On 4 February 2009, China initiated dispute settlement proceedings against the European Union (EU) before the World Trade Organization (WTO), contending that the EU imposes anti-dumping duties on leather footwear contrary to WTO rules. Unless there is a settlement, a panel will soon be established to rule on China’s claims. If the WTO ultimately makes findings against the EU, it will be required to take measures to make its footwear duties consistent with WTO law.  

Factual background  

From 1995 to 2005, the EU imposed quotas on various types of footwear from China, including leather footwear. Following the expiration of these measures, the EU footwear industry sought anti-dumping protection. In July 2005, the Commission agreed to investigate their claims. In October 2006, the EU decided to impose a definitive anti-dumping duty of 16.5% on Chinese shoes. Consequently, all Chinese shoes falling within the scope of the measures were subject to an additional ad valorem duty of 16.5% when entering the EU.

The anti-dumping duties imposed in October 2006 were set to expire in October 2008. However, following a request from the EU footwear industry, a review was initiated for the purpose of reconsidering whether the expiry of the duties was justified. Under WTO and EU rules, anti-dumping duties remain in force pending the outcome of review investigations. As a consequence, the anti-dumping duties remained in place despite the original intent for them to expire in October 2008. Following a nearly 15-month investigation period, in December 2009, the EU decided to extend the anti-dumping duties until May 2011.  

The Chinese claims

China is specifically contesting the EU’s October 2006 and December 2009 decisions to impose anti-dumping duties on leather footwear from China. It is also challenging provisions of the EU’s basic anti-dumping Regulation which formed the direct legal basis for those duties. China puts forward a number of claims with respect to these measures. Although numerous, the claims generally concern the following:

  1. The EU’s non-market economy methodologies and procedures (e.g. the EU requirement for Chinese producers to fulfil certain conditions in order to receive an individual anti-dumping duty and the failure to examine certain market economy requests by Chinese producers);
  2. The EU’s assessments of whether exports of Chinese footwear to the EU were dumped (e.g. the EU’s choice to use prices and costs in Brazil as a basis for determining whether footwear was exported by Chinese companies to the EU at unacceptably low prices);
  3. The EU’s assessments of whether dumped Chinese imports were causing injury to EU footwear producers (e.g. the EU’s alleged use of a low quantity of exports as a basis for relevant calculations, failure to evaluate all relevant indicators having a bearing on the state of the EU industry and use of unverified data); and
  4. The EU’s respect for evidentiary and due process rights (e.g. the EU’s alleged failures to provide sufficient time for interested parties to defend their interests, promptly provide evidence presented and publish sufficiently detailed information).

Business impact  

The Chinese action is the second WTO challenge to EU anti-dumping duties in less than a year. The first case was filed in July 2009 and concerned anti-dumping duties on iron and steel fasteners. Like the fasteners case currently pending before the WTO, the footwear complaint is heavily focused on challenging the fairness and objectivity of the EU’s anti-dumping procedure and practice. The EU’s treatment of Chinese companies considered to be operating under “non-market economy” conditions is also a particular focus of both complaints. Final determinations in the WTO cases brought by China against EU anti-dumping measures are unlikely to be made before 2011. However, if successful, changes required by the rulings could have a broader impact on EU anti-dumping process and procedure since the EU would effectively be prohibited from taking similar measures in other anti-dumping investigations.

It is notable that the EU’s October 2006 footwear anti-dumping determination has also been subject to challenge at the EU level. Very recently, claims by a number of Chinese footwear producers against the EU’s 2006 investigation were rejected by the EU’s General Court. Many of these claims were identical to those which will be examined by the WTO. Therefore, despite the negative EU decision, WTO dispute settlement may provide another avenue of relief for the Chinese companies. A group of EU footwear importers also recently challenged the EU’s December 2009 anti-dumping decision. The EU’s December 2009 anti-dumping decision has also been recently challenged by a group of EU footwear importers. A final decision in their case is not likely for at least a couple of years. However, it is notable that many of their claims are similar to those being made by China before the WTO. Therefore, any WTO decision could also have an impact on the outcome of their case.