Contributing Lawyers

Canada

Cyndee Todgham Cherniak

United States

Susan Kohn Ross

Australia

Andrew Hudson



China Files Case at WTO Against EU Footwear AD Duties With Support of EU Footwear Association

On February 4, 2010 China filed a Request for Consultations with the World Trade Organization (WTO) Dispute Settlement Body (DSB) regarding the continuation of 16% antidumping duties on footwear by the European Union. This is not unusual in the current trade environment where parties challenge unfairly imposed trade remedies.

The trade measure at issue is the December 22, 2009 decision by the EU to extend anti-dumping duties against Chinese (and Vietnamese) footwear for 15 months. Dumping occurs when a product is sold in a foreign market at less than its domestic cost price. Antidumping duties may be continued where it is warranted. The level of antidumping duties is 16.%, which is not so bad in comparison to the 170%+ rate applied by Canada against certain carbon steel screws from China.

Where this case gets interesting is the evidence of the lack of support in the EU for the imposition of the duties. According to the Financial Times, in November 2009, the EU Member States had agreed to stop collecting the duties. However, before the deadline, for rescinding, Malta, Germany and Austria changed their position.

Even Lord Mandelson, who imposed the original duties in 2006 in his previous role as European trade commissioner, lobbied heavily against the renewal of the antidumping duties. In addition, the European Footwear Association (EFA) spoke out against the continuation of the antidumping duties. At the time of the December 22, 2009 decision, Manfred Junkert of the Federation of the German Footwear Industry voiced his disappointment and made the following statement:

“The continuation of the anti-dumping duties on footwear for another 15 months is completely unacceptable. It shows that, despite all the public rhetoric, the EU prefers to follow its protectionist course at the expense of successful European footwear businesses and consumers. Economic logic and due process have been utterly disregarded throughout this case. Our only hope left is that this time round, the EU will actually honour its commitment to end these onerous duties after 15 months and not a day more ...”

The EFA opposition to the EU decision continues and they came out in support China's decision to file the request for consultations at the WTO. According to Amy Shields of Drapers, the EFA announced on February 4, 2010 "that the footwear association shares China’s view that the EU's decision to extend the levies – 16.5% on imported Chinese leather footwear and 10% on Vietnamese leather footwear – by a further 15 months in December was “based on questionable investigation and a flawed analysis of the economic facts". The EFA include hundreds of European shoe manufacturers, including major shoe manufacturers, such as Adidas, Clarks, Timberland, Ecco, and Hush Puppies.

The next steps will be interesting as the industry may get more involved in the WTO process. Under the WTO dispute settlement procedures, if China and the EU cannot agree a settlement within 60 days, then China would request that the WTO DSB establish a dispute settlement panel.

Once a panel is established, the industry may request that the panel permit the filing of amicus briefs setting out their views. This may be the most interesting evidence, which could influence the panel's decision. The industry probably can present the best information to the WTO and the most extensive reasons as to why continuation of the duties is no longer warranted.

However, the reality is that it will likely take more than 15 months to resolve the dispute at the WTO.  The antidumping duties may be rescinded by the time the DSB Panel report is released.  Previous WTO decisions have made it clear that antidumping duties that have been improperly collected do not have to be returned or refunded under the WTO rules.  Unfortunately, there may be a hollow victory if the EU plays this one through.

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