EU Re-imposes Definitive Anti-dumping Duties on a Number of Shoe Exporters
17 November 2017
On 31 October 2017, the EU re-imposed definitive anti-dumping duties on shoe imports from Vietnam and mainland China for four company groups, for the period 2006-2011. These duties had been annulled by the EU’s top court in 2016. This latest re-imposition of duties follows a similar re-imposition against 19 other footwear exporters on 9 March this year. In practice, the re-imposition means that the companies who imported from the producers identified are unable to request a refund of the duties previously collected, as the re-imposition “cures” the European Commission’s illegality identified in the 2016 court judgment.
Background: In 2006, the Council imposed definitive anti-dumping duties on certain shoe imports from mainland China and Vietnam. These were extended by 15 months until 31 March 2011.
Five producers, among them Hong Kong manufacturers Brosmann and Risen Footwear, unsuccessfully challenged the duties before the EU’s Court of First Instance (now known as the General Court). Yet, on appeal in 2012, the Court of Justice (the highest court at EU level) set aside the initial judgments. The Court of Justice considered that the Commission had violated Article 2(7)(b) and (c) of the Anti-dumping Regulation by not examining requests for market economy treatment (MET) for the companies concerned. It thus annulled the duties in relation to the five companies.
As a result, the Commission resumed the anti-dumping proceeding and investigated whether the companies could have claimed MET status in the original investigation. The Commission found this not to be the case, but in March 2014, the Council of Member States’ ministers rejected the Commission’s proposal for re-imposed duties. The Council considered that the importers who had bought shoes from the exporters concerned, and had already been reimbursed, had obtained a legitimate expectation not to have new duties imposed retroactively.
Following these developments, three European importers (Clark, Puma and Timberland) challenged the anti-dumping duties in their national Member State courts, invoking the Brosmann case. Through the preliminary reference procedure, these cases were referred to the Court of Justice which, in February 2016, widened its previous judgment to include any MET or individual treatment (IT) requests from non-sampled producers that the Commission had not examined.
In order to avoid being barred from a retroactive imposition of duties where reimbursement had already taken place, as occurred after the Brosmann case, on 17 February 2016 the Commission instructed all national customs authorities to forward to it any requests for reimbursement of anti-dumping duties. This measure was challenged by the German importer Deichmann in case C‑256/16. The case is still pending before the Court of Justice, but on 20 July 2017 the Advocate-General rendered a negative (non-binding) opinion for Deichmann, which tends to guide the Court’s reasoning.
After the British, Belgian and Swedish customs authorities forwarded notifications of importers seeking refunds of anti-dumping duties, the Commission analysed MET and IT claims it had previously rejected from 19 exporters pursuant to the 2016 judgment. The Commission found that none of these exporters qualified, and then re-imposed definitive duties on them on 9 March 2017.
Current measure: Following this re-imposition, the present decision of 31 October 2017 was taken after four other company groups, who likewise had requested MET and IT during the initial investigation, had made themselves known to the Commission within a time period set out in the 9 March 2017 decision. As was the case in that decision, the Commission has once again ruled that none of the applicants are eligible for either MET or IT.
However, several lawsuits have been lodged challenging the legality of the decision to re-conduct an investigation first conducted several years ago, as well as the decision not to grant MET and IT status to the exporters concerned.
Comment: As stated, in addition to the aforementioned lawsuits, whether the Commission was legally empowered to order national customs authorities to notify the Commission, who had to then wait to reimburse importers until the Commission had ruled on the exporters’ MET and IT status, is still awaiting judgment by the Court of Justice. Although the Court is expected to rule in the Commission’s favour, if the Court decides otherwise, importers would presumably be able to recuperate the anti-dumping duties. The question is therefore relevant to Chinese mainland companies associated with Union importers. Indeed, part of the reason why the Council of Member States’ ministers did not agree to a retroactive re-imposition of duties after the Brosmann case was that it would mostly have affected domestic importers, not foreign exporters.
However, in future cases it might have an indirect impact on exporters insofar as Union importers could become more risk-averse, given the increased flexibility of the Commission to deny anti-dumping refunds even where the European courts have annulled the initial duties. It is also important to distinguish the two re-impositions in 2017 from the annulment and reimbursement of duties won by Hong Kong exporters Brosmann and Risen Footwear in 2012.
Furthermore, the new lawsuits that were raised after the March 2017 decision may also determine whether a refund will be available. Yet, unless re-conducting the investigation several years hence is itself found illegal, the Commission may simply once more consider the MET and IT claims of the concerned exporters, and deny the requests yet again.
If the Commission’s measures are upheld, they will set a precedent which will clearly influence the decision as to whether it is worthwhile for exporters to seek an annulment of past duties in the EU courts. As the Commission would simply be able to re-conduct its initial investigation in a bid to clear the illegality, the exporter must be relatively certain that such an investigation would render a positive outcome before a court challenge is launched.