producer had been awarded MET. Further, because Golden Step had not made any domestic sales of the same general category of products in the country concerned, the SG&A and profit could not be established pursuant to Article 2(6)(b) of the basic Regulation. Consequently, it had to be determined in accordance with Article 2(6)(c) of the basic Regulation, i.e. on the basis of any other reasonable method.

112. In this context, the Commission assessed SGA and profit rates along three possible scenarios. It first established SGA and profits using the data of the original investigation. It also considered SGA and profits from Chinese exporting producers that recently obtained MET in other recent investigations and which had domestic sales in the ordinary course of trade. In a third scenario, it examined information regarding SG&A and profit found in the analogue country. Normal value was then assessed along these scenarios.

2.2. Chinese and Vietnamese Export Prices

113. Where export sales were made directly to independent customers in the Community, the export prices were established on the basis of prices actually paid or payable for the product concerned in accordance with Article 2(8) of the basic Regulation.

114. Where export sales to the Community were made through unrelated trading companies located outside the Community, export prices were established on the basis of the prices of the product when sold for export to the trading companies i.e. to an unrelated buyer, by the producers concerned in accordance with Article 2(8) of the basic Regulation.

2.3. Comparison of Chinese and Vietnamese Export Prices with Analogue Country Normal Values

115. Following the methodology employed in the original investigation, for exported product types not sold on the Brazilian domestic market, the domestic sales prices of the most closely resembling product types were used in establishing normal values. These were appropriately adjusted where warranted.

116. The normal value and export prices were compared on an ex-works basis. For the purpose of ensuring a fair comparison between the normal value and the export price, due allowance in the form of adjustments was made for differences affecting prices and price comparability in accordance with Article 2(10) of the basic Regulation. In particular, the following adjustments have been made:

117. It was examined whether a level of trade adjustment under Article 2(10)(d) of the basic Regulation was warranted. In that context it was found that the levels of trade in the domestic and export markets were different. Accordingly, adjustments were made in accordance with Article 2(10)(d)-(i) of the basic Regulation to reflect the discounts granted to wholesalers on the Brazilian market, as compared to sales to retailers which had solely been made by the three Brazilian producers investigated.

118. In order to ensure a fair comparison between Chinese and Vietnamese exports on the one hand and Brazilian domestic sales on the other hand, an allowance was granted in accordance with Article 2(10)(i) of the basic Regulation to reflect differences in commissions paid to independent agents in Brazil.

119. According to Article 2(10)(k) of the basic Regulation, an allowance for R&D and design was also granted in order to reflect the costs incurred by the Brazilian producers as opposed to Chinese/Vietnamese producers.

120. An adjustment pursuant to Article 2(10)(a) of the basic Regulation was also made in the previous investigation to reflect differences in the quality of the leather used to manufacture the footwear. In the current investigation no such adjustment was found necessary because of the similar quality of leather used by the Brazilian, Chinese and Vietnamese exporters (see recital (87)).

121. Other adjustments, including such concerning transport and insurance pursuant to Article 2(10)(e) of the basic Regulation, were made in all cases where they were found to be reasonable, accurate and supported by evidence.

122. Certain interested parties argued that USD/EUR exchange rate fluctuations impacted on the dumping margins found and warranted an adjustment. This claim had to be rejected. Under Article 2(10)(j) of the basic Regulation such adjustment can only be granted where a sustained movement in exchange rates has taken place. Where exchanges rates fluctuate freely, as is the case for the USD/EUR rate, they regularly move up- and downwards. No sustained movement can be identified in such case and accordingly no adjustment can be granted.

2.4. Determination of dumping for the companies investigated in the PRC

2.4.1. Determination of dumping for Golden Step

123. In the case of Golden Step, the comparison of its export price with the normal value as explained in recitals (111) onwards showed a dumping margin in a range between 5% and 16%.

2.4.2. Determination of dumping for the companies not granted MET

124. Pursuant to Article 2(11) and (12) of the basic Regulation, the dumping margin was established on the basis of a comparison of a weighted average normal value by product type with a weighted average export price by product type. For all sampled companies one weighted average dumping margin has been calculated in the PRC. This dumping margin was attributed to all other exporting producers in the PRC.

125. The country-wide level of dumping for the PRC was established a range between 35% and 38% of the CIF Community frontier price, depending on the calculation method used for Golden Step as explained in recital (115).

126. In view of what was concluded regarding the selection of the analogue country, a dumping calculation was also performed using the methodology stated above, except that Brazilian normal values were replaced by those of the cooperating Indonesian producers. This calculation resulted in a dumping margin ranging between 19% and 22%, depending on the calculation method used for Golden Step.

2.5. Determination of dumping for the companies investigated in Vietnam

127. Pursuant to Article 2(11) and (12) of the basic Regulation, the dumping margin was established on the basis of a comparison of a weighted average normal value by product type with a weighted average export price by product type. Since none of the sampled companies had been granted MET, one weighted average dumping margin has been calculated in Vietnam. This dumping margin was attributed to all other exporting producers in Vietnam.

128. The country-wide level of dumping for Vietnam was established at 43.8 % of the CIF Community frontier price.

129. Similarly to the PRC, a dumping calculation was also performed using the methodology stated above, except that Brazilian normal values were replaced by those of the cooperating Indonesian producers. This calculation resulted in a dumping margin of 28.4%.

2.6. Conclusion on Continuation of Dumping from the Countries Concerned

130. Certain interested parties argued that exports from the countries concerned between the imposition of definitive measures in April 2006 and the end of the RIP had fallen. It was argued that this decrease reflected falls in production and production capacity in the PRC and Vietnam which were due to the imposition of the definitive measures, a switch in production from the PRC and Vietnam to other countries or increase in their domestic sales. A further claim was that import prices had either increased or remained stable. The parties claimed therefore that import volumes and prices could not justify the finding of a continuation of dumping at significant volumes during the RIP.

131. These arguments do not change the finding that substantial dumping margins were found for the RIP and that those margins cover large volumes of imports with large Community market shares. It was therefore concluded that a continuation of dumping has taken place in respect of the product concerned originating in the PRC and Vietnam.

3. Development of imports from the PRC should measures be repealed

3.1. General remarks

132. The likely development of imports from the PRC was analysed in terms of both expected prices and volumes.

133. As a starting point prices were established for the RIP. Data was available from the sampling returns (received from 58 co-operating exporting producers) which contained sales prices for the domestic market and export prices both to the Community market and to third country markets. This information was used as it was deemed to be the best source of price information available for the product concerned for the purpose of comparing price indications on various markets. This data was deemed representative because it covered 22% of imports to the Community market. Export prices to the Community included in the sampling returns were cross-checked with statistical information available to the Commission, even if the statistical information could not be used for price comparisons as it did not cover Chinese domestic sales and exports to third countries.

134. Although Comext based data was another reliable source it did not provide, as already explained in recital (67), the possibility of comparing prices on different markets.

135. Prices on the Community market were obtained from Community producers' sampling data. The investigation established that these average prices were of comparable types to the imported footwear because:

136. they concerned the like product;

137. they were at the same level of trade;

138. they were at comparable incoterms;

139. they involved comparable quantities.

140. The impact of certain new developments since the end of the RIP was also analysed because it was considered significant enough to affect the likelihood of continuation of dumping. Such analysis was also requested by interested parties.

3.2. Relationship between prices in the Community and the PRC

141. Sampling returns indicated that the Chinese domestic prices established on the basis of exporters' own data were lower than prices on the Community market. It should, however, be noted that the data of all non-sampled companies (including data relating to any domestic sales) could not be verified. A detailed analysis of domestic prices in the PRC could therefore not be performed. Moreover, it was not deemed necessary, given the overall finding of continuation of dumping.

3.3. Relationship between export prices to third countries and the price level in the Community

142. Sampling returns indicated that the prices achieved by the Chinese co-operators on major third country markets were lower than prices prevailing on the Community market. This again indicated that Chinese producers could export larger quantities to the Community. Should measures be allowed to lapse it would be more profitable for Chinese exporting producers to redirect their exports to the Community. However, these data on prices achieved by the Chinese co-operators on major third markets could not be verified and therefore this analysis was not pursued further

143. Certain interested parties claimed that other markets had become more attractive than the Community market. To support this claim one party submitted an analysis of the Chinese customs statistics. However, the Commission’s analysis has shown that, apart from the U.S., the Community market remains the most attractive market for the Chinese exporters. In fact, exports increased over the period covered by this party's analysis (i.e. 2005 to 2008). Should the anti-dumping duties be repealed, the Community market would become even more attractive and volumes would therefore likely increase.

3.4. Relationship between export prices to third countries and prices in the PRC

144. The sampling returns received from the 58 Chinese co-operating companies show that export prices to major third country markets are below the prices they achieve on the domestic market. However, these data could not be verified and therefore this analysis was not pursued further.

145. In addition the level of the export prices to third countries compared to the Brazilian normal value indicated that those export prices are generally substantially lower. However, again for the reasons explained in recital (140), these data could not be verified and therefore this analysis was not pursued further.

146. In conclusion the available data indicated a likelihood of continuation of dumping.

3.5. Unused capacities and stocks

147. All Chinese companies in the sample operated a production to order system and therefore their stocks were of finished goods awaiting despatch. The production to order system is used because the footwear sector has to adapt to new fashions each season based on orders from customers and cannot use sales from stocks. Therefore, as companies had no real stocks, that element could not be considered as a meaningful indicator for the analysis of likelihood of continuation of dumping.

148. The investigation established that unused capacities of all 58 cooperating Chinese companies accounted for about 9% of their total production capacity of footwear. This quantity would correspond to 14.5 million pairs for the 58 co-operators or around 65 million pairs for all exporting producers. The latter figure is around 10% of total Community consumption (as given in table 3).

149. The likely use of this spare capacity was analysed. Given the aforementioned differences between the price levels in the Community, on the Chinese domestic market and in third countries, Chinese companies are likely to have an incentive to use spare capacity for exports to the Community. Another factor, which makes the EU market attractive for the Chinese exporters, is its size.

150. Furthermore, it should be pointed out that the existing assembly lines can be used to produce other kinds of footwear such as STAF and shoes with textile uppers as well as the product concerned. The companies sampled and the other co-operators in China produced large quantities of footwear which is not the product concerned. The current split between production of the product concerned and other footwear depends on the requirements of consumers and the ordering and sourcing policies of the Community importers. However should the measures be repealed the Community importers would surely reassess their sourcing policies and may order a greater proportion of the product concerned from Chinese producers. This could result in an increase of the quantities of the product concerned exported to the Community.

3.6. Circumvention and absorption practices

151. As established by Regulation (EC) No 388/2008, the existing measures covering the PRC were circumvented by consignments through Macao SAR. Subsequently, measures were extended to consignments of the product concerned assembled in and transhipped through Macao SAR. Those circumvention practices demonstrate the attractiveness of the Community market for Chinese exporting producers.

3.7. Conclusion

152. The investigation has shown that should measures be repealed there would be a likelihood of continuation of dumping. This conclusion is based on the attractiveness of the Community market in terms of volume as well as on price comparisons between the Community, Chinese and third country markets.

153. Furthermore, a number of factors including the relative levels of prices, the availability of spare capacities, circumvention and the ability to switch from the production of other footwear to the product concerned provide evidence for a likely increase in imported quantities if measures are repealed. On the other hand, other factors such as the world economic crisis and a tendency to switch production to other countries will inevitably reduce imported quantities to some extent. These factors are further analysed in section 5 (Developments following the RIP) below.

154. It is concluded that imports from the PRC will continue to enter the Community market in large volumes and that such volumes will be sold at low, dumped prices so that there is likelihood of continuation of dumping should the measures be allowed to lapse.

4. Development of imports from Vietnam should measures be repealed

4.1. General

155. The likely development of imports from Vietnam was analysed in terms of both expected prices and volumes.

156. As a starting point prices were established for the RIP. Data was available from the sampling returns (received from 51 co-operating Vietnamese exporting producers) which contained sales prices for the domestic market and export prices both to the Community market and to third country markets. This information was used as it was deemed to be the best source of price information for the product concerned for the purpose of comparing price indications on various markets. This data was deemed representative because it covered 82% of imports to the Community market. The Community sales prices included on the sampling returns were cross-checked with statistical information (Taric data) available to the Commission. However, the statistical information could not be used for price comparisons as it did not cover Vietnamese domestic sales and exports to third countries.

157. Although Comext based data was another reliable source it did not provide, as already explained in recital (67), the possibility of comparing prices on different markets.

158. Prices on the Community market were obtained from Community producers' sampling data. The investigation established that these average prices were of comparable types to the imported footwear because:

159. they concerned like products;

160. they were at the same level of trade ;

161. they were at comparable incoterms;

162. they involved comparable quantities.

4.2. Relationship between prices in the Community and Vietnam

163. Sampling returns indicated that the Vietnamese domestic prices established on the basis of exporters' own data were lower than prices on the Community market. It should, however, be noted that the data of all non-sampled companies (including data relating to any domestic sales) could not be verified. A detailed analysis of domestic prices in Vietnam could therefore not be performed. Moreover, as in the case of the PRC, it was not deemed necessary, given the overall finding of continuation of dumping.

4.3. Relationship between export prices to third countries and the price level in the Community

164. According to data from the Vietnam General Statistics Office and the Vietnam General Department of Customs (2008 calendar year) around 50% of Vietnamese footwear exports are dispatched to the Community market. Further, the sampling information received shows that during the RIP the co-operating exporters also sold very large volumes on third country markets.

165. Sampling returns indicated that the prices achieved by the Vietnamese co-operators on major third country markets were lower than prices prevailing on the Community market. This indicated that Vietnamese producers could export larger quantities to the Community.

4.4. Relationship between export prices to third countries and prices in Vietnam

166. Bearing in mind the low volume of sales made by the exporting producers on the Vietnamese domestic market no meaningful conclusion could be made in respect of this comparison.

4.5. Unused capacities and stocks

167. All Vietnamese companies in the sample operated a production to order system and therefore their only stocks were of finished goods awaiting despatch. The production to order system is employed because the footwear sector has to adapt to new fashions each season based on orders from customers and cannot utilise sales from stocks. It is therefore considered that stocks are in this case not a very strong indicator.

168. The investigation established that unused capacities of all 51 co-operating Vietnamese companies account for about 17% of their total production capacity for footwear. This quantity would correspond to 34 million pairs for the 51 co-operators or around 42 million pairs for all exporting producers. The latter figure is around 6% of total Community consumption (as given in table 3).

169. The likely use of this spare capacity was analysed. Given the aforementioned differences between the price levels in the Community and on third country markets, Vietnamese companies are likely to have an incentive to use their spare capacity for exports to the Community. This conclusion is supported by the attractiveness of the Community market in terms of its size.

170. Furthermore, it should be pointed out that the existing assembly lines can be used to produce other kinds of footwear such as STAF and shoes with textile uppers as well as the product concerned. The companies sampled and the other co-operators in Vietnam produced large quantities of footwear which was not the product concerned. The current split between production of the product concerned and other footwear depends on the requirements of consumers and the ordering and sourcing policies of the Community importers. However should the measures be repealed the Community importers would reassess their sourcing policies and may order a greater proportion of the product concerned from Vietnamese producers. This could result in an increase of the quantities of the product concerned exported to the Community.

4.6. Conclusion

171. In addition to the continuation of dumping at high levels the investigation has shown that should measures be repealed there would be a likelihood of continuation of dumping. This conclusion is based on the attractiveness of the Community market in terms of its size and price levels.

172. Furthermore, a number of factors including the relative levels of prices, the availability of spare capacities, and the ability to switch from the production of other footwear to the product concerned provide evidence for an increase in imported quantities if measures are repealed. On the other hand, other factors such as the world economic crisis and a tendency to switch production to other countries will inevitably reduce imported quantities to some extent. These factors are further analysed in section 5 (Developments following the RIP) below.

173. It is concluded that imports from Vietnam will continue to enter the Community market in large volumes and that such volumes will be sold at low, dumped prices so that there is likelihood of continuation of dumping should the measures be allowed to lapse.

5. Developments following the RIP

174. The impact of post-RIP developments as regards both PRC and Vietnam were also analysed because they were considered significant enough to affect the volumes of the product concerned produced in the countries concerned and exported to the Community market, and its prices.

5.1. The worldwide economic crisis

175. The crisis began in the second half of 2008 (i.e. after the end of the RIP). Some parties argued that it would have an impact on the production and exports (including exports to the Community) of the product concerned originating in the countries concerned because of the shrinking consumption on the world and Community footwear markets.

5.2. Developments in import volumes and prices following the RIP

176. It should be stated at the outset that the allegations made by parties concerning the likely impact of post-RIP developments on export volumes from the countries concerned and the consumption in the Community were contradictory. Some interested parties estimated that exports from the countries concerned could fall by as much as 25-30% in 2009 as compared to RIP figures. Other interested parties expected such imports to remain stable. The Eurostat statistics available for the first half of 2009 indeed show a fall of 25% of import volumes from China and a fall of 28% of import volumes from Vietnam. In terms of prices, Eurostat statistics show an increase of 34% for imports of the product concerned from China and an increase of 26% for imports of the product concerned from Vietnam. However, taking into account the reasons expressed in recital (67) above these trends can not be considered as representative.

5.3. A Switch in the sourcing of Community imports from the PRC and Vietnam to other countries

177. Some parties argued that exports of the product concerned originating in the countries concerned would fall because of a switch in sourcing away from the PRC and Vietnam to other countries such as Indonesia, Cambodia and India. It was argued that the process began after the imposition of measures in April 2006 and would continue if measures were re-imposed following the current review. Other reasons for such a switch were also mentioned, most notably rising production costs. For China they were alleged to be due to rising labour, energy and local materials costs, as well as environmental and labour legislation. An increase in the value of RMB was also brought up as a possible cause of the switch to other countries. For Vietnam it was alleged that there was a switch of sourcing to other countries because of increasing labour costs together with the loss of the 3.5% GSP duty benefit on imports to the EU. Furthermore, it was argued that the switch of sourcing away from China and Vietnam was made attractive due to footwear production competitiveness improvements in the countries that are the new source. It was also argued that the switch was made easier by the fact that many producers in the countries concerned were owned or controlled by companies in other parts of South East Asia, such as Taiwan or Hong Kong and because sourcing of footwear for the Community market is controlled by large Community importers, who have the means to easily change their sources of supply whenever necessary.

178. For the PRC, although it was apparent that some exporters have relocated and might further relocate to reduce their costs, the relocation was sometimes to other parts of the PRC (away from the coastal provinces which formed the traditional footwear production base). Such a move would not, in itself, lead to a reduction in production and exports from the PRC.

179. As regards Vietnam, it is not considered likely that the 3.5% duty increase resulting from GSP graduation is of a magnitude such as to prompt significant relocation of production. Whilst it cannot be excluded that this graduation may have some impact on export volumes from Vietnam, it is unlikely to considerably affect the sourcing decisions of large Community importers. It is recalled that despite the imposition of anti-dumping duties much higher than 3.5%, both Vietnam and China maintained high levels of import volumes into the Community.

180. It is therefore considered that any relocation of production would not be of such a magnitude as to radically change importers' sourcing decisions.

181. As regards imports from other countries into the Community, it was found that, after the anti-dumping measures were imposed, they did increase from certain Asian countries. This, however, does not alter the fact that the product concerned continued to be imported from the two countries under investigation into the Community in very significant volumes and at dumped prices.

5.4. Development of Chinese Domestic Consumption

182. Some parties argued that exports from the PRC would fall because of an increase in the Chinese domestic consumption, encouraged by the policies of the Chinese authorities. However, none of the parties submitted evidence which would allow an evaluation of the expected consumption growth – this evaluation is made even more difficult due to the economic crisis.

183. Whilst it is not unreasonable to assume that China's recent economic growth will result, at least in the medium term, in some increase in domestic consumption of footwear, no evidence has been submitted to demonstrate that this growth would lead to a (further) reduction in exports to the Community.

5.5. Conclusion

184. The economic crisis is having a downward influence on imports into the Community from the countries concerned. It is however not unreasonable to assume that a recovery will follow at some stage, which would then result in increased sales volumes. Even if the highest forecast of a 25 – 30% fall materialized over 2009 as a whole, volumes from the PRC would still reach over 80 million pairs and achieve a Community market share of above 10% and volumes from Vietnam would still reach around 48 million pairs and achieve a Community market share of around 7%.

185. As regards a switch of sourcing of Community imports, it was found that the relocation observed to date has not had a determinative effect, and there is no indication that there would be in the near future any major change in the trends observed so far.

186. Exports from the countries concerned to the Community have continued to be made at dumped prices during the RIP. In view of the economic crisis and the (expected) contraction in demand, and in the absence of any information on import prices during the post-RIP pointing to the contrary, it does not seem unreasonable to predict that exports will continue to be made at dumped prices.

187. In light of the above findings concerning both the RIP and post RIP developments it is concluded that ther