Document: WT/DS405/R Page A-1 ANNEX A EXECUTIVE SUMMARIES OF THE FIRST WRITTEN SUBMISSIONS OF THE PARTIES Contents Page Annex-A-1 Executive Summary of the First Written Submission of China A-2
Document codes: WT/DS405/R
Complainant: China
Respondent: EU
Third parties: Australia, Brazil, Colombia, Japan, Turkey, U.S., Vietnam
Dispute stage: Panel
Agreements cited: Art. 9  Anti-dumping  Protocol of AccessionArt. 6.10, 9.2, 9.3, 9.4  Anti-dumpingArt. I, XVI:4, X:3(a)  GATT 1994Art. 2.1, 2.4  Anti-dumpingArt. VI:1  GATT 1994Art. 3.1, 17.6, 3.4, 3.5, 6.1.2, 6.5, 6.5.1, 6.5.2, 6.8, 11.3, 12.2.2, 1, 18.1, 2.2.2, 2.6, 9.1, 3.3, 6.2, 6.4, 6.5.1, 6.5.2, 6.1.1, 6.9, 6.10.2  Anti-dumping

ANNEX A

EXECUTIVE SUMMARIES OF THE FIRST WRITTEN
SUBMISSIONS OF THE PARTIES

Contents Page
Annex-A-1 Executive Summary of the First Written Submission of China A-2
Annex A-2 Executive Summary of the First Written Submission of the
European Union A-12

ANNEX A-1

EXECUTIVE SUMMARY OF THE FIRST WRITTEN
SUBMISSION OF CHINA

I. INTRODUCTION

1. On 4 February 2010, China requested consulta tions with the European Union. Consultations
between China and the European Union were held on 31 March 2010 but failed to result in a mutually
satisfactory solution. On 8 April 2010, China request ed the establishment of a Panel. The Panel was
established on 18 May 2010 and was composed on 5 July 2010.

2. In its first written submission, China presented its view of the facts and legal issues pertinent
to this case and at the same time responded to the European Un ion's Request for a Preliminary Ruling
filed on 22 July 2010. The extent to which this summary treats certain facts and legal issues should
not be taken as any indication of the relative importance that China attaches to them.

II. CHINA'S RESPONSE TO THE EU'S REQUEST FOR A PRELIMINARY RULING

3. In its Request for a Preliminary Ruling (P R Request), the European Union claimed the
following regarding China's Panel Request: a) that China's "as such" claims concerning Article 9(5) of
the Basic AD Regulation do not meet the specificity requirement s of Article 6.2 of the DSU; 2) that
China's claims based on Article 17.6(i) of the Anti-Dumping Agreement also fail to satisfy the
requirements of Article 6.2 of the DSU, and that in any case Article 17.6(i) cannot form the basis of a
claim; 3) that some of China's claims concer ning the Review Regulation and Definitive Regulation
lack the required specificity regarding the measure that they were attacking, and 4) that certain claims
should be excluded from the Panel's terms of refe rence for "having no basis in the request for
consultations".

4. With respect to the European Union's allegations of lack of specificity in the Panel Request as
required by Article 6.2 of the DSU, similar allegations were made with respect to disparate claims in
three different sections of its PR Request, to wh ich most of China's arguments in response were
equally applicable.

5. With respect to the allegations that China has not identified the specific measures at issue,
China considers that the measures at issue were unambiguously identif ied with sufficient precision.
The three measures are, as they we re identified in the Panel Requ est, (1) Article 9(5) of Council
Regulation (EC) No. 384/96 on protection against dumped imports from countries not members of the
European Community
 as amended, codified and replaced by Council Regulation (EC)
No. 1225/2009, (2) Council Implementing Regulation (EU) No. 1294/2009 of 22 December 2009 and
(3) Council Regulation (EC) No. 1472/2006 of 5 October 2006.

6. With respect to the allegations that China failed, in its Panel Request, to provide a brief
summary of the legal basis of several of its claims, also made in various sections of the PR Request,
China considers that the European Union has e rroneously considered that the provision of legal
arguments with respect to claims is what is require d to meet the "summary of the legal basis"
standard, when in fact the mere listing of provision s of agreements violated has been held to be
sufficient to meet the Article 6.2 DSU standard. Furthermore, China considers that it had generally

gone well beyond the minimum standard of what is c onsidered to constitute a "summary of the legal
basis" by explaining which specific parts of the various provisions on which it bases its claims it
considered to have been violated. In addition, China considers that the European Union did not
demonstrate that its ability to defend its interests has been prejudiced by the alleged lack of specificity
with respect to the various claims. Lastly, the European Union ignored the fact that, in order to clarify
the meaning of claims made in a panel request, reference may be made to a party's first written
submission, which in this case should certainly clar ify any ambiguities in the Panel Request, to the
extent that there were any.

7. With respect to the asserti on that certain of China's clai ms should be excluded from the
Panel's terms of reference because they were not adequately expressed in the request for consultations,
China considers that there is no WTO requirement of continuity between the claims in a consultations
request and a panel request, and to the extent th at there is, the European Union has drastically
overstated it. With respect to the addition of Ar ticle 9.1 of the Anti-Dumping Agreement that the
European Union has identified specifically in claim III.6 concerning the determination of injury in the
original investigation, China considers that the a ddition of the claim under that article cannot be said
to have changed the nature of the dispute as a w hole, and it can reasonably be said to have evolved
from the legal basis indicated in its request for consultations, thus meeting the minimum standard.

8. In the context of the European Union's cont ention that Article 17.6(i) of the Anti-Dumping
Agreement cannot be the basis of a claim because it does not impose an obligation on investigating
authorities, and thus China's claims made on the basis of that article should be excluded from the
Panel's terms of reference, China considers that, view ed in the context of the relevant agreements and
the AB's rulings that a panel must hold the investig ating authorities' establishment or evaluation of the
facts to be inconsistent with the Anti-Dumping Agreement when it does not act in conformity with the
standards established by that Article, it does indeed impose an obligation on investigating authorities.
China has further noted the undesirable practical c onsequences of considering otherwise, as well as
the fact that in this case the Panel should consider China's claims based on Article 17.6(i) of the Anti-
Dumping Agreement.

III. CHINA'S CLAIMS CONCERNING ARTICLE 9(5) OF THE BASIC AD REGULATION

9. Chinese exporting producers can obtain an indi vidual dumping margin and duty if they obtain
Market Economy Treatment (MET). In the event that they do not qualify for MET, they can obtain an
individual dumping margin and duty only if they ge t Individual Treatment (IT), subject to compliance
with the five criteria listed in Article 9(5) of the Basic AD Regulation . If, however, the non-MET
exporting producers fail to demonstrate that they satis fy the five IT criteria of Article 9(5), they
cannot obtain an individual dumping margin and duty rate and are automatically subject to the
country-wide duty rate. China considers that Article 9(5) of the Basic AD Regulation violates
Articles 6.10, 9.2, 9.3, 9.4 and 18.4 of the Anti-Dumping Agreement, as well as Articles I.1 and
X:3(a) of the GATT 1994 and Article XVI:4 of the WT O Agreement. As a result of these violations,
China requests that the Panel find Article 9(5) to be inconsistent with th e aforementioned provisions
and recommend that it be withdrawn.

10. With respect to Article 6.10, China consider s that Article 6.10 provides that as a mandatory
rule individual dumping margins be determined for each known exporter or producer, except when
sampling is applied. Article 6.10.2 further requir es that as a rule an individual dumping margin be
established for a producer that is not initially sam pled if it provides the necessary information and the
only exception is when the number of producers/exporters is so large that it would be unduly
burdensome to do so and it would prevent the timely completion of the investigation. However,
Article 9(5) creates an additional exception, with no counterpart in the Anti-Dumping Agreement, in
violation of Article 6.10, that in order to benefit from an individual dumping margin, an exporter from
China must fulfil the specific IT conditions.

11. With respect to Article 9.2, China considers th at this article is violated in that exporting
producers in non-market economy countries that do not obtain MET and fail to qualify for IT will not
be subject to an individual anti-dumping duty based on their individual dumping margin which in fact
is determinant of the 'appropr iate amount' of duty that should be collected from such exporting
producers. The Article 9.2 the requirement to specifically name the supplier/s read together with
Article 6.10 leaves no room for any other interpre tation except that the duty be established on an
individual basis for each producer/exporter involved except where it is impracticable to do so because
of the large number of producers/exporters involved.

12. With respect to Article 9.3, China submits that Article 9(5) of the Basic AD Regulation is
inconsistent with that article because if a non-mark et economy exporting producer fails to meet the IT
criteria, the dumping margin for such an exportin g producer is not established in accordance with
Article 2 of the Anti-Dumping Agreement, and it follows that the anti-dumping duty based on such a
dumping margin will lead to the collection of duty in amounts exceeding the individual dumping
margin of some of the exporting producers concerned.

13. With respect to Article 9.4, China considers that on account of the Article 9(5) criteria, the
dumping margin for the sampled non-market economy exporting producers that fail to obtain IT is not
established on an individual basis and is not cal culated in accordance with the requirements of
Article 2. Consequently, the weighted average dumping margin including the dumping margin for
non-IT exporting producers, applicable to the non-sam pled exporting producers, is not consistent with
the requirement of Article 9.4 of the Anti-Dumping Ag reement. Furthermore, contrary to Article 9.4,
non-MET exporting producers that are granted individual examination can only obtain an individual
duty only if they satisfy the IT criteria.

14. With respect to Article I:1 of GATT 1994, Chin a considers that the advantage of obtaining an
individual dumping margin and an individual duty is not accorded by the European Union
unconditionally to like products originating in the territories of all WTO Members, notably on account
of the additional Article 9(5) IT criteria appli cable only in case of imports from non-market economy
countries. In case of imports from market economies, exporting producers are automatically i.e.
without being subject to any cond itions or additional criteria, notably the IT criteria, granted an
individual dumping margin and indi vidual duty rate and this constitu tes an 'advantage' or 'favour'
within the meaning of Article I:1 of the GATT 1994, not granted in the context of imports from what
the European Union terms as non-market economy countries, including China.

15. With respect to Article X:3(a) of GATT 1994, China considers that the European Union
violates that article because it does not administer the provisions of Article 9(5) in a uniform,
impartial and reasonable manner. The European Uni on does not administer Article 9(5) in a 'uniform'
manner insofar as it applies different methodologies to establish the country-wide dumping margins
and duty rates for non-IT exporting producers depe nding on the level of cooperation of exporting
producers in a given case being high or low and even within these subset s, notably when the
cooperation is low, it uses a host of different methodologies to determine the country-wide dumping
margin and the country-wide duty rate. The Europ ean Union does not administer Article 9(5) in a
'reasonable' manner in anti-dumping investigations concerning non-market economy countries notably
China, because the country-wide dumping margin and country-wide duty are established for non-IT
exporting producers in an unreasonable manner and of ten through the inappropriate application of
'facts available'.

16. In light of the foregoing, China considers that the European Union violated Article XVI:4 of
the Marrakesh Agreement establishing the World Tr ade Organisation and Article 18.4 of the Anti-
Dumping Agreement.

IV . CHINA'S CLAIMS CONCERNING THE REVIEW REGULATION

17. China considers that the Review Regulation is inconsistent with the European Union's
obligations under the below-mentioned provisions of the Anti-Dumping Agreement and GATT 1994
and China requests that the Panel find that the Re view Regulation is inconsistent with the below-
mentioned provisions and recommend that it be withdrawn.

18. China submits that in the current case, the European Un ion violated the substantive
disciplines of Articles 2.1 and 2.4 of the Anti-Dumping Agreement as well as Article VI:1 of the
GATT 1994 in establishing continued dumping which was the basis of its determination of the
likelihood of continuation of dumping under Article 11.3 of the Anti-Dumping Agreement.

19. China considers that on account of the anal ogue country selection procedure and the resulting
selection of Brazil as the analogue country, the Eur opean Union precluded a fair comparison between
the export price and normal value in violation of Articles 2.1, 2.4 and 17.6(i) of the Anti-Dumping
Agreement, as well as VI:1 of GATT 1994. Furt hermore, the analogue country selection process was
such that it did not amount to a proper estab lishment of the facts and an unbiased and objective
evaluation of those facts, in violation of Article 17.6(i) of the Anti-Dumping Agreement.

20. Additionally, the European Union violat ed Articles 2.1 and 2.4 of the Anti-Dumping
Agreement and Article VI:1 of the GATT 1994 by us ing the PCN classification system used in the
original investigation which led to the grouping of completely different footwear types together,
disregarding the technical differences, market rea lities and consumer perceptions of the distinction
between divergent footwear types. Moreover, th e mid-investigation re-classification of footwear
categories further made an already overly broa d and hence defective definition of the product
concerned (and like product) even broader and precluded sufficient and accurate comparability
between footwear manufactured in the European Un ion, footwear imported from China and footwear
produced in the analogue country, Brazil.

21. China posits the applicability of the Article 3 provisions in the present case taking into
account – (i) the interpretation accorded by the Panels a nd AB on this issue; (ii) in light of the facts of
this case; and (iii) the approach of the European Union made known in WTO disputes.

22. With regard to the various claims, Chin a first submits that by not soliciting sampling
information from only one interested party, i.e. the complainant European Union producers
comprising the domestic industry, while all the othe r interested parties were required to complete
detailed sampling forms in order to be sampled, the European Union violated the obligation of
conducting the expiry review investigation in an objective and unbiased manner as required by
Articles 3.1 and 17.6(i) of the Anti-Dumping Agreement. The mere fact that the complainant
European Union producers had presented aggregate da ta in the expiry review request/complaint, had
provided declarations of support, and that the CE C had sent a letter on behalf of the complainant
producers mentioning their agreement to be included in the sample is not a substitute for the normal
sampling procedure that should have been app lied because the information solicited through the
sampling forms was not only significantly more deta iled but would have provided the relevant data
that was not otherwise provided to the European Union for the selection of the European Union
producers' sample, which in turn could be considered positive evidence.

23. The European Union violated Articles 3.1and 17.6(i), 6.10 of the Anti-Dumping Agreement
and Article VI:1 of the GATT 1994 - (i) by selecting the European Union producers' sample
comprising of eight complainants in the absence of affirmative, objective, credible and verifiable data
and evidence. Consequently, the European Union could not have conducted an objective examination
of the facts which were not at its disposal. Moreover, as the sample was not based on credible and
affirmative data and was selected in the absence of the requisite data in violation of Articles 3.1 and
17.6(i), it is not consistent with the sampling criteri a of Article 6.10 of the Anti-Dumping Agreement.

It follows that the European Union's evaluation of injury to the domestic industry based on such a
sample notably with regard to the price-unde rcutting calculation and the analysis of the
microeconomic indicators was inconsistent with Ar ticle 3.1 of the Anti-Dumping Agreement as well
as Article VI:1 of the GATT 1994; (ii) the European Union producers' sample was neither statistically
valid nor represented the largest percentage of volum e that could reasonably be investigated, and the
European Union failed to cover the largest percenta ge of volume that could be investigated, thus
violating Article 6.10. Consequently, the injury determination of the European Union based on such a
sample was not the result of an 'objective examination' of 'positive evidence' and was thus inconsistent
with Articles 3.1, 17.6(i) of the Anti-Dumping Ag reement and Article VI:1 of the GATT 1994; (iii)
the inclusion of a company in the sample that was no longer a European Union producer of the like
product, is inconsistent with the provisions of Articles 3.1, 17.6(i) of the Anti-Dumping Agreement
that require the investigating authorities to c onduct an injury determination on the basis of an
'objective examination' of 'positive evidence' and Ar ticle 6.10 that requires the sample to be either
statistically valid or account for the 'largest representative volume' of the production, sales of the
domestic industry. As a result the injury determin ation of the European Union for the entire domestic
industry to the extent it was based on such a sample was inconsistent with Articles 3.1, 17.6(i) and
Article 6.10 of the Anti-Dumping Agreement as well as Article VI:1 of the GATT 1994; (iv) the use
of an overly broad PCN classification system and the subsequent mid-investigation re-classification of
footwear categories by the European Union precluded an objective examination of both the volume of
the allegedly 'dumped' Chinese imports and the effect of these imports on prices in the domestic
market for like products and the consequent imp act of these imports on domestic producers of such
products within the meaning of Articles 3.1 and 17.6(i) of the Anti-Dumping Agreement and
Article VI of the GATT 1994.

24. China submits that the European Union viol ated Article 3.4 of the Anti-Dumping Agreement
because it analysed the macroeconomic injury indicators on the basis of data that included the data of
producers not part of the European Union industry, i.e.– (i) producers that were not included amongst
the complainants representing 35 per cent of the European Union production of the like product, i.e.
the domestic industry in this case. These producers were part of the European Union production but
not part of the European Union industry in this case, but their data was taken into account as the
European Union used the data for the ' whole [European]Union production '; (ii) producers that either
ceased production in the European Union, outso urced majority of their production outside the
European Union, are major importers of the product concerned and/or are re lated to exporters in
China. The data of such producers was included in the Prodcom data as well as the aggregate data
reported by the various national Member States' producer associations, which was the basis of the
European Union's evaluation of the macroeconomi c injury indicators. Moreover, the European
Union's evaluation of these injury indicators was not based on 'positive evidence' and an 'objective'
evaluation of such evidence and was thus inconsis tent with Articles 3.1 and 17.6(i) of the Anti-
Dumping Agreement.

25. With respect to the causation analysis, Chin a considers that the European Union violated
Articles 3.1, 3.5 and 17.6(i) of the Anti-Dumping Agreement by - (a) failing to ensure that injury
caused by certain other known factors was not attributed to the imports of the product concerned from
China; (b) failing to analyse several other factors 'known' to it as these were consistently pointed out
by the interested parties in their comments and ther efore attributed the injury caused by such factors
to the Chinese imports; and (c) failing to make an objective examination based on positive evidence
demonstrating that Chinese imports are through the effects of dumping, causing injury to the
European Union industry.

26. With respect to Article 6.1.2 of the Anti- Dumping Agreement, China considers that the
European Union did not make available 'promptly' the evidence provided by all the sampled European
Union producers in their injury as well as Community interest questionnaire responses to all interested
parties and thereby violated that article. More sp ecifically, the injury questionnaire responses of four
out of the eight sampled producers were not made av ailable to the interested parties 'promptly' on the

grounds that the responses contained confidential information, even though the producers concerned
did not request confidentiality. The non-confiden tial Community interest questionnaire responses of
five European Union producers sampled in the expiry review were not made available at all.

27. China further considers that in violation of Article 6.4 of the Anti-Dumping Agreement, the
European Union failed to provide timely opportunities for interested parties to see all non-confidential
information that was relevant to the presentation of their case and was used by the European Union in
the expiry review investigation with regard to the– (i) information used for establishing the sample of
the European Union producers including the info rmation pertaining to the procedure used and
concerning the data of the sample and the amen ded data concerning one sampled producer that
discontinued the production of the like product during the RIP; (ii) information regarding the revised
production and sales data of the complainant pro ducers and the sampled producers pursuant to the
discovery that one sampled producer had discontin ued the production of the like product during the
RIP; (iii) information regarding the analogue c ountry selection procedure, the cooperation of the
analogue country producers and the data submitted by some of them; and (iv) information regarding
the Community interest questionnaire responses of five European Union producers sampled in the
expiry review investigation. Consequently, Ch inese exporters were deni ed opportunities to defend
their interests in violation of the first sentence of Article 6.2 of the Anti-Dumping Agreement, which
requires that " [t]hroughout the anti-dumping investigatio n all interested parties shall have a full
opportunity for the defence of their interests."

28. China considers that the European Uni on violated Article 6.5 of the Anti-Dumping
Agreement by - (a) granting confidential treatme nt to names of the European Union producers
including complainants, supporters, sampled prod ucers and producers sampled in the original
investigation; by granting confidential treatment to some information in the expiry review request,
standing forms, CEC submissions, questionnaires of sampled EU producers; and analogue country
questionnaires, which were not conf idential; and (b) granting confiden tial treatment to some of the
information in these documents and to the na mes of the European Union producers including
complainants, supporters, sampled producers and producer s sampled in the original investigation that
completed the Community interest questionnaire, in the absence of 'good cause'. The European Union
violated Article 6.5.1 of the Anti-Dumping Agreemen t by - (a) failing to require the parties concerned
to provide non-confidential summaries of the c onfidential information submitted and/or to give a
statement of reasons as to why summarization was not possible; and (b) by failing to ensure that the
non-confidential summaries provided permitted a reasonable understanding of the confidential
information submitted.

29. Furthermore, the European Union violated Ar ticle 6.5.2 by failing to find that confidentiality
of the European Union producers' names (incl uding that of complainants, supporters, sampled
producers and producers sampled in the original inve stigation that completed the Community interest
questionnaire) was not warranted in this case on a ccount of several reasons. Consequently, Chinese
exporters and other interested partie s were denied the right to defend th eir interests as per Article 6.2.
Furthermore, it was the European Union's obligati on to find that confidentiality of information for
which non-confidential summaries were not provided in the non-confidential injury questionnaire
responses by each of the eight sampled European Union producers was unwarranted because - (i) such
information was amenable to non-confidential summarization; (ii) no request for confidentiality of the
information was made by these producers; (iii) there was no explanation from these producers why
only specific producers could not provide non-confid ential summaries for responses to particular
questions while other sampled producers had pr ovided the non-confidential summaries of their
responses to the very same questions. Thus th e European Union should have disregarded such
information and by not doing so it violated Article 6.5.2. Moreover the Chinese exporters could not
have a complete picture based on the responses of all the eight sampled producers to adequately and
in a timely manner defend their interests within the meaning of Article 6.2 of the Anti-Dumping
Agreement.

30. China further considers that the European Uni on by failing to apply facts available within the
meaning of Article 6.8 when faced with incorr ect and misleading information from the sampled
European Union producer that discontinued the pr oduction of the like product during the RIP in its
confidential and non-confidential injury questionna ire responses and from some or all sampled
producers regarding the PCNs produced by them, acted inconsistently with Article 6.8 and did not
conduct the injury determination in an objective and unbiased manner in accordance with Article 3.1
of the Anti-Dumping Agreement.

31. China considers that the European Union violated Article 12.2.2 of the Anti-Dumping
Agreement by failing to provide in the Review Regul ation relevant information on matters of fact and
law, as well as the reasons for its determinations, with respect to various key points throughout the
investigation including (i) the data used for the selection of the European Union producers' sample;
(ii) the granting of confidential treatment to th e names of the complainants, supporters, sampled
producers and producers sampled in the original i nvestigation; (iii) determination concerning the
evaluation of the macroeconomic injury indicators; (iv) the difference in the figures concerning the
representativeness of the sampled European Union produ cers at different stages of the investigation;
(v) extent to which the data of the sampled produc er that discontinued production in the European
Union of the like product during the RIP was used for the purpose of the injury determination; (vi)
how the re-classification of PCNs was achieve d for the Chinese exporters and the sampled
complainant producers; and (vii) quantification of allowances in the form of adjustments made for
differences affecting price comparability.

32. Based on the violation of the aforementioned provisions of the Anti-Dumping Agreement and
the GATT 1994, China submits that as a conseque nce, the European Union also violated
Articles 11.3, 1 and 18.1 and of the Anti-Dumping Agreement.

V . CHINA'S CLAIMS CONCERNING THE DEFINITIVE REGULATION

33. China considers that as a result of the determin ations made in the European Union's original
investigation, it has violated various provisi ons of the Anti-Dumping Agreement, GATT 1994,
China's Protocol of Accession (Protocol) and the Report of the Working Party on the Accession of
China.

34. By not examining the non-sampled c ooperating Chinese exporting producers' MET
applications, China considers that the European Uni on violated Part I, paragraph 15 (a)(ii) of the
Protocol, Paragraph 151(e), (f) of the Report, and Articles 2.4, 6.10.2 and 17.6(i) of the Anti-Dumping
Agreement. Part I, paragraph 15 (a)(ii) of China' s Protocol of requires individual examination of and
findings regarding all MET questionnaire responses that have been submitted, as in order to apply the
"analogue country" procedure, the importing WT O Member must first determine whether the
producers cannot clearly show that they operate under market economy conditions.

35. China considers that by failing to provide a disclosure on the merits of the MET questionnaire
responses, the European Union failed to provide Chinese producers a full opportunity for the defence
of their interests as required by Paragraphs 151 (e) and (f) of the Working Party's Report.
Furthermore, the European Union has not established facts in a "proper" manner and has not evaluated
those facts in an unbiased and objective way within the meaning of Article 17.6(i) Anti-Dumping
Agreement, as it requested massive amounts of in formation and, once provided, rejected that
information outright, without any analysis whatso ever. China considers that an investigating
authority must examine individual MET forms as th e MET determination is based on the information
provided by individual producers.

36. China considers that the European Union violated Article 2.2.2 of the Anti-Dumping
Agreement as the amounts for SG&A and profits established for one Chinese company granted MET
were not calculated on the basis of a "reasonable method," as the European Union used the SG&A and

profits of Chinese exporters in other anti-dumping cases involving a radically different industry from
that of the product concerned when it was clearly more reasonable to use figures reported by other
Chinese companies producing footwear. Furthermor e, the European Unio n did not calculate a
benchmark to ensure that the "cap" ( i.e. the profit normally realized by other exporters or producers
on sales of products of the same general category in the domestic market of the country of origin) was
not exceeded.

37. China considers that the European Union vi olated Articles 2.4 and 17.6 of the Anti-Dumping
Agreement, as well as Article VI:1 of the GATT 1994 by having precluded a fair comparison between
the export price and the normal value with respect to three issues – (i) with respect to the analogue
country selection procedure, the European Union showed the same sort of bias toward the selection of
Brazil as it did in the review investigation, men tioned above. Among other reasons, it granted only
minimal extensions to certain co mpanies located in Thailand and I ndonesia to submit the response to
the questionnaire for producers in potential anal ogue countries, whereas several Brazilian companies
were granted more time, and the European Union did not objectively evaluate all the information
made available by interested parties, despite rep eated requests from those interested parties. As a
result, the European Union violated the standard set forth by Article 17.6(i) requiring lack of bias, and
precluded a "fair comparison" per 2.4 as well.

38. Constituting a further violation of the fair comp arison obligation of Article 2.4, and similar to
the scenario described above, the Eu ropean Union ignored several factors which should have made it
obvious that Brazil was an inappropriate analogue country selection, among others, that costs of
production are different in the two countries and the vast differences in per capita GNP.

39. China considers that the PCN methodology was t oo broad to allow for a fair comparison, thus
violating Article 2.4. Despite requests from interest ed parties, the PCN did not take into account the
type, quantity or quality of the leather used, nor the differences between the production processes.
Furthermore, the European Union failed to iden tify footwear designed for sporting activities and
STAF, thereby mixing footwear used for sports and casual footwear. As the European Union
excluded STAF above a certain price threshold af ter the PCN had been established, it used a
methodology not based on the PCN, which did not allow for a fair comparison.

40. With respect to adjustments for differences in production costs, China considers that fair
comparison obligation under Article 2.4 and prope r establishment obligation under Article 17.6(i)
were violated because the European Union made an upward adjustment to the Brazilian normal value
on the basis of the data of the sampled Chinese expor ting producers that were not granted MET. At
one point in the investigation the European Union did not grant MET to 11 sampled Chinese
exporting producers and considered that these Ch inese exporting producers did not operate under
market economy conditions with regard to the manufac ture and sales of the like product in China, but
at another point the European Union saw fit to use the very data of the sampled Chinese exporting
producers that it otherwise disregarded, and to make significantly high adjustments of 21.6 per cent to
the normal value based on the Brazilian producers' costs.

41. China considers that because the Eur opean Union wrongly established the like
product/product concerned by not excluding STAF below €7.5/pair, even though conceptually and
technically there is no difference between STAF below and above €7.5, it violated Article 2.6 of the
Anti-Dumping Agreement. The European Union shou ld not have been permitted to sub-categorize
STAF into lower priced and higher priced categor ies, which are respectively included and excluded
from the investigation. Since price cannot be the determining factor in what constitutes a "product"
within the meaning of Article 2.6 of the Anti-Dump ing Agreement the European Union violated that
Article.

42. China considers that the European Uni on violated Article 6.10 of the Anti-Dumping
Agreement because the sample of the Chinese exporting producers selected was not based on the

largest percentage of export volumes of the product concerned. This is ass uredly the case as the
sample was established before the exclusion of STAF from the product scope of the investigation; and
the domestic sales volumes of the sampled compani es were also wrongly taken into account for
sample selection, while the key determining factor should have been the volume of export sales.

43. China considers that the European Union vi olated Articles 6.10, 9.2 and 9.3 of the Anti-
Dumping Agreement with respect to the denial of Chinese exporters of the calculation of individual
dumping margins and duty for the same reasons that it considers that the Article 9(5) of the Basic AD
Regulation violates those articles as such. China notes, however, that the facts of this case are not
such that the European Union could claim that it would be exempt from calculating individual
dumping margins as a result of the number of producer s being so large that individual examinations
would be unduly burdensome.

44. China considers that the European Union viol ated Articles 3.1, 6.10 and 17.6(i) of the Anti-
Dumping Agreement and Article VI:1 of GATT 1994 because it did not solicit sampling information
from one category of interested party, i.e. the producers. The European Union therefore
impermissibly discriminated between the complain ant and exporting producers with respect to the
sample selection procedure and therefore did not pe rform an "objective examination," and act in an
unbiased manner as required by Articles 3.1 and 17.6. By making its injury assessment partially on
the basis of unverified data of producers including those not part of the domestic industry, it did not
comply with the requirement of Article 3.1 that it make the relevant determination on the basis of
"positive evidence".

45. China considers that the European Union violated Articles 3.1, 3.2, 9.1 and 17.6(i) of the
Anti-Dumping Agreement because it wrongly calculated the underselling margin by applying a
volume-based reduction ratio to the originally calcu lated price-based margin and by allocating the
non-injurious import value in relation to import values for 2005, i.e. a period outside the investigation
period. Furthermore the underselling calculation w as based on only 46.6 per cent of exports of the
sampled Chinese exporting producers. Finally, for the calculation of the non-injurious price for the
European Union industry, the Eur opean Union established a rate of profit based on data relating to
footwear that was not part of the product subject to the investigation and concerning only one segment
of the domestic industry.

46. The European Union violated Articles 3.1 and 9.2 of the Anti-Dumping Agreement as the
anti-dumping duty on Chinese exports was not imposed and collected on a non-discriminatory basis
as required by Article 9.2, since the duty rate establis hed for China was higher than that for Vietnam,
although both the dumping and injury margins found for Vietnamese exporters were higher than those
for Chinese exporters.

47. China considers that the European Uni on violated Article 3.3 of the Anti-Dumping
Agreement because the cumulative assessment of im ports from China and Vietnam was inappropriate
and it failed to recognize important differences between China and Vietnam concerning import
volumes, market shares and prices, most notably the sudden increase of imports from China caused by
the lifting of the quota on imports of footwear as of January 2005.

48. China considers that the European Union vi olated Articles 3.1, 3.2 and 3.4 of the Anti-
Dumping Agreement because, among other reasons, (1 ) it failed to use the verified figures on
production capacity and capacity utilization provided by the European Union producers and instead
based the examination of production capacity and th e capacity utilization on the employment figures,
(2) it did not sufficiently consider various injury factor s, such as sales values or market share analysis
based on turnover, (3) several sampled producers did not show any signs of injury, and (4) it failed to
adequately assess the extent by which the 2005 im port increase was due to the lifting of the quota on
imports of footwear from China.

49. With respect to the causation analysis, Chin a considers that the European Union violated
Articles 3.1, 3.5 and 17.6(i) of the Anti-Dumpi ng Agreement as it failed 1) to abide by the non-
attribution obligation of Article 3.5 with respect to, among other factors, the lifting of the quota on
Chinese imports, the changing trends in demand and Eu ro-U.S. dollar exchange rate, 2) to take into
account factors which had a clear impact on the do mestic industry, and 3) to conduct an objective
examination based on positive evidence, thereby violating Articles. 3.1 and 17.6(i).

50. China considers that the European Union violated Article 6.1.1 of the Anti-Dumping
Agreement and Part I, paragraph 15 the Protocol because the MET questionnaire is a "questionnaire"
within the meaning of Article 6.1.1, and thus th e respondents should have had 30 days to respond to
it. In addition, the extremely high burden imposed by the breadth of information requested in the
questionnaire makes it such that parties did not have full opportunity for the defence of their interests,
as required by the Protocol, given the 15 day deadline to respond.

51. China considers that the European Union violated Articles 6.2, 6.4, 6.5, 6.5.1 6.5.2, with
respect to the treatment of confidential informa tion, as well as Article 12.2.2 of the Anti-Dumping
Agreement, with respect to the failure to adequately explain the reasons for its determinations, in very
similar ways to those described above with respect to the review investigation. The differences in the
facts are detailed in the First Written Submission, to which China refers.

52. China considers that the European Uni on violated Article 6.9 of the Anti-Dumping
Agreement because the additional de finitive disclosure regarding a change in the form of the
measures was not made in sufficient time for the inte rested parties to defend their interests, namely
only three working days which is not a sufficient time period to analyse and comment on the
substantial change in the form of the measures and the modifications in the underlying calculations of
the injury margins, and on the appropriateness of us ing data that relate to a period subsequent to the
IP.

53. China considers that the European Union vi olated Articles 1 and 18.1 of the Anti-Dumping
Agreement because based on the violation of th e aforementioned Anti-Dumping Agreement and
GATT 1994 provisions, the European Union applied an anti-dumping duty in breach of Article VI of
the GATT 1994 and the provisions of the Anti-Dumping Agreement.

ANNEX A-2

EXECUTIVE SUMMARY OF THE FIRST WRITTEN
SUBMISSION OF THE EUROPEAN UNION

PRELIMINARY ISSUES

1. China misunderstands Article 17.6(i) of the ADA. In China's view, "the Article should not
only be regarded as imposing an obligation, but imposing one of substance beyond that otherwise
contained in the ADA". China acknowledges that its interpretation of Article 17.6(i) likely does not
correspond to the original intent of the drafters. In EU's view, supported by Appellate Body case law,
Article 17.6(i) serves as a reminder (or evidence) that the duties of proper establishment of facts and
their unbiased and objective evaluation are indeed contained in other provisions of the ADA. China's
claims based on Article 17.6(i) should be excluded from the Panel' s terms of reference because they
fail to satisfy the requirements of Article 6.2 DSU.

CHINA'S "AS SUCH" CLAIM AGAINST ARTICLE 9(5) OF THE BASIC AD
REGULATION

2. The EU maintains that China's Panel Request fa iled to meet the requirements of Article 6.2 of
the DSU with respect to its claims relating to Articles 6.10, 9.3 and 9.4 of the ADA and Article X:3(a)
of the GATT 1994. The EU considers that when the descripti on of a legal claim does not relate to the
specific result of the operation of the measure at issue as described by the complainant's panel request,
the explanation provided as to how or why the meas ure challenged violates the various provisions is
insufficient to present the problem clearly, as required by Article 6.2 of the DSU, and more so in case
of "as such" claims. In order for the Panel to examine whether China's Panel Request meets the
requirements under Article 6.2 of the DSU, the EU submits that the Panel should first examine the
measure on its face. Once the scope or operation of Article 9(5) of the Basic AD Regulation has been
established, the Panel should pro ceed to examine whether China's Panel Request complies with the
requirements under Article 6.2 of the DSU. Otherwise, the requirement to "plainly connect" the
measure at issue and the legal claims under Article 6.2 of the DSU in a sufficient manner to present
the problem clearly will be meaningless. Indeed, it would amount to a mere exercise of "ticking
boxes" (i.e. whether the panel request contains a meas ure, a legal claim and a description of what is at
issue), leaving the respondent Member wondering how the measure at issue can be the source of the
alleged nullification or impairment of benefits.

3. The text of Article 9(5) of the Basic AD Regulation leaves no doubt that the issue contained
in that provision refers to the imposition of anti-dum ping duties. When Article 9(5) of the Basic AD
Regulation is seen in the context of other provisions of the Basic AD Regulation, the same conclusion
is reached about its meaning and content. Since the meaning and content of Article 9(5) are clear on
its face, then the Panel should assess the consistency of this measure "as such" on that basis alone.

4. Should the Panel find that China's Panel Request plainly connects the challenged measure
with the provisions of the covered agreemen ts in accordance with Article 6.2 of the DSU (quod non),
the EU submits that the Panel should refrain from examining China's claims under Articles 6.10, 9.2,
9.3 and 9.4 of the ADA and Article X:3(a) of the GATT 1994 since the specific measure described by
China in its Panel Request (i.e. Article 9(5) of the Basic AD Regulation) does not fall within the scope
of the obligations contained in the provisions of the covered agreements invoked by China.

5. The EU requests the Panel to reject China' s claims that Article 9(5) of the Basic AD
Regulation is "as such" inconsistent with Ar ticles 6.10, 9.2, 9.3, 9.4 and 18.4 of the ADA, Articles I:1
and X:3(a) of the GATT 1994 and Article XVI:4 of the WTO Agreement . The relevant part of
Article 9(5) of the Basic AD Regulation that Chin a is challenging in the present dispute is meant to
address an issue which is not new in the context of the application of anti-dumping rules: how to
impose anti-dumping measures on imports from non-market economy countries. In the context of
anti-dumping proceedings, the application of Article 9(5) amounts to a purely threshold question:
does the supplier meet the five criteria? Or, put in substantive terms, can the applicant company be
considered as a supplier acting independently from the State? If the answer by the EU authorities is
positive, that IT supplier is considered an inde pendent exporter or producer and the source of the
alleged price discrimination, and an individual anti-dumping duty will be specified for that IT
supplier. In contrast, if the answer is negative, that non-IT supplier is not considered a genuine
exporter or producer, but an entity which does not act independently from the State (which is
ultimately the actual producer and the source of the a lleged price discrimination) and, thus, that non-
IT supplier will be subject to the actual supplier, coun try-wide duty rate. In other words, Article 9(5)
serves to identify the relevant supplier (i.e. an inde pendent supplier or the St ate and its related export
branches) for the purpose of examining whether dum ping occurs and then addressing accordingly the
actual source of price discrimination.

6. As a non-market economy country, the EU inv estigating authorities apply Article 9(5) to
imports from China. The fact that China is a non- market economy country is very relevant for the
present case. In a non-market economy country, St ate control over the means of production and State
intervention in the economy, including international trade, imply that all the means of production and
natural resources belong to one entity, the State. All imports from non-market economy countries are
therefore considered to emanate from a single supplier, the State. The State (in this case, China) in
this sense can be considered as one supplier whose dumping behaviour can be identified and
addressed in accordance with the disciplines in the ADA. In view of the State's control over
international trade, it would not be relevant to name exporting companies which do not act
independently from the State separately since th ey collectively constituted one single supplier or
exporting entity, i.e. the State. The application of a single duty rate then also becomes necessary to
avoid circumvention of the duties (i.e. the channelli ng of exports through the supplier with the lowest
duty rate). Article 9(5) is therefore addressing this specific situation.

7. China's claims against Article 9(5) of the Basic AD Regulation are based on a
misinterpretation of the relevant provisions in the ADA as well as China's Protocol of Accession, and
fundamentally ignore the relevance of China being a non-market economy country in the present
dispute. First, Article 6.10 does not contain a strict rule requiring investigating authorities to always
determine dumping margins on an individual basis. Second, contrary to what China asserts,
Article 6.10 does not contemplate only one exception (i.e. sampling) where investigating authorities
are permitted to depart from the general principl e of determining dumping margins on an individual
basis. The interpretation that Article 6.10, firs t sentence, does not contain a strict obligation and
sampling is just but one situation where the preference for the individual determination of dumping
margins does not need to be followed is supporte d by the existence of other situations where the
preference mentioned in Article 6.10, first sentence, may not apply. Third, as the relevant case-law
has clarified, Article 6.10 should not be interp reted as requiring the determination of dumping
margins for each legal entity in al l cases, regardless of whether they are economically related to each
other. Article 9(5) aims at identifying the relevant supplier and the actual source of price
discrimination in the context of imports from non- market economy countries (i.e. an IT supplier
which acts independently from the State or the St ate and its related export branches). The EU
considers that the relationship between non-IT supplie rs and the State is similar to that addressed by
the panel in Korea – Certain Paper
, and thus the reasoning followed by that panel may be applied by
analogy in the present case.

8. China also submits that Article 9(5) of the Basic AD Regulation violates Article 9.2 of the
ADA in that exporting producers in non-market econom y countries that do not obtain MET and fail to
qualify for IT will not be subject to an individual anti-dumping duty. The EU observes that, in the
context of its Article 9.2 claim, China also ignores that, in the case of imports from non-market
economy countries, the State and those companies which do not act independently from the State, can
be considered as one single supplier of the pro duct concerned and the actua l source of any alleged
price discrimination. Thus, the imposition of anti-dumping duties "on a country-wide basis" pursuant
to the operation of Article 9(5) would imply th e imposition of duties on the actual supplier (i.e.
"China Inc.") for which injurious dumping is fo und pursuant to an investigation conducted in
accordance with the requirements of the ADA. On this basis, China's observations about the terms
"appropriate", "amounts", "sources" as well as other contextual considerations would fall. In addition,
assuming that Article 9.2 of the ADA lays down the principle that anti-dumping duties are applied on
an individual basis for each supplier involved, the EU submits that China's interpretation that the only
exception to this principle is where it is imprac ticable to do so "because of the large number of
suppliers involved", as provided by Article 9.4 of the ADA, i.e. when sampling is used, is incorrect.
Indeed, sampling is not the only situation where in vestigating authorities can depart from the general
principle contained in Article 6.10, first senten ce. Likewise, Article 9.2 expressly permits the
imposition of duties on a country-wide basis in othe r cases than the sampling scenario, in particular
when it is "impracticable" to do so on an i ndividual basis. Moreover, Article 9.4 of the ADA cannot
be the only exception to the individual imposition of duties, as China argues, because, by definition,
that would deprive the third sentence of Article 9.2 of the ADA of any meaning. In fact, this
interpretation would make that sentence ("impracti cable") redundant and unnecessary, contrary to the
principle of effectiveness in treaty interpreta tion, since the only excep tion would already be
mentioned in Article 9.4. The EU considers that Article 9.2 of the ADA, third sentence, in view of its
text, context, and object and purpose leads to the conclusion that Members are allowed to impose anti-
dumping duties on a country-wide basis in cases where the specification of individual anti-dumping
duties per supplier would be ineffective. This would be the case, in particular, when the imposition of
individual anti-dumping duties per supplier could r esult in the anti-dumping measure being deprived
of any effect on the source of the price discrimination. The EU submits that Article 9(5) of the Basic
AD Regulation falls under that category.

9. The EU considers that China's claims under Articles 9.3, 9.4 and 18 of the ADA as well as
Article XVI:4 of the WTO Agreement are entirely dependent on a finding that Article 9(5) "as such"
infringes Article 9.2 and, to some extent, Article 6.10. Moreover, the EU notes that China's claim
under Article I:1 of the GATT 1994 depends on a finding as to whether the ADA permits an
investigating authority to require suppliers in case of imports from non-market economy countries to
prove that certain conditions are met in order to obtain an individual anti-dumping duty. If the ADA
so permits, in view of the lex specialis principle, and Article II:2(b) of the GATT 1994, no violation
of Article I:1 of the GATT 1994 can be found. Finally, the EU fails to see how Article 9(5) can fall
within the scope of Article X:3(a) of the GATT 1994. Thus, the Panel should reject China's claim.

REVIEW REGULATION

10. Claim II.1 and II.13. Paragraph 151 of the Working Party Report on the Accession of China
creates no obligations for other WTO Members. Th e purpose of choosing an analogue country is to
secure a comparable price as the normal value. Ch ina's accusation of bias in the selection of the
analogue country is entirely unfounded. The obligation on a Member making the choice of such a
country is to find one that is 'appropriate' unde r the circumstances, not the one that is 'most
appropriate'. Competitiveness of the domestic market is a factor to be considered in making the
selection, and was amply satisfied by Brazil. Diffe rences in economic development are not relevant.
The Commission placed significant, but not exclus ive reliance on the representativeness of domestic
sales. China's complaints about the lack of sp ecificity of the EU's PCN system of product
classification are unfounded.

11. China errs by disregarding Article 11.3 of the ADA. There is a difference between saying
that Article 3 of the ADA applies to an expiry review measure – which is what China argues and what
the Appellate Body in the US – Oil Country Tubular Goods Sunset Reviews case explicitly said is not
the case – and saying that Article 3 of the ADA may provide "guidance" for a consideration of claims
raised under Article 11.3 " where appropriate ". The Panel is asked to review claims II.2 to II.5 in
light of the various provisions of Article 3 cited by China, in isolation from the disciplines set out in
Article 11.3 of the ADA. Such an approach constitutes a lega l error which should be avoided. For
this reason alone, the Panel should not consider China' s claims. China's approach is also not justified
by the facts of the case.

12. Claim II.2 . China's claim is legally and factua lly mistaken. Contrary to China's
understanding, the domestic industry for the purposes of the review has been defined as the totality of
the EU producers. On law, China effectively ar gues that a compliance with the requirements of
Article 3.1 of the ADA depends on the conduct of the sampling procedures pursued for the purpose of
establishing dumping under Article 2 of the ADA. In the EU's view, Article 3.1 sets up an objective
standard (instead of a relative or a comparativ e standard) the compliance with which has to be
considered on the merits of what happened in the injury investigation. Contrary to what China tries to
imply – the panel in EC – Salmon (Norway) never stated that the disciplines of Article 6.10 of the
ADA should be followed in an injury analysis. Ra ther, it stated: "… we see no basis to impose the
criteria of Article 6.10 on sampling in the context of injury." In any event, no EU producer was
"considered automatically eligible to be sampled" without having to provide detailed information.

13. Claim II.3. China's claims are based on legal and factual misunderstandings. On law, the
issue of whether an injury analysis based on sampling is consistent with the ADA is subject to an
examination based on Article 3.1 of the ADA (and not Article 6.10 thereof, as China argues). On
facts, China's concern is not, in reality, with the availability of data and their presence on the file, but
rather with the access of China's interested parties to this data. This is not, however, an issue which
arises, legally, under Article 3.1 of the ADA. The selection of the sample has in any event been
described in several notes available in the non-confid ential version of the file. With respect to the
producer who discontinued production during the RIP, only the real level of production in the EU
during the RIP was taken into account, as explained in the Review Regulation.

14. Claim II.4 . Contrary to what China asserts, the "domestic industry" in the review
investigation did not comprise only the complain ing producers. China's claim thus does not
correspond to the facts. Further, given that the "domestic industry" was defined as the entire domestic
industry (rather than merely the complainants), it was not overly difficult to adjust the Prodcom data
to take account of the two companies which were excluded as related (recital 19 of the Review
regulation) and the one company which discontinued production (recital 23). The EU submits that in
the circumstances of this case, the approach adopt ed by the EU investigating authority (namely
seeking data at the macro-level from Prodcom a nd producer associations, with subsequent
verification), together with subsequent cross-check ing of the information received from these various
sources, including information obtained from the samp le and specialised sectoral studies, was entirely
reasonable and perhaps yielded even the highest level of accuracy possible.

15. Claim II.5. China's claim is insufficiently speci fic to qualify under Article 6.2 of the DSU.
The ADA lays down no methodology for dete rmining causation. China's fails in its attempt to show
that the EU wrongly attributed to the dumped imports injury caused by other factors. The
examination of the issue of 'structural inefficiency' shows that the condition of the EU industry did not
break the causal link between the dumped imports and the injury to the industry. Appropriate
consideration was given to the effects of non-dum ped imports from third countries, contraction in
demand, and changes in pattern of consumption; furthermore high labour costs, outsourcing, and
exchange rate fluctuations were properly addressed.

16. Claim II.6 . The EU was correct in removing uncertainties as to the confidential status of
submissions, and these explained the delays in maki ng information available in the various instances
raised by China.

17. Claim II.7 . In Article 6.4 of the ADA the notion of information is a narrow one, and the
provision regulates the period following the provision of information. The various instances raised by
China either fell outside the scope of this provisi on or involved circumstances where its requirements
were fulfilled by the EU authorities, both as regard s the selection of the sample of EU producers, and
of the analogue country.

18. Claim II.8. That a particular company is supporting a complaint is a fact that is capable of
being kept confidential. The ADA does not provide for weighing the importance of protecting
confidentiality, and the complainants gave adequate grounds for protecting their identities. The EU's
treatment of the annexes to the Review Request and of responses of the sampled EU producers
respected the rules on confidentiality. Good cause for protecting information that is 'by nature'
confidential is provided by demonstrating that the information falls into this category.

19. Claim II.9 . Neither Article 6.2 nor Article 6.5.2 of the ADA provide a basis for making
claims in this context. The complainants' demand for confidentiality was justified.

20. Claim II.10. Article 6.8 of the ADA does not impose an obligation on national authorities to
reject information; it is permissive in charact er. The company referred to by China ultimately
supplied correct data to the EU authorities. The same is true of China's claim regarding the allocation
of products to PCNs.

21. Claim II.11 . China's invocation of Article 11.3 of the ADA in a consequential role
misunderstands its place in the Agreement as regards expiry reviews.

22. Claim II.12. China's invocation of Article 12.2.2 of the ADA is so vague as to place its claim
outside the limits set by Article 6.2 of the DSU. In the instances cited by China the information
published by the EU was sufficient to satisfy the requirements of the ADA. The EU was not engaged
in 'reconciling diverging information and data' a nd so did not publish an evidentiary path. The
justification for protecting identities was ad equately explained as was the evaluation of
macroeconomic injury indicators, the representa tiveness of the sample, the discontinuation of
production and several other topics raised by China.

23. Claim II.14. China's claim of consequential breach is redundant.

DEFINITIVE REGULATION

24. Claim III.1/Claim III.20 . The EU considers that China's claims are based on a wrong
understanding of the implication of the use of sampl ing in the present case. Contrary to what China
argues, the examination of the MET applications is not required with respect to exporting producers
which do not fall within the sample and do not qualify for individual examination. On this basis, the
Panel should reject China's claim in their entirety.

25. Claim III.2. The third option in Article 2.2.2 of the ADA for setting the SG&A and profits in
a constructed price requires reasonableness and imposes a cap. The former implies three elements for
matching the analogue sales with the original sale – similarity of product, same market, ordinary
course of trade. The EU had to balance these, a nd China has not shown that the EU's decision was
unreasonable. The conditions assumed in the cap coul d not be applied in the circumstances of this
case.

26. Claim III.3 / Claim III.20 . There is no evidence that the Commission was biased in the
procedures that it adopted in choosing an analogue c ountry. In this choice the EU was right to place
considerable emphasis on the possibility of making comparisons with sales prices. The EU's gave
correct consideration to the factors of competition, labour costs, and the representativeness of sales.
China has presented no arguments or evidence that ca ll into question the suitability of the EU's PCN
system for comparing prices. The adjustment for leather was necessary, and possible because the cost
differences could be determined on the basis of the international market.

27. Claim III.4 . China confuses the notion of 'product concerned' with that of 'like product';
there is no rule that limits the scope of an ti-dumping proceedings to like products. China has
established no legal rule governing that scope. No r has China shown that the EU may not use a value
limit on its definition of the product scope.

28. Claim III.5. China's claim, grounded in Article 6.10 of the ADA, is based on an erroneous
understanding of the ADA. The EU refers to its explanations on this issue provided in the section
addressing China's claim II.2. The information on th e macroeconomic indicators with respect to the
Community industry was obtained from the complaint and the standing forms sent to the
complainants. Hence, China is incorrect in submitting that the EU relied on data from associations
which included companies that were not parts of the industry. With respect to the issue of
verification, China's argumentation is based on a legal error.

29. Claim III.6 / Claim III.16. China fails to understand that the purpose of the EU's lesser duty
rule is to determine
what price increase would be necessary to remove the injury. China's
invocation of Article 9.1 of the ADA and its shift of focus to the EU's lesser duty rule are not
permitted by the DSU because they were not raised in consultations. Article 3.1 of the ADA
addresses the existence of injurious dumping, not the calculation of the 'lesser duty', which in any
case is an entirely voluntary matter. Hence, with respect to the claim at issue, a Member which
takes such action is not obliged to observe the legal concepts found in Article 3. There is no basis
for claiming that the EU failed properly to evaluate the facts. China has not established that the
EU's methodology for calculating the lesser duty was discriminatory.

30. Claim III.7 . Claims of failure to make an obj ective examination should be framed under
Article 3.1 of the ADA. The EU's description of volumes of imports having deve loped 'in parallel'
was clearly not intended as a mathematical expression. The right to cumulate does not depend on the
existence of normal conditions of competition. Chin a has not refuted the EU finding that the market
shares of China and Vietnam developed similarly.

31. Claim III.8. China's interpretation of the notion of production capacity (as an injury factor)
is too restrictive; it has not shown that in the ci rcumstances of the footwear industry the EU was not
justified in linking it to employment. The combin ation of data from the whole industry with those
from sampled companies is an acceptable, indeed commendable practice. Furthermore, relying on
data from all the sampled companies (rather than just three) would have produced the same result.
The injury finding involves an overall appreciation of factors, and is not determined by any single
factor. Since profit figures are themselves usually small margins, an index of annual change can
produce very large figures. Proper account was taken of the margin of dumping.

32. Claim III.9 . Exporters are not eliminated as a cause of injury merely because some
circumstance, such as removal of a quota, has given them the opportunity to dump. The EU fully
examined the role of changes in consumer preferences as a potential cause of injury, and its evaluation
of consumption is not open to criticism. Exporte rs cannot escape responsibility for injury by blaming
exchange rate movements. The methodology adopte d by the EU for injury assessment discounted the
effects of changes in export performance.

33. Claim III.10 / Claim III.11 / Claim III.12 . The complainants made a reasoned application
for confidentiality regarding the identities of them selves and their supporters, and the EU justifiably
accorded them that treatment. G ood cause was given by all these par ties. Several of China's claims
cover information about which it had invoked no duty of disclosure. Other claims concerned data that
were properly accorded confidential treatment. On several matters it appears that no request for the
data was made by interested parties. Some of Chin a's claims are stated with insufficient precision to
be clearly understood. Its claims of insufficien t summarization of confidential information are not
justified.

34. Claim III.13 . The document sent to exporters regarding possible MET was not a
'questionnaire' in the sense of Article 6.1.1 of the ADA. That term is reserved for the main,
comprehensive list of questions sent to interested parties. Paragraph 151 of China's Accession
Working Party Report provides no basis for a claim. The EU gave adequate time for exporters to
respond to its queries.

35. Claim III.14 . The document explaining the changed basis for calculating the 'lesser duty'
was a follow-up to the disclosure made by the EU under Article 6.9 of the ADA. As such, the EU was
under no obligation to allow interested parties the opportunity to comment, although it did in fact do
so.

36. Claim III.15. China is mistaken is saying that one company was removed from the list of the
sampled exporters. Rather, the removal of STAF from the 'product concerned' had consequences for
the export volumes of the firms in the sample. The selection criterion of the 'largest volume of the
exports from the country in question' allows for c onsideration to be given to the level of domestic
sales because it is qualified by the phrase 'that can r easonably be investigated'. In any event, China
agreed with the EU on the composition of the sample.

37. Claim III.17/Claim III.18. By it is own admission, China's claim is based on the assumption
that the application of Article 9(5) of the Basic AD Regulation is inconsistent with Articles 6.10,
6.10.2, 9.2 and 9.3 of the ADA in all cases. As the EU has shown before, China's "as such" claim is
without merit and, thus, the Panel should reject it also in the specific context of the original
investigation at issue.

38. Claim III.19. The EU published sufficient informati on about the selection of the sample. In
other respects China exaggerates the amount of information that must be published, or includes topics
where there is no obligation to publish. Not every ar gument that is raised by an interested party need
be addressed.

39. Claim III.21. China's claim of consequential breach is redundant.

CONCLUSION

40. The EU requests the Panel to reject all of China's claims.