CELEX: 51997PC0431
Language: en
Date: 1997-07-30
Title: Amended proposal for a Council Regulation (EC) imposing a definitive anti-dumping duty on imports of leather handbags originating in the People's Republic of China and terminating the proceeding concerning imports of plastic and textile handbags originating in the People's Republic of China

COMMISSION OF THE EUROPEAN COMMUNITIES
                                                Brussels, 30.07.1997
                                                COM(97) 431 final
                              Amended proposal for a
                         COUNCIL REGULATION (EC)
imposing a definitive anti-dumping duty on imports of leather handbags
originating    in the People's Republic of China and terminating the
proceeding concerning imports of plastic and textile handbags originating
in the People's Republic of China
            (presented by the Commission pursuant to Article 189 a (2)
                                of the EC-Treaty)
 ---pagebreak---  ---pagebreak---                            EXPLANATORY MEMORANDUM
In the original proposal of the Commission, it was stated that provisional duties paid
should be collected. After discussion in COREPER on 25 July, changes have to be made
to this proposai in order to satisfy requests by Member States that provisional anti-
dumping duties should not be collected but be released. Only on this basis a majority of
the Member States could be achieved.
In order to proceed to this release, it is now proposed to base definitive duties on "threat
of injury*'. In such "threat of injury" cases, Article 10 (2) of the Basic Anti-Dumping
Regulation provides that provisional duties are released ex lege, which leaves no
discretion to the Council as far as this release is concerned.
For these reasons, the following major changes regarding the original proposal have been
made in the proposed Council Regulation:
- in the title, the reference to the collection of provisional measures has been deleted
- in recital 55, the decrease in sales quantities is expressed as a percentage
- in recital 57, the overall profitability (all sales included) has been established at around
   5%
- recital 61 has been adapted to show a precarious situation of the Community industry
- recital 63 now refers to the precarious situation (and not to material injury)
- recital 64 now shows that imports from China have increased considerably and will
   probably happen at such prices that price increases of the Community industry will be
   prevented
- recital 69 now refers to the precarious situation
- recital 118 refers to Article 10 (2) of the Basic Regulation and releases the provisional
   duties
- the operative part has been adapted accordingly.
 ---pagebreak---                                        A    OU
                                Amended proposal for a
                          Council Regulation (EC) No     /97
                                          of
 imposing a definitive anti-dumping duty on imports of leather handbags
originating       in the People's Republic of China and terminating the
proceeding concerning imports of plastic and textile handbags originating
in the People's Republic of China
The Council of the European Union,
Having regard to the Treaty establishing the European Community,
Having regard to Council Regulation (EC) No 384/96 of 22 December 1995 on
protection against dumped imports from countries not members of the European
Community1, and in particular Articles 9(2), 9(4) and10(2) thereof,
Having regard to the proposal presented by the Commission after consulting the
Advisory Committee,
Whereas:
1
    OJ No L 56, 6.3.1996, p. 1
 ---pagebreak---                          A.   PROVISIONAL MEASURES
   (1)    By Regulation (EC) No 209/972 the Commission imposed a provisional
          anti-dumping duty on imports into the Community of handbags
          originating in the People's Republic of China and falling within CN
          codes 4202 21 00 (leather), 4202 22 10 (plastic) and 4202 22 90
          (textiles).
                      B.            SUBSEQUENT PROCEDURE
   (2)   Subsequent to the imposition of the provisional anti-dumping duty, the
         interested parties who so requested were granted an opportunity to be
         heard by the Commission. A number of these parties also made
         written submissions making their views on the findings known.
   (3)   The Commission's services         investigated further    aspects of the
         Community interest and sought and verified all information deemed
         necessary for the definitive findings. Due to the large number of parties
         which made themselves known well after the expiry of the deadline
         and the arguments raised by interested parties at a very advanced
         stage of the investigation and immediately after the imposition of
         provisional measures, the Commission exceptionally accepted to
         include these parties in the investigation         regarding Community
         interest.
2
  OJ No L 33, 4.2.1997, p.11.
 ---pagebreak--- (4)  Upon request parties were informed in writing of the essential facts
     and considerations on the basis of which it was intended to
     recommend both the imposition of definitive duties and the definitive
     collection of the amounts secured by way of provisional duty with
     respect to leather handbags, and further to terminate the proceeding
     with respect to plastic and textile handbags.
(5)  The oral and written comments presented by the parties were
     considered, and, where appropriate, the Commission's findings were
     modified to take account of them.
                      C.     Support for the complaint
(6)  Some interested parties have claimed that the complaint did not
     receive support from a major proportion of total Community production
     because there was no evidence that individual producers accounting
     for a major proportion gave such support. They also pointed out that
     the   opposition    of   several   National  Associations affects   the
     representativity of the complainant.
(7) After examination prior to the initiation of the proceeding, it was
    determined that the National Associations of Belgium, France, Greece,
    Italy, Portugal, Spain and United Kingdom supported the complaint.
    The production of their associated members accounts for a major
    proportion (around 70%) of total Community production under the
    terms of Article 5 (4) of Council Regulation (EC) No 384/96 (hereinafter
    referred to as "the basic regulation").
 ---pagebreak--- (8)  The support of the members of the National Associations (i.e. the
     individual companies) was obtained by CEDIM through the above-
     mentioned National Associations, which have the legal capacity to
     represent their members.
(9)  No opposition was registered prior to initiation of the investigation as
     three other     National Association members of CEDIM              (Austria,
     Germany and The Netherlands) agreed within CEDIM not to oppose
     the complaint. Finally, no company or National Association from the
     remaining five other Member States (Denmark, Finland, Ireland,
     Luxembourg and Sweden) expressed opposition to the complaint.
(10) Subsequent to the initiation of the proceeding, the British Association
     decided to withdraw its support. The Austrian, German and Dutch
     Associations, which initially abstained, also decided to oppose the
     proceeding. This change in position cannot throw into question
     retrospectively the validity of the initiation of the proceeding. Given the
     low production in these countries (less than 7% of total Community
     production) such opposition does not put into question the fact that the
     complainant continues to represent a major proportion of total
     Community production.
(11) Finally, almost all companies which expressed opposition to the
     proceeding are importers and retailers of handbags, which are not
     producing the product concerned. Their opposition is therefore
     irrelevant for evaluating the representativity of the complaint.
 ---pagebreak--- (12) It can therefore be concluded that, prior to the initiation of the
     proceeding, the      Commission      sought   and  obtained, from      the
     complainant, evidence that it fulfilled the requirement of Article 5(4) of
     the basic regulation with regard to representativity and that the
     required degree of support was maintained throughout the proceeding.
                             D.    Investigation
(13) Some interested parties have claimed that the sample of Community
     producers as described in recital 5 of Regulation (EC) No 209/97 is
     neither representative nor statistically valid because the sampled
     companies were selected from a separate list of companies submitted
     by the respective National Associations and not from the membership
     lists used to assess the representativity of the complaint. These parties
     claim that the National Associations were thus allowed to pre-select
     either only Community producers who supported the complaint, or
     those whose financial indicators facilitated findings of injury or those
     willing to cooperate.
 ---pagebreak---                                    6
(14) The    sample of Community         producers was based       on detailed
     information previously not available to the National Associations with
     that degree of detail or for the period in question. Therefore, it is
     considered that a valid sample of Community producers could not
     have been selected on the basis of the list of members submitted by
     the National Associations as the basis for the complaint.
(15) The argument that the National Associations could have pre-selected
     those Community producers whose indicators facilitated findings of
     injury is also incorrect. Indeed, it should be recalled that general data
     concerning production, sales, consumption and employment has been
     assessed at total Community industry level where no pre-selection is
     possible. As far as data concerning the sampled Community producers
     is concerned, this information is of such a detailed and confidential
     nature that it is not normally submitted to the National Associations
     and therefore leaves no scope for any pre-selection by any National
     Associations. Thus, this argument should also be rejected.
 ---pagebreak--- (16) Some parties have also argued that the non disclosure of the identity
     of the sampled Community producers has resulted in a denial of their
      right of defence.
(17) The threat of commercial retaliation is considered to be a serious
     commercial pressure justifying the non disclosure of the identity of the
     Community producers. Moreover, it is not considered that the lack of
     knowledge of the identity of the sample Community producers
     hampers the rights of defence of interested parties who have access to
     the non-confidential versions of the responses to the questionnaires
     submitted by other interested parties during the proceeding.
(18) One interested party has claimed that the sample of unrelated
     importers is distorted by the fact that only large unrelated importers
     have been sampled. Due to their bargaining power these importers
     tend to import at lower prices which has resulted in a distortion in the
     dumping margins found.
(19) This allegation is unfounded; unrelated importers were sampled
     according to their volume of imports and employment, to reflect large,
     medium and small importers.
     The names of the sampled unrelated importers in France in recital (10)
     of Regulation (EC) No 209/97 should be amended as follows: instead
     of Dane et Galliay, it should read Pollyconcept. This does not affect
     the validity of the findings of the Commission since the data of the
     latter has been used consistently.
 ---pagebreak--- (20) Subsequent      to the   imposition    of the    provisional anti-dumping
     measures, a producer/exporter (Gebr. Picard International Ltd.) was
     sent on its request an exporters' questionnaire and it submitted a
     complete reply. This producer/exporter had not been investigated prior
     to Regulation (EC) No 209/97 as it had initially focused on its role as
     an importer, and not as a related exporter, although it had as such
     manifested itself within the time limits established in paragraph 7 of the
     Notice of Initiation.
(21) A large number of producers/exporters manifested themselves and
     offered to co-operate immediately before or following the publication of
     Regulation (EC) No 209/97, i.e. well beyond the time limit established
     in paragraph 7 of the Notice of Initiation.            Accordingly, these
     companies have not been considered to be interested parties in the
     proceeding and their requests for individual treatment have been
     dismissed as being inadmissible on these grounds.
 ---pagebreak---        E.   PRODUCT UNDER CONSIDERATION - LIKE PRODUCT
1.   Product under consideration
(22) For the purpose of the preliminary findings, the Commission
     considered leather, plastic and textile handbags to be one product,
     given the fact that they were considered to possess the same
     characteristics and be intended for the same use.
(23) After the imposition of provisional measures, several interested parties
     claimed that a distinction should be made between leather handbags
     on the one hand and synthetic handbags (plastic/textile) on the other.
     Some parties have also claimed that a distinction should further be
     made between leather handbags, patch leather handbags and
     polyurethane (PU) coated split leather handbags in view of the alleged
     differences in style, quality, finish, use, price and consumer perception
     differences.
(24) It should be recalled that it is the standard practice of the Commission,
     as confirmed by the European Court of Justice, that the product under
     consideration be defined according to its basic physical characteristics,
     use, interchangeability and consumer perception.
 ---pagebreak---                                   10
(25) In this respect, the investigation has shown that the different types of
     raw materials used in the manufacture of leather and synthetic
     handbags     confer    on  the    product   distinctly different physical
     characteristics.
     While their general use is the same, it has now been found that the
     consumer has a clearly different perception of leather handbags and
     synthetic handbags respectively,      consumer choice being governed
     mainly by the type of external raw material of the handbag.
(26) The investigation has also shown that in the handbag market stable
     consumer preferences exist. Therefore, the interchangeability of the
     two types of handbags is almost non-existent, except to a very limited
     extent in the sector of leather-look plastic handbags. This has allowed
     a notable price differential between leather handbags and synthetic
     handbags, resulting in two different market segments, separated by
     clear dividing    lines between     which    it is not considered    that
     interchangeability can take place to a significant degree.
(27) Therefore and in accordance with the well-established practice of the
     institutions concerning the product definition, leather and synthetic
     handbags are to be considered different products.
 ---pagebreak---                                   11
2.    Like product
(28) Several parties have argued that the leather handbags manufactured
     in the Community and those imported from the People's Republic of
     China are not like products in the sense of Article 1 (4) of the basic
     regulation due to the differences in quality, design and use. It has also
     been argued that the differences in       quality between the imported
     handbags and those manufactured in the Community are such that
     both products are not in competition.
(29) The investigation has further shown that, within each one of the two
     products under consideration (leather handbags/synthetic handbags)
     imported handbags cover the full range of types, from higher to lower
     quality, and as such are in direct competition with the entire range of
     the Community production. These findings are supported by the
     information supplied on this issue by several cooperating importing-
     Community producers on this issue showing that the handbags
     manufactured in the Community and those imported from the People's
     Republic of China do not have quality differences, both items belong to
     the same collections and are sold to the same customers. Therefore,
     across the range there are no quality differences for comparable
     models.
(30) Concerning differences in design, it cannot be concluded that these
     would be such as to constitute a different like product. In this respect,
     some importers have even acknowledged that they design their
     handbags in the Community, following the fashion of the season, as is
     the         case         with        Community           manufacturers.
 ---pagebreak---                                       12
                                  F.     DUMPING
1.    Normal value
   (31) As to the selection of the analogue country, one importer alleged that
         neither the Regulation (EC) No 209/97 nor the disclosure documents
         sufficiently explained why India or Taiwan were not selected as
         analogue countries. The Council considers however that recitals 24 to
        26 of Regulation (EC) No 209/97 are sufficiently precise on this point.
   (32) Several interested parties have requested that the names of the two
        co-operating Indonesian companies be disclosed alleging that this
        would be necessary to exercise their rights of defence effectively. The
        Council, however, does not consider it possible to disclose the names
        of these companies as the co-operation of these companies could only
        be secured provided a strict guarantee of confidential treatment of the
        identity of the companies was given by the Commission. In addition,
        supplying the actual names of the companies involved would not add
        to the rights of defence of these interested parties. In this regard, the
        essential economic facts characterising the situation of these two
        exporters have been set out in recitals 28 and 29 of Regulation (EC)
        No 209/97.
 ---pagebreak---                                     13
(33) In view of the fact that leather handbags and synthetic handbags have
     been considered to be different products, separate normal values were
     constructed for leather and synthetic handbags, in accordance with
     Article 2 (7) of the basic regulation, on the basis of the cost of
     production for these two products of the two co-operating Indonesian
     producers, to which a reasonable amount for profit and selling, general
     and administrative costs ("SGA") was added. The findings in recital 28
     (fourth indent) of Regulation (EC) No 209/97 on the representativity of
     the two Indonesian producers are confirmed in respect of both like
     products.
(34) It has been alleged that the cost of production of the co-operating
     Indonesian producers should be adjusted to take into account the fact
     that the Chinese exporters predominantly import raw materials under
     inward processing relief procedures. In this respect, it should be noted
     that, the raw materials for both like products used by the co-operating
     Indonesian producers were found to be of non-Indonesian origin and
     imported into Indonesia free of customs duties under a procedure of
     inward processing relief.     It follows that the procurement patterns in
     Indonesia and in China are the same and that therefore no adjustment
     is warranted in this respect.
(35) It was submitted by one exporter that the percentage of SGA used by
     the Commission was not representative of the SGA incurred by the
     Chinese exporters. Accordingly, the SGA has been reviewed on the
     basis of the actual SGA incurred by the Indonesian exporters of
     handbags at the level of trade comparable to that of sales made by the
     Chinese exporters.
 ---pagebreak---                                        14
2.    Export price
    (36) In view of the low level of co-operation of Chinese exporters (including
          exports of Gebr. Picard International Ltd) in this proceeding, which
          amounts to only 1,58% of all exports from the People's Republic of
          China, the export prices of the co-operating exporters could not be
          considered representative of the prices charged by exporters which did
          not co-operate.
   (37) For the purpose of the definitive findings, export prices of the co-
          operating companies Shilton and Lee & Man in respect of the two like
          products were established using the same method as for the
          provisional findings. In respect of these companies, the findings set
         out in recitals 33 and 34 of Regulation (EC) No 209/97 are confirmed.
   (38) The third co-operating exporter (Gebr. Picard International Ltd), not
         granted individual treatment by Regulation (EC) No 209/97, was found
         to make all of its exports to the EC via a related company established
         in the Community; thus its export prices were constructed on the basis
         of Article 2 (9) of the basic regulation by deducting from the prices
         charged by the related importer to its first independent customers its
         SGA and a profit margin based on the average profit of unrelated
         importers.
   (39) Export prices of the non-cooperating          Chinese exporters were
         established as explained under recital 32 of Regulation (EC) No
         209/97. This methodology is herewith confirmed.
 ---pagebreak---                                      15
3.    Comparison
   (40) The weighted average normal value FOB Indonesia for each of the
        leather and synthetic handbags was compared with the weighted
        average export price FOB China with respect to each of the two like
        products concerned. For the purpose of ensuring a fair comparison
        between normal value and the export price, due allowance in the form
        of adjustments was made in accordance with Article 2 (10) of the basic
        regulation, where claims were made and satisfactory evidence was
        supplied    demonstrating    that   such   differences   affected   price
        comparability.
   (41) It was argued by one exporter that the comparison of normal value and
        export price should be made in respect of every single handbag model
        or catalogue number (commonly referred to as "style number") rather
        than on the basis of averages of each like product.         The Council
        considers however that, as a practical matter, a comparison at this
        level is not possible in view of the extreme variety of model numbers,
        each having different physical characteristics and combinations of
        features and accessories. In addition, no objective criteria were found
        to exist for distinguishing particular categories or models within the
        respective like product; for similar reasons, it was not possible for the
        Commission to compare normal value and export price on the basis of
        categories regrouping model or catalogue numbers. It follows that the
        only reasonable method for the Commission was to compare normal
        value and export price in respect of averages for each of the two
        products concerned (i.e. separately for leather handbags and synthetic
        handbags).
 ---pagebreak---                                      16
4.    Dumping margins
   (42) As indicated above, three co-operating producers/exporters - all
        privately-owned companies based in Hong Kong with handbag
        factories in China - presented admissible requests for individual
        treatment i.e. the establishment of separate export prices and thus of
        individual dumping and injury margins.
   (43) The findings set out in recitals 37 to 40 of Regulation (EC) No 209/97,
        with respect to the two companies having been provisionally granted
        individual treatment are confirmed.
   (44) In   addition,   the   claim   for  individual treatment   of   a   third
        exporter/producer (Gebr. Picard International Ltd) was investigated. It
        was found that its factual situation was very similar to that of the two
        companies having been provisionally granted individual treatment and
        described in recitals 38 and 39 of Regulation (EC) No 209/97.
 ---pagebreak---                                       17
 (45) The Council considers that the three co-operating companies claiming
       individual treatment enjoyed a degree of genuine independence from
       the public Chinese authorities comparable to that which would prevail
       in a market economy country, and thus that the risk of channelling of
       exports through these sources with individual anti-dumping duty rates
       would seem to be very limited. Accordingly, separate export prices
       and individual dumping and injury margins have been established for
       the three exporters concerned, as an exception to the principle of
       calculating country-wide dumping margins in respect of non-market
       economy countries (Article 9 (5) of the basic regulation). It should be
       pointed out that individual treatment is granted only in respect of the
       like product which was actually produced and exported to the
       Community by the exporter concerned during the investigation period,
       i.e. leather   handbags     in respect of Shilton and Gebr.      Picard
       International Ltd and synthetic handbags in respect of Lee & Man.
(46) The dumping margins established for the companies granted individual
      treatment have been established as follows:
      •      Shilton, in respect of leather handbags: nil
      •     Gebr. Picard International Ltd, in respect of leather handbags:
      7,7%
      •      Lee & Man, in respect of synthetic handbags: 64,7 %.
(47) The weighted average dumping margin for the exporters not granted
      individual treatment has been established at:
      •     83,5% in respect of leather handbags, and
      •     151 % in respect of synthetic handbags
      of the CIF export price Community frontier duty unpaid.
 ---pagebreak---                                     18
                         G.    LEATHER HANDBAGS
                                   (1)  Injury
1.   Consumption in the Community market
(48) Between 1992 and the investigation period, the consumption of leather
     handbags in the Community increased from around 51 million units to
     52,3 million units, i.e. an increase of approximately 2,5%.
2.   Volume and market share of imports
(49) Between 1992 and the investigation period, imports of leather
     handbags originating in the People's Republic of China increased from
     8,2 million units to 10,4 million units, i.e. by 27%. When measured in
     value, the increase amounts to 15%, from ECU 43,6 million in 1992 to
     ECU 50 million in the investigation period.
(50) The share of the Community market taken up by imports of leather
     handbags originating in the People's Republic of China increased from
     16% in 1992 to 20% in the investigation period.
 ---pagebreak---                                    19
3.    Prices of dumped imports and undercutting
(51) As already mentioned in the provisional regulation, due to the non-
     cooperation by the Chinese exporters, official statistical data has been
     used for the analysis of the price evolution of imported leather
     handbags. Thus, the average CIF import price of leather handbags
     has decreased by 9%, from ECU 5,29 per unit in 1992 to ECU 4,79 per
     unit in the investigation period.
(52) The calculation of the price undercutting has followed the methodology
     used in Regulation (EC) No 209/97, that is, the CIF imports prices of
     the sampled unrelated importers, adjusted to customer deliver level,
     were compared to the selling prices in the Community of those
     Community producers whose production comprised the most baisc
     types sold, at the same level of trade
(53) When expressed as a percentage of the Community producers' selling
     prices, the comparison with import prices of unrelated importers, as
     recalculated following substantiated arguments submitted by interested
     parties after the imposition of provisional measures, show an
     undercutting for leather handbags amounting to 31,4%.
 ---pagebreak---                                    20
4.    Situation of the Community industry
      (a) Production
(54) Production of leather handbags by the Community industry increased
     from an estimated 26,5 million units in 1992 to 30,3 million units in the
     investigation period. When measured in value, production increased
     from an estimated 905 million ECU in 1992 to 1.100 million ECU in the
     investigation period, i.e. by 21%.
      (b) Sales volume
(55) A decline in sales volume in the Community of output manufactured by
     the Community industry between 1992 and the investigation period
     has been established. Indeed, sales decreased from around 21 million
     units in 1992 to 20 million units in the investigation period, i.e. a
     decrease of around 5%. When measured in value, sales decreased by
     around 8%, from around 600 million ECU in 1992 to 550 million ECU in
     the investigation period.
     (c) Market share
(56) The share of the Community market occupied by the Community
     industry when measured in units decreased from around 41% in 1992
     to around 39% during the investigation period.
 ---pagebreak---                                   21
      (d) Profitability and employment
(57) Following Article 3(8) of the basic regulation, profitability and
     employment of Community producers has been calculated for the
     narrowest group of products for which information has been provided
     by the sampled Community producers, that is, handbags made of both
     leather and synthetics.
     The revised weighted average profitability concerning sales in the
     Community shows a decline from 5,9% in 1992 to 1,3% during the
     investigation period.
     On all sales, the Community industry achieved an overall profit of
     around 5%.
(58) Employment figures in the handbag sector as extrapolated from the
     information received by Community producers in the Community
     interest analysis show that employment declined from about 18.600
     people in 1992 to 14.000 people in the investigation period, a drop of
     25%.
 ---pagebreak---                                  22
5.    Conclusion on injury
(59) The economic indicators of the Community industry examined in
     conjunction with the conclusions drawn in respect of the volume of
     imports and their prices show that the Community producers' situation
     has deteriorated between 1992 and the investigation period in respect
     of leather handbags. As has been demonstrated, the Community
     industry as a whole suffered declining sales volume, loss of market
     share, declining employment       and declining profitability    in the
     Community market.
(60) As far as production is concerned, further reference is made to the fact
     that exports of the Community producers increased significantly.
(61) It is therefore the view of the Council that the situation of the
     Community industry is clearly precarious, and the trend points to a
     further deterioration.
 ---pagebreak---                                    23
                               (2)    Causation
1.    Effects of the dumped imports
(62) The penetration of the Community market by imports of leather
     handbags from the People's Republic of China at dumped prices which
     significantly undercut the prices of Community producers coincided
     with a loss of market share and a deterioration of the financial situation
     of the Community industry. Given the increasing volume of low priced,
     dumped handbags, it became apparent during the investigation that
     many Community producers were unable to compete against the
     dumped imports.
(63) Moreover, due to the fact that competition takes place across the
     range and to the fact that the distribution system is shared by products
     both manufactured in the Community and imported from the People's
     Republic of China, the high price differential in the form of undercutting
     is a direct cause of the precarious situation of the Community industry.
(64) Accordingly, it is considered that dumped imports from the People's
     Republic of China increased at a significant rate and are likely to enter
     at prices which will prevent price increases.
 ---pagebreak---                                   24
2.    Effects of other factors
(65) Care was taken to ensure that any impact on the Community industry
     caused by other factors was not attributed to the imports concerned.
(66) In this respect, particular reference was made by certain interested
     parties to imports into the Community of handbags originating in India.
     Available Eurostat data shows that the volume of imports of leather
     handbags from India has remained stable between 1992 and the
     investigation period at around 5 million units. As regards the prices of
     these imports, these have increased from around 8 ECU in 1992 to
     around 9,2 ECU in the investigation period, an increase of 15%, well
     above the prices of Chinese handbags. The share of volume of the
     Community market occupied by imports of handbags from India has
     decreased by 4% from 1992 to the investigation period.
 ---pagebreak---                                   25
(67) As to imports of leather handbags from Hong Kong, when measured in
     units, these have increased from around 400.000 units in 1992 to
     around 750.000 units in the investigation period. With respect to total
     imports of handbags into the Community, Hong Kong increased its
     share of the volume of Community handbag imports from 1,9% in 1992
     to 3,3% in the investigation period. However, the share of the
     Community market occupied by imports of handbags originating in
     Hong Kong has remained at relatively low levels, increasing from 0,6%
     in 1992 to 1,4% in volume in the investigation period.
(68) As to imports from other third countries, their share of total imports has
     decreased from 32% in 1992 to 30% in the investigation period. The
     share of the Community market occupied by these imports has
     decreased from 12% of volume in 1992 to 1 1 % in the investigation
     period.
     It should be noted that the Community market share of imports from all
     third countries, excluding the People's Republic of China, has
     remained stable from 1992 to the investigation period, at 23%, when
     measured in units.
 ---pagebreak---                                   26
3.    Conclusion on causation
(69) Although certain other factors       may     have contributed to the
     precarioussituation of the Community industry, taken in isolation, the
     high volumes of dumped imports from the People's Republic of China
     are threatening to cause material injury to the Community industry.
     This conclusion is based on the various elements set out above and in
     particular the level of price undercutting, the market share gained by
     imports of handbags from this country, at the expense of the
     Community industry, and the deterioration of the profitability of the
     Community producers.
                          (3)   Community Interest
1.    General considerations
(70) It should be recalled from recitals 76 et seq. of Regulation (EC) No
     209/97 that an appreciation of the various interests, including the
     interests of the Community industry, importers, distributors and
     retailers was made, and that the Commission provisionally concluded
     that there were no compelling reasons not to take action against the
     imports in questions. Furthermore, the Commission undertook to
     conduct an examination of certain issues concerning Community
     interest which had not been sufficiently substantiated at the time of the
     provisional determination.
 ---pagebreak---                                     27
2.     Impact on the Community industry
          (a)     Current situation of the industry
(71) The     information   received from the 50 Community         producers
      responding to the questionnaire on Community interest addressed to
      interested parties and representing around 20% of total handbag
     Community production, shows that a major proportion of the
     production in the Community is of leather handbags. In terms of value,
     93% of the total Community production is of leather handbags.
(72) Substantial creative value is added to the product in the Community in
     the form of design, innovation and quality. Community producers have
     a special know-how in working the leather, which is the result of a long
     tradition in this sector in the Community.
(73) The share of the Community leather handbag market held by the
     Community industry was 39% in the investigation period, a sign of its
     economic importance.
(74) The viability of the Community industry is also evident from its
     performance on the export markets, significant and increasing due to
     the locomotive effect of the brand names promoting handbags "made
     in Europe". Exports of leather handbags by the Community industry
     have increased from around 6 million units in 1992 to around 10 million
     units in the investigation period.
 ---pagebreak---                                    28
          (b)   Effects of the imposition/non-imposition of measures
(75) In the absence of anti-dumping measures, there is no element that
     indicates that the negative situation of the Community industry would
      not continue, to the detriment of an industry that is inherently both
     viable and competitive.
(76) The situation of importing producers in the Community has been
     examined and it is concluded that the majority of the companies
     investigated by the Commission manufacture leather handbags in the
     Community and import synthetic handbags from the People's Republic
     of China. In those cases where such importing producers imported
     leather handbags, such imports are, in general, ancillary.
3.    Impact on importers-traders
(77) Further investigation has shown that the full amount of the provisional
     anti-dumping duty (39.2%) is being shared, generally in an equal
     proportion, by the different steps in the distribution chain: in particular
     the importer, the retailer and, finally, the consumer. This seems to be
     possible due to the average mark up of importers and retailers
     respectively of around 70% on CIF including a profit of 14% on
     turnover.
(78) The impact of any definitive measures on importers and traders has to
     be seen in the light of the findings of the product concerned. Indeed, a
     reduction in the scope of application of the measures to leather
     handbags only (see recitals 118 et seq) will minimise the impact of
     measures on these interested parties.
 ---pagebreak---                                    29
(79) Some importers have claimed to having had to cease their activity or to
     be experiencing financial difficulties. Since importers are generally
     purchasing in US Dollars, they are currently suffering from the strength
     of the US Dollar against European currencies. It is concluded,
     therefore, that the weak financial situation of certain importers/traders
     is also attributable to currency fluctuations.
(80) As to the argument that the imposition of anti-dumping duties will not
     have the effect of increasing sales of the Community producers but
     would make importers purchase from other third countries, it should be
     mentioned that it is not the purpose of any anti-dumping measure to
     limit imports from third countries at non-dumped prices. Moreover, the
     investigation has confirmed that it is not likely that a major proportion
     of importers will source leather handbags from other third countries,
     due to the skilled labour and know-how necessary to manufacture
     leather handbags currently available in the People's Republic of China.
(81) Given the above, measures on imports of leather handbags are not
     likely to endanger the business performance of the distribution chain.
 ---pagebreak---                                     30
4.    Impact on consumers
(82) As has been mentioned above, the full amount of the duty is currently
      being shared by the different steps in the distribution chain. Therefore,
      the effect of the duty on the consumer in the form of a price increase is
      not likely to exceed 9%.
(83) Furthermore, leather handbags being a fashion product not purchased
     on a regular basis, a moderate increase in the prices for the consumer
     should be seen in the light of the lack of a clear perception of the
     appropriate price for a handbag for a consumer, which is not likely to
     affect demand substantially in the long term.
(84) In view of this, it is not expected that definitive measures on imports of
     leather handbags will have a significant impact on the consumer.
5.    Conclusion on Community interest
(85) In the light of the above, it is considered that the conclusions drawn by
     the Commission in the Regulation (EC) No 209/97 concerning
     Community interest should be confirmed with respect to leather
     handbags. There are no compelling reasons which would lead to the
     conclusion that adopting definitive measures would not be in the
     interest of the Community.
 ---pagebreak---                                      31
                            H.   Synthetic handbags
                                    (A)  Injury
1.   Consumption in the Community market
(86) Between 1992 and the investigation period, the consumption of
     synthetic handbags in the Community increased from 73 million units
     to 96 million units, i.e. an increase of approximately 31%.
2.   Volume and market share of imports
(87) Between 1992 and the investigation period, imports of synthetic
     handbags originating in the People's Republic of China increased from
     53 million units to 78 million units, i.e. by 47%. When measured in
     value, the increase amounts to 31%, from ECU 152 million in 1992 to
     ECU 199 million in the investigation period.
(88) The share of the Community market taken by imports of handbags
     originating in the People's Republic of China increased from 73% in
     1992 to 81% in the investigation period.
 ---pagebreak---                                     32
 3.     Prices of dumped imports and undercutting
 (89) The average CIF import price of synthetic handbags as reported by
        Eurostat has decreased by 10%, from ECU 2,8 per unit in 1992 to
       ECU 2,5 per unit in the investigation period.
 (90) The undercutting margin amounts to 27,8 % for synthetic handbags.
4.      Situation of the Community industry
            (a)   Production
 (91) The estimated production of synthetic handbags by the Community
       industry has remained stable at around 14 million units between 1992
       and the investigation period.
           (b)    Sales volume
(92) A decline       in sales volume      in the Community     of  handbags
      manufactured by the Community industry of around 70% between
       1992 and the investigation period has been established. Indeed, sales
      decreased from around 6 million units in 1992 to around 2 million units
      in the investigation period.
           (c)   Market share
(93) The share of the Community market occupied by the Community
      industry when measured in units decreased from around 9% in 1992 to
      around 3% during the investigation period.
           (d)   Profitability and employment
(94) The overall profitability of Community producers declined progressively
      from 5,9% in 1992 to 1,3% during the investigation period.
(95) Employment figures in the handbag sector declined from about 18.600
      people in 1992 to 14.000 people in the investigation period, a drop of
      25%.
 ---pagebreak---                                   33
5.    Conclusion on injury
(96) It is considered that the Community industry of synthetic handbags
     suffered material injury within the sense of Article 3 of the basic
     regulation.
(97) This stems from the deterioration of the economic factors of the
     Community industry during the period 1992 to the investigation period,
     namely declining sales volume, loss of market share, declining
     employment and declining profitability, as seen in the light of the
     increase in the volume of imports of synthetic handbags from the
     People's Republic of China and its prices.
                               (B)   Causation
1.    Effects of the dumped imports
(98) Given the above findings, it is considered that the imports of synthetic
     handbags from the People's Republic of China had, taken in isolation
     a material impact on the situation of the Community industry.
(99) Indeed, given that synthetic handbags manufactured in the Community
     and those imported from the People's Republic of China compete
     across the range, where the distribution system is common to both
     products, the undercutting found indicates that, taken in isolation,
     imports of synthetic handbags from the People's Republic of China
     caused material injury to the Community industry.
 ---pagebreak---                                    34
2.    Effects of other factors: imports from third countries
(100)The Commission has examined the impact on the Community industry
      of factors other than imports of synthetic handbags from the People's
      Republic of China, namely, imports from other third countries.
(101)Concerning India, available Eurostat data shows that even if the
     volume of imports from India has increased from 1,6 million units in
      1992 to 3,4 million units in the investigation period, their share of total
     imports of synthetic handbags into the Community has only increased
     from 2,6% in 1992 to 3,6% in the investigation period. The share of the
     Community synthetic handbag market occupied by these imports has
     remained at a low level, being 3,5% in the investigation period.
(102)Regarding imports of synthetic handbags from Hong Kong, when
     measured in units these have increased from 1,5 million units in 1992
     to 6,5 million units in the investigation period. However, their share of
     the Community synthetic handbag market has remained at a relatively
     low level, increasing from 2% in 1992 to 7% in the investigation period.
(103)As to imports from other third countries, their share of the total import
     of synthetic handbags into the Community has decreased from 11% in
     1992 to 5,5% in the investigation period. The share of the Community
     synthetic handbags market occupied by these imports has decreased
     from 9,7% in 1992 to 5% in the investigation period.
 ---pagebreak---                                     35
3.      Conclusion on causation
(104)The above analysis shows that, even if certain other factors might
        have contributed to the injury suffered by the Community industry, it is
        considered that taken in isolation, the high volume of synthetic
        handbags imported from the People's Republic of China at dumped
        price have caused material injury to the Community industry.
                             (C) Community Interest
1.      Community industry
(105)The indicators of the Community synthetic handbag industry show that
    it is not likely that the Community industry would benefit from any anti-
    dumping measure imposed. The imposition of measures would not have
   the effect of increasing the sales of the Community synthetic handbags
    manufacturers, given that it is likely that synthetic handbags will be
   sourced from other third countries in the medium term. Indeed, it has
   been ascertained that the production process in the synthetic sector is of
   such a nature that it can be transferred to another third country within a
   relatively short period of time. In this respect, evidence has been
   provided by some interested parties showing that this has already taken
   place in some instances. There are, therefore, strong reasons to expect
   that most of the volume and price benefits which anti-dumping measures
   may have will not go to the Community industry but to imports from other
   third countries.
 ---pagebreak---                                     36
(106)Sn addition, the consequences of the non-imposition of measures on
   the employment levels of the Community synthetic handbag producers is
    relatively limited, given the low sales volume in the Community of
   Community produced synthetic handbags and the estimated employment
   figures for synthetic handbags of around 500 employees. While these
   jobs may be exposed to competition from dumped imports of handbags
   from the People's Republic of China, this figure has to be compared to a
   total employment figure for the entire Community handbags sector of
   around 14.000 employees. In this respect, it is expected that an increase
   in the sales volume of the Community manufacturers of leather handbags
   may have the effect of offsetting this negative impact, if any.
2.      Impact on importers/traders
(107)ln view of the high share of the Community synthetic handbag market
   held by imports from the People's Republic of China, if definitive anti-
   dumping measures of the provisional amount were to be imposed, a
   substantial impact on Community importers and traders would be
   expected.
(108)Indeed, a comparison of the market shares held respectively by the
       Community industry (around 2% in the investigation period) and the
       imports from the People's Republic of China (around 80% in the
       investigation period) indicate that the negative impact on importers and
       traders of the product that would result,            would be clearly
       disproportionate to any possible benefit in the short term to the
       Community industry which would be gained through the imposition of
       anti-dumping measures.
 ---pagebreak---                                   37
(109)The estimated employment for the distribution chain of synthetic
     handbag has been estimated at around 4.100 employees. It is
     considered that the imposition of anti-dumping measures on imports of
     synthetic handbags will have, at least in the medium term, a negative
     impact on this employment. Indeed, since the expected switch in the
     source of supply to other third countries will take place in the medium
     term, it is expected that in the meantime a certain number of jobs in
     the distribution sector will be at risk. On the other hand it is not
     expected that the employment levels of the Community synthetic
     handbags manufacturers will decrease to a significant extent, in view
     of the fact that the Community industry is concentrating on the export
     markets.
3.    Impact on consumers
(110)ln this respect, it has to be recalled that, should a definitive duty be
     imposed, a shortage in supply will occur, at least in the short term, thus
     restricting consumer choice.
     The effect on the consumer in the form of a certain price increase
     should also be seen in the light of the likely absence of any benefit for
     the Community producer and the negative impact on the distribution
     chain.
 ---pagebreak---                                    38
4.   Conclusion on Community interest
(111)ln view of the above mentioned facts and trends which differ
      significantly from those established in respect of leather handbags, it is
      considered that there are compelling reasons why the imposition of
     definitive measures on imports of synthetic handbags is not in the
      interest of the Community. The negative impact of definitive anti-
     dumping measures on imports of synthetic handbags from the
      People's Republic of China would be disproportionate to any actual
     benefit to the Community industry.
                                   I.    Duty
1.     Leather handbags
(112)Some interested parties have argued that the duty should take the
     form of a variable duty. However, given the wide variety of leather
     handbags and the fact that it is considered that competition is taking
     place across the whole range of leather handbags and not among
     those in the lower price range, it is considered that measures should
     take the form of an ad valorem duty.
     The provisional conclusions with respect to the type of duty to be
     applied are therefore confirmed.
(113)As for the calculation of the injury threshold, i.e. price underselling, the
     Council confirms the methodology followed by Regulation (EC) No
     209/97 (recitals 103 to 105). Thus,          to the percentage of the
     undercutting found, the weighted average profit shortfall of the
     sampled Community producers during the investigation period was
     added. On this basis, the weighted average injury margin for leather
     handbags, expressed as a percentage of the free-at-the-Community-
     frontier price amounts to 38%.
 ---pagebreak---                                    39
(114)For the companies which requested and were granted individual
     treatment, their injury margin, when expressed as a percentage of the
     free-at-the-Community-frontier price amounts to the following:
              • For Shilton, given that the dumping margin found is nil, in
                 accordance with Article 7 (2), it was not considered
                 necessary to calculate an individual injury margin.
              • For Picard, the injury margin amounts to 32,7%.
(115)ln accordance with Article 7(2) of the basic regulation, as the injury
     elimination level is below the dumping margin found, the anti-dumping
     duty calculated on the basis of the free-at-frontier price should amount
     to 38%.
(116)For the companies which requested and were granted individual
     treatment, the anti-dumping duty should amount to the following:
              • For Shilton: nil.
              • For Picard: 7,7%, which is the dumping margin established
                 for this company.
 ---pagebreak---                                   40
2.   Synthetic handbags
(117)ln view of the fact that it is considered that there are compelling
     reasons not to adopt anti-dumping measures concerning synthetic
     handbags, the proceeding with respect to imports of plastic handbags
     (4202 22 10) and textile handbags (4202 22 90) should be terminated.
                   J.    Collection of provisional duties
(118)Concerning leather handbags, since the Community industry is
     suffering a threat of material injury, the Council considers it appropriate
     to decide that, pursuant to Article 10(2) of the basic regulation, the
     amounts secured by way of provisional anti-dumping duty under
     Regulation (EC) No 209/97 for leather handbags be released .
(119)The provisional duties secured with respect to plastic and textile
     handbags should also be released
 ---pagebreak---                                     41
HAS ADOPTED THIS REGULATION:
                                     Article 1
1. A definitive anti-dumping duty is hereby imposed on imports of handbags
   with outer surface of leather, of composition leather or patent leather
   falling within CN code 4202 21 00 originating in the People's Republic of
   China.
2. For the purpose of this .Regulation, leather handbags shall be understood
   to mean, bags whether or not with shoulder strap, including those without
   handle, with outer surface of leather, of composition leather or patent
   leather, designed primarily to contain small objects for personal use such
   as keys, purses, make-up, cigarettes, etc., regardless of their size and
   form.
3. The rate of the duty shall be 38% of the net, free-at-frontier price, before
   duty (Taric 8900), with the exception of imports of leather handbags
   which are manufactured by the following companies, which shall be
   subject to the following rates of the duty:
           Jane Shilton (Pacific) Ltd.:        0,0 % (Taric additional    code
   8961)
           Gebr. Picard International Ltd.     7,7 % (Taric additional    code
   8087)
 ---pagebreak---                                     42
                                     Article 2
 1. The anti-dumping proceeding concerning imports of handbags with outer
    surface of plastic sheeting or with outer surface of textile materials falling
    within CN codes 4202 22 10 and 4202 22 90 is hereby terminated.
2. The amounts secured by way of provisional anti-dumping duties under
    Commission Regulation (EC) No 209/97 shall be released.
                                     Article 3
This Regulation shall enter into force on the day following 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,             1997.
                                                                 For the Council
                                                                  The President
 ---pagebreak---                                         V3
                                                                  ISSN 0254-1475
                                                            COM(97) 431 final
                                              DOCUMENTS
EN                                                                     02 11
                                    Catalogue number : CB-CO-97-435-EN-C
                                                             ISBN 92-78-23862-7
Office for Official Publications of the European Communities
L-2985 Luxembourg