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Footwear Saga: German Shoe Retailer Claims Illegal Recalculation of Duties

In continuance of the longwinded footwear saga, on 11 May 2017 German retailer Deichmann argued before the EU’s highest court that EU investigators illegally recalculated anti-dumping duties on Chinese and Vietnamese shoes after they were ruled illegal last year, so as to avoid reimbursing importers.

From 2006, on the basis of Council Regulation 1472/2006, the EU imposed definitive anti-dumping duties ranging from 9.7% to 16.5% on imports of certain footwear with uppers of leather, originating in Vietnam and mainland China for two years. Following an expiry review, the EU further extended the anti-dumping measures by Implementing Regulation1294/2009.

When footwear producers and exporters challenged these anti-dumping duties before the EU Courts (see: Cases C-249/10 and C-247/10), the EU Court of Justice found that the Commission had failed to examine substantiated requests for market economy treatment from non-sampled traders, pursuant to the basic Anti-dumping Regulation. The Court ordered the annulment of Regulation 1472/2006 and Regulation 1294/2009 insofar as they related to the producers and exporters who had initiated the legal challenge.

Following the successful challenge to the anti-dumping duties in Cases C-249/10 and C-247/10, C & J Clark International (Clarks) and Puma lodged claims for the reimbursement of the anti-dumping duties before their national courts on the basis that Regulation 1472/2006 and Regulation 1294/2009 were invalid. These matters were referred, by the national courts, to the EU Court of Justice for a preliminary ruling. In two other cases, namely, Joined Cases C-659/13 and C-34/14, the Court of Justice ruled that the two regulations were invalid with respect to all concerned exporters and importers, since the Commission had failed to assess claims for market economy treatment as well as individual treatment.

By means of Commission Implementing Regulation 2016/223 of 17 February 2016, the European Commission obliged national customs authorities, which had to decide on an application for re-imbursement of anti-dumping duties due to the annulment of the contested regulations, to forward requests for re-imbursement to the Commission. According to Implementing Regulation 2016/223, national customs authorities are to await the Commission's assessment of the market economy treatment and individual treatment claims, and, where appropriate, the re-imposition of the anti-dumping duty at the appropriate rate, before proceeding with any re-imbursement.

According to the Commission, the legal basis for such an obligation is Article 14 of the basic Anti-dumping Regulation, which provides that the Regulation imposing duties shall specify the detailed modalities of its collection by Member States. The Commission had a period of 8 months to assess the claims and communicate the level of reimbursement to the national customs authority.

Hong Kong traders of footwear hailing from mainland China may be surprised to learn that the Commission has so far rejected each and every reimbursement claim reviewed by it.

Deichmann and Clarks, two EU importers of footwear, proceeded to challenge Regulation 2016/223. Deichmann challenged Regulation 2016/223 before a German tax court, which, in turn, referred the matter to the EU Court of Justice for a preliminary ruling (Case C-256/16). The question asked by the German tax court is whether Commission Implementing Regulation 2016/223 establishing a procedure for assessing certain market economy treatment and individual treatment claims made by exporting producers from mainland China and Vietnam, and implementing the judgment of the Court of Justice in Joined Cases C-659/13 and C-34/14, is valid.

It has been reported that during the oral hearing before the EU Court of Justice as part of the proceedings in Case C-256/16, Deichmann, a German retailer, raised the allegation that the Commission illegitimately recalculated anti-dumping duties in order to evade having to reimburse importers. According to Deichmann, the Commission lacks the legal basis to reassess market economy treatment as well as individual treatment claims by mainland Chinese and Vietnamese producers of shoes. This is because, Deichmann argued, the anti-dumping proceedings ended when the duties expired in March 2011 and were thus already closed when the Commission requested the national custom authorities to notify it about repayment claims. According to Deichmann, the Commission had no legal basis to then reopen the anti-dumping proceedings by re-examining the exporters’ claims.

During a hearing that took place on 11 May 2017, the Commission argued that, according to EU trade law, it has the power to specify the “detailed modalities” for the collection of duties. The Commission further argued that requesting national customs authorities not to repay duties before the Commission assesses the claims “was part of proceedings related to the implementation of the February 2016 ruling by the EU executive”.

According to the Commission, it may remedy those aspects of the contested regulation on the basis of which it was annulled. It has been reported that the Court will issue its opinion on the matter on 20 July 2017.

Content provided by Picture: HKTDC Research
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