Graduation thesis
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 my supervisor,
Phan Thi Hien Giang, MSCs., for her professional and inspirational suggestions,
corrections and advice in bringing this thesis to completion.
I am also grateful to Hanoi Foreign Trade University, especially those teachers at
the English Faculty, for giving me the opportunity to study in such an academically
stimulating program in Bachelor of Business English. The course has provided me with
comprehensive knowledge and useful skills in business and foreign trade so that I am able
to fulfill this thesis and have the courage to embark on the challenging journey of life-long
learning.
My sincere thanks are due to the World Bank Library and National Library, the
librarians, staff and the administrative office of the Hanoi Foreign Trade University for
providing me the valuable materials and assistance.
I am deeply indebted to my close friends, my relatives and my boyfriend who have
always supported and encouraged me to finish the thesis.
Last but of course not least, I would like to share this moment of happiness and
sense of achievement with my parents and my brother, who have always stood by my side
and rendered me enormous support and unfaltering love during the whole process of my
study.
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Graduation thesis
ACKNOWLEGEMENTS...............................................................................1INTRODUCTION............................................................................................4
Background to the study................................................................................................4Objective of the study....................................................................................................4Research questions.........................................................................................................5Structure of the thesis....................................................................................................5Scope of the study..........................................................................................................5Research methodology...................................................................................................5
Chapter 1..........................................................................................................7LITERATURE REVIEW...............................................................................7
1.1. Dumping in international trade....................................................................71.1.1. Definition.............................................................................................................71.1.2. Impacts on importing countries and international trade......................................8
1.1.2.1. Impacts on importing countries...................................................................81.1.2.2. Impacts on international trade......................................................................8
1.2. Anti-dumping law...........................................................................................91.2.1. WTO's anti-dumping law.....................................................................................9
1.2.1.1. Determination of dumping.........................................................................101.2.1.2. Anti-dumping measures.............................................................................14
1.2.2. EU's anti-dumping law......................................................................................161.2.2.1. Determination of dumping.........................................................................17
1.3. Comparison between WTO and EU anti-dumping laws..........................22Chapter 2........................................................................................................25THE FOOTWEAR CASE.............................................................................25
2.1. Overview of the Vietnam footwear industry..............................................252.1.1. The importance of Vietnam’s footwear industry...............................................252.1.2. Footwear exports to the European Union..........................................................30
2.2. Overview of the EC's anti-dumping petition.............................................312.3. The petitioner's arguments..........................................................................32
2.3.1. Market economy treatment................................................................................332.3.1.1. Business decisions.....................................................................................342.3.1.2. Accounting.................................................................................................352.3.1.3. Assets and 'carry over'................................................................................362.3.1.4 Legal environment and currency exchange................................................37
2.3.2. Individual treatment...........................................................................................372.3.3. Vietnam's selling under the normal value..........................................................372.3.4. Injury..................................................................................................................39
2.3.4.1. Macro-economic indicators........................................................................402.3.4.2. Micro-economic indicators........................................................................41
2.4. The subject country's arguments................................................................432.4.1. Market-economy treatment................................................................................442.4.2. Level of ‘injury’ to EU producers.....................................................................452.4.3. Inappropriate choice of surrogate country.........................................................49
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Graduation thesis
2.4.4. Effects on interest of the Community................................................................502.5. Summary.......................................................................................................51
Chapter 3........................................................................................................54RECOMMENDATIONS AND LESSONS LEARNT................................54
3.1. Conclusions and recommendations............................................................543.1.1. Diversify the markets outside the EU................................................................563.1.2. Diversify the product range...............................................................................583.1.3. Enhance model of business transfer..................................................................583.1.4. Improve competitiveness...................................................................................59
3.2. Lessons learnts..............................................................................................603.2.1. Fully understanding on international trade law concerning dumping issue......603.2.2. Strengthen market economy in Vietnam...........................................................623.2.3. Domestic enterprises must be well-prepared.....................................................633.2.4. Create good public relation................................................................................64
CONCLUSION..............................................................................................66BIBLIOGRAPHY..........................................................................................67
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Graduation thesis
INTRODUCTION
Background to the study
In recent years, a great number of bilateral and multilateral trade agreements have
been signed between Vietnam and other countries and international organizations, which,
among other things, have provided greater access for Vietnamese goods to the global
market. However, several kinds of Vietnam exports have been accused of being sold at
dumped prices in some foreign markets. In particular, anti-dumping tariff was imposed on
Vietnam by the 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, the European Commission officially
lodged yet another dumping lawsuit against Vietnamese footwear products exported to the
EU market. Such series of lawsuits has raised massive concern for Vietnamese producers, as
it has had a negative impact on international economic integration process of Vietnam, as
well as shown that Vietnam has not adequately prepared for a bigger "playing field".
Active integration inevitably entails proactive study about foreign markets.
Nevertheless, international markets in general, and the EU market in particular have different
regulations and trading practice that requires deep understanding to defend oneself from
implicit risks. Although dumping and anti-dumping suits are not something new to Vietnam
as it was several years ago, and Vietnam has been moving on a very steep learning curve, it is
still necessary for Vietnamese enterprises to deepen their understanding by further analysis if
they are to avoid anti-dumping petition as they break into markets abroad.
Objective of the study
This graduation paper, therefore, aims to furnish Vietnamese exporters and concerned
government agencies with a structured approach to anti-dumping lawsuits by contributing a
closer look at anti-dumping regulations and experience from the footwear case. With this
study, Vietnamese exporters will hopefully be able to gain the essential ‘weapon’ to defend
themselves when there is a complaint filed against them, and more importantly, to avoid
being challenged and getting exhausted in the daunting investigation and lawsuit process.
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Research questions
The key question is: "How can Vietnamese exporters prove that Vietnam leather footwear
is not being dumped into the EU market?" To seek answer to the question, the following
sub-questions will be addressed:
- What are the differences between antidumping law of WTO and that of the EU?
- How did the EC accuse Vietnam of dumping leather footwear in the EU market?
- What were the arguments used by Vietnam in the footwear lawsuit?
- What are the lessons learnt for Vietnam for future dumping and antidumping lawsuits?
Structure of the thesis
To achieve the above objectives, the thesis is divided into of three chapters. Chapter
1 lays the theoretical ground for the paper by defining the two concepts: dumping and anti-
dumping, and presenting different perspective of anti-dumping according to GATT/WTO,
and the EU. Chapter 2 will then move on with an actual case study: the footwear case. It
begins with an overview of the footwear industry in Vietnam, and then provides a detailed
description and analysis of the footwear dispute procedure, the arguments used by two
sides: the EU and VN. Finally, the last chapter will conclude the paper with some
recommendations for settling other dumping disputes in the future; for avoiding anti-
dumping lawsuit; and avoiding negative consequences 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 leather footwear. This will serve
as an empirical but structured approach that Vietnamese current and potential export
enterprises need to familiarize with if they are to survive and succeed in the international
market.
Research methodology
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The report draws heavily on desk research, with data and information obtained from
the Official Journals of the European Union, Action Aids Vietnam, the Vietnam Leather
and Footwear Association, official and unofficial reports, various comments and figures
from published studies by experts in the field, newspapers, magazines, and the Internet.
This is supplemented by primary information and experience gathered in the field
verification exercise by the EU investigators to the footwear enterprises in Vietnam in the
summer of 2005.
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Chapter 1
LITERATURE REVIEW
1.1. Dumping in international trade
1.1.1. Definition
According to article 2, part 1 of the agreement on implementation of article VI of the
general agreement in tariffs and trade 1994, "a product is to be considered as being
dumped, i.e. introduced into the commerce of another country at less than its normal value,
if the export price of the product exported from one country to another is less than the
comparable price, in the ordinary course of trade, for the like product when destined for
consumption in the exporting country". A question is raised: what are the reasons of
dumping activities in international trade?
In today’s global game of intense competition, dumping helps enterprises easily break
into and then dominate other markets. However, there are differences between the aim of
big companies and small ones, developed countries and developing ones. In respect of
small companies and developing countries, their products are less competitive and they
have to dump in an effort to sell their goods. With regard to big firms and developed
nations, they sell at a low price on importing markets to gain market share, furthermore, to
kick out competitors, and gradually dominate the importing markets. Once breaking into
importing markets, exporters are able to completely control them by low a price that is the
target of dumping activities. Secondly, in case countries are shortage of foreign currencies,
they may foster export by lowering goods' prices. However, dumping may happen beyond
the control of producers, exporters in some cases, for instance: bottle-neck, supply exceeds
demand, damageable inventory, etc.; they have to sell goods at lower prices to recover their
capital.
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In short, there are many purposes to dump, but whatever purposes they have,
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 of international
trade. Eliminating fair competition to break into markets, dumping has turned into an
obstacle against the trend of trade liberalization. In the short term, consumers gain benefit
from dumping because of cheap price. However, this is an unfair competition activity; it
can seriously damage domestic 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 of goods have
caused or threaten to cause damage to a substantial part of the domestic industry.
1.1.2.2. Impacts on international trade
In the short term, dumping helps transaction of goods on international trade increase
in quantity. Normally, dumping enterprises intend to take over foreign markets, i.e.
competing with domestic producers or importers from other countries for market share. As
selling price is lower than equilibrium price on the market, in accordance with the law of
supply and demand, there will be a new equilibrium point, and an increase in quantity
demanded that will be met by exporters. Therefore, an increase in quantity demanded will
lead to an increase in quantity supplied, that means international trade will develop.
In the long term, when dumping enterprises control markets, and then raise selling
prices, quantity demanded will decrease gradually, and so does trading volume. Otherwise,
domestic enterprises better their competitive ability; vie with foreign exporters for market
share. If government of import country imposes anti-dumping tariff, import goods will no
longer be attractive for low price, so import quantity will reduce.
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Dumping always bring benefit for consumers as lower price, wide selection of cheap
and diversified import goods. On the contrary, domestic producers suffer losses. Moreover,
workers will lose their jobs because of reducing production, or bankruptcy. If the interests
of consumers are bigger than the ones of home producers and the unemployed, the society
still benefits. 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 complicated issues 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 one country to
another is less than a comparable price, in the ordinary course of trade, for the like product
when destined for consumption in the exporting country. Therefore, by imposing anti-
dumping measures against foreign exporters, importing countries want to prevent exporters
from selling goods at price below its normal value. The main purpose of the imposition of
anti-dumping measures is to protect the domestic economy and home production from
unfair competition, furthermore, to create fair competition environment, a vital factor for
trade liberalization. Consequently, anti-dumping measures are said to be necessary, as they
set up the legal framework in which all players enjoy fair competition. Contrary to the
above purposes, domestic firms can strategically use this measure to target only foreign
firms they view as competitive rivals, some nations abuse anti-dumping measures to protect
domestic production which lead to commercial dispute. As a result, it is necessary to study
dumping and anti-dumping law to take part in international trade.
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 document for nations to refer to when they
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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 criteria for
determination of dumping, injury, causal link between the dumped imports and the alleged
injury.
- Regulations on procedure: provisions about investigation and anti-dumping duties
imposition.
- Regulations on dispute settlement among WTO's members concerning anti-dumping
issues.
- Regulations on competence of Committee on Anti-dumping Practices
1.2.1.1. Determination of dumping
A dumping case will be determined by comparing the export price and the normal
value of the product.
Export price
Export price is the selling price from country of origin or exporting country to
importing country. There are two ways of calculating export price:
- Export price is the transaction price between producer or exporter of exporting
country and importer of importing country.
- The export price may be constructed on the basis of the price at which the imported
products are first resold to an independent buyer, or if the products are not resold to an
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independent buyer, or not resold in the condition as imported, on such reasonable basis as
the authorities may determine.
To apply the first method, there are two conditions: Export price is existing (product
is exported under sales contract between producer/exporter and importer); export price is
reliable (price is quoted in a normal sales contract). Documents like commercial invoice,
bill of lading, letter of credit... can be used to specify export price. Nevertheless, the export-
import activities are not always performed under the basis of a foreign trade sales contract
(for instance: export is to move goods from headquarter in one country to its agents in
another one, barter contract). Accordingly, there will be no transaction price to define
export price. Or price quoted in the contract is unreliable because of association or a
compensatory arrangement between the exporter and the importer or a third party. In these
cases, the second method will be used.
The normal value
"The normal value is the selling price of the like product on exporting market".
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 of such a product, another product which, although
not alike in all respects, has characteristics closely resembling those of the product under
consideration. The Agreement provides three methods to calculate a product’s “normal
value”.
- The first is the main one which is based on the price in the exporter’s domestic
market. In case of dependent relations between producer and distributor in the exporting
country (so producer can offer cheaper price to distributor), the authorities of the importing
country may take selling price offered by distributor to the first independent importer to be
the normal price.
- The other two methods are alternatives. they are used when there is no domestic
price of the like product in the expiring country for the following reasons: a) When there
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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 in the domestic market in special condition; c) the
volume of the sales in the domestic market of the exporting country is low (less than 5% in
comparison with 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 is enough to
compare with the export price reasonably, the investigating can use the selling price of the
like product to define the normal value. The two alternatives are:
+ A comparable price of the like product when exported to an appropriate third
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 by the exporter or producer under
investigation, provided that such records are in accordance with the generally accepted
accounting principles of the exporting country and reasonably reflect the costs associated
with the production and sale of the product under consideration. Authorities shall consider
all available evidence on the proper allocation of costs, including that which is made
available by the exporter or producer.
If the like product is exported from a non-market economy (the selling price and
input price are set by the government), the above methods are not used to determine the
normal value. Under this circumstance, the Anti-dumping Agreement allows the authorities
to use the selling price or production cost of a third country to calculate the normal value of
the product under consideration.
The ordinary course of trade
There is no specific definition of what sales of the product in the ordinary course of
trade are. however, the Anti-dumping Agreement defines a specific circumstance in which
sales of the like product in the domestic market of the exporting country or sales to a third
country at prices below per unit (fixed and variable) costs of production plus
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administrative, selling and general costs may be treated as not being in the ordinary course
of trade. The like product may be disregarded in determining normal value only if the
authorities determine 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 reasonable period of time. If prices which are
below per unit costs at the time of sale are above weighted average per unit costs for the
period of investigation, such prices shall be considered to provide for recovery of costs
within a reasonable period 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 normal value to
define dumping margin. The comparison must obey these rules:
- This comparison shall be made at the same level of trade (for e.g.:
ex-factory/wholesale/retail price). Normally, the ex-factory price is chose to compare.
- 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 also demonstrated to affect
price comparability shall be considered.
Three methods are provided to make comparison:
- A comparison of a weighted average normal value with a weighted average of
prices of all comparable export transactions
- A comparison of normal value and export prices on a transaction-to-transaction
basis
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- a weighted average basis may be compared to prices of individual export
transactions if the authorities find a pattern of export prices which differ significantly
among different purchasers, regions or time periods, and if an explanation is provided as to
why the above two methods can not take these differences into account appropriately.
1.2.1.2. Anti-dumping measures
Provisional measures
Provisional measures aim at preventing injury being caused during the investigation.
They can be brought into effect in the investigation period, provided that: a) a preliminary
affirmative determination has been made of dumping and consequent injury to a domestic
industry; b) the authorities judge such measures necessary to prevent injury being caused
during the investigation; c) an investigation has been initiated, a public notice has been
given to that effect and interested parties have been given adequate opportunities to submit
information and make comments. Provisional measures may take the form of:
- A provisional duty
- A security - by cash deposit or bond - equal to the amount of the anti-dumping duty
provisionally estimated
- Withholding of appraisement provided that the normal duty and the estimated amount of
the anti-dumping duty are indicated.
Provisional measures must not be greater than the provisionally estimated margin of
dumping. Among the above measures, the Anti-dumping Agreement encourages countries
to apply the second one. In fact, almost all nations use this measure because of its simple
procedure.
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Price undertakings
According to the Anti-dumping Agreement, during the procedural process, the
authorities and producers, exporters can reach an agreement in price undertakings. "Price
undertakings are commitments under which producers; exporters will revise their prices or
cease exporting dumped goods. Undertakings are voluntary arrangements among producer,
exporter, and importer".
Price undertakings shall not be sought or accepted from exporters unless the
authorities of the importing country have made a preliminary affirmative determination of
dumping and injury caused by such dumping. Price undertakings may be suggested by the
authorities of the importing country, but no exporter shall be forced to enter into such
undertakings. Normally, the authorities of importing country will accept price undertakings
offered by exporter, if the undertakings can remove the injury caused by dumped imports If
an undertaking is accepted, the investigation of dumping and injury shall be continued 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 undertaking shall 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 decision whether the amount of the
anti-dumping duty to be imposed shall be the full margin of dumping or less are to be made
by the authorities of the importing country. The Anti-duping Agreement suggests that the
duty be less than the margin if such lesser duty would be adequate to remove the injury to
the domestic industry.
When an anti-dumping duty is imposed in respect of any product, such anti-dumping
duty shall be collected in the appropriate amounts in each case, on a non-discriminatory
basis on imports of such product from all sources found to be dumped and causing injury,
except imports from those sources from which price undertakings have been accepted.
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The amount of the anti-dumping duty shall not exceed the margin of dumping, 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, the authorities
shall promptly carry out a review for the purpose of determining individual margins of
dumping for any exporters or producers in the exporting country who have not exported the
product to the importing country during the period of investigation, provided that these
exporters or producers can show that they are not related to any of the exporters or
producers in the exporting country who are subject to the anti-dumping duties on the
product. Such a review shall be carried out on an accelerated basis, compared to normal
duty assessment and review proceedings in the importing country. No anti-dumping duties
shall be levied on imports from producers and exporters while the review is being carried
out. The authorities may, however, remain appraisement and/or request guarantees to
ensure that if such a review results in a determination of dumping in respect of such
producers or exporters, anti-dumping duties can be levied retroactively to the date of the
initiation of the review.
Anti-dumping duty shall be terminated on a date not later than five years from its
imposition. Then interested parties shall have the right to request the authorities to examine
whether the continued imposition of the duty is necessary, whether the injury would be
likely to continue or recur if the duty were removed or varied, or both. The review shall be
carried out providing that 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 dumped imports which cause
significant injury to Community producers. If left unchallenged, dumping gives the third
country exporter an unfair competitive advantage which could be exploited with
considerable negative consequences for the Community industry. These regulations were
set up on the basis of the Treaty establishing the European Community, the Regulations
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adopted pursuant to Article 235 of the Treaty applicable to goods manufactures from
agricultural products, proposals from different parties in the Council, opinions of the
European Parliament, especially the Anti-dumping Agreement of the WTO. The anti-
dumping regulations of the European Union have been amended several times to be in
accordance with international regulations and custom. Existing Community rules were
replaced by a new Anti-Dumping regulation 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 complaints and 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 a comparable price for the like
product, in the ordinary course of trade, as established for the exporting country'
Export price
Basically, the EU legislation prescribes two methods of calculating export price as
mentioned in the WTO's regulations. The export price shall be the price actually paid or
payable for the product when sold for export from the exporting country to the Community.
in cases where there is no export price or where it appears that the export price is unreliable
because of an association or a compensatory arrangement between the exporter and the
importer or a third party, the export price may be constructed on the basis of the price at
which the imported products are first resold to an independent buyer, or, if the products are
not resold to an independent buyer, or are not resold in the condition in which they were
imported, on any reasonable basis.
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In these cases, adjustment for all costs, including duties and taxes, incurred between
importation and resale, and for profits accruing, shall be made so as to establish a reliable
export price, at the Community frontier level.
Normal value
In general, the EU's rules of this matter follow the basic requirements of the WTO,
and they are concerned in more detailed. sales of the like product intended for domestic
consumption shall normally be used to determine normal 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 the ordinary course of trade. When there are no or insufficient
sales of the like product in the ordinary course of trade, the normal value is calculated on
the basis of export price of the like product to a third country or on the constructed 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 for profits. 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 other
producers, exporters in the same exporting country.
In the case of imports from non-market economy countries, normal value shall be
determined on the basis of the price or constructed value in a market economy third
country, or the price from such a third country to other countries; or where those are not
possible, it shall be on the basis of the price actually paid or payable in the Community for
the like product after being adjusted to include a reasonable profit margin.
1.2.2.2. Investigating authorities and investigation procedure
Investigating authorities
According to EU Regulations, the European Commission, Ministerial Council,
Member States and Court of law have the right to conduct the investigation to impose anti-
dumping measures.
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European Commission
The EC plays the most important role in enforcing anti-dumping law of the EU. It is
responsible for receiving complaint, initiating an investigation, carrying out the
investigation, imposing the provisional anti-dumping measures, accepting price
undertakings from foreign exporters and petitioning for applying official anti-dumping
tariff. The EC can also suggest Ministerial Council to approve the amendment of anti-
dumping regulation and promulgate new law on commerce. Within the Commission, the
General Department of Trade is in charge of enforcing anti-dumping law. It includes about
100 offices specializing in investigating dumping cases and other trade compensation
measures.
Ministerial Council
The Ministerial Council has competence to approve the imposition of official anti-
dumping tariff petitioned by the Commission. It has the right to pass the promulgation or
amendment of commercial law submitted by the Commission.
Member States
Member States engage in carrying out anti-dumping law through Advisory
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 one member opposes to the Commission's decision, it will become ineffective.
Member States are responsible for collecting anti-dumping tax through their own customs
offices.
Court
Decision on imposing anti-dumping measures made by the Committee or the
Commission will be appraised by the Court. It will examine whether the decision making
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process of the authorities follows the correct procedure. In fact, EU's Court has handled an
anti-dumping petition since 1998, but there is still no result, which shows the limitation of
the appraisement of EU's Court in anti-dumping mechanism.
Investigation procedure
The complaint may be submitted to the Commission by the Community industry. The
Community industry often communicates unofficially with officers 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 submitting the
application. The complaint shall be considered to have been made by or on behalf of the
Community industry if it is supported by those Community producers whose collective
output constitutes more than 50 % of the total production of the like product produced by
that portion of the Community industry expressing either support for or opposition to the
complaint. However, no investigation shall be initiated when Community producers
expressly supporting the complaint account for less than 25% of total production of the like
product produced by the Community industry. In order to determine whether the complaint
can be seen as being on behalf of the Community industry, the Commission normally send
questionnaires to all producers 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 of the
Community production of the like product by the complainant. Where a complaint is made
on behalf of the Community industry the complaint shall list all known Community
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producers of the like product, and a description of the volume and value of Community
production of the like product accounted for by such producers.
- A description of the allegedly dumped product, the names of the country or
countries of origin, the identity of exporters or foreign producers and a list of importers.
- Proves of dumping activities.
- Information on injury caused by alleged dumped imports on the Community
industry.
After receiving the complaint, the Commission is responsible for examining the
accuracy and adequacy of the evidence provided to determine whether there is sufficient
evidence to justify the initiation of an investigation. Within 45 days of the date on which
the complaint is lodged, the Commission has to make decision and publish a notice on the
Official Journal. An investigation shall be carried out within a year, and 15 months is
maximum.
Questionnaire
As soon as announcing the initiation of an investigation, the Commission shall send
questionnaires to all interested parties including the complainant, importers, exporters and
their representative associations, consumer organizations. The time limit for exporters shall
be counted from the date of receipt of the questionnaire; they have 30 days to reply. If the
questionnaire is not answered fully and precisely, the Commission shall make decision base
on data provided by the complainant.
Information approachability
All interested parties may inspect all information which is not confidential, made
available by any party to an investigation.
Inspection
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After receiving the answers, the Commission shall appoint its officers to inspect head
offices of importers and producers in the EU, and then inspect the offices of exporters in
exporting country in order to define whether the data provided is in accordance with normal
accounting procedure. The inspection ensures the accuracy of the information in the
questionnaire.
The Advisory Committee does not have the right to make decision but it may inform the
Commission of the supporters and opposers among Member States. Through the Advisory
Committee, Member States may put political pressure on the Commission.
Preliminary decision
Preliminary decision shall be summarized in written form and sent to Member 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 the EU's law is
the same as the WTO's. It must be fair, specific, shall be made at the same level of trade
and in respect of sales made at as nearly as possible the same time and with due account
taken of other differences which affect price comparability. The EU lists in detail those
factors for which adjustment can be made: 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,
currency conversions.
After calculating dumping margin, the next step is to define whether dumped imports
have cause, or threaten to cause damage to the Community industry or material retardation
of the establishment of such an industry. Level of damage will be evaluated by indicators
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such as profits, productivity, and market share. If damage is proved, the European
Commission will apply anti-dumping measures.
Provisional measures
Judging, making decision on imposing provisional measures falls within the
competence of the European Commission, however, the European Council is able to make
another substitution decision by voting. The WTO's provisional measures have three forms,
but the EU only apply the second one. Provisional duties shall be secured by a guarantee.
The amount of the provisional anti-dumping duty should be less than the margin of
dumping if it would be adequate to remove the injury to the Community industry.
Price undertakings
Investigations may be terminated without the imposition of provisional or definitive
duties upon receipt of satisfactory voluntary undertakings from any exporter 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 is eliminated.
Anti-dumping duties
If the European Commission has appropriate proves to impose definitive duties, the
Commission will present to the Advisory Committee a proposal which is then submitted to
the European Council. The Council will make final decision 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 the Community
market is shown to be lower than the price on the producer's home market;
- A material injury to Community industry: the imports have caused or threaten to cause
damage to a substantial part of the industry within the EC, such as loss of market share,
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reduced prices for producers and resulting pressure on production, sales, profits,
productivity etc.;
- The interests of the Community: the costs for the Community of taking measures must not
be disproportionate to the benefits.
Unlike the WTO's Anti-dumping Agreement, besides the interests of domestic
producers, the third condition is also concerned with the interests of consumer and
producers who use imported products as input. The EU's determination on imposing anti-
dumping duties bases on the interests of the Community that is different from the WTO's
one.
Chapter remarks
The anti-dumping regulation of the EU and the WTO has both similarities and
differences. On exporting to foreign markets, Vietnamese enterprises have to carefully
research their anti-dumping regulations. Getting familiar with complicated rules on
investigation and imposition anti-dumping measures 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 to adapt in
the bigger field of the WTO.
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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 various markets, in which EU, the US
and Japan account for nearly 59% (this does not include the products exporting through the
third countries), 20% and 3% respectively.
Figure 1. Vietnam’s share in the world’s footwear market
Source: Lefaso, 2005
According to the country's General Statistics Office, Vietnamese footwear has found
market in over 40 countries. From 2004, it ranks as the fourth largest footwear exporter in
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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 reached 3.039 billion USD (2.34 billion Euro)., of which sport shoes
accounted for around 67%, lady shoes 19.5%, canvas shoes 7%, and slippers and sandals
6%.
Vietnam will intensify export of footwear to traditional markets, including the United
States and the European Union (EU), in a move to reap 6.2-6.5 billion U.S. dollars from
exporting the products in 2010.
The footwear industry is considered as one of the strategic economic sector of
Vietnam. It has been developing very fast over the last decade. It is today the third largest
foreign currency earner of the country after crude oil and garments. The footwear industry
has some 300 manufactures engaged in footwear manufacturing and leather tanning,
including 35 sate-owned companies, 191 private enterprises and 134 foreign invested
companies. Private and foreign invested companies are playing an increasingly important
role. Foreign invested units have demonstrated its prevailing advantage in production
capacity, output and market as a result of huge investment with a number 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
Year 2000 2001 2002 2003 2004 2005
USD Euro USD Euro USD Euro USD Euro USD Euro USD Euro
Footwear
export
1,468 1.130 1,575 1,212 1,846 1,421 2,267 1,745 2,640 2,032 3,039 2,340
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National
total
export
14,448 11,124 15,100 11,627 16,700 12,859 20,600 15,862 26,503 20,407
Proportio
n (%)
10,16 10,43 11,05 11,00 10,00
Source: Lefaso, 2005 (1USD = 0.77euro)
Vietnam is estimated to earn nearly 2.1 billion dollars from exporting footwear 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)
6 months July 7 months 7 months on year
over 2005
Quantity Value Quantity Value Quantity Value Quantity Value
Crude oil 8240 4180 1400 740 9640 4920 94.2 122.4
Coal 13615 428 2200 70 15815 498 167.2 135.4
Garment,
textile
2762 600 3362 132.1
Footwear 1747 340 2087 122.3
Bags,
wallets...
251 50 301 108.5
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Electronic
products
770 130 900 119.8
Bamboo,
sedge
products
96 18 114 106.3
Ceramics 141 22 163 116.1
Gemstones,
metals
73 10 83 120.4
Electric
wires,
cables
311 55 366 137.7
Plastic
products
212 40 252 130.1
Bicycles,
bicycle
parts
73 6 79 81.4
Vegetable,
animal oil
8 2 10 95.1
Children
toys
26 4 30 139.8
Instant
noodles
33 5 38 89.2
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Rice 2843 771 500 135 3343 906 95.3 94.6
Coffee 507 582 60 73 567 655 87.4 129.4
Vegetables 132 20 152 111.4
Latex 290 517 55 118 345 635 141.6 213.2
Pepper 76 109 13 20 89 129 136.9 144.3
Cashew
nuts
55 219 11 45 66 246 121.7 100.4
Green tea 44 44 11 11 55 55 137.6 130.1
Peanuts 9 6 2 2 11 8 24.0 28.3
Furniture 918 160 1078 126.6
Aqua
cultural
products
1426 310 1736 125.5
Source: Ministry of Trade.
Along with its contribution to the national export figures, the industry plays a major
role in attracting labor. It has created half-a-million direct jobs and an equal number of jobs
in supporting industries, making it a significant contributor to reducing poverty. At the end
of 2004, workers in the footwear industry accounted for 6.5% of the total number of
industrial workers, who come from rural areas outside the surveyed enterprises, is
approximately 50-70%. In certain businesses it is higher than 80%. The proportion of
women workers aged 18 to 25 is approximately 70%. The high proportion of women
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workers is an advantage for the industry, as women in Vietnam are preferred to men in jobs
requiring attention to detail and skill. However, these immigrant women workers are the
most vulnerable when there is an external factor affecting their income and employment, as
they are living far from home 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 for shoes is big. With annual
imports of 800 pairs of footwear, this market amounts to 29,3% of the total world footwear
consumption. While in 1995 Vietnamese 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 Generalized
System of Preferences that EU has granted to Vietnam under which preferential tariffs
equal only 70% of the normal tariff rates and have given the 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
characteristics create high demand for leather footwear.
At present, Vietnam ranks second after China in terms of footwear export earnings.
The European Union is the industry's primary market, accounting for 59% of Vietnam's
total annual footwear export. Moreover, the footwear industry also generates Vietnam's
largest export to the EU. Vietnam's total export revenue to the EU was 5.51 billion in 2005,
of which 2.1 billion was from the footwear industry. This amounted to 38% of Vietnam's
total annual exports to the trade bloc. Among the EU member nations, the United Kingdom,
Germany, Belgium, France and the Netherlands are the main importers of Vietnamese
footwear.
In the coming years, the EU will likely to continue to be the dominant market for
Vietnam's footwear. Vietnam also eyes revenue of over 4.7 billion dollars for footwear
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exported to the EU in 2010, accounting for more than 7.5 percent 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 European Commission requesting an anti-
dumping investigation into 33 types of footwear with leather uppers from Vietnam and
China. The CEC alleged that Vietnam and China exported footwear products to the
European market at prices lower than the normal cost, causing injury to EU leather
footwear industry.
In July 7, the EC official launched the anti-dumping investigation of leather uppers
footwear importing from Vietnam and China. According to law, the EC will investigate
Vietnam and China to determine whether or not producers followed market economy
conditions in the process of production and sales. From that point, investigators will
consider production costs to decide if the products have indeed been dumped. The criteria
for market economy conditions mainly focus on the following:
- Business and financial decisions have been made without Government interference.
- Accounting vouchers are independently audited according to international accounting
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
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During the investigation, inspectors selected Brazil as the reference country in order
to determine standard cost and price when calculating the normal cost for Vietnam and
China.
From September 22 to October 14, 2005, the EC selected eight Vietnamese
enterprises as a sample for investigation
On November 23, 2005, the EC concluded that none of the eight enterprises in the
survey met the criteria for market economy as regulated by the EC law.
Although the EC could not identify absolutely whether export prices were lower than
normal cost, enterprises in the study were denied market economy treatment based on
government participation in the form of low interest rates, regulated land prices, and tax
preference.
On February 23, 2006, EC announced the time schedule the EC imposed provisional
duties on imports footwear with leather uppers originating in Vietnam. According to that,
on April 7, 2006, the duties were 4.2%; 8.4% from June 2, 2006; 12.6% from July 17,
2006; and finally 16.8% from September, 2006. After September, 2006, EC will make a
final decision on the case.
On October 6, 2006, the EU has officially imposed an anti-dumping duty of 10% on
Vietnamese upper leather footwear.
2.3. The petitioner's arguments
Ten sampled Community producers are located in five different Member States. They
requested that their identities be kept confidential as the disclosure of their identity could
lead to a risk of significant adverse effects. Certain complainants Community producers
supply customers in the Community that also source their products from Vietnam, thus
benefiting from these imports. Those complainants are therefore in a sensitive position
since some of their clients may not be satisfied with their lodging or supporting a
complaint.
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2.3.1. Market economy treatment
The EU anti-dumping does not stipulate what constitutes a non-market economy.
Instead the regulations list 15 countries consider being non-market economies, and
presently divide them into the following three groups.
Table 3. Categories of non-market economies in EU basic regulation
1 Those which have had reforms which
have led to the emergence of firms for which
market economy conditions might prevail.
China, Vietnam, and
Kazakhstan
2 Any non-market economy country which
is a member of the WTO at the date of the
initiation of the investigation.
Albania, Armenia,
Azerbaijan, Georgia,
Kyrgyzstan, Moldova and
Mongolia.
3 Other non-market economies. Belarus, North Korea,
Tajikistan, Turkmenistan,
and Uzbekistan.
Source: Swedish National Board of Trade.
Eight Vietnamese companies have been selected to be samples for exporting
producers. The following table summarizes the determination for each company against
each of the five criteria set out by the European Commission.
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Table 4. EU investigation outcomes
Company 1 2 3 4 5 Conclusion
Business
decisions
Accounting
standard
Assets
and
'carry
over'
Legal
environment
Currency
exchange
Company 1 no no No yes yes No MET
Company 2 no no No yes yes No MET
Company 3 no no No yes yes No MET
Company 4 no no No yes yes No MET
Company 5 no yes No yes yes No MET
Company 6 no no No yes yes No MET
Company 7 yes no No yes yes No MET
Company 8 yes no No yes yes No MET
Source: Official Journal of the European Union
2.3.1.1. Business decisions
Business decisions are decisions of firms regarding prices, costs, and inputs,
including for instance raw materials, cost of technology and labor, output, sales, and
investment, made in response to market signals reflecting supply and demand, and without
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significant State interference in this regard, and costs of major inputs substantially reflect
market values.
Regarding the first criterion, six companies failed to demonstrate that their business
decisions are made in response to market signals and without significant State interference.
Four of them operate under the obligation to export either all or a significant part of their
production. The companies concerned claimed that they were allowed to sell on their
domestic market. However, their submission failed to give any relevant counter arguments.
The companies merely argued that they are free to ask for a modification of their
investment license if they want to sell on their domestic market and/or that quantitative
sales restriction have a tax purpose. In that respect, the Commission services cannot but
note that the companies are apparently free to remove this restriction from their investment
license but did not request any modification during the investigation period nor thereafter.
These companies were thus still subject to a sales ratio and were therefore not able to take
their business decisions in reaction to market signals. The claims were therefore rejected.
The two remaining companies were found to be entirely state owned with direct
management links to the state. Both of these companies challenged the fact that there was
significant State interference but did not provide additional new arguments to substantiate
their claims which were, therefore, rejected.
2.3.1.2. Accounting
Firms have on clear set of basic accounting records which are independently audited
on line with International Accounting Standards (IAS) and are applied for all purposes.
As far as the second criterion is concerned, seven companies failed to fulfill the
condition. Three companies had no audited accounts nor published financial statements.
For three other companies, it could not be guaranteed that accounting records are in line
with the IAS and applied for all purposes since the auditors specifically mentioned in the
published financial statements that the accounting statements are not interested to present
the financial position of the company in accordance with accounting principles and
practices generally accepted in countries and jurisdictions other than Vietnam. this was
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found to be in contradiction to the IAS norms which state in their 'Framework for the
preparation and presentation of financial statements' that 'the objective of financial
statement is to provide information about the financial position, performance and changes
in financial position of an entity that is useful to wide range of users in making economic
decisions'. In addition, any entity whose financial statements comply with IAS shall make
an explicit and unreserved statement of such compliance in the notes which is obviously not
the case for these companies. For two of these companies, significant problems have been
raised by the auditors in their report and for one of them, the verification performed by the
auditors was found to be highly insufficient to guarantee the reliability of the accounts. The
seven exporting producers concerned contested the conclusion. However, in view of the
absence of audited accounts for three of them, the substantial problems raised by the
auditors themselves in their report for two others, and the significant remark made by the
auditors concerning the last two companies, which clearly warns the users that their
accounts do not comply with the generally accepted accounting principles: the submission
made by these seven companies did not contain any new elements that would permit the
Commission services to revise their conclusions. The claims were rejected.
2.3.1.3. Assets and 'carry over'
The production costs and financial situation of firms are not subject to significant
distortions carried over from the former non-market economy system, in particular in
relation to depreciation of assets, other write-offs, barter trade and payment via
compensation of debts.
As far as the thirst criterion is concerned, in view of the situation regarding the land
use rights which do not correspond to market economy conditions but are still centrally
determined by the authorities, in particular regarding price setting and price revision, all
companies failed to demonstrate that there are no distortions carried over from the non-
market economy system. Moreover, for three of these companies, distortions were also
found to be carried over from non-market economy system regarding, more particularly,
the valuation of the assets. The conclusions were contested by the companies which failed
to provide new elements to substantiate their claims. The latter were rejected.
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2.3.1.4 Legal environment and currency exchange
The fourth and fifth criteria were found to be met by each of the eight companies.
2.3.2. Individual treatment
The EU basic regulation also provides for individual treatment of companies in
certain non-market economies whose decisions regarding exports are considered not to be
distorted by state intervention. In order to be granted individual treatment the applicant will
have to show that it fulfils the following criteria: in the case of wooly or partly foreign
owed firms or joint ventures, exporters are free to repatriate capital and profits; export
prices and quantities, and conditions and terms of sale are freely determined; the majority
of the shares belong to private persons. State officials appearing on the board of Directors
or holding key management positions shall either be in minority or it must be demonstrated
that the company is nonetheless sufficiently independent from state interference; exchange
rate conversions are carried out at the market rate; State interference is not such as to permit
circumvention of measures if individual exporters are given different rates of duty.
As far as Vietnam is concerned, the exporting producers who requested MET also
claimed IT in the event that they would not to be granted MET. On the basis of the
information available, it was found that these companies did not meet all the requirements
for IT. In particular, it was established that for four companies, the export sales quantities
were not freely determined by the company, but were fixed in the company's business
license. For the two 100% State-owned companies, it was considered that they failed to
demonstrate that appropriate measures were taken to prevent State interference. for the two
remaining companies, it was considered that they linked to a third company which did not
fulfill the requirements for IT as set in EU's regulation for reasons of export sales
restrictions and State involvement in its internal structure and decision-making process. As
there would be a risk of circumvention were different duty rates to be applied to these thee
related companies, IT could not be granted to the former two companies.
2.3.3. Vietnam's selling under the normal value
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According to Article 2 of the EU's anti-dumping regulation, in case of imports from
non-market economy countries and to the extent that MET could not be granted, normal
value has to be established on the basis of the price or constructed value in an analogue
country. The Commission indicated its intention to use Brazil as an appropriate analogue
country for the purpose of establishing normal value for Vietnam. The three main Brazilian
exporting producers are:
- Bison Indústria de Calcados Ltda
- Calcados Azeleia SA
- H. Bettarello Curtidora e Calcados Ltda
One of the most important criteria for the selection of the analogue country are the
representative domestic sales in the analogue country as compared to exports of the product
concerned originating in the non-market economy country or country concerned by the
proceeding. Brazil appeared to be the most reasonable choice in view of the representative
domestic sales which were found to account for 5% or more in comparison with exports
from Vietnam.
Table 5. Average unit prices of Vietnamese products on EU market
2001 2002 2003 2004 IP
Vietnam EUR/pair 12,5 11,8 10,5 9,8 9,7
Index: 2001=100 100 95 84 79 78
Source: Eurostat.
The above table shows the average prices of Vietnamese exports into the Community.
After a comparison between normal value and export price was made on an ex-factory
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basis, the European Commission came to a conclusion that Vietnamese provisional
dumping margin is 64%.
2.3.4. Injury
Within the Community, the product concerned is manufactured by more than 8000
producers. Around 80% of the Community production is concentrated in Italy, Portugal,
and Spain. In the table below are presented certain indicators provided by Italy, Spain,
Portugal, France, Poland and Greece which demonstrate that the sector has been facing
serious negative development.
Table 6. Macro indicators provided by the national federations of the
complainants
2001 2002 2003 2002 IP
Production (000 pairs) 538 910 446 917 408 559 370 143 349 222
Index 2001=100 100 83 76 69 65
Employment 238 018 226 126 215 426 201 174 194 579
Index 2001=100 100 95 91 85 82
Number of companies 10 728 10 684 10 447 10 044 9 579
Index 2001=100 100 100 97 94 89
Source: Official Journal of the European Union
Production of footwear with uppers of leather in the above mentioned Member States
declined by 35% during the period considered. During the same period, more than 1000
companies were forced to close down. This represented more than 43 000 job losses; a
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decrease of 20% of employment in 2001. The decline of number of companies was
especially marked during the IP, a period which significantly overlaps with the year 2005.
This indicates an acceleration of bankruptcies during the first quarter of 2005.
An injury analysis was carried out, the injury indicators have been established at two
levels: the macro-economic elements were assessed at the level of the entire Community
industry; the micro-economic elements for the individual companies.
2.3.4.1. Macro-economic indicators
The analysis of the macro-economic indicators revealed that the injury mainly
materialized in terms of decrease of sales volume and market share. Since footwear is
manufactured on order, this also had a direct negative impact on the production level and
employment in the Community.
The production volume of the overall Community industry went down from 223
million pairs in 2001 to 146,9 million pairs during the investigation period. This represents
a decrease of more than 30%.
Table 7. Production volume of the Community industry
2001 2002 2003 2004 IP
Production (000 pairs) 223 047 182 576 172 339 158 213 146 868
Index: 2001=100 100 82 77 71 66
Source: Official Journal of the European Union
Because production takes place on order, the sales volume of the Community
industry followed a decreasing trend similar to the production. The number of pairs sold on
the Community market dropped by more than 50 million between 2001 and the IP, i.e. by
33%
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In terms of market shares, the Community industry market shares dropped from
27,1% in 2001 to 17, 9% during the IP.
Table 8. Sales volume and market share
2001 2002 2003 2004 IP
Sales (000 pairs) 158 913 125 665 121 234 11 240 105 749
Index: 2001=100 100 79 76 70 67
Market shares 27,1% 23,7% 22,0% 19,3% 17,9%
Source: Official Journal of the European Union
Employment dramatically decreased during the overall period considered. More than
26 000 jobs were lost within the Community industry, representing a decrease of 31% in
the IP compared to the 2001 level.
Table 9. Employment
2001 2002 2003 2004 IP
Total employees 83 238 69 361 66 425 61 640 57 047
Index: 2001=100 100 83 80 74 69
Source: The Journal of the European Union
2.3.4.2. Micro-economic indicators
The analysis of the micro-economic elements revealed that the individual companies
in the sample have reached the lowest possible level of profit during the investigation
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period. Their level of profit during the IP was around break-even, and the cash flow follows
a dangerous declining trend.
Table 10. Sales prices
2001 2002 2003 2004 IP
EUR/pair 20,9 20,5 20,0 19,8 19,4
Index: 2001=100 100 98 96 95 93
Source: The Journal of the European Union
The average unit sales price continuously declined during the period considered. The
decrease was of 7,2%. The analysis of the situation of the sampled companies revealed that,
during the IP, they were not able to further decrease their prices levels without incurring
losses.
Table 11. Cash flow, profitability and return on investments
2001 2002 2003 2004 IP
Cash flow (EUR 000) 13 497 10 991 8 147 10 754 5 706
Profit on net turnover 1,6% 2,1% 0,1% 2,3% 1,1%
Return on investments 5,7% 8,0% 0,4% 10,0% 4,8%
Source: The Journal of the European Union
The cash flow was especially affected. It declined by almost 60% between 2001 and
the IP. The profitability level in relation to turnover remained relatively stable at a level of
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1,5% between 2001 and 2004, with the exception of the year 2003, but then dropped to a
break-even level during the IP. The return on investments followed the same trend.
2.4. The subject country's arguments
Eight footwear companies in Vietnam have been selected to be samples for exporting
producers in Vietnam:
- Pou Yuen Vietnam Enterprise Ltd, Yuen Yuen.
- Pou Chen Vietnam Enterprise Ltd, Yuen Yuen.
- Taekwang Vina Industrial Co. Ltd.
- Haiphong Leather Products and Footwear Company.
- Company No 32
- Dona Biti's IMEX Corp. Pte. Ltd.
- Binh Tien Imex Corp. Pte. Ltd.
- Kai Nan Joint Venture Co. Ltd.
According to Mr. Nguyen Duc Thuan, Vice President of Vietnam Leather and
Footwear Association, "60 enterprises selected by the petitioner are small and medium
enterprises; they do not have well organized operation. As a result, their ability to be given
market-economy treatment by the EU is not high. These 60 enterprises are not
representatives and do not show the size of the Vietnamese footwear industry. We have
more than 200 enterprises, among which are big ones with large scale production; however,
they are not selected as samples for Vietnamese footwear exporters.
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2.4.1. Market-economy treatment
"Vietnamese leather shoe manufacturers are functioning according to the rules of the
market economy and they are enjoying free trade and fair competition," said Foreign
Ministry spokesman Le Dung in Hanoi. "The Vietnamese government does not intervene
and does not subsidize business activities of enterprises. The comparative advantages of
Vietnam enterprises are low labor costs and modern technology imported from Europe".
According to statistics data, more than 70% among big export enterprises are joint-
stock and 100% foreign-invested ones which the Vietnamese government cannot intervene
in the business.
The SOEs reform program in accordance with World Bank guidelines had reduced a
large number of SOEs and most SOEs had to do business themselves and operate according
to commercial principles. Vietnamese government can not interfere in setting prices for
their products exported to the EU, as more than 80 percent of them are sub-contractors for
foreign firms with famous brands as Clark, Nine West, Gabor, Camel and Siebel.
Laura Atlee, lawyer on behalf of the Lefaso members, pointed out that it was
unreasonable to jump to the conclusion that the firms inspected could not comply with the
majority of the criteria concerning business operation costs. Regarding the criterion on
business operations, Laura rejected the EC argument that Vietnam exporters did not have
the 80% export rate as regulated by Vietnam's Investment Law to receive subsidy. She
interpreted the EC argument as being out of line with two decrees issued by the Vietnamese
Government on Foreign Investment in Vietnam. The first decree No.24/2000/ND-CP
stipulates that investors have the right to choose investment projects, investment partners,
place, time, market and ratio of share contribution in accordance with the investment law
and the decree itself. Another decree No.27/2003/ND-CP is to provide companies with two
levels of incentives. Accordingly, companies either exporting 80% of their products or
employing over 5000 workers may receive preferential tax treatment.
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According to Director of the Trade Ministry' Competition Administration
Department, Dinh Thi My Loan, Vietnam is a transitional economy in which attracting
investment play a vital role in economic development. Land cost reductions (one of the
EU's accusations against Vietnam), if any, are a form of export incentives. This is a
common tool in economic policies which is preferred by market economies, including the
EU. Therefore, it can not be seen as a distortion of production cost as concluded by the EU.
The Vietnamese government continued to lift price controls. Energy, water, and other
factors of production were available at rates largely determined by supply and demand. The
government fixed prices only in natural monopolies and regulated prices in other products
such as gasoline, metals, cements, and paper, and these prices were often adjusted to reflect
costs. The government had never controlled the price, allocation and output decision of
enterprises as in other communist countries.
Vietnam’s labor code confirmed the principle of free bargaining between workers and
employers at or above the minimum wage and guarantees labor mobility. Foreign invested
enterprises hired labor directly with freely bargained wages.
Concerning the criterion on accounting and auditing norms, the EC argued that such
standard applied in Vietnamese enterprises did not follow international norms. Laura
claimed that EC inspectors did not completely understand Vietnam's accounting and
auditing norms, along with the Land Law and Vietnam's Law on Foreign Investment.
Lefaso described the claim as groundless since the country's norm, in fact, complied with
those set by the International Federation of Accountants - as Vietnam is an acting member.
2.4.2. Level of ‘injury’ to EU producers
According to Department of Trade Promotion, Ministry of Trade, among 30% of
Vietnamese leather footwear producers, 70% produce and export footwear to the EU
market in the form of pre-production with low benefit. More than 95% of Vietnamese
footwear exported to the EU are bearing the name of clients such as Nike, Adidas, ... or
trademarks of retail corporations like Famous Footwear, K, Shoes... provided by foreign
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partners. This is a popular type of production cooperation between foreign clients and
Vietnam enterprises. Therefore, it is groundless to say that Vietnam is dumping as more
than 80% of Vietnam's footwear enterprises are sub-contractors for foreign firms that
manufacture products for such global names as Clark, Nine West, Gabor, Camel and
Siebel. Almost all Vietnamese shoemakers cannot impose prices for exports to the EU
market.
Some directed exporters have small scale of production and low productivity, so they
are not ably to harm or threaten to harm the footwear industry of EU.
In accordance with the assessment of the EU, the needs for footwear of the EU
market is 2.5 billion pairs, in which leather footwear accounted for 35%. The imported
amount from China is 1.25 billion pairs, accounting for 50% of the total import needs of the
EU market. Meanwhile, import quantity of Vietnam is 269 million pieces, making up 11%
of the total import needs of the EU market.
Table 12. 10 biggest footwear exporters into the EU market
2005
(1000 Euro)
2005
(pairs)
01-05/2006
(1000 Euro)
01-05/2006
(pairs)
China 4,730,143 1,259,482,144 2,323,242 668,549,155
Vietnam 2,088,569 269,839,140 881,080 113,314,301
Rumania 1,034,455 71,481,775 430,561 30,894,861
India 512,797 52,706,802 285,669 31,108,964
Indonesia 455,672 50,941,707 224,057 24,297,653
Brazil 322,941 31,192,469 178,430 18,428,481
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Tunisia 243,28 28,275,942 110,458 14,067,788
Thailand 240,598 19,769,762 103,211 8,958,652
Morocco 145,224 14,612,153 71,541 7,038,256
Hungary 128,072 11,218,189 50,895 4,776,239
Source: Statistics of the European Customs
Imports of leather shoes from China soared 450 percent from 2004 to 2005 and by
1,000 percent from 2001 to 2005. Vietnamese imports fell by 1 percent from 2004 to 2005,
mainly due to sharper competition with China, but grew 95 percent from 2001 to 2005.
Therefore, the increase of Vietnamese exports to the EU market is not significant in
comparison with China. According to many economists, Vietnamese export would do no
harm to the EU producers.
In 2005, the number of Chinese shoes under anti-dumping investigation was 206
million pieces, accounting for 16.5% of the total exported amount. While the number of
Vietnamese shoes under investigation was 119 million pieces, accounting for 45% of the
total exported amount. This number showed the huge differences in quantity exported from
Vietnam and China to the EU. In terms of quantity, Vietnam exports are 4.8 times less than
China, but investigated ratio is 2 times more than China.
In terms of price, during the period of 2001-2005, the export price of China and
Vietnam decreased 31% and 20% respectively. Although the average selling prices
declined, Vietnamese ones are still lower than the Chinese ones in terms of examining each
commodity. For instance, code 642 219, Vietnam's price is Chinese's price is which is 2.6
times lower than Vietnam's. Code 640 299, Vietnam's price is 2.82 times higher than
China's.
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Table 13. Comparison between unit prices of certain leather commodities
from China and Vietnam.
Code Pieces Euro/piece
China Vietnam China Vietnam
640 192 4,013,468 12 3,24 9,33
640 219 17,033,578 2,739,510 3,29 8,4
640 291 7,720,857 1,137,339 4,92 7,92
640 299 277,638,818 29,542,546 1,93 5,45
640 399 68,562,309 32,545,592 7,98 9,54
640 411 23,988,298 6,268,266 6,88 8,47
640 419 143,903,058 17,415,669 1,19 5,23
640 420 2,914,992 70,087 1,4 6,76
640 590 7,129,538 202,410 1,54 2,18
64041910 37,040,262 1,548,905 0,97 1,29
Source: Statistics of the European Customs
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The estimated margin of dumping of Vietnam is 130%, China is 400%. If Vietnamese
uppers leather footwear were imposed 16.8% duties, Chinese products must be imposed
40% duties.
The Federation of European Sporting Goods Industries (FESI) also concerned that the
proposed duties are considerably higher than under the previous proposal, especially in the
case of Vietnam. This runs counter to any development policy logic: Vietnam, which saw
its exports to the EU decline (Eurostat figures show a 57.4 percent jump in Chinese exports
into the 25 EU countries between 2004 and 2005. In an odd twist, Vietnam's exports
actually fell 9.9 percent) and prices rise in 2005, will be capped to a lower export level and
face substantially higher duties than China.
2.4.3. Inappropriate choice of surrogate country
The EC chose Brazil to be the reference market for Vietnamese-made shoes. Vietnam
completely opposed to this decision. Brazil does not possess similarities to Vietnam in
terms of socio-economic and culture developments, or per capita GNP, labor cost and
condition to access to raw material. The average GDP of Brazil is 3,320 USD/ per capita,
while the number of Vietnam is 500 USD/ per capita. Vietnam has a per capita income a
third of Brazil's consequently, the average manual labor cost per hour of the Brazilian
footwear industry is US$1.45 per person, much higher than that of Vietnam, which is at
US$0.35 per person, so the range of salary paid by Brazilian enterprises is much higher
than Vietnam. Moreover, salary structure in Brazil is completely different from the Asian
countries.
On the basis of the World Bank's main criteria for classifying is gross nation income
per capita, Brazil is classified in the same category as China, Thailand and Indonesia, not
Vietnam.
Vietnam has to import cow leather and does not have the same access to raw
materials as Brazil which has large and well established production of raw leather. Brazil
has one of the largest commercial bovine herds of the worlds as well as hundreds of
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companies specialized in tanning and leather finished. The Brazilian tanning industry
producers, annually, more than 30 million hides, of which is absorbed by the Brazilian
leather consuming market. Such know-how in terms of processing and availability of raw
material can only have downward effect on the Brazilian cost of production. The
investigation of the Vietnamese exporting producers showed that the quality of the leather
used by Vietnamese producers was higher than that used by Brazilian ones. It would cause
the production cost of Vietnamese products higher than the Brazilian ones. Thus, why
Vietnam has to dump their products at a lower price than Brazil?
2.4.4. Effects on interest of the Community
With EC’s high anti-dumping tariff, the price of one pair of shoes exported from
Vietnam to EU will increase by EUR 1,5-2. This will affect not only Vietnamese workers
as well as EU consumers, EU footwear retail industry, and many EU footwear investors
who are doing business in Vietnam. Other supporting industries and services of Vietnam
and EU countries will also suffer from this tariff.
Protectionism is against whom? The EU consumers. If the duties come into effect,
they have to pay higher prices and measures would result in a reduced choice of footwear.
the re-inclusion of children shoes which was first exempted to avoid forcing up prices
for poor families is a dangerous step back into protectionism and will hurt Europe's poorer
families with children most.
Northern European countries, the British and Germany strongly opposed the proposal
of anti-dumping duties application on uppers leather footwear. In their opinion, this
proposal is too strict and is a UN expected barrier to retail activities in these countries. "It is
clearly a form of protectionism," said a member of the British Conservative Party in
European Parliament.
Much of the European shoe industry has also voiced concerns and concluded that the
EU investigation was biased from the start. Some critics of the EU's anti-dumping policy,
led by the Footwear Association of Importers and Retail chains argue that the EU is
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overlooking the thousands of European jobs in the distribution network of major
manufacturers. With much of their production already based in East Asia, some of the
biggest names in the sportswear industry including Adidas, Puma, and Rebook feared such
penalties could damage a European market worth around US$48 billion a year. The
Federation of the European Sporting Goods Industry, which represents many major brands,
argued consumers face higher prices, and jobs could be lost in an industry which employs
about 650,000 people in Europe. Britain's Clarks is one of the shoe companies likely to be
hit badly by the anti-dumping actions since 60% of its products are made in Vietnam
"The investigation continues to cover many other sports shoes that are not produced
in Europe and which pose no threat to European shoe makers, only the threat to lost jobs in
the retail sector and higher prices for Europe's consumers. These measures are against the
interests of the European economy," said FESI president Horst Widmann.
Kevin Hawkins, Director General of the British Retail Consortium, said: The
Commission is caving in to the pleadings of uncompetitive European producers who are
clearly favors over low income families and retail workers. Yet this substantial and
damaging new tax will do nothing to create or reserve a single job in European shoe
production. Manufactures here do not make the low cost shoes China and Vietnam produce.
All duties will do is wipe out any profit margin made on leather shoe sales, forcing retailers
to either raise prices or cut costs by axing jobs. There is no evidence that duties increase
sales for European manufacturers. There will be no long-term winners from this latest blow
to the free trade principles the EU says it supports.
2.5. Summary
These proceedings have limited the efforts made by the two parties in the
implementation of the Market Access Agreement between the EU and Vietnam (entered on
31 March, 2005) and are contrary to the General System of Preferences accorded to
Vietnam by the EU, including the footwear industry.
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The European Commission's provisional investigation concluded that there is
compelling evidence of serious state intervention in the leather footwear sector in Vietnam
- cheap finance, tax holidays, non-market land rents, improper asset valuation. This state
intervention is leading to dumping unacceptable under WTO rules. Significant comparative
advantage in Vietnam is being topped up with uncompetitive behavior. The Competition
Administration Department at the Ministry of Trade of Vietnam, says that Vietnamese
business are operating under the principles of a market economy, with freedom to business
and fairness in competition, and are not dumping their products on the EU market. Officials
also say that the Government of Vietnam does not interfere with businesses and does not
provide them with subsidies. while Vietnam is still a transition economy, the footwear
industry is not priority for Government support, officials say, and exemption from, or
reduction in, rent (if any) should be regarded as an incentive to encourage investment but
not a distortion of production cost. The Leather and Footwear Association says that in
practice, Vietnamese companies operate in a market economy in which they are responsible
for the outcome of their business operations and for ensuring that all legal rights and
interests of their workers are met. Nearly 80% of the Vietnam footwear companies process
their own imports, neither participating in marketing and distribution, nor making any
pricing decisions on exported products, which makes it impossible for them to truly "dump"
their products.
As the EC did not grant Market Economy Treatment to Vietnam, Brazil was chosen
to be analogue country to calculate the normal value. Brazil was used because its footwear
sector, production range and export capacity is of analogous size to that of Vietnam.
However, Vietnam sides feel that Brazil is inadequate. There are major differences between
Brazil and Vietnam in terms of GDP and labor cost. Those indicators are much higher than
that of Vietnam. Moreover, the Brazilian footwear industry is under the strict state control,
limiting the number of factories and providing incentives for those in the North. In contrast,
the Vietnam footwear industry has developed freely without state interference in pricing,
scale or factory location.
The investigation also concluded that there is clear evidence of injury to EU
producers. Since 2001, closely tracking the rise on dumped imports, European footwear
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production has contracted by about 30%. Some 40000 jobs in the sector have been lost.
This is not related solely to dumped goods, but sate-intervention and dumping in Vietnam
exacerbate intense competition. The Vietnamese sides proved that Vietnam footwear
enterprises can not injure the EU producers because they are sub-contractors, do not
participate in price decision, their market share is much lower than that of China, and
products' prices are higher than China's.
The adoption of anti-dumping measures will negatively affect legitimate benefits of
450 million consumers in 25 EU countries as well preventing them from lower-priced
options in shoes selection. It will also have effect to EU Stakeholders, including but not
limited to designers, dealers, distributors, and retailers.
Final decision
On the 4th of October, 2006, the EC made their final decision on leather
footwear anti-dumping case against Vietnam. An official anti-dumping
duty of 10% has been imposed on uppers leather footwear from Vietnam
in the period of 2 years.
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Chapter 3
RECOMMENDATIONS AND LESSONS LEARNT
3.1. Conclusions and recommendations
The implementation of anti-dumping duties is a trade barrier which is more
frequently used on the international market. This kind of barrier is mainly used by
developed countries to limit exporting goods from developing countries which have
comparative advantage on labor cost and other cheap inputs. Vietnam is not an exception as
the EU has not recognized Vietnam as a market economy. Facing this challenge, Vietnam
should consider it as an indispensable and objective one on world economy integration,
between a developing, non-market economy and a developed one.
Although the EU often encourages all nations on the world to boost trade
liberalization, fair competition, demolishing trading obstacles and non-trading barriers, it is
now taking measures to apply anti-dumping duties on Vietnam. With the aim to protect
small group pf manufacturers without comparative potentials in leather shoes production,
including France, Italy and Spain, the EU has imposed tariffs threaten to bankrupt many
Vietnamese exporters at the cost of thousands of jobs.
The proposal runs counter to the EC-initiated spirit of trade liberalization and goes
against Vietnam's poverty reduction effort supported by the European Union. It affects the
smooth development in the Vietnam-EU relations, noting that some EU members have
opposed the planned anti-dumping duty.
Not only Vietnamese stakeholders see the petition as unfair, but some EU
stakeholders also se it as unreasonable. According to the European Chamber of Commerce
(Eurocham), "the proposal for the anti-dumping provision duties, at least part of that, has
been based on the inadequate information provided by the foreign partners, to whom
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Vietnam enterprise are sub-contractors". Moreover, as said by the EU parliament delegation
on its visit to Vietnam, the imposition of anti-dumping duties in footwear products
originated from Vietnam to EU could not change the weak situation of the EU producers.
Eurocham also requires the consideration for Vietnam's status as a developing
country while imposing of anti-dumping duties. Moreover, one member of the European
parliament, Mr. Frithjor Schmidt, said: "The decision of the provisional anti-dumping
duties is just based only on trade aspects, but not on other aspects, like development and
social aspects, which should not be neglected when making a deal with developing
countries"
Leafso said the leather shoes industry has lost one-third of orders from the EU as
many importers are turning to other countries such as Indonesia. Some producers have
withdrawn processing orders from Vietnam. The inflow of FDI has also been seriously
affected as FDI and private enterprises operating in the sector account for a large proportion
of overall capital while State-owned enterprises make up only 10%. There has been a
general drop in income. Revenue declined by 15-60%, or tens of billions of dong in value
(about 500,000 euro equivalent), at 76% of enterprises.
Since women make up 80% of the total labor force in this sector, most of them come
from countryside, they are likely to have less income and fall again into the vicious circle
of poverty. This would definitely increase the burden to the whole society and thus
increasing poverty in Vietnam. The anti-dumping suit has caused a sharp drop in wages, to
minimum wage only, or in some cases to "job waiting" wages of 70% minimum wage.
Unemployment and loss of income are a fear for everyone. For women and migrant
workers, it is much more than that, since they are vulnerable in the society. A large number
of workers have an average of two dependents, most of whom are elderly or children. A fall
in income and production would make life much more difficult to take care of their
families. Industrial production, particularly footwear, has helped employees from the
countryside live a more steady life. But with job losses resulting from the EC suit, all they
can do is return to their hometowns for farm work. And even that avenue is sometimes
closed, when farmland is converted to other purposes. No jobs, no income, and no chance
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to return - all of them can lead an honest employee to engage in high risk behaviors in one
way or another. It might be their way of survival. They might engage in sex work,
trafficking of women, drug use, drug trafficking, etc. They must do whatever they can do to
have income. Such risk behaviors would affect not only themselves but also society as a
whole.
Faced with the challenges discussed above, Vietnamese exporters are advised to take
the following steps:
3.1.1. Diversify the markets outside the EU
The footwear industry should shift from the EU market to others, including countries
and regions with big purchasing power, including the US, Japan, Canada, China's Hong
Kong, South Korea and Australia, and markets with high potential growth like Indonesia,
Malaysia, the Middle East, Africa, South Asia and Russia. Besides researching and
developing on potential markets, Vietnamese enterprises need to better promotion
activities, look for distribution partners.
After being sued by the EU, Vietnam footwear export turnover to the EU has
decreased, meanwhile turnover to the US has been in opposite direction. The US market
may be the importing market of Vietnam, take the place of the EU. The United States
annually imports nearly 2.124 billion pairs of shoes and sandals worth 16.19 billion dollars.
China is the country's biggest footwear supplier with a market share of 70 percent, followed
by Italy 7.7 percent, Brazil 6.7 percent, Indonesia 3 percent and Vietnam 2.9 percent.
Vietnam reaped 450 million dollars from exporting footwear to the United States in
the first nine months of this year, a year-on- year rise of 52 percent. The revenue in
September alone surged over 80 percent to roughly 55 million dollars
Key items shipped to the market are sports shoes, leather-upper shoes, and cloth-
upper shoes, adding that foreign- invested enterprises contribute most to the footwear
export revenue, since they actively promote trade due to financial strength and launch
products with well-known brands under subcontracts with overseas firms. Domestic
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producers have not fully exploited their potentialities. Thus, the state should assist domestic
shoes producers, especially small-and medium-sized enterprises, in accessing the US
market to ensure the sustainable development of the local footwear industry, adding that the
producers themselves should be more creative in designing models, and more active in
building their own product brands. Relevant Vietnamese agencies will intensify trade
promotion activities, expanding support to leather footwear producers and exporters, and
further studying fashion trends in overseas markets to make suitable products.
As Vietnamese producers have just accessed the US market, they still have many
opportunities to widen their markets there. Vietnam plans to earn over one billion dollars in
2010 from shipping footwear to the United States, equal to more than five percent of the
foreign country's total footwear import turnover, the Trade Information Center under the
Trade Ministry said, noting that the percentage was three percent in 2005.
In the context of anti-dumping case against Vietnam and China, Thailand, Indonesia
and some other footwear exporting countries in Asia have temporarily neglect several
markets among which is Australia market, in order to gather human and material resources
to accomplish orders from the EU. Seizing this opportunity, many Vietnam footwear export
enterprises have boosted exports to Australia.
Among all the goods, knitting–capped shoes and leather capped–shoes enjoyed major
demand in Australian markets, especially tanned leather–capped sports shoes.
Vietnam’s footwear exporting to Australia has been enjoying convenience in the
current years because exporting tax on these goods in Australia has been reduced to 12.5
percent from 17.5 percent since January 2005 and to be down to 7.5 percent since January
2007. On the other hand, Vietnam and Australia have been accelerating implementation of
agreements and commitment in opening market as well as trade liberalization.
Besides foreign markets, Vietnamese footwear enterprises also need to boost sales in
the domestic market, and intensify investment in renewing production technologies to
produce more high-grade products using no leather uppers.
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3.1.2. Diversify the product range
The EU has only pursued uppers leather footwear, enterprises can switch to materials
like resin and leatherette which are not subject to tariffs or can keep exporting other types
of footwear, for example shoes with their uppers and soles made of rubber or plastic, and
different kinds of sandals to the EU market. Besides leather footwear, Vietnam also has
many competitive products such as sport shoes, women shoes, children shoes, canvas
shoes, embroidered shoes, leatherette shoes, etc. Furthermore, domestic materials are
available for producing canvas shoes, embroidered shoes.
Vietnamese footwear enterprises should focus on producing high priced leather shoes
because: 1)low priced products are easily made and sold, however, producers would face
severe challenges from many competitors like China, India, Thailand, etc. and various
exporting countries having the same production skills. If leather shoes are also their main
exported goods, the competition in price as well as quantity is unavoidable. 2) If Vietnam
has to compete in terms of price, its products can not survive in the "war" against Chinese
low priced products. Besides, there are many footwear exporting countries produce shoes at
the equivalent price with some types of Vietnamese footwear. Therefore, if Vietnam merely
pays attention to manufacture low priced commodities, it would be at a disadvantage in
competition. Moreover, it easily becomes engaged in anti-dumping lawsuit. The petition
against Vietnamese uppers leather footwear is the consequence of producing and exporting
low priced products. As a result, it is necessary to adjust the mechanism of production
towards high priced leather footwear. That would help Vietnam avoid anti-dumping barrier,
furthermore, it could approach high-income consumers which promotes Vietnam's
prestigious and competitive ability on foreign markets.
3.1.3. Enhance model of business transfer
Vietnamese enterprises should carry out the model of business transfer. This is a
popular model in the world but it is not familiar in Vietnam. Business transfer has two
typical forms: licensing and technology transfer.
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Regarding the first form, Vietnam leather export and manufacture enterprises are
able to buy license to use trade name of a famous footwear companies like Italian or French
companies. Then these companies have to run the business independently in a certain
period of time without binding regulations from the licensers. That helps Vietnamese
enterprises avoid lawsuits, enhance reputation and improve competitiveness. This type of
business transfer is also an element which assists Vietnamese enterprises in building and
develops their trade name in the future.
Concerning the second type, in addition to using the licensers' trade names,
Vietnamese enterprises are transferred mode of conducting business as well as style of
management. This is the most effective form of business since Vietnam enterprises have to
follow regulations and strict process in running the business in conformity with criteria
being set by famous trade name owners; and have the opportunities to be known by the
European consumers. Whoever is using the trade name to do business, the relationship
between the licensees and licensers is always close in order to protect the prestigious and
trade name value. Vietnam firms will gain experiences in management, operating style
which satisfies high income consumers with strict requirements on product, and being
familiar with using well-known brand name shoes. This form helps Vietnam companies
overcome anti-dumping barrier, bolster its reputation and image on the European market.
3.1.4. Improve competitiveness
Domestic enterprises need to invest in new technology, high-class shoes production.
At first, domestic enterprises need to reduce input costs and create high added value in each
product. They have to diminish material imports rate for input by investing in domestic
production. The association among domestic firms is necessary as receiving big orders or
negotiating material prices. Then they should improve designers' skills, establish distinctive
trademark, and provide attractive and comfortable models. Further efforts should be made
by Trade promotion Center in Hanoi and Ho Chi Minh City to introduce Vietnamese
products on international market in an organized, highly competitive way. Domestic
companies cooperate with Association and Commercial Counselor in countries supplying
major materials (China, Taiwan, Korea, etc.), main importing countries (EU, US, Japan,
etc.), and potential importing markets (Australia, South Africa, etc.) to actively research
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technical barriers of these countries against footwear in an effort to find out the most
efficient selling and payment method.
It is also necessary for domestic companies to change from sub-contractors to
owners. The major requirement is to connect design and manufacture. They must have
qualified employees specializing in exploring material resources, selling products, taking
care of consumers, clearing import-export procedures, being well-informed about financial
sector, advance manufacturing process, renewing equipment. Enterprises have to perform
functions of trading companies. Instead of marketing their products to trading companies,
they introduce their commodities directly to foreign importers or large scale retailers.
Nowadays, Vietnamese exports have been increasing and they have to bear the risk of
being levied antidumping tariff. Therefore, some recommendations for Vietnam are
discussed shortly in order to solve future dumping and antidumping cases.
3.2. Lessons learnts
The footwear case has significant implications for Vietnamese exporters, whether
they are current or potential, big or small, state-owned or private, domestic or foreign-
invested, regardless of the industry they are operating in. The key lessons are:
3.2.1. Fully understanding on international trade law concerning dumping issue
The biggest difficulty Vietnam has to face now is that almost all government officials
being responsible for this issue do not have thorough knowledge of dumping and
international law dealing with dumping and anti-dumping. Vietnamese government must
have specific strategy in training official in charge so that they will be expert on law, have
experience to settle international commercial disputes in general, be proficient in anti-
dumping measures in particular.
Dumping and anti-dumping have not caught the eyes of the scientific world. Training
system on law and commerce has not had training program and lecturers specializing in
dumping and anti-dumping law. As a result, Vietnam does not have any lawyer or
consultant being well-informed in dumping. When Vietnam involves in a dumping petition,
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both the Government and its enterprises have to hire foreign law companies or foreign
consultants, which is either expensive or ineffective.
Each enterprise may have their own lawyers, or a group of enterprises hire a lawyer
to consult legal issues. There should be a co-ordination between Vietnamese lawyers and
foreign ones, as Vietnamese lawyers are not able to fully understand EU's law, and
represent Vietnamese firms to report to the EU, while foreign lawyers are not familiar with
Vietnamese enterprises' activities. Vietnamese lawyers play a significant role in anti-
dumping lawsuit against Vietnamese firms, since they prepare most arguments and
evidences in response to the Commission. Young Vietnamese lawyers are now showing
their ability, because they are good at foreign language, and have knowledge, experience in
consulting international transactions.
To break into foreign markets effectively at a low cost and risk, Vietnamese firms
should spend a certain amount of money to hire consulting companies or well-known
consultants because they are experts in local law. They should be consulted as soon as
penetrating into new markets, should not wait until being sued, they may suffer severe loss
since the petitions often last for years. Chinese enterprises are good examples. When they
broke into new markets, they were on the defensive like Vietnamese firms now. Because of
having been sued in many anti-dumping petitions, most of Chinese firms hire lawyers to
consult about legal barriers in foreign markets, including anti-dumping barrier. Moreover,
they collect information related to foreign markets to actively deal with anti-dumping
lawsuit.
Not only official in Ministry of Trade and related Association have to understand
about anti-dumping law but Vietnamese export-import enterprises have to research as well.
The Government should collect market information through its ambassadorial offices to
provide domestic firms with importing market situation, legal framework, and culture so as
to avoid or overcome trade barriers to fast approach the market. Regarding dumping suits,
Governmental offices have to assist companies with information related to the case and
good lawyers. The government can share information via Internet, or cooperate with other
Government and corporations to organize conferences, trade fairs and exhibitions.
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Human resources are becoming more and more important in joining in international
trade. However, this is our weakest point. Vietnamese enterprises should pay more
attention to personnel system, training program for staff working in export-import field to
improve their professional skill, knowledge about foreign markets, international law,
especially anti-dumping regulations. Besides, companies should have promotion policies to
attract human resource.
3.2.2. Strengthen market economy in Vietnam
There is no specific, objective criterion to differentiate between a market economy
and a non-market one. Therefore, granting market economy treatment may depend on
subjective opinions of each commercial partner or political relation. Although Vietnam has
achieved remarkable success in developing private economy, eliminate monopoly in some
key aspects, etc. However, it has not been recognized as market economy by the EU and
the USA which cause Vietnam at a disadvantage in anti-dumping case. In order to win
dumping disputes made by other countries, Vietnam should strengthen its economy to be
classified as a “market economy” as this is the first step to win dumping suits.
The extent of government ownership or control of the means of production
- Speed up the privatization process.
- Continue to strengthen land-use rights, and to simplify and reduce regulatory controls
The extent to which joint ventures or other investments by firms of other foreign
countries are permitted in the foreign country.
- Remove all dual pricing relating to foreign-invested enterprises (FIEs) including land
rental fees.
- Make government policies the same for both domestic enterprises and FIEs.
The extent of Government control over the allocation of resources and over the
price and output decisions of enterprises
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- Remove all price controls on industrial goods (e.g. cement, steel, iron)
- Introduce Competition Law
- Continue to encourage competition between state-owned commercial banks and other
financial intermediaries in Vietnam
- Continue to “level the playing field” between private and state enterprises, particularly
concerning finance and land-use rights.
Establish a transparent, coherent accounting system in line with international
standards.
3.2.3. Domestic enterprises must be well-prepared
Domestic firms have to prepare documents and records related to accounting and
auditing process. These documents and records must be transparent so that they can be
persuasive proof against the implication of anti-dumping duties. Normally, the EU's final
decision has to base on investigation to verify production situation and consumption. The
whole input and output cost of the enterprise will be reflected on the accounts and will be
certified by auditing company. If these costs are equivalent to other countries in the area
having the same level of development and they are clear, transparent, the EC investigators
will have difficulty in finding good reasons for determining dumping actions.
Enterprises must be ready and active, cooperative on being involved in anti-dumping
cases. This is a chance for them to collect information and proof the reasonability of their
export price. Once they do not take part in, they will lose their right to complain and
protest. Investigating authorities will make their own decisions and impose anti-dumping
measures which benefit for them. On the other hand, when foreign firms win the case, they
will not hesitate to sue other commodities, therefore, Vietnam will have difficulties in
exporting its products. As a result, Vietnamese enterprises should try their best to win the
case or being imposed anti-dumping tariff at the lowest rate.
Besides fully cooperating with investigating authorities, enterprises should hire
professional, prestigious lawyers that cost a lot of money. Firms should save a certain
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amount of money to prepare in advance for legal disputes. Being well-prepared will helps
firms actively deal with petition without interfering in business activities.
3.2.4. Create good public relation
That is the relations with Associations, consumers, environment activists, Labor
Unions in the importing markets. In international trade, public relation is widely used in an
effort to create waves of opposition from consumers, related associations that can change
the decisions of the EU. It is important to establish a good relationship, win the confidence
of public, for example, environment protection, labor law conformation.
Making connection between consumers and importers in importing countries will be
an advantage for exporters. Anti-dumping petition is a contradiction between foreign
exporters or domestic importers with domestic producers, but in spite of the result,
consumers are at a loss. Anti-dumping tariff is an indirect one which will be paid by end
users.
The imposition of anti-dumping tariff will affect the interest of consumers and
importers in the importing countries. Vietnamese exporters should take advantage to put
pressure on investigating authorities. In developed countries like the US or the EU,
consumers often establish consumer organizations to protect their interest. These
organizations have great influence, so Vietnamese enterprises should establish good
relationship with them. This activity is very popular in developed countries. Vietnamese
firms can create this relationship by assign representatives to investigate importing markets,
or set up representative offices, and maintain the relation with consumer organizations as
well as importers.
In conclusion, Vietnam has just integrated into international trade, dumping and anti-
dumping are still new issue to domestic enterprises. Once they are become engaged in an
anti-dumping case, they realize its effect and learn some lessons to avoid lawsuits or to
solve the problems effectively. Vietnamese companies have to equip themselves with basic
knowledge on dumping and anti-dumping, as well as unite with one another to set a
common price to avoid anti-dumping duties. Enterprises have to be ready to deal with anti-
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dumping petitions. When being involved in a case, Vietnam firms should associate with the
importers and consumers in the importing countries, other enterprises in and outdoor to
protect their rights, actively cooperate with investigation authorities.
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Graduation thesis
CONCLUSION
Globalization is naturally the integration of developing economies into the world
economy; they have to compete sharply with developed nations. This is an unfair
competition in which big countries are calling for "trade liberalization", but they still abuse
unfair trade barriers to protect their domestic markets against developing countries. Among
those "tricks" is an anti-dumping measure, an effective tool which is widely used today.
As the country is deepening its integration into the global economy, Vietnamese
export enterprises have to carefully research many issues in order to survive and compete,
to maintain, and to strengthen as well as bolstering their positions in the world of business.
After being involved in around 23 anti-dumping petitions, they are now becoming
increasingly aware of the dumping issue. However, dumping is very complicated, so
Vietnamese companies should study the Anti-dumping Agreement, the basic anti-dumping
law of the world set by the WTO. On exporting goods into a market, they should research
the anti-dumping law of that market as each nation has their own regulations.
This thesis focuses on the EU market, a vast and potential market for Vietnam, and
the recent EU's anti-dumping petition against Vietnamese leather upper shoes footwear
products. The thesis aims at providing basic knowledge about the WTO's and the EU's anti-
duping law. It also draws out lessons from the footwear case and makes recommendations
in the hope that Vietnamese enterprises can make use of them to protect themselves against
unfair competition in the world market.
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BIBLIOGRAPHY
1. Commission Regulation (EC) No 553/2006, Official Journal of the European Union.
2. Half of a million Vietnamese footwear jobs at risk: Where is the balance between trade
and development?, May 2006, ActionAid Vietnam and Vientam Leather and Footwear
Association.
3. Vietnam leather and footwear industry - Tradition and Modernity, Hanoi National
Politics
4. Vietnamese leather footwear are not dumping, Hong Phuc, Page 20, Vietnam Trade and
Market.
5. EU anti-dumping tariff and some solutions for Vietnam, PH.D Nguyen Anh Tuan,
No.10/2006, Industry Magazine.
6. www.euractiv.com
7. www.cecshoe.be
8.www.tdctrade.com
9. www. atimes.com
10. www.europa.eu.int
11. www.thanhnien.com.vn
12. www.vnexpress.net
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