Proposal for a Council Regulation (EC) amending Regulation (EC) No 1567/97 concerning a definitive anti- dumping duty on imports of leather handbags originating in the People's Republic of China
Date: 1998-10-23
Institutions: European Commission
Subjects: China, anti-dumping duty, fancy leather goods and glove-making industry, import, leather

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 23.10.1998 
COM(1998) 573  final 

Proposal for a 
COUNCIL REGULATION (EC) 

amending Regulation (EC) No 1567/97 concerning a definitive 
anti-dumping duty on imports of leather handbags originating 
in the People's Republic of China 

(presented by the Commission) 

EXPLANATORY  MEMORANDUM 

1. 

2. 

Attached  is  a  proposal  for  a  Council  Regulation  amending  Regulation  (EC) 
No 1567/97  concerning  a  definitive  anti-dumping  duty  on  imports  of  leather 
handbags originating in the People's Republic of China. 

The  investigation  has  shown  in  particular  that  individual  duties  should  be 
instituted  for  a  number  of  companies  that  were  found  to  be  eligible  for 
individual treatment. 

Proposal for a 
COUNCIL REGULATION (EC) 

amending Regulation (EC) No 1567/97 concerning a definitive 
anti-dumping duty on imports of leather handbags originating 
in the People's Republic of China 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, 

Having  regard  to  Council  Regulation  (EC)  No  384/96  of  22  December  1995  on 
the 
protection  against  dumped 
European Community1, as last amended by Regulation (EC) No 905/982, and in particular 
Article  11(3) thereof, 

from  countries  not  members  of 

imports 

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

Whereas: 

(1) 

(2) 

I.  PREVIOUS PROCEDURE 

(EC)  No  1567/973, 
imports  of 
in 

imposed  a  definitive 
the  Council 
By  Regulation 
leather  handbags, 
falling  within 
anti-dumping  duty  on 
CN code 4202 21 00,  originating 
the  People's  Republic  of  China. 
The measures  consist  of  an ad valorem anti-dumping  duty  of  38% applicable  to 
all  exporters  except  for  the  companies  Jane  Shilton  (Pacific)  Ltd.  (0.0%)  and 
Picard International Ltd. (7.7%). 

II.  REVIEW 

the  Commission  published  a  notice 

On  13  September  1997, 
Official Journal of  the European Communities*,  inviting  Chinese  exporters  of 
leather  handbags  to  submit  information  in  order  to  establish  whether  there  was 
sufficient  evidence  warranting  the  initiation  of  an  interim  review  of  Regulation 
(EC) No  1567/97 limited to the issue of individual treatment of exporters. On the 
basis  of  the  information  received  following  the  publication  of  that  notice,  the 
Commission  considered 
there  were  sufficient  grounds  warranting, 
exceptionally,  the  initiation  of  an  early  interim  review  of  the  existing  measures 
limited to the aspect of individual treatment. 

that 

the 

in 

1  OJ L 56, 6.3.1996, p. 1. 
2  OJL  128, 30.4.1998, p. 18. 
3  OJL208, 2.8.1997, p. 31. 
4  OJC 278, 13.9.1997, p. 4. 

(3) 

(4) 

(5) 

in 

the  Official  Journal  of 
Consequently,  by  a  notice  published 
the European Communities* 
the 
the  Commission, 
Advisory Committee  and  in  accordance  with  Article  11(3)  of  Regulation  (EC) 
No 384/96 (hereinafter  referred  to as the 'Basic Regulation'), initiated a review of 
the anti-dumping measures in force  and commenced an investigation. The review 
was  limited  to  the  aspect  of  whether  the  cooperating  exporters  qualified  for 
individual  treatment  in  respect  of  their  export  price,  in  which  case  individual 
dumping and injury margins could be established for these exporters. 

consulting 

after 

The  Commission  officially  advised  the  authorities  of  the  exporting  country. 
Furthermore, it gave the parties directly  concerned  the opportunity to make their 
views known in writing and to request a hearing. 

The  Commission  sent  questionnaires  to  the  parties  known  to  be  concerned  and 
received  detailed  information  from  the  following  companies  with  respect  to 
exports  to  the  Community  of  leather  handbags  produced  by  themselves  or  by 
companies related to them in the People's Republic of China: 

The Well Leatherware Manufactory  Limited, Hong Kong*; 

The  IP  Handbag  Connections  Limited,  Hong  Kong*  (in  respect  of 
IP Handbag Industrial Ltd.); 

Lucci Creation Limited, Hong Kong* ; 

respect  of 
South  Sea  Leatherwares  Limited,  Hong  Kong* 
Shundi South Sea  Leather  Handbag  Factory  Ltd.  and  Nam  Chow  Leather 
Products Co. Ltd.); 

(in 

Colleen  Handbags  Manufacturer  Limited,  Hong  Kong*  (in  respect  of 
Shenzhen Colleen Handbag Co. Ltd.); 

Crownwick  Enterprises  Limited,  Hong  Kong  (in  respect  of  Shenzhen 
Crownwick Leatherwares Co. Ltd.); 

C-Duck Leather Goods Company Limited, the People's Republic of China; 

Lai Wah Industries Limited, Hong Kong*; 

Industries  Limited,  Hong  Kong* 

W.K.  Maxy 
respect  of 
W.K. Maxy Industries  Ltd.  and  W.K.  Maxy  Leather  Goods  Industries 
Zhongshan Co. Ltd.); 

(in 

Wideland Trading Company, Hong Kong*; 

Sitoy  (H.K.)  Handbag  Fty.  Limited,  Hong  Kong*  (in  respect  of  Dongguan 
Sitoy Leather Products Factory Ltd.); 

Superior  Leather  Limited,  Hong  Kong  (in  respect  of  Ever  Trust  Leather 
Products Shenzhen Co. Ltd.); 

5 

OJC  378,  13.12.1997,  p. 8. 

C&S  Company  Limited,  Kyongki-Do,  South  Korea  (in  respect  of  Kunshan 
C&S Leather Products Co. Ltd.); 

Taiwan Yamani Inc., Taipei, Taiwan (in respect of Yamani Continental Inc.). 

(6) 

The  Commission  sought  and  verified  all  information  it  deemed  necessary  for 
purposes  of  its  investigation  and  carried  out  on-the-spot  verifications  at  the 
premises of the companies indicated in recital 5 with an asterisk. 

(7) 

In addition, the following  importers, located in the Community, cooperated in the 
investigation and their replies were verified  on the spot: 

Plastimoda S.p.A., Italy, 

Medici Grimm KG, Germany. 

(8) 

(9) 

Since  the  scope  of  the  investigation  was  limited  to  the  issue  of  individual 
treatment, and in order to enable the Commission to expedite  its investigation, it 
was  considered  appropriate,  exceptionally,  to  use  for  the  review  the  same 
investigation  period  as  that  for  the  initial  investigation,  that  is  1 April  1995  to 
31 March  1996  (hereinafter  referred  to  as  'the  investigation  period')  so  as  to 
compare export price and normal  value within the  same time period  (as required 
by Article 2(10) of the Basic Regulation). 

III.  PRODUCT UNDER CONSIDERATION 

The  product  under  consideration  is  the  same  as  that  described  in  Article  1 of 
Regulation (EC)  No  1567/97,  that  is  handbags  with  outer  surface  of  leather, 
of composition  leather  or  patent  leather,  whether  or  not  with  a  shoulder  strap, 
including  those  without  handle,  designed  primarily  to  contain  small  objects 
for personal  use  such  as  keys,  purses,  make-up  and  cigarettes,  regardless  of 
their size and  form  and  currently  classifiable  under  CN  code  4202  21  00 
(hereinafter  referred to as 'leather handbags'). 

In this respect, it should be clarified  that  so-called  backpacks  and  shopping bags 
are considered to be 'handbags'  and thus covered by the investigation (and by the 
measures imposed) if they fit the aforesaid  description, regardless of the particular 
size and form these products may have. So-called belt-bags, that is bags which are 
not  designed  to  be  carried  by  hand  and/or  on  shoulders,  are  not  covered  by 
the investigation. 

IV.  DUMPING 

1.  Normal value 

(10)  Since  the  investigation  is  limited  to  individual  treatment,  that  is  an  issue 
concerning  the determination  of an individual  dumping margin  on the basis of a 
comparison  of  the  exporter's  individual  export  prices  with  the  normal  value 
established  in the analogue country, the normal value as established  in the initial 
investigation  in  Indonesia  -  selected  as  analogue  country  in  accordance  with 
Article 2(7) of the Basic Regulation - has been retained. 

This was considered  appropriate, even more so as the investigation  period  of the 
review  coincides  with  that  of  the  initial  investigation,  that  is  to  say  the  export 
prices and normal value compared were effectively  established  for the same time 
period, as required by Article 2(10) of the Basic Regulation. 

2.  Export price 

(a)  Individual treatment 

(11)  All  exporters  cooperating  in  the  investigation  requested  individual  treatment 

pursuant to Article 9(5) of the Basic Regulation. 

Consequently,  it was verified  whether those companies  sufficiently  demonstrated 
that they enjoyed  a degree of legal and factual  independence  from  the authorities 
in the  People's  Republic  of  China,  comparable  to that  which  would  prevail  in a 
market  economy  country,  so  as  to  ensure  that,  if  those  companies  were  to  be 
granted  individual  treatment,  no  genuine  risk  would  ensue  that  exports  from 
companies  subject  to  a  higher  anti-dumping  duty  rate  would  be  channelled 
through them. To this end, the Commission addressed  detailed questions to those 
companies  regarding  ownership,  management  and  control  of  production  and 
commercial policies. 

(12)  The  companies  which  submitted  questionnaire  responses 

in  the  present 
investigation were incorporated  in the Hong Kong Special Administrative Region 
(which  is not part  of the customs territory  of the People's  Republic  of China) or 
outside  the  People's  Republic  of  China  but  exported  to  the  Community  leather 
handbags  manufactured  at  operations  in  the  People's  Republic  of  China 
controlled  by them. Those operations were either  entities  without  a legal  identity 
of  their  own,  producing  handbags  on  the  basis  of  so-called  'processing  with 
foreign  materials'  agreements,  or  legal  entities  in  their  own  right  under 
Chinese law,  structured  as  so-called  'Sino-foreign  cooperative joint  ventures'  or 
'wholly-owned foreign  enterprises'. 

(13) 

It  was  found  that  some  of  the  exporters  were  subject  to  a  restriction  in  the 
People's Republic of China concerning the proportion of the output which may be 
sold  on the Chinese  domestic  market.  However,  that  restriction,  which  appeared 
not  to  be  strictly  enforced  by the  Chinese  authorities,  had  to  be  assessed  in  the 
concrete economic context within which each of these companies were operating 
in the People's Republic of China, in order to appraise whether the authorities in 
that  country  would  have  sufficient  leverage  to  induce  these  companies  into 
channelling  exports  of  other  Chinese  manufacturers  subject  to  a  higher 
anti-dumping duty rate. This leverage hinges on the level of investment at risk in 
the  People's  Republic  of  China  relative  to  turnover.  The  level  of  investment  in 
turn mainly depends on the characteristics  of the manufacturing  process used  for 
the products concerned. 

In this respect, it should be pointed out that the manufacturing  of leather handbags 
is a particularly  labour-intensive  and hardly automated  industry. The value of the 
assets deployed at the manufacturing  facilities  in the People's  Republic  of China 
was  found  to  be  very  small,  particularly  when  compared  with  the  turnover 
light  and  relatively 
generated.  The 

limited  machinery  used  consists  of 

conventional  equipment,  such as sewing  and stitching machines, which  in many 
cases had moreover been fully depreciated. 

In the light of these findings, it is considered that the authorities  in the People's 
Republic of China would not have sufficient  leverage to effectively  influence the 
commercial behaviour of the exporters concerned, considering also that the costs 
and procedures  involved  to  close  down  the  manufacturing  operations  are very 
limited. Consequently,  it was concluded that this restriction is not an obstacle to 
granting  individual  treatment  since  it  does  not  create  a  genuine  risk  of 
circumvention via possible channelling (see recital 11). 

(14) 

In the  course  of  the  present  investigation  an exporter  came  forward  which had 
cooperated in the initial investigation and was granted individual treatment and a 
zero  duty  rate  in  Regulation  (EC)  No  1567/97,  as  it  was  found  not  to  have 
dumped.  It  informed  the  Commission  about  a  change  in  the  structure  of  its 
operations which took place after the investigation period and as a result of which 
the  legal  entity identified  as the  "exporter" in Regulation  (EC) No  1567/97  was 
found  to have changed.  Upon  submitting  the appropriate  evidence  requested by 
the  Commission,  it  was  found  that  the  new  legal  entity  continues  to  satisfy  all 
requirements for individual treatment and that therefore the zero duty rate has to 
be attributed to it. 

(b)  Determination of the export price 

(15) 

In accordance with Article 2(8) of the Basic Regulation, where exports were made 
to unrelated importers  in the Community,  the export prices were  established on 
the basis of the prices actually paid or payable for export to the Community. 

Where  exports  were  made  to  a  related  importer  in  the  Community  or  a 
compensatory  arrangement  existed  between  the  importer  and  the  exporter, 
the export  price  was  established,  in  accordance  with  Article  2(9)  of  the 
Basic Regulation,  on  the  basis  of  resale  prices  to  the  first  independent  buyer 
adjusted  to  take  account  of  all  costs  incurred  between  importation  and  resale, 
including customs duties and a 5% profit on turnover, that is the average profit of 
the unrelated importers which cooperated in the initial investigation. 

3.  Comparison 

(16) 

In accordance with Article 2(10) and (11) of the Basic Regulation, the weighted 
average  normal  value  was  compared  with  the  weighted  average  export  price  at 
FOB level  In order to make a fair comparison between normal value and export 
price, adjustments  claimed made for differences  in physical characteristics, import 
charges,  level  of  trade,  transport,  insurance,  handling  charges,  packing  costs, 
credit,  discounts  and  warranty  were  granted,  provided  it  could  be  demonstrated 
that they affected  prices and price comparability. 

(17)  A  number  of  exporters  claimed,  pursuant 

the 
Basic Regulation,  that  an  adjustment  should  be  made  to  take  into  account 
differences  in physical  characteristics  between  the  leather  handbags  produced  in 
Indonesia,  on  the  basis  of which  normal  value  was  computed,  and  the  exported 
leather  handbags  produced  in the  People's  Republic  of  China,  used  to  calculate 
export  prices.  Where  it  was  found  that  the  outer  surface  of  leather  handbags 

to  Article  2(10)(a)  of 

exported from the People's Republic of China to the Community was of a type of 
leather  of  a  significantly  lower  quality  (split  or  suede  leather  and  patchwork 
leather)  than  that  of  the  handbags  used  to  establish  normal  value  in  Indonesia 
(genuine  leather),  the  normal  value  was  adjusted  to  reflect  the  impact  of  such 
difference  on the market value of the leather handbags. 

4.  Dumping margins 

(18)  The dumping margins  expressed  as a percentage  of the  CIF Community frontier 
value  of the  imports  were  found  to  be  as  follows  with  respect  to  the  exporters 
eligible for individual treatment: 

-  C-Duck Leather Goods Company Ltd.: 0.0%; 

-  Wideland Trading Company: 0.0%; 

-  Lucci Creation Ltd.: 0.0%; 

-  Kunshan C&S Leather Products Co. Ltd. : 0.0%; 

-  Yamani Continental Inc.: 0.0%; 

- 

IP Handbag Industrial Ltd. : 0.0%; 

-  W.K.  Maxy  Industries  Ltd.  and  W.K.  Maxy  Leather  Goods  Industries 

Zhongshan Co. Ltd. : 0.0%; 

-  Lai Wah Industries Ltd. : 3.1 %; 

-  Shenzhen Colleen Handbag Co. Ltd.: 4.2%; 

-  The Well Leatherware Manufactory  Ltd.: 6.5%; 

-  Shenzhen Crownwick Leatherwares Co. Ltd.: 12.4%; 

-  Shundi  South  Sea  Leather  Handbag  Factory  Ltd  and  Nam  Chow  Leather 

Products Co. Ltd.: 39.0%; 

-  Ever Trust Leather Products Shenzhen Co. Ltd.: 45.2%; 

-  Dongguan Sitoy Leather Products Factory Ltd.: 58.3%. 

It  should  be  noted  that  the  names  of  some  of  the  companies  above  differ  from 
the ones  listed  in  recital  5  in  those  instances  where  the  manufacturing  of  the 
product  concerned  takes  place  at  companies  in  the  People's  Republic  of  China 
which  have  their  own  legal  identity  according  to  Chinese  law  and  which 
must therefore  be  considered 
the 
present investigation. 

the  exporter  for  purposes  of 

to  be 

V.  AMENDMENT  OF THE MEASURES BEING  REVIEWED 

(19) 

In  accordance  with  the  lesser-duty-rule  as  set  out  in  Article  9(4)  of  the 
Basic Regulation,  it  was  also  examined  whether,  for  each  company  eligible  for 
individual treatment, the amount of the duty based on the injury  margin would be 
lower  than  the  duty  based  on  the  dumping  margin.  The  methodology  used  to 
calculate  injury  margins  was  the  same  as  that  in  the  initial  investigation.  In  all 
cases the  injury  margins  were  found  to be higher  than  the  dumping  margins and 
the duty rates should therefore be based on the dumping margins  found. 

It was submitted that the duty rates established in the present investigation should 
take  retroactive  effect  as  from  the  date  of  entry  into  force  of  Regulation  (EC) 
No 1567/97.  This  argument  could  not  be  accepted  in  view  of  the  prospective 
nature  of  measures  adopted  purusant  to  review  investigations  and  also  as  this 
would  result,  for  those  exporters  which  receive  as  a  result  of  the  present 
investigation a lower duty rate than the residual duty, in an unwarranted bonus for 
their non-cooperation in the initial investigation. 

(20)  Given  the  relatively  low  volume  of  exports  of  the  companies  which  should 
receive  individual  treatment,  as  compared  with  the  total  volume  of  exports 
from the People's Republic of China of the product concerned to the Community, 
it  was  concluded  that  a  change  of  the  country-wide  duty  rate  specified  in 
Regulation (EC) No  1567/97 was unnecessary. 

(21)  The interested parties were informed  of the facts  and considerations  on the basis 
of which it was intended to amend Regulation (EC) No  1567/97, and were given 
an opportunity  to comment.  This comments  were taken  into  account  and,  where 
appropriate, the findings were modified  accordingly. 

(22)  Given the above, the Council concludes that Regulation (EC) No  1567/97 should 

be amended. 

(23)  This review does not  affect  the date on which  Regulation  (EC) No  1567/97 will 

expire, pursuant to Article  11(2) of the Basic Regulation, 

HAS ADOPTED THIS REGULATION: 

Article 1 

Article  1(3) of Regulation (EC) No  1567/97 is hereby amended as follows: 

1. 

In  the  first  indent,  the  words  'Jane  Shilton  (Pacific)  Ltd.'  are  replaced  by 
'Zengcheng Jane Shilton Leather Goods Company Ltd.'. 

2. 

The following indents are added: 

"-  C-Duck Leather Goods Company Ltd.: 0.0% (Taric additional code: 8961); 

Wideland Trading Company: 0.0% (Taric additional code: 8961); 

Lucci Creation Ltd.: 0.0% (Taric additional code: 8961 ); 

Kunshan C&S Leather Products Co. Ltd.: 0.0% (Taric additional code: 8961); 

9 

Yamani Continental Inc.: 0.0% (Taric additional code: 8961); 

- 

IP Handbag Industrial Ltd.: 0.0% (Taric additional code: 8961 ); 

-  W.K.  Maxy  Industries  Ltd.  and  W.K.  Maxy  Leather  Goods  Industries 

Zhongshan Co. Ltd.: 0.0% (Taric additional code: 8961); 

Lai Wah Industries Ltd. : 3.1 % (Taric additional code: 8310); 

Shenzhen Colleen Handbag Co. Ltd: 4.2% (Taric additional code: 8311); 

The Well Leatherware Manufactory Ltd.: 6.5% (Taric additional code: 8451); 

Shenzhen  Crownwick  Leatherwares  Co.  Ltd.:  12.4%  (Taric  additional 
code: 8452); 

Shundi  South  Sea  Leather  Handbag  Factory  Ltd.  and  Nam  Chow  Leather 
Products Co. Ltd.: 39.0% (Taric additional code: 8453); 

Ever  Trust  Leather  Products  Shenzhen  Co.  Ltd.:  45.2%  (Taric  additional 
code: 8454); 

Dongguan  Sitoy  Leather  Products  Factory  Ltd.:  58.3%  (Taric  additional 
code: 8455)." 

Article 2 

This Regulation  shall  enter into  force  on the day following  that  of its publication  in the 
Official Journal of the European Communities. 

This  Regulation  shall  be  binding  in  its  entirety  and  directly  applicable  in  all 
Member States. 

Done at Brussels, 

For the Council 
The President 

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ISSN 0254-1475 

COM(98) 573 final 

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