CELEX: 51998PC0573
Language: en
Date: 1998-10-23
Title: 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

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