EU ANTI-DUMPING LAWSUIT AGAINST VIETNAM - WHAT CAN BE LEARNT FROM THE FOOTWEAR CASE?

EU ANTI-DUMPING LAWSUIT AGAINST VIETNAM - WHAT CAN BE LEARNT FROM THE FOOTWEAR CASE?

EU ANTI-DUMPING LAWSUIT AGAINST VIETNAM - WHAT CAN

BE LEARNT FROM THE FOOTWEAR CASE?

ACKNOWLEGEMENTS

First and foremost, I would like to express my special thanks to mysupervisor, Phan Thi Hien Giang, MSCs., for her professional andinspirational suggestions, corrections and advice in bringing this thesis tocompletion

I am also grateful to Hanoi Foreign Trade University, especially thoseteachers at the English Faculty, for giving me the opportunity to study in such

an academically stimulating program in Bachelor of Business English Thecourse has provided me with comprehensive knowledge and useful skills inbusiness and foreign trade so that I am able to fulfill this thesis and have thecourage to embark on the challenging journey of life-long learning

My sincere thanks are due to the World Bank Library and NationalLibrary, the librarians, staff and the administrative office of the Hanoi ForeignTrade University for providing me the valuable materials and assistance

I am deeply indebted to my close friends, my relatives and myboyfriend who have always supported and encouraged me to finish the thesis

Last but of course not least, I would like to share this moment ofhappiness and sense of achievement with my parents and my brother, whohave always stood by my side and rendered me enormous support andunfaltering love during the whole process of my study

INTRODUCTION 4

Background to the study 4

Objective of the study 4

Research questions 5

Structure of the thesis 5

Scope of the study 5

Research methodology 5

Chapter 1 7

LITERATURE REVIEW 7

1.1 Dumping in international trade 7

1.1.1 Definition 7

1.1.2 Impacts on importing countries and international trade 8

1.1.2.1 Impacts on importing countries 8

1.1.2.2 Impacts on international trade 8

1.2 Anti-dumping law 9

1.2.1 WTO's anti-dumping law 9

1.2.1.1 Determination of dumping 10

1.2.1.2 Anti-dumping measures 14

1.2.2 EU's anti-dumping law 16

1.2.2.1 Determination of dumping 17

1.3 Comparison between WTO and EU anti-dumping laws 22

Chapter 2 25

THE FOOTWEAR CASE 25

2.1 Overview of the Vietnam footwear industry 25

2.1.1 The importance of Vietnam’s footwear industry 25

2.1.2 Footwear exports to the European Union 30

2.2 Overview of the EC's anti-dumping petition 31

2.3 The petitioner's arguments 32

2.3.1 Market economy treatment 33

2.3.1.1 Business decisions 34

2.3.1.2 Accounting 35

2.3.1.3 Assets and 'carry over' 36

2.3.1.4 Legal environment and currency exchange 37

2.3.2 Individual treatment 37

2.3.3 Vietnam's selling under the normal value 37

2.3.4 Injury 39

2.3.4.1 Macro-economic indicators 40

2.3.4.2 Micro-economic indicators 41

2.4 The subject country's arguments 43

2.4.1 Market-economy treatment 44

2.4.2 Level of ‘injury’ to EU producers 45

2.4.3 Inappropriate choice of surrogate country 49

2.4.4 Effects on interest of the Community 50

2.5 Summary 51

Chapter 3 54

RECOMMENDATIONS AND LESSONS LEARNT 54

3.1 Conclusions and recommendations 54

3.1.1 Diversify the markets outside the EU 56

3.1.2 Diversify the product range 58

3.1.3 Enhance model of business transfer 58

3.1.4 Improve competitiveness 59

3.2 Lessons learnts 60

3.2.1 Fully understanding on international trade law concerning dumping issue 60

3.2.2 Strengthen market economy in Vietnam 62

3.2.3 Domestic enterprises must be well-prepared 63

3.2.4 Create good public relation 64

CONCLUSION 66

BIBLIOGRAPHY 67

INTRODUCTION Background to the study

In recent years, a great number of bilateral and multilateral tradeagreements have been signed between Vietnam and other countries andinternational organizations, which, among other things, have provided greateraccess for Vietnamese goods to the global market However, several kinds ofVietnam exports have been accused of being sold at dumped prices in someforeign markets In particular, anti-dumping tariff was imposed on Vietnam bythe European Union on glutamate in 1998, by Poland on gas lighter in 2000,

by Canada on garlic in 2002, by the US on catfish in 2002, shrimp (2003),woodwork (2004) and again by the EU on bicycles in 2004 On July 2005, theEuropean Commission officially lodged yet another dumping lawsuit againstVietnamese footwear products exported to the EU market Such series oflawsuits has raised massive concern for Vietnamese producers, as it has had anegative impact on international economic integration process of Vietnam, aswell as shown that Vietnam has not adequately prepared for a bigger "playingfield"

Active integration inevitably entails proactive study about foreign markets.Nevertheless, international markets in general, and the EU market in particularhave different regulations and trading practice that requires deep understanding

to defend oneself from implicit risks Although dumping and anti-dumpingsuits are not something new to Vietnam as it was several years ago, andVietnam has been moving on a very steep learning curve, it is still necessary forVietnamese enterprises to deepen their understanding by further analysis if theyare to avoid anti-dumping petition as they break into markets abroad

Objective of the study

This graduation paper, therefore, aims to furnish Vietnamese exporters andconcerned government agencies with a structured approach to anti-dumpinglawsuits by contributing a closer look at anti-dumping regulations andexperience from the footwear case With this study, Vietnamese exporters willhopefully be able to gain the essential ‘weapon’ to defend themselves whenthere is a complaint filed against them, and more importantly, to avoid beingchallenged and getting exhausted in the daunting investigation and lawsuitprocess

Research questions

The key question is: "How can Vietnamese exporters prove that Vietnamleather footwear is not being dumped into the EU market?" To seek answer tothe question, the following sub-questions will be addressed:

- What are the differences between antidumping law of WTO and that of theEU?

- How did the EC accuse Vietnam of dumping leather footwear in the EUmarket?

- What were the arguments used by Vietnam in the footwear lawsuit?

- What are the lessons learnt for Vietnam for future dumping and antidumpinglawsuits?

Structure of the thesis

To achieve the above objectives, the thesis is divided into of threechapters Chapter 1 lays the theoretical ground for the paper by defining thetwo concepts: dumping and anti-dumping, and presenting different perspective

of anti-dumping according to GATT/WTO, and the EU Chapter 2 will thenmove on with an actual case study: the footwear case It begins with anoverview of the footwear industry in Vietnam, and then provides a detaileddescription and analysis of the footwear dispute procedure, the argumentsused by two sides: the EU and VN Finally, the last chapter will conclude thepaper with some recommendations for settling other dumping disputes in thefuture; for avoiding anti-dumping lawsuit; and avoiding negativeconsequences from the case

Scope of the study

Dumping and anti-dumping lawsuits are a very broad topic However,this study only focuses on a particular case: the VN - EU dispute on leatherfootwear This will serve as an empirical but structured approach thatVietnamese current and potential export enterprises need to familiarize with ifthey are to survive and succeed in the international market

Research methodology

The report draws heavily on desk research, with data and informationobtained from the Official Journals of the European Union, Action AidsVietnam, the Vietnam Leather and Footwear Association, official andunofficial reports, various comments and figures from published studies byexperts in the field, newspapers, magazines, and the Internet This issupplemented by primary information and experience gathered in the field

verification exercise by the EU investigators to the footwear enterprises inVietnam in the summer of 2005.

Chapter 1 LITERATURE REVIEW

1.1 Dumping in international trade

in the exporting country" A question is raised: what are the reasons ofdumping activities in international trade?

In today’s global game of intense competition, dumping helps enterpriseseasily break into and then dominate other markets However, there aredifferences between the aim of big companies and small ones, developedcountries and developing ones In respect of small companies and developingcountries, their products are less competitive and they have to dump in aneffort to sell their goods With regard to big firms and developed nations, theysell at a low price on importing markets to gain market share, furthermore, tokick out competitors, and gradually dominate the importing markets Oncebreaking into importing markets, exporters are able to completely controlthem by low a price that is the target of dumping activities Secondly, in case

countries are shortage of foreign currencies, they may foster export bylowering goods' prices However, dumping may happen beyond the control ofproducers, exporters in some cases, for instance: bottle-neck, supply exceedsdemand, damageable inventory, etc.; they have to sell goods at lower prices torecover their capital.

In short, there are many purposes to dump, but whatever purposes theyhave, dumping still causes bad effects on importing countries, others nations,and international trade

1.1.2 Impacts on importing countries and international trade

1.1.2.1 Impacts on importing countries

Nowadays, dumping activities are becoming popular in the context ofinternational trade Eliminating fair competition to break into markets,dumping has turned into an obstacle against the trend of trade liberalization Inthe short term, consumers gain benefit from dumping because of cheap price.However, this is an unfair competition activity; it can seriously damagedomestic production of importing countries in the long term As a result,nations around the world try to fight against dumping in an attempt to prevent

or minimize dumped goods on their markets in case the imports of that type ofgoods have caused or threaten to cause damage to a substantial part of thedomestic industry

1.1.2.2 Impacts on international trade

In the short term, dumping helps transaction of goods on internationaltrade increase in quantity Normally, dumping enterprises intend to take over

foreign markets, i.e competing with domestic producers or importers fromother countries for market share As selling price is lower than equilibriumprice on the market, in accordance with the law of supply and demand, therewill be a new equilibrium point, and an increase in quantity demanded thatwill be met by exporters Therefore, an increase in quantity demanded willlead to an increase in quantity supplied, that means international trade willdevelop.

In the long term, when dumping enterprises control markets, and thenraise selling prices, quantity demanded will decrease gradually, and so doestrading volume Otherwise, domestic enterprises better their competitiveability; vie with foreign exporters for market share If government of importcountry imposes anti-dumping tariff, import goods will no longer be attractivefor low price, so import quantity will reduce

Dumping always bring benefit for consumers as lower price, wideselection of cheap and diversified import goods On the contrary, domesticproducers suffer losses Moreover, workers will lose their jobs because ofreducing production, or bankruptcy If the interests of consumers are biggerthan the ones of home producers and the unemployed, the society stillbenefits On making decision of whether to levy anti-dumping tariff or not,many nations consider this element

Dumping and anti-dumping measures are controversial and complicatedissues that result in strained international trade relations, hinder WTO's target

in establishing a transparent, equal international business environment

1.2 Anti-dumping law

As analyzed above, if the export price of a product exported from onecountry to another is less than a comparable price, in the ordinary course oftrade, for the like product when destined for consumption in the exportingcountry Therefore, by imposing anti-dumping measures against foreignexporters, importing countries want to prevent exporters from selling goods atprice below its normal value The main purpose of the imposition of anti-dumping measures is to protect the domestic economy and home productionfrom unfair competition, furthermore, to create fair competition environment,

a vital factor for trade liberalization Consequently, anti-dumping measuresare said to be necessary, as they set up the legal framework in which allplayers enjoy fair competition Contrary to the above purposes, domestic firmscan strategically use this measure to target only foreign firms they view ascompetitive rivals, some nations abuse anti-dumping measures to protectdomestic production which lead to commercial dispute As a result, it isnecessary to study dumping and anti-dumping law to take part in internationaltrade

1.2.1 WTO's anti-dumping law

The Agreement on Implementation of Article VI of GATT 1994,commonly known as the Anti-dumping Agreement, is a suggestive documentfor nations to refer to when they set up their own anti-dumping law However,WTO's members have to obey Anti-dumping Agreement

The Anti-dumping Agreement includes:

- Regulations on content: detailed provisions about methods and criteriafor determination of dumping, injury, causal link between the dumped importsand the alleged injury.

- Regulations on procedure: provisions about investigation and dumping duties imposition

anti Regulations on dispute settlement among WTO's members concerninganti-dumping issues

- Regulations on competence of Committee on Anti-dumping Practices

as imported, on such reasonable basis as the authorities may determine

To apply the first method, there are two conditions: Export price isexisting (product is exported under sales contract between producer/exporterand importer); export price is reliable (price is quoted in a normal salescontract) Documents like commercial invoice, bill of lading, letter of credit can be used to specify export price Nevertheless, the export-import activitiesare not always performed under the basis of a foreign trade sales contract (forinstance: export is to move goods from headquarter in one country to itsagents in another one, barter contract) Accordingly, there will be notransaction price to define export price Or price quoted in the contract isunreliable because of association or a compensatory arrangement between theexporter and the importer or a third party In these cases, the second methodwill be used.

The normal value

"The normal value is the selling price of the like product on exportingmarket" According to article 2.6 Anti-dumping Agreement "like product"("produit similaire") shall be interpreted to mean a product which is identical,i.e alike in all respects to the product under consideration, or in the absence ofsuch a product, another product which, although not alike in all respects, hascharacteristics closely resembling those of the product under consideration.The Agreement provides three methods to calculate a product’s “normalvalue”

- The first is the main one which is based on the price in the exporter’sdomestic market In case of dependent relations between producer anddistributor in the exporting country (so producer can offer cheaper price to

distributor), the authorities of the importing country may take selling priceoffered by distributor to the first independent importer to be the normal price.

- The other two methods are alternatives they are used when there is nodomestic price of the like product in the expiring country for the followingreasons: a) When there are no sales of the like product in the ordinary course

of trade in the domestic market of the exporting country; b) product is sold inthe domestic market in special condition; c) the volume of the sales in thedomestic market of the exporting country is low (less than 5% in comparisonwith the quantity of the like product sold in the importing market), however,

in case it is proved that the quantity of the sold product in domestic market isenough to compare with the export price reasonably, the investigating can usethe selling price of the like product to define the normal value The twoalternatives are:

+ A comparable price of the like product when exported to an appropriatethird country, provided that this price is representative

+ the “constructed value” of the product, which is calculated on the basis

of the cost of production, plus selling, general, and administrative expenses,and profits Costs shall normally be calculated on the basis of records kept bythe exporter or producer under investigation, provided that such records are inaccordance with the generally accepted accounting principles of the exportingcountry and reasonably reflect the costs associated with the production andsale of the product under consideration Authorities shall consider all availableevidence on the proper allocation of costs, including that which is madeavailable by the exporter or producer

If the like product is exported from a non-market economy (the sellingprice and input price are set by the government), the above methods are notused to determine the normal value Under this circumstance, the Anti-dumping Agreement allows the authorities to use the selling price orproduction cost of a third country to calculate the normal value of the productunder consideration.

The ordinary course of trade

There is no specific definition of what sales of the product in the ordinarycourse of trade are however, the Anti-dumping Agreement defines a specificcircumstance in which sales of the like product in the domestic market of theexporting country or sales to a third country at prices below per unit (fixed andvariable) costs of production plus administrative, selling and general costsmay be treated as not being in the ordinary course of trade The like productmay be disregarded in determining normal value only if the authoritiesdetermine that such sales are made within an extended period of time(normally one year and no less than 6 months) in substantial quantities and are

at prices which do not provide for the recovery of all costs within a reasonableperiod of time If prices which are below per unit costs at the time of sale areabove weighted average per unit costs for the period of investigation, suchprices shall be considered to provide for recovery of costs within a reasonableperiod of time, the sales is considered to be in the ordinary course of trade

Calculating the dumping margin

A fair comparison shall be made between the export price and the normalvalue to define dumping margin The comparison must obey these rules:

- This comparison shall be made at the same level of trade (for e.g.: factory/wholesale/retail price) Normally, the ex-factory price is chose tocompare

ex Sales are made at as nearly as possible the same time

- differences in conditions and terms of sale, taxation, levels of trade,quantities, physical characteristics, and any other differences which are alsodemonstrated to affect price comparability shall be considered

Three methods are provided to make comparison:

- A comparison of a weighted average normal value with a weightedaverage of prices of all comparable export transactions

- A comparison of normal value and export prices on a transaction basis

transaction-to a weighted average basis may be compared to prices of individualexport transactions if the authorities find a pattern of export prices whichdiffer significantly among different purchasers, regions or time periods, and if

an explanation is provided as to why the above two methods can not take thesedifferences into account appropriately

1.2.1.2 Anti-dumping measures

Provisional measures

Provisional measures aim at preventing injury being caused during theinvestigation They can be brought into effect in the investigation period,provided that: a) a preliminary affirmative determination has been made ofdumping and consequent injury to a domestic industry; b) the authorities judgesuch measures necessary to prevent injury being caused during theinvestigation; c) an investigation has been initiated, a public notice has beengiven to that effect and interested parties have been given adequateopportunities to submit information and make comments Provisionalmeasures may take the form of:

Price undertakings

According to the Anti-dumping Agreement, during the proceduralprocess, the authorities and producers, exporters can reach an agreement inprice undertakings "Price undertakings are commitments under whichproducers; exporters will revise their prices or cease exporting dumped goods.Undertakings are voluntary arrangements among producer, exporter, andimporter"

Price undertakings shall not be sought or accepted from exporters unlessthe authorities of the importing country have made a preliminary affirmativedetermination of dumping and injury caused by such dumping Priceundertakings may be suggested by the authorities of the importing country, but

no exporter shall be forced to enter into such undertakings Normally, theauthorities of importing country will accept price undertakings offered byexporter, if the undertakings can remove the injury caused by dumped imports

If an undertaking is accepted, the investigation of dumping and injury shall becontinued if the exporter so desires or the authorities so decide In such a case,

if a negative determination of dumping or injury is made, the undertakingshall automatically lapse

Anti-dumping duties

If goods is found to be dumped and causing injury for domestic industry,the decision whether or not to impose anti-dumping duty, and the decisionwhether the amount of the anti-dumping duty to be imposed shall be the fullmargin of dumping or less are to be made by the authorities of the importingcountry The Anti-duping Agreement suggests that the duty be less than themargin if such lesser duty would be adequate to remove the injury to thedomestic industry

When an anti-dumping duty is imposed in respect of any product, suchanti-dumping duty shall be collected in the appropriate amounts in each case,

on a non-discriminatory basis on imports of such product from all sourcesfound to be dumped and causing injury, except imports from those sourcesfrom which price undertakings have been accepted

The amount of the anti-dumping duty shall not exceed the margin ofdumping, but the duty can be less than the margin if it can remove the injury

to the domestic market

If a product is subject to anti-dumping duties in an importing country, theauthorities shall promptly carry out a review for the purpose of determiningindividual margins of dumping for any exporters or producers in the exportingcountry who have not exported the product to the importing country during theperiod of investigation, provided that these exporters or producers can showthat they are not related to any of the exporters or producers in the exportingcountry who are subject to the anti-dumping duties on the product Such areview shall be carried out on an accelerated basis, compared to normal dutyassessment and review proceedings in the importing country No anti-dumpingduties shall be levied on imports from producers and exporters while thereview is being carried out The authorities may, however, remainappraisement and/or request guarantees to ensure that if such a review results

in a determination of dumping in respect of such producers or exporters, dumping duties can be levied retroactively to the date of the initiation of thereview

anti-Anti-dumping duty shall be terminated on a date not later than five yearsfrom its imposition Then interested parties shall have the right to request the

authorities to examine whether the continued imposition of the duty isnecessary, whether the injury would be likely to continue or recur if the dutywere removed or varied, or both The review shall be carried out providingthat a reasonable period of time has elapsed since the imposition of the anti-dumping duty

1.2.2 EU's anti-dumping law

As early as the foundation of the European Community, its regulations

on dumping and anti-dumping were formed They are targeted at dumpedimports which cause significant injury to Community producers If leftunchallenged, dumping gives the third country exporter an unfair competitiveadvantage which could be exploited with considerable negative consequencesfor the Community industry These regulations were set up on the basis of theTreaty establishing the European Community, the Regulations adoptedpursuant to Article 235 of the Treaty applicable to goods manufactures fromagricultural products, proposals from different parties in the Council, opinions

of the European Parliament, especially the Anti-dumping Agreement of theWTO The anti-dumping regulations of the European Union have beenamended several times to be in accordance with international regulations andcustom Existing Community rules were replaced by a new Anti-Dumpingregulation which came into force on 1 January 1995 This in turn was updated

by Regulation 384/96, which came into force on 6 March 1996 The regulation

is then amended in 1998, 2000, and 2002

1.2.2.1 Determination of dumping

The European Commission is responsible for investigating complaintsand assessing whether they are justified

Principle 2, Article 1 of the EU's anti-dumping defines: 'A product is to

be considered as being dumped if its exports to the Community is less than acomparable price for the like product, in the ordinary course of trade, asestablished for the exporting country'

Export price

Basically, the EU legislation prescribes two methods of calculatingexport price as mentioned in the WTO's regulations The export price shall bethe price actually paid or payable for the product when sold for export fromthe exporting country to the Community in cases where there is no exportprice or where it appears that the export price is unreliable because of anassociation or a compensatory arrangement between the exporter and theimporter or a third party, the export price may be constructed on the basis ofthe price at which the imported products are first resold to an independentbuyer, or, if the products are not resold to an independent buyer, or are notresold in the condition in which they were imported, on any reasonable basis

In these cases, adjustment for all costs, including duties and taxes,incurred between importation and resale, and for profits accruing, shall bemade so as to establish a reliable export price, at the Community frontierlevel

Normal value

In general, the EU's rules of this matter follow the basic requirements ofthe WTO, and they are concerned in more detailed sales of the like productintended for domestic consumption shall normally be used to determinenormal value if such sales volume constitutes 5% or more of the sales volume

of the product under consideration to the Community, and it is sold in theordinary course of trade When there are no or insufficient sales of the likeproduct in the ordinary course of trade, the normal value is calculated on thebasis of export price of the like product to a third country or on theconstructed value of the product A noticeable point in calculating on the basis

of the constructed based on the cost of production in the country of origin plus

a reasonable amount for selling, general and administrative costs and forprofits If related costs are not reflected in the records kept by producers,exporters, they will be adjusted or specified on the basis of costs of otherproducers, exporters in the same exporting country

In the case of imports from non-market economy countries, normal valueshall be determined on the basis of the price or constructed value in a marketeconomy third country, or the price from such a third country to othercountries; or where those are not possible, it shall be on the basis of the priceactually paid or payable in the Community for the like product after beingadjusted to include a reasonable profit margin

1.2.2.2 Investigating authorities and investigation procedure

Investigating authorities

According to EU Regulations, the European Commission, MinisterialCouncil, Member States and Court of law have the right to conduct theinvestigation to impose anti-dumping measures.

European Commission

The EC plays the most important role in enforcing anti-dumping law ofthe EU It is responsible for receiving complaint, initiating an investigation,carrying out the investigation, imposing the provisional anti-dumpingmeasures, accepting price undertakings from foreign exporters and petitioningfor applying official anti-dumping tariff The EC can also suggest MinisterialCouncil to approve the amendment of anti-dumping regulation andpromulgate new law on commerce Within the Commission, the GeneralDepartment of Trade is in charge of enforcing anti-dumping law It includesabout 100 offices specializing in investigating dumping cases and other tradecompensation measures

Ministerial Council

The Ministerial Council has competence to approve the imposition ofofficial anti-dumping tariff petitioned by the Commission It has the right topass the promulgation or amendment of commercial law submitted by theCommission

Member States

Member States engage in carrying out anti-dumping law throughAdvisory Committee (or the so-called "the Anti-dumping Committee"),consisting of representatives of each member, with an officer of the

Commission as chairman The consultation of Advisory Committee is referred

to by the Commission in every law enforcement procedure If there is onemember opposes to the Commission's decision, it will become ineffective.Member States are responsible for collecting anti-dumping tax through theirown customs offices

Court

Decision on imposing anti-dumping measures made by the Committee orthe Commission will be appraised by the Court It will examine whether thedecision making process of the authorities follows the correct procedure Infact, EU's Court has handled an anti-dumping petition since 1998, but there isstill no result, which shows the limitation of the appraisement of EU's Court inanti-dumping mechanism

Investigation procedure

The complaint may be submitted to the Commission by the Communityindustry The Community industry often communicates unofficially withofficers of the Commission to determine whether there is sufficient evidence

to justify the initiation of an investigation The complainant frequently lodges

a draft complaint to the Commission for reference

The Community industry

In reality, the association represents the Community industry submittingthe application The complaint shall be considered to have been made by or onbehalf of the Community industry if it is supported by those Communityproducers whose collective output constitutes more than 50 % of the total

production of the like product produced by that portion of the Communityindustry expressing either support for or opposition to the complaint.However, no investigation shall be initiated when Community producersexpressly supporting the complaint account for less than 25% of totalproduction of the like product produced by the Community industry In order

to determine whether the complaint can be seen as being on behalf of theCommunity industry, the Commission normally send questionnaires to allproducers concerning about their production and opinions of the complaint

Examining the complaint

A complaint shall contain the following information:

- Identity of the complainant and a description of the volume and value ofthe Community production of the like product by the complainant Where acomplaint is made on behalf of the Community industry the complaint shalllist all known Community producers of the like product, and a description ofthe volume and value of Community production of the like product accountedfor by such producers

- A description of the allegedly dumped product, the names of thecountry or countries of origin, the identity of exporters or foreign producersand a list of importers

- Proves of dumping activities

- Information on injury caused by alleged dumped imports on theCommunity industry

After receiving the complaint, the Commission is responsible forexamining the accuracy and adequacy of the evidence provided to determinewhether there is sufficient evidence to justify the initiation of an investigation.Within 45 days of the date on which the complaint is lodged, the Commissionhas to make decision and publish a notice on the Official Journal Aninvestigation shall be carried out within a year, and 15 months is maximum.

Questionnaire

As soon as announcing the initiation of an investigation, the Commissionshall send questionnaires to all interested parties including the complainant,importers, exporters and their representative associations, consumerorganizations The time limit for exporters shall be counted from the date ofreceipt of the questionnaire; they have 30 days to reply If the questionnaire isnot answered fully and precisely, the Commission shall make decision base ondata provided by the complainant

The Advisory Committee does not have the right to make decision but itmay inform the Commission of the supporters and opposers among MemberStates Through the Advisory Committee, Member States may put politicalpressure on the Commission.

Preliminary decision

Preliminary decision shall be summarized in written form and sent toMember States The decision shall be discussed at the Advisory Committee.Provisional duties shall be imposed in case the Commission defines that there

is dumping and consequent injury to the Community industry

1.3 Comparison between WTO and EU anti-dumping laws

Making comparison between the export price and the normal value in theEU's law is the same as the WTO's It must be fair, specific, shall be made atthe same level of trade and in respect of sales made at as nearly as possible thesame time and with due account taken of other differences which affect pricecomparability The EU lists in detail those factors for which adjustment can bemade: physical characteristics, import charges and indirect taxes, discounts,rebates and quantities, level of trade, transport, insurance, handling, loading,and ancillary costs, packing, credit, after-sales costs, commissions, currencyconversions

After calculating dumping margin, the next step is to define whetherdumped imports have cause, or threaten to cause damage to the Communityindustry or material retardation of the establishment of such an industry Level

of damage will be evaluated by indicators such as profits, productivity, and

market share If damage is proved, the European Commission will apply dumping measures.

Price undertakings

Investigations may be terminated without the imposition of provisional ordefinitive duties upon receipt of satisfactory voluntary undertakings from anyexporter to revise or to cease exports to the area in question at dumped prices,

so that the Commission is satisfied that the injurious effect of the dumping iseliminated

Anti-dumping duties

If the European Commission has appropriate proves to impose definitiveduties, the Commission will present to the Advisory Committee a proposalwhich is then submitted to the European Council The Council will make finaldecision on imposing anti-dumping duties by voting

The anti-dumping duties will be imposed only when the following

conditions are met:

- A finding of dumping: the export price at which the product is sold on theCommunity market is shown to be lower than the price on the producer'shome market;

- A material injury to Community industry: the imports have caused orthreaten to cause damage to a substantial part of the industry within the EC,such as loss of market share, reduced prices for producers and resultingpressure on production, sales, profits, productivity etc.;

- The interests of the Community: the costs for the Community of takingmeasures must not be disproportionate to the benefits

Unlike the WTO's Anti-dumping Agreement, besides the interests ofdomestic producers, the third condition is also concerned with the interests ofconsumer and producers who use imported products as input The EU'sdetermination on imposing anti-dumping duties bases on the interests of theCommunity that is different from the WTO's one

Chapter remarks

The anti-dumping regulation of the EU and the WTO has bothsimilarities and differences On exporting to foreign markets, Vietnameseenterprises have to carefully research their anti-dumping regulations Gettingfamiliar with complicated rules on investigation and imposition anti-dumpingmeasures is necessary for exporters and related producers to avoid anti-dumping activities in foreign markets As Vietnam is on the way to WTO's

accession, the experience on the EU market may be useful for Vietnam toadapt in the bigger field of the WTO

Chapter 2 THE FOOTWEAR CASE

2.1 Overview of the Vietnam footwear industry

2.1.1 The importance of Vietnam’s footwear industry

Vietnam is one of the 10 largest footwear exporters in the world.Annually, about 90% of Vietnam's footwear products are exported to variousmarkets, in which EU, the US and Japan account for nearly 59% (this does notinclude the products exporting through the third countries), 20% and 3%respectively

Figure 1 Vietnam’s share in the world’s footwear market

Footwear Export Markets

Others

Source: Lefaso, 2005

According to the country's General Statistics Office, Vietnamesefootwear has found market in over 40 countries From 2004, it ranks as thefourth largest footwear exporter in the world after China, Chinese Hong Kong,and Italy, with an annual export value of US$2.6 billion, increasing 15% over

2003 Up to the year 2005, the footwear industry export volume has reached3.039 billion USD (2.34 billion Euro)., of which sport shoes accounted foraround 67%, lady shoes 19.5%, canvas shoes 7%, and slippers and sandals6%

Vietnam will intensify export of footwear to traditional markets,including the United States and the European Union (EU), in a move to reap6.2-6.5 billion U.S dollars from exporting the products in 2010

The footwear industry is considered as one of the strategic economicsector of Vietnam It has been developing very fast over the last decade It istoday the third largest foreign currency earner of the country after crude oiland garments The footwear industry has some 300 manufactures engaged infootwear manufacturing and leather tanning, including 35 sate-ownedcompanies, 191 private enterprises and 134 foreign invested companies.Private and foreign invested companies are playing an increasingly importantrole Foreign invested units have demonstrated its prevailing advantage inproduction capacity, output and market as a result of huge investment with anumber of efficient projects The share of export contributed by these non-state companies has increased from around 73.5% in 2000 to around 83% in

2003

The footwear industry plays an important role in Vietnam's exports,accounting for 10% of the annual total

Table 1 Footwear exports compared to total exports in 2000-2005

16,700

12,859

20,600

15,862

26,503

20,407

Proporti

on (%)

Source: Lefaso, 2005 (1USD = 0.77euro)

Vietnam is estimated to earn nearly 2.1 billion dollars from exportingfootwear to the world market in the first seven months of this year, a year-on-year rise of 22.3 percent

Table 2 Vietnam's export in July and seven moths of 2006

(Units: Thousand tones; Million USD)

year over 2005Quantit

y

Value

Quantity Valu

e

Quantity

Value

Quantity

Value

Coal 13615 428 2200 70 15815 498 167.2 135.4Garment,

Source: Ministry of Trade.

Along with its contribution to the national export figures, the industryplays a major role in attracting labor It has created half-a-million direct jobsand an equal number of jobs in supporting industries, making it a significantcontributor to reducing poverty At the end of 2004, workers in the footwearindustry accounted for 6.5% of the total number of industrial workers, whocome from rural areas outside the surveyed enterprises, is approximately 50-70% In certain businesses it is higher than 80% The proportion of womenworkers aged 18 to 25 is approximately 70% The high proportion of womenworkers is an advantage for the industry, as women in Vietnam are preferred

to men in jobs requiring attention to detail and skill However, theseimmigrant women workers are the most vulnerable when there is an externalfactor affecting their income and employment, as they are living far fromhome and are easily exploited

2.1.2 Footwear exports to the European Union

EU is a major market for Vietnamese footwear This is a robust market of

400 million people whose living standards are quite high and demand forshoes is big With annual imports of 800 pairs of footwear, this marketamounts to 29,3% of the total world footwear consumption While in 1995Vietnamese footwear earned only US $400m in exports, this increased sharply

to US$800 million and nearly US$1 billion in 1998 and 1999 respectively.The surge in footwear exports to the EU is attributed to the GeneralizedSystem of Preferences that EU has granted to Vietnam under whichpreferential tariffs equal only 70% of the normal tariff rates and have giventhe Vietnamese footwear industry a comparative advantage over neighbor

competitors who do not enjoy similar favorable conditions As the EC data,since 1996, Vietnam has ranked third largest in footwear exported to the EU,after China and Indonesia Europe's colder climate and weather characteristicscreate high demand for leather footwear.

At present, Vietnam ranks second after China in terms of footwear exportearnings The European Union is the industry's primary market, accounting for59% of Vietnam's total annual footwear export Moreover, the footwearindustry also generates Vietnam's largest export to the EU Vietnam's totalexport revenue to the EU was 5.51 billion in 2005, of which 2.1 billion wasfrom the footwear industry This amounted to 38% of Vietnam's total annualexports to the trade bloc Among the EU member nations, the UnitedKingdom, Germany, Belgium, France and the Netherlands are the mainimporters of Vietnamese footwear

In the coming years, the EU will likely to continue to be the dominantmarket for Vietnam's footwear Vietnam also eyes revenue of over 4.7 billiondollars for footwear exported to the EU in 2010, accounting for more than 7.5percent of the block's total footwear import turnover in the year

2.2 Overview of the EC's anti-dumping petition

On May 30, 2005, the European Confederation of Footwear Producers(CEC), which represents EC footwear producers with combined market share

of more than 40% in upper leather footwear, field a petition with the EuropeanCommission requesting an anti-dumping investigation into 33 types offootwear with leather uppers from Vietnam and China The CEC alleged thatVietnam and China exported footwear products to the European market at

prices lower than the normal cost, causing injury to EU leather footwearindustry.

In July 7, the EC official launched the anti-dumping investigation ofleather uppers footwear importing from Vietnam and China According to law,the EC will investigate Vietnam and China to determine whether or notproducers followed market economy conditions in the process of productionand sales From that point, investigators will consider production costs todecide if the products have indeed been dumped The criteria for marketeconomy conditions mainly focus on the following:

- Business and financial decisions have been made without Governmentinterference

- Accounting vouchers are independently audited according to internationalaccounting standards (IAS) and are applicable for all purposes

- Business orientation is not in line with planned or subsidized economy

- Business adheres to Bankruptcy Law and Asset Law

- Currency flow must be at market rates

During the investigation, inspectors selected Brazil as the referencecountry in order to determine standard cost and price when calculating thenormal cost for Vietnam and China

From September 22 to October 14, 2005, the EC selected eightVietnamese enterprises as a sample for investigation