The request was lodged by the European Confederation of the Footwear Industry (CEC, ‘the applicant’), on behalf of producers representing a major proportion, in this case more than 35 %, of the total Union production of certain footwear with uppers of leather.

In the framework of the standing test several national associations of footwear producers in Member States expressed their views vis-à-vis the opening of the expiry review and requested that their names be kept confidential for fear that their member companies could face retaliation from some customers. Some other parties questioned why the names and the positions of the opposing and supporting associations have been kept confidential. The Commission asked the associations explicitly again whether they could agree to a disclosure of their name and position. Four associations agreed to disclose their names and positions, whereas the others opposed, referring once more to their fear for retaliation against their member companies. The Commission took the view that there indeed was a significant possibility of retaliation in the form of lost sales for these producers and accepted that names should not be disclosed.

Some parties argued that the Commission should not have initiated an expiry review investigation as Article 3 of the original Regulation states that it shall be in force for a period of 2 years as of its entry into force. Recital 326 of the original Regulation, however, explains that, notwithstanding the shorter duration of the measures, the rules of Article 11 of the basic Regulation will apply mutatis mutandis. In line with this recital, the text of the notice of impending expiry4 stated that the measures would expire on 7 October 2008 unless a review was initiated in accordance with the rules of Article 11(2) of the basic Regulation. Since an expiry review of the anti-dumping measures has indeed been initiated, the anti-dumping measures remain in force pending this review.

The request for the expiry review was based on the grounds that the expiry of the measures would be likely to result in a continuation or recurrence of dumping and injury to the Union industry.

Having determined, after consulting the Advisory Committee, that sufficient evidence existed for the initiation of an expiry review, the Commission announced, by a Notice of initiation published in the Official Journal of the European Union5 on 3 October 2008 (the ‘Notice of initiation’), the initiation of an expiry review pursuant to Article 11(2) of the basic Regulation.

The investigation of likelihood of continuation or recurrence of dumping and injury covered the period from 1 July 2007 to 30 June 2008 (‘review investigation period’ or ‘RIP’). The examination of the trends relevant for the assessment of a likelihood of a continuation or recurrence of injury covered the period from 1 January 2006 up to the end of the RIP (the ‘period considered’). Reference was also made where appropriate to the year 2005 and to the investigation period used in the original investigation which covered the period from 01 April 2004 to 31 March 2005 (‘original investigation period’ or ‘OIP’).

The procedure to obtain the information necessary for the selection of the sample of Union producers was as follows. The CEC acting on behalf of all complainants confirmed that all complaining producers were ready to cooperate and participate in the sampling exercise. Given the detailed and extensive information available on file (emanating i.a. from the complaint, standing exercise, and CEC submissions), it was not necessary to send a sampling form to individual complaining producers. In addition, the Notice of initiation invited any producer to make itself known should it wish to cooperate in the proceeding. In addition to the complainants, a further five companies made themselves known after initiation and requested to be included in the sampling exercise. All of these were sent sample forms requesting information already at hand for the complainants. Only two of the five companies supplied sample returns. These two companies were however not retained as they were excluded from the definition of the Union industry (see recital 198).

Union production of the product concerned is largely concentrated in three Member States holding around 2/3 of all production. The rest is spread over the remaining Member States. As seen in recitals 202 and onwards, the Union producers business models are characterised by differences mainly in product/quality range, distribution channels and whether clustering of activities and subcontracting parts of the manufacturing process within or outside the Union takes place.

On the basis of the information obtained, the Commission selected a sample based on the largest representative volumes of production and sales within the Union which could be investigated within the time available. However, as detailed above, this is not an entirely homogenous industry and in order to assess representativeness of the selected companies, the producers’ geographical spread amongst Member States6, as well as the segment to which their products belong were also taken into consideration. As a result 8 companies operating in four member States were selected. The selected companies also represent all the major business models present in the Union, in terms of how the product is manufactured, of how the product is distributed, and of product specialisation. Regarding product specialisation, the companies selected included production across all major price segments (low range, mid range, high range) as well as across all gender and age segments (ladies, men, unisex, children footwear). Regarding product distribution, the companies selected included all major levels of distribution (to wholesalers, to retailers, as well as direct retailing). Regarding production, the companies selected included full in-house manufacturing in all key stages of the production process as well as companies which had outsourced parts of such manufacturing process (both in and outside the Union).

The 8 producers selected in the sample were thus considered to be representative of the overall producers in the Union, and represented 8,2 % of the production of the complaining Union producers and 3,1 % of the total Union production. Pursuant to Article 17(2) of the basic Regulation, CEC was consulted on the selection of the sample and did not raise any objections.

The investigation revealed that one of the sampled Union producers progressively discontinued production in the Union during the RIP, taking its full manufacturing activity outside the Union. It should be noted that the weight of the company was not such as to have any significant impact, at least from a quantitative point of view, on the situation of the sampled companies as a whole—including their representativeness. The quantitative findings on injury would not have been materially different should this company have been excluded. In this context, and given that (i) it had produced in the Union during the RIP, and that (ii) it subcontracts large part of the production, a business model which, according to many parties, is important in the Union, it was decided not to formally exclude this company from the sample. This further ensures that, qualitatively, the sample represents as adequately as possible the reality of the sector. Furthermore, considering that an expiry review requires an analysis of continuation/recurrence of injury, this may help in better predicting how the situation on the Union market could develop if the measures were not continued. However, evidently only data pertaining to its activity as Union producer were used.

The Union institutions have considered whether, given that the Union production and sales of this company during the RIP were found to be lower than initially reported at sample stage, the Union industry's production and sales as a whole should have been reduced similarly—i.e., the resulting impact on the sample should be transposed to the entire population. However, it was found that the error appears to have been made in good faith by this company who mistakenly counted outsourcing to a country in the Union vicinity as Union production. In that light, firstly, it is noted that the sample is used primarily to assess those injury indicators which cannot be reasonably obtained for the Union industry as a whole. Production and sales have been obtained at an aggregated level for the Union industry, and therefore the argument is not relevant. In addition, the information on file, including that compiled in parallel via the additional analysis of national associations performed in this investigation, does not indicate any need for such an adjustment. Finally, for argument's sake, if the full production and sales figures for the Union industry in the RIP were reduced to transpose the sample's lower figures, this would neither affect the representativeness of the sample nor the general conclusions regarding injury.

Various interested parties claimed a breach of the Article 17 of the basic Regulation, alleging that the sample of Union producers was not representative in terms of the percentage of production covered, in terms of production range, sales prices, ratio between production and sales, geographical spread as well as profitability and performance. It was also held that the sample did not take into account the large number of producers that have outsourced production to third countries.

These allegations were carefully analysed and in view also of the complexity of this case, additional questionnaires were sent, processed and verified on-spot not only for individual companies, but also for national associations. In this context, the number of companies selected in the sample had to be limited to what could be reasonably investigated within the time available, i.e. 8 companies.

Furthermore, given that the Union industry is highly fragmented in this case, it is unavoidable that the companies in the sample cover a relatively small portion of the overall Union production. This fragmentation, together with the fact that the larger producers were selected to be in the sample, implies that further increasing the number of companies would in any event not have had a significant impact on the proportion of the sample as compared to the overall Union production.

As explained above in recital 21, the Commission took geographical spread into account when selecting the sample. It is underlined that, by nature, a sample does not have to reflect the exact geographical spread (nor the exact distribution or breakdown of any other criterion) of the entire population in order to be representative. It suffices that, as is the case for the current sample, which includes four Member states, it reflects the relevant proportions of the major manufacturing countries involved. Any other approach would have been administratively impracticable, particularly if several different criteria have to be taken into account in order to ensure representativeness. In fact, this claim would imply in fine that a sample would be sufficiently representative only if it contained the full population. The investigation has thus underlined that the sample which covers four Member states, including the three with the by far biggest production, is largely representative of the Union production as a whole, in particular when taking into account production that is based on tolling arrangements and therefore should be accounted for in the Member state of the company ordering the tolling service.

The sampled companies also included a cross-section of product ranges which reflected the relevant orders of magnitude of Union production. In addition, the product ranges involved correspond to those of Chinese and Vietnamese exports.

Concerning sales prices, it was also argued that the average sales prices of the sample were not representative in relation to the sales prices indicated in the review request. In this context it should be noted however that, contrary to this claim, the investigation has shown that average sales prices of the sample are consistent with the prices reported in the request. In any event, even if this would not have been the case, the average sales prices of a sample would not have to be exactly the same as those reported in the request, as long as they are found to reflect the sales prices of the population of producers as a whole.

Regarding representativeness in terms of ratio between production and sales, it is recalled that in the sector as a whole production is typically made to order and strongly reflects fashion trends. Therefore, stock is not a very telling indicator, and production closely approximates sales. This has been confirmed at complaint stage and also during the investigation for sampled companies and for the Union industry as a whole.

In addition to the considerations as outlined above, it is recalled that in any event Article 17 of the basic Regulation sets out that investigations may be limited to samples which are either statistically valid, or which constitute the largest representative volume of production, sales, or exports which can be reasonably investigated. It is clear from the wording of this provision that there is no quantitative indication or threshold as to what constitutes the level of the representative volume. The only indication is that such volume may be limited to what can reasonably be investigated within the time available.

For the reasons explained above, the claims made by the various parties were rejected and the legal validity of the sample is hereby confirmed since the sample is representative and was selected in full compliance with Article 17 of the basic Regulation.

Based on the information available, 139 importers were contacted. 22 unrelated importers replied to the sampling form, out of which 21 agreed to be included in the sample. According to the data they submitted, these 21 importers accounted for 12 % of imports of the product concerned from the PRC and 40 % of those imports from Vietnam (in the RIP).

The five largest importers (Adidas, Clarks, Nike, Puma and Timberland) accounted for about 18 % of the imports concerned as they all reported significant imports from both countries. It was therefore considered that a sample composed of these five companies would be representative within the meaning of Article 17(1) of the basic Regulation, i.e. in terms of volume of imports.

However, in order to better reflect the geographical spread of importers and the differences in the types of footwear types imported, three other importers were selected in addition. In this respect, from the sampling returns it appeared that many of the importers that replied operated on a much smaller scale in terms of volume and they imported less known/fashionable brand shoes or higher value shoes. The business model and traded product segments of these smaller importers appeared to be distinct from the largest importers and these smaller importers could altogether account for an important share of the imports concerned. It was therefore considered important to have these importers also represented, as these companies’ economic reality might be different from those of the large importers mentioned in recital 35 above.

On these grounds, a sample of eight importers including the five largest importers and three smaller importers was selected. They represented around 10 % of imports from the PRC and around 34 % of imports from Vietnam.

All cooperating importers which had indicated their willingness to cooperate were given an opportunity to comment on the selection of the sample. Questionnaires were sent for completion to the sampled companies. Seven of the sampled importers replied within the given deadlines. In view of its non-cooperation, the eighth sampled importer eventually had to be excluded from the sample.

Verification visits were also carried out at the premises of the 8 sampled Union producers, located in four different Member States. As was the case in the original investigation the sampled Union producers as well as other cooperating Union producers requested, on the grounds of the provisions of Article 19 of the basic Regulation that their identities be kept confidential. They claimed that the disclosure of their identity could lead to a risk of significant adverse effects. Certain complainant Union producers supply customers in the Union that also source their products from the PRC and Vietnam, thus benefiting directly from these imports. Those complainants are therefore in a sensitive position since some of their clients may have evident reasons to oppose their lodging or supporting a complaint against alleged injurious dumping. For these reasons they considered that there was a risk of retaliation by some of their clients, including the possible termination of their business relationship. The request was granted as it was sufficiently substantiated.

The representatives of certain exporting producers as well as unrelated importers claimed that they could not properly exercise their right of defence because the identity of the complainants had not been disclosed. They argued that, in those circumstances, they could not verify that the companies included in the sample were truly representative. In the alternative, these parties held that should confidentiality nevertheless be warranted, full disclosure of the individual company figures should in such case be given.

In this context it is recalled that the production volume of the sample, broken down by countries, was made available for inspection to all interested parties. As concerns the argument that all information but for the identity of the company should be disclosed it should be noted that such disclosure could indirectly reveal the identity of the sampled company. The usual practice of disclosure of non limited versions of the questionnaire responses was therefore maintained (i.e. containing indexed data) also in this case. In view of the foregoing it must be concluded that the right of defence of parties was adequately preserved and the claim was therefore rejected.

Certain parties argued that the like product sold in the Union was not comparable to the product concerned exported from the PRC and Vietnam. It was found however that the product sold in the Union (in this review) was comparable to the product concerned exported from the countries concerned. In particular, it was found that the physical and technical characteristics and uses, as well as the channels of distribution of the product concerned were similar and have not changed since the original investigation. This argument was therefore rejected.

Certain parties also argued that the system used to compare product types sold by the various co-operators in the investigation was inappropriate because it was not specific enough to guarantee a fair comparison. However, the system used (PCN system) allowed for the comparison of up to 600 different categories or product types organised into five main criteria, namely style of footwear, type of consumer, type of footwear, material of outer sole and presence of lining. Moreover, this PCN system was already used in the previous investigation. No substantiated reasons have been put forward to show why it should be amended. Therefore the same PCN system that was used in the original investigation was applied in the present expiry review investigation. This argument was therefore rejected.

Certain parties alleged that the Commission changed its methodology as compared to the original case by changing the definition of the product control numbers (PCN's) in the course of the investigation. This allegation is however not correct. Rather, in the course of the investigation, it became apparent that certain parties had wrongly interpreted and applied the PCN structure for certain product types. In order to ensure a consistent approach, the footwear models in question were therefore re-classified and attributed to the proper PCN heading wherever this was found necessary. Thus, wherever the Commission identified inaccurate information given by the parties concerned it had to rectify this. Such rectification can therefore neither be considered as a change in methodology, nor as a change of content of the PCN. On the contrary, the need to respect the PCN methodology was the very reason why the rectification had to be carried out. Therefore the argument had to be rejected.

Several interested parties made claims similar to those received in the original investigation. They argued that certain types of footwear, within the scope of the like product, e.g. hiking shoes, bowling shoes, white water canoeing shoes, special technology shoes, horse riding shoes and special sizes shoes, were too different to belong to the same category. A further claim was that the value threshold of EUR 7,5 per pair applicable to STAF shoes should be reduced. It is recalled that in the original investigation this value threshold had been reduced from EUR 9 to EUR 7,5 per pair.

In this respect, an expiry review does not allow for a change in the scope of the product under measures. Such change could be considered if a party were to make a substantiated request under Article 11(3) of the basic Regulation. Therefore the above claims had to be rejected.

Where export sales were made directly to independent customers in the Union, the export prices were established on the basis of prices actually paid or payable for the product concerned in accordance with Article 2(8) of the basic Regulation.

Where export sales to the Union were made through unrelated trading companies located outside the Union, export prices were established on the basis of the prices of the product when sold for export to the trading companies i.e. to an unrelated buyer, by the producers concerned in accordance with Article 2(8) of the basic Regulation.

Following the methodology employed in the original investigation, for exported product types not sold on the Brazilian domestic market, the domestic sales prices of the most closely resembling product types were used in establishing normal values. These were appropriately adjusted where warranted.

The normal value and export prices were compared on an ex-works basis. For the purpose of ensuring a fair comparison between the normal value and the export price, due allowance in the form of adjustments was made for differences affecting prices and price comparability in accordance with Article 2(10) of the basic Regulation. In particular, the following adjustments have been made:

It was examined whether a level of trade adjustment under Article 2(10)(d) of the basic Regulation was warranted. In that context it was found that the levels of trade in the domestic and export markets were different. Accordingly, adjustments were made in accordance with Article 2(10)(d)-(i) of the basic Regulation to reflect the discounts granted to wholesalers on the Brazilian market, as compared to sales to retailers which had solely been made by the three Brazilian producers investigated.

In order to ensure a fair comparison between Chinese and Vietnamese exports on the one hand and Brazilian domestic sales on the other hand, an allowance was granted in accordance with Article 2(10)(i) of the basic Regulation to reflect differences in commissions paid to independent agents in Brazil.

According to Article 2(10)(k) of the basic Regulation, an allowance for R&D and design was also granted in order to reflect the costs incurred by the Brazilian producers as opposed to Chinese/Vietnamese producers.

An adjustment pursuant to Article 2(10)(a) of the basic Regulation was also made in the previous investigation to reflect differences in the quality of the leather used to manufacture the footwear. In the current investigation no such adjustment was found necessary because of the similar quality of leather used by the Brazilian, Chinese and Vietnamese exporters (see recital 87).

Other adjustments, including such concerning transport and insurance pursuant to Article 2(10)(e) of the basic Regulation, were made in all cases where they were found to be reasonable, accurate and supported by evidence.

Certain interested parties argued that USD/EUR exchange rate fluctuations impacted on the dumping margins found and warranted an adjustment. This claim had to be rejected. Under Article 2(10)(j) of the basic Regulation such adjustment can only be granted where a sustained movement in exchange rates has taken place. Where exchanges rates fluctuate freely, as is the case for the USD/EUR rate, they regularly move up- and downwards. No sustained movement can be identified in such case and accordingly no adjustment can be granted.

Pursuant to Article 2(11) and (12) of the basic Regulation, the dumping margin was established on the basis of a comparison of a weighted average normal value by product type with a weighted average export price by product type. Since none of the sampled companies had been granted MET, one weighted average dumping margin has been calculated in Vietnam. This dumping margin was attributed to all other exporting producers in Vietnam.

The country-wide level of dumping for Vietnam was established at 43,8 % of the CIF Union frontier price.

Similarly to the PRC, a dumping calculation was also performed using the methodology stated above, except that Brazilian normal values were replaced by those of the cooperating Indonesian producers. This calculation resulted in a dumping margin of 28,4 %.

Certain interested parties argued that exports from the countries concerned between the imposition of definitive measures in April 2006 and the end of the RIP had fallen. It was argued that this decrease reflected falls in production and production capacity in the PRC and Vietnam which were due to the imposition of the definitive measures, a switch in production from the PRC and Vietnam to other countries or increase in their domestic sales. A further claim was that import prices had either increased or remained stable. The parties claimed therefore that import volumes and prices could not justify the finding of a continuation of dumping at significant volumes during the RIP.

These arguments do not change the finding that substantial dumping margins were found for the RIP and that those margins cover large volumes of imports with large Union market shares. It was therefore concluded that a continuation of dumping has taken place in respect of the product concerned originating in the PRC and Vietnam.

The likely development of imports from the PRC was analysed in terms of both expected prices and volumes.

As a starting point prices were established for the RIP. Data were available from the sampling returns (received from 58 cooperating exporting producers) which contained sales prices for the domestic market and export prices both to the Union market and to third country markets. This information was used as it was deemed to be the best source of price information available for the product concerned for the purpose of comparing price indications on various markets. These data were deemed representative because they covered 22 % of imports to the Union market. Export prices to the Union included in the sampling returns were cross-checked with statistical information available to the Commission, even if the statistical information could not be used for price comparisons as it did not cover Chinese domestic sales and exports to third countries.

Although Eurostat based data was another reliable source it did not provide, as already explained in recital 67, the possibility of comparing prices on different markets.

• they concerned the like product,

• they were at the same level of trade,

• they were at comparable incoterms,

• they involved comparable quantities.

The impact of certain new developments since the end of the RIP was also analysed because it was considered significant enough to affect the likelihood of continuation of dumping. Such analysis was also requested by interested parties.

Sampling returns indicated that the Chinese domestic prices established on the basis of exporters’ own data were lower than prices on the Union market. It should, however, be noted that the data of all non-sampled companies (including data relating to any domestic sales) could not be verified. A detailed analysis of domestic prices in the PRC could therefore not be performed. Moreover, it was not deemed necessary, given the overall finding of continuation of dumping.

Sampling returns indicated that the prices achieved by the Chinese co-operators on major third country markets were lower than prices prevailing on the Union market. This again indicated that Chinese producers could export larger quantities to the Union. Should measures be allowed to lapse it would be more profitable for Chinese exporting producers to redirect their exports to the Union. However, these data on prices achieved by the Chinese co-operators on major third markets could not be verified and therefore this analysis was not pursued further

Certain interested parties claimed that other markets had become more attractive than the Union market. To support this claim one party submitted an analysis of the Chinese customs statistics. However, the Commission's analysis has shown that, apart from the United States’ market, the Union market remains the most attractive market for the Chinese exporters. In fact, exports increased over the period covered by this party's analysis (i.e. 2005 to 2008). Should the anti-dumping duties be repealed, the Union market would become even more attractive and volumes would therefore likely increase.

The sampling returns received from the 58 Chinese cooperating companies show that export prices to major third country markets are below the prices they achieve on the domestic market. However, these data could not be verified and therefore this analysis was not pursued further.

In addition the level of the export prices to third countries compared to the Brazilian normal value indicated that those export prices are generally substantially lower. However, again for the reasons explained in recital 140, these data could not be verified and therefore this analysis was not pursued further.

In conclusion the available data indicated a likelihood of continuation of dumping.

All Chinese companies in the sample operated a production to order system and therefore their stocks were of finished goods awaiting despatch. The production to order system is used because the footwear sector has to adapt to new fashions each season based on orders from customers and cannot use sales from stocks. Therefore, as companies had no real stocks, that element could not be considered as a meaningful indicator for the analysis of likelihood of continuation of dumping.

The investigation established that unused capacities of all 58 cooperating Chinese companies accounted for about 9 % of their total production capacity of footwear. This quantity would correspond to 14.5 million pairs for the 58 co-operators or around 65 million pairs for all exporting producers. The latter figure is around 10 % of total Union consumption (as given in table 3).

The likely use of this spare capacity was analysed. Given the aforementioned differences between the price levels in the Union, on the Chinese domestic market and in third countries, Chinese companies are likely to have an incentive to use spare capacity for exports to the Union. Another factor, which makes the Union market attractive for the Chinese exporters, is its size.

Furthermore, it should be pointed out that the existing assembly lines can be used to produce other kinds of footwear such as STAF and shoes with textile uppers as well as the product concerned. The companies sampled and the other co-operators in China produced large quantities of footwear which is not the product concerned. The current split between production of the product concerned and other footwear depends on the requirements of consumers and the ordering and sourcing policies of the Union importers. However should the measures be repealed the Union importers would surely reassess their sourcing policies and may order a greater proportion of the product concerned from Chinese producers. This could result in an increase of the quantities of the product concerned exported to the Union.

As established by Regulation (EC) No 388/2008, the existing measures covering the PRC were circumvented by consignments through Macao SAR. Subsequently, measures were extended to consignments of the product concerned assembled in and transhipped through Macao SAR. Those circumvention practices demonstrate the attractiveness of the Union market for Chinese exporting producers.

The investigation has shown that should measures be repealed there would be a likelihood of continuation of dumping. This conclusion is based on the attractiveness of the Union market in terms of volume as well as on price comparisons between the Union, Chinese and third country markets.

Furthermore, a number of factors including the relative levels of prices, the availability of spare capacities, circumvention and the ability to switch from the production of other footwear to the product concerned provide evidence for a likely increase in imported quantities if measures are repealed. On the other hand, other factors such as the world economic crisis and a tendency to switch production to other countries will inevitably reduce imported quantities to some extent. These factors are further analysed in section 5 (developments following the RIP) below.

It is concluded that imports from the PRC will continue to enter the Union market in large volumes and that such volumes will be sold at low, dumped prices so that there is likelihood of continuation of dumping should the measures be allowed to lapse.

The likely development of imports from Vietnam was analysed in terms of both expected prices and volumes.

As a starting point prices were established for the RIP. Data were available from the sampling returns (received from 51 cooperating Vietnamese exporting producers) which contained sales prices for the domestic market and export prices both to the Union market and to third country markets. This information was used as it was deemed to be the best source of price information for the product concerned for the purpose of comparing price indications on various markets. These data were deemed representative because they covered 82 % of imports to the Union market. The Union sales prices included on the sampling returns were cross-checked with statistical information (Taric data) available to the Commission. However, the statistical information could not be used for price comparisons as it did not cover Vietnamese domestic sales and exports to third countries.

Although Eurostat based data was another reliable source it did not provide, as already explained in recital 67, the possibility of comparing prices on different markets.

• they concerned like products,

• they were at the same level of trade,

• they were at comparable incoterms,

• they involved comparable quantities.

Sampling returns indicated that the Vietnamese domestic prices established on the basis of exporters’ own data were lower than prices on the Union market. It should, however, be noted that the data of all non-sampled companies (including data relating to any domestic sales) could not be verified. A detailed analysis of domestic prices in Vietnam could therefore not be performed. Moreover, as in the case of the PRC, it was not deemed necessary, given the overall finding of continuation of dumping.

According to data from the Vietnam General Statistics Office and the Vietnam General Department of Customs (2008 calendar year) around 50 % of Vietnamese footwear exports are dispatched to the Union market. Further, the sampling information received shows that during the RIP the cooperating exporters also sold very large volumes on third country markets.

Sampling returns indicated that the prices achieved by the Vietnamese co-operators on major third country markets were lower than prices prevailing on the Union market. This indicated that Vietnamese producers could export larger quantities to the Union.

Bearing in mind the low volume of sales made by the exporting producers on the Vietnamese domestic market no meaningful conclusion could be made in respect of this comparison.

All Vietnamese companies in the sample operated a production to order system and therefore their only stocks were of finished goods awaiting despatch. The production to order system is employed because the footwear sector has to adapt to new fashions each season based on orders from customers and cannot utilise sales from stocks. It is therefore considered that stocks are in this case not a very strong indicator.

The investigation established that unused capacities of all 51 cooperating Vietnamese companies account for about 17 % of their total production capacity for footwear. This quantity would correspond to 34 million pairs for the 51 co-operators or around 42 million pairs for all exporting producers. The latter figure is around 6 % of total Union consumption (as given in table 3).

The likely use of this spare capacity was analysed. Given the aforementioned differences between the price levels in the Union and on third country markets, Vietnamese companies are likely to have an incentive to use their spare capacity for exports to the Union. This conclusion is supported by the attractiveness of the Union market in terms of its size.

Furthermore, it should be pointed out that the existing assembly lines can be used to produce other kinds of footwear such as STAF and shoes with textile uppers as well as the product concerned. The companies sampled and the other co-operators in Vietnam produced large quantities of footwear which was not the product concerned. The current split between production of the product concerned and other footwear depends on the requirements of consumers and the ordering and sourcing policies of the Union importers. However should the measures be repealed the Union importers would reassess their sourcing policies and may order a greater proportion of the product concerned from Vietnamese producers. This could result in an increase of the quantities of the product concerned exported to the Union.

In addition to the continuation of dumping at high levels the investigation has shown that should measures be repealed there would be a likelihood of continuation of dumping. This conclusion is based on the attractiveness of the Union market in terms of its size and price levels.

Furthermore, a number of factors including the relative levels of prices, the availability of spare capacities, and the ability to switch from the production of other footwear to the product concerned provide evidence for an increase in imported quantities if measures are repealed. On the other hand, other factors such as the world economic crisis and a tendency to switch production to other countries will inevitably reduce imported quantities to some extent. These factors are further analysed in section 5 (developments following the RIP) below.

It is concluded that imports from Vietnam will continue to enter the Union market in large volumes and that such volumes will be sold at low, dumped prices so that there is likelihood of continuation of dumping should the measures be allowed to lapse.

The crisis began in the second half of 2008 (i.e. after the end of the RIP). Some parties argued that it would have an impact on the production and exports (including exports to the Union) of the product concerned originating in the countries concerned because of the shrinking consumption on the world and Union footwear markets.

It should be stated at the outset that the allegations made by parties concerning the likely impact of post-RIP developments on export volumes from the countries concerned and the consumption in the Union were contradictory. Some interested parties estimated that exports from the countries concerned could fall by as much as 25-30 % in 2009 as compared to RIP figures. Other interested parties expected such imports to remain stable. The Eurostat statistics available for the first half of 2009 indeed show a fall of 25 % of import volumes from China and a fall of 28 % of import volumes from Vietnam. In terms of prices, Eurostat statistics show an increase of 34 % for imports of the product concerned from China and an increase of 26 % for imports of the product concerned from Vietnam. However, taking into account the reasons expressed in recital 67 above these trends can not be considered as representative.

Some parties argued that exports of the product concerned originating in the countries concerned would fall because of a switch in sourcing away from the PRC and Vietnam to other countries such as Indonesia, Cambodia and India. It was argued that the process began after the imposition of measures in April 2006 and would continue if measures were re-imposed following the current review. Other reasons for such a switch were also mentioned, most notably rising production costs. For China they were alleged to be due to rising labour, energy and local materials costs, as well as environmental and labour legislation. An increase in the value of RMB was also brought up as a possible cause of the switch to other countries. For Vietnam it was alleged that there was a switch of sourcing to other countries because of increasing labour costs together with the loss of the 3,5 % GSP duty benefit on imports to the Union. Furthermore, it was argued that the switch of sourcing away from China and Vietnam was made attractive due to footwear production competitiveness improvements in the countries that are the new source. It was also argued that the switch was made easier by the fact that many producers in the countries concerned were owned or controlled by companies in other parts of South East Asia, such as Taiwan or Hong Kong and because sourcing of footwear for the Union market is controlled by large Union importers, who have the means to easily change their sources of supply whenever necessary.

For the PRC, although it was apparent that some exporters have relocated and might further relocate to reduce their costs, the relocation was sometimes to other parts of the PRC (away from the coastal provinces which formed the traditional footwear production base). Such a move would not, in itself, lead to a reduction in production and exports from the PRC.

As regards Vietnam, it is not considered likely that the 3,5 % duty increase resulting from GSP graduation is of a magnitude such as to prompt significant relocation of production. Whilst it cannot be excluded that this graduation may have some impact on export volumes from Vietnam, it is unlikely to considerably affect the sourcing decisions of large Union importers. It is recalled that despite the imposition of anti-dumping duties much higher than 3,5 %, both Vietnam and China maintained high levels of import volumes into the Union.

It is therefore considered that any relocation of production would not be of such a magnitude as to radically change importers’ sourcing decisions.

As regards imports from other countries into the Union, it was found that, after the anti-dumping measures were imposed, they did increase from certain Asian countries. This, however, does not alter the fact that the product concerned continued to be imported from the two countries under investigation into the Union in very significant volumes and at dumped prices.

Some parties argued that exports from the PRC would fall because of an increase in the Chinese domestic consumption, encouraged by the policies of the Chinese authorities. However, none of the parties submitted evidence which would allow an evaluation of the expected consumption growth – this evaluation is made even more difficult due to the economic crisis.

Whilst it is not unreasonable to assume that China's recent economic growth will result, at least in the medium term, in some increase in domestic consumption of footwear, no evidence has been submitted to demonstrate that this growth would lead to a (further) reduction in exports to the Union.

The economic crisis is having a downward influence on imports into the Union from the countries concerned. It is however not unreasonable to assume that a recovery will follow at some stage, which would then result in increased sales volumes. Even if the highest forecast of a 25 – 30 % fall materialized over 2009 as a whole, volumes from the PRC would still reach over 80 million pairs and achieve a Union market share of above 10 % and volumes from Vietnam would still reach around 48 million pairs and achieve a Union market share of around 7 %.

As regards a switch of sourcing of Union imports, it was found that the relocation observed to date has not had a determinative effect, and there is no indication that there would be in the near future any major change in the trends observed so far.

Exports from the countries concerned to the Union have continued to be made at dumped prices during the RIP. In view of the economic crisis and the (expected) contraction in demand, and in the absence of any information on import prices during the post-RIP pointing to the contrary, it does not seem unreasonable to predict that exports will continue to be made at dumped prices.

In light of the above findings concerning both the RIP and post RIP developments it is concluded that there is a likelihood of continuation of dumping.

Total Chinese imports decreased from 157 to 125 million pairs during the period considered, or from 21,6 % to 18,5 % of the Union market.

However as demonstrated above, when comparing to the OIP, a strong increase of imports from China took place after the end of the quota system (1 January 2005), on the basis of low import prices. Import levels decreased after the imposition of measures, stabilising in 2007 and the RIP at over 120 million pairs—almost twice the amount of the OIP import volumes.

In addition, it should be underlined that an anti-circumvention investigation found that dumped Chinese products were avoiding the duties and undermining the remedial effect of the measures by circumventing the aforesaid measures via Macao within the meaning of Article 13 of the basic Regulation. This shows that the Union market has continued to be very important to Chinese exporting producers.

Vietnamese imports decreased in the period considered from 79 to 69 million pairs. Notwithstanding this drop of over 13 % as compared to the OIP, import levels remain significant and market shares are roughly stable around the 10 % mark during the RIP.

Together, imports from China and Vietnam amounted to 237 million pairs in 2006, 185 million pairs in 2007 and 194 million pairs in the RIP. While there was a decrease in volumes in the period concerned, the import levels are still higher than those that led to the imposition of measures (166 million). The joint market share of China and Vietnam dropped from 32,7 % to 28,7 % over the period but also in this case, the RIP market share is considerably higher than that of the OIP of 23 %.

The Commission considered whether the effects of dumped imports from the countries concerned should be assessed cumulatively, on the basis of the criteria set out in Article 3(4) of the basic Regulation. This Article provides that the effects of imports from two or more countries simultaneously subject to anti-dumping investigations shall be assessed cumulatively only if it is determined that (a) the margin of dumping established in relation to the imports from each country is more than de minimis as defined in Article 9(3) of the basic Regulation and that the volume of imports of each country is not negligible and (b) a cumulative assessment of the effects of the imports is appropriate in the light of the conditions of competition between imported products and the conditions of competition between the imported products and the like Union product.

In this respect, it was firstly found that the dumping margins established for each of the countries concerned were more than de minimis. In addition, the volume of the dumped imports from each of those countries was not negligible in the sense of Article 5(7) of the basic Regulation. Indeed, the import volume represented for PRC and Vietnam respectively around 18 and 10 % of the Union consumption during the RIP.

The investigation further showed that the conditions of competition both between the dumped imports and between the dumped imports and the like Union product were similar. It was found that, irrespective of their origin, footwear with uppers of leather produced/sold by the countries concerned and those produced/sold by the Union industry compete against each other since they are alike in terms of their basic characteristics, interchangeable from the consumer's point of view and distributed via the same distribution channels. In addition, the investigation revealed that for both countries, the volume of imports developed in parallel: both countries decreased their imports by around 10-25 % between 2006 and the RIP. The import prices of those two countries are also in the same order of magnitude. In addition those prices were found to undercut the Union industry's prices at a comparable level of trade.

On this basis, it is concluded that all conditions of cumulation are met and that accordingly the effect of the dumped imports originating in the countries concerned should be assessed jointly for the purpose of the injury analysis.

Average prices of Chinese imports in the period under consideration have remained fairly stable, at around EUR 8,4 per pair. This is approximately 20 % higher than the price level of the OIP (EUR 7,2) Average prices of Vietnamese imports have decreased during the period considered, and are in the RIP close to the EUR 9,2 level which was at hand in the OIP. The assessment of the trends of average prices does however not take into account changes in product mix that might have occurred in the period considered.

The approach to calculate the price undercutting follows that of the original investigation. The import prices, including the anti-dumping duties, of the sampled exporting producers were compared to the Union industry prices, on the basis of weighted averages for comparable product types during the RIP. The Union industry prices were adjusted to an ex-works level and compared to CIF Union frontier import prices, plus anti-dumping and customs duties. This price comparison was made for transactions at the same level of trade, duly adjusted where necessary, and after deduction of rebates and discounts. For a fair comparison, adjustments were made to reflect costs incurred in the Union by the importers, such as design, selection of raw material, etc, which otherwise would not be reflected in the import price. This was justified since footwear imported is produced on order on the basis of the specifications (raw material, design) given by the importers themselves.

As seen in the above, total imports from third country imports have increased in absolute terms in the period under consideration. Overall imports have gone from 185 million pairs in 2006 to 201 million pairs in the RIP and in market share they have increased from 26 % to 30 % in the RIP.

Prices from third countries are however on average 34 % higher than Chinese prices, and 28 % higher than Vietnamese prices.

Production decreased by 6 % in the period considered, largely mirroring the decrease in consumption of leather shoes noted for the same period.

Some interested parties representing importers and retailers claimed, but without providing any evidence, that the decrease in production in the Union would have to be seen as a positive indication rather than a sign that the Union industry continued to suffer injury in the period concerned. According to these parties, the decrease in production has been the consequence of a conscious streamlining process in the Union industry whereby the lower end segment has been abandoned in favour of the medium high end segment in which the Union industry has always been competitive

In this respect it should however be underlined and as determined already in the original investigation that many Union producers have disappeared because they were not able to compete against dumped imports — not necessarily due to inherent or structural lack of competitiveness. Therefore the allegation that the decrease of the Union production has to be considered as a positive indication is rejected

One interested party claimed that the fact that the Union industry capacity utilisation had remained stable showed that no injury was taking place.

As was already concluded in the original investigation the actual capacity in this sector is strongly dependent on the number of workers available rather than the technical capacity of the machines in the production line. For this reason, capacity is best measured by assessing the employment level as detailed below in section 2.3. In any event contrary to the claim made by the parties the investigation demonstrated that capacity utilisation when assessed from the point of view of technical capacity, decreased from 71 % to 66 % in the period considered and the argument that the stable utilisation rate would be a sign of no injury, can therefore not be upheld.

The Union industry sales decreased in absolute terms by 8 % in the period under consideration. However, in view of the fact that the same period saw a decrease in consumption of 7 %, the Union industry still managed to maintain its market share at a stable rate. When comparing to the situation in the original investigation which saw a drop in sales of 33 % it is also clear that the free fall in sales and market shares have been halted after the imposition of the measures.

One interested party claimed that no injury existed since the Union industry had increased its market share in the period considered. The investigation has however revealed that the Union industry's market share has seen very small changes in the period considered. Furthermore, as detailed above in section E.2 it would have been expected that the streamlining of production and change in business model would have allowed the companies that remain to materially increase their market presence. The fact that sales of the Union producers have remained flat indicates that the pressure caused by dumped imports continues to be a concern.

Some interested parties claimed that the fact that the Union industry had not increased its market share since the introduction of duties has shown that the Union industry has not been able to benefit from the duties and that the imported products in any event are not substitutable with the product produced in the Union.

Again it should be underlined that market share is only one of the indicators examined and that as detailed below under other factors, the investigation has shown that there is significant competition between Union manufactured products and the product imported from the countries concerned. While it is correct that the Union producers have not been able to significantly increase their market share the massive drop in sales seen in the original investigation has been halted and the measures have allowed Union producers to stabilise sales and market share. Further increases in market share appear to have been halted by the price pressure generated materially by dumped imports as seen in recitals 261 - 262.

Other interested parties claimed that the Union industry has seen a significant improvement in export performance and that injury therefore no longer was at hand.

As seen in the table below the investigation has however contrary to this claim, revealed that the exports performance of the Union industry in the period considered showed a slight decrease rather than an increase.

In any event, it should be noted that exports accounts for only 25 % of the Union producers’ sales. The performance in the Union is therefore still by far the most important factor determining the financial situation of Union producers. In addition, the investigation has not shown that an increase in export activity would provoke a drop in the sales in the Union.

Union producers employed around 260 000 persons directly involved in the production of the product concerned in the RIP.

One interested party claimed that the fact that employment levels in the Union industry had remained stable indicates that injury is no longer sustained.

In this context it is recalled that the assessment of injury has to be founded on an analysis of all relevant indicators and not only on one factor in isolation. Furthermore, the investigation ascertained that employment of the Union industry decreased slightly (– 2,0 %). The fact that a large part of the Union industry has moved towards a cluster system of production has likely been instrumental in allowing the employment levels not to decrease further and allow for the maintenance of important know how in the producing companies

Another interested party indicated that the lack of available labour force in the Union, rather than competition from imports from the countries concerned was one of the main reasons of the problems facing the Union industry.

Considering however that no evidence was provided in support of this claim and since the findings of the investigation did not suggest that availability of work force would be a significant problem to Union producers, this argument cannot be upheld.

In this review, average productivity in the period considered has been assessed on the basis of total employment, including all work force of all production facilities in a cluster system. Productivity decreased moderately during the period. As mentioned under section E.2. the productivity is linked to the overall structure and types of footwear produced in the companies and can vary greatly from a country to another country and from a company to another. Therefore the drop cannot be considered as significant.

Between 2006 and the RIP, the Union industry market share remained stable but considering the fact that consumption decreased Union producers still lost sales in absolute terms.

As concerns the impact on the Union industry of the magnitude of the actual margin of dumping, given the volume and the prices of the imports from the countries concerned, this impact cannot be considered to be negligible.

Anti-dumping measures against imports of certain footwear with uppers of leather originating in PRC and Vietnam were imposed in October 2006. In this period only a partial recovery of the situation of the Union producers has been observed as detailed below.

Stocks remained negligible at around 2 % of the production. It is recalled that the importance of this indicator should not be overestimated as production for this product type is made on order and stock at a determined point in time is the result of goods sold but not yet delivered.

Sales prices increased by 30 % during the period. This increase is the result of two main factors. On one side the result of developments in business model mentioned above; on the other side, the cost increase mainly attributable to the raw materials.

The profit levels of the Union industry improved in the period concerned from 1,3 % in 2006 to 3 % in the RIP. The improvement in the profit influenced the evolution of the cash flow and Return of investments. This, however, has to be seen in the light of a significant deterioration and low levels of investment in the original investigation.

Some interested parties argued that the profits of the Union industry had markedly improved and that this profit in fact was substantially higher than the 6 % target profit established in the original investigation. It was thus claimed that injury no longer was at hand, no matter the state of the other injury indicators.

In this context it should be noted that while it holds true that the profitability levels have improved, the investigation has revealed that the Union industry has not been able to reach the target profit of 6 % as determined in the original investigation. A more pronounced increase of profit levels would have been expected not the least when considering the effort of a large part of industry in moving into new business models. This shows that industry is still in a fragile situation from a profitability point of view. The argument that the profit levels would be such as to indicate that the Union industry no longer suffers injury must therefore be rejected.

The investigation has shown that SME's, which constitute essentially the whole sector, are not in a position, due to their still weak financial situation, to provide sufficient bank guarantees and have therefore difficulties to raise new capital.

While investments did see an increase in the period considered, in absolute terms it still represented only 6 % of the turnover in the RIP. In addition, this increment is influenced by exceptional investments made in buildings by one of the sampled Union producers. Otherwise, the level of investment would be stable during the reference period and at low levels. Again, this has to be seen in the light of a significant deterioration and low levels of investment in the original investigation.

Average wages have remained flat over the period considered, indicating that actual salaries are decreasing and not following the normal salary development. This only further demonstrates the level of pressure exerted on Union producers

While the combined import volumes from the countries concerned have seen a decrease in the period considered, the volumes in the RIP still far exceed those in the original investigation. In the case of China the levels are almost twice of those seen in the OIP and while import volumes of Vietnam have decreased in the same period, their presence on the market is still significant with a market share of around 10 %.

An analysis of the prices of imports from the countries concerned in the period considered, shows that prices of Chinese imports have remained stable while Vietnamese prices have decreased. When compared to prices in the OIP, Chinese prices have increased by around 20 % but prices of the Vietnamese are close to those found in the OIP. Notwithstanding differences in product mix and level of trade considerations, it is clear that average imports prices of EUR 8,6 for the PRC and EUR 9,51 from Vietnam continue to cause major concern to the Union producers whose average sales prices are well above EUR 30. This becomes even more evident when looking at the undercutting levels that have seen a drastic increase when compared to the OIP. For China undercutting levels have increased from 13,5 % to 31,9 % in this period and for Vietnam the equivalent increase is from 15,9 % to 38,9 %.

On the basis of the above it must be concluded that imports from the countries concerned both in terms of volume and price, continues to adversely affect the performance of Union producers.

The Commission thoroughly analysed whether any other known factors than the dumped imports could have had a bearing on the continued injury suffered by the Union producers in order to ensure that possible injury caused by any such factors was not attributed to the dumped imports.

As seen from the above, several interested parties have claimed that factors other than the dumped imports have been the major cause of injury to the Union industry.

The relevant other factors have been identified and carefully analysed. However, the facts of the case show that none of the other known factors in isolation or seen together would be such as to break the causal link between the dumped imports and the injury suffered by Union producers

As concluded above in recital 261-262, imports of large volumes at dumped prices from the PRC have continued during the RIP.

An analysis of capacities and the development of the domestic market in the PRC also revealed that this already high volume of exports would continue should measures be terminated. Even in the event that imports, as alleged, would decrease by up to 30 % as a consequence of the market downturn, the volumes would still be very large.

It was also concluded that, due to its higher price level, when compared to the Chinese domestic market as well as third country markets, the Union would continue to be an attractive market for Chinese exports should measures be allowed to lapse. While a certain increase in export price could not be ruled out it was nevertheless concluded that these exports would continue to be dumped.

The significant levels of dumping and undercutting observed indicate that the export volumes to the Union mentioned above would be made at dumped prices which would lie significantly below the prices and costs of the Union producers.

The combined effect of such volumes and prices would as such be capable to lead to a deterioration of the Union producers’ already precarious situation.

Also for the case of Vietnam, continuation of dumping in large volumes was established in the RIP.

It was also concluded that the Union continues to be the most important market for the Vietnamese exporters and that this is likely to continue to be the case in the event that measures are discontinued.

Considering the existence of significant spare capacities and when considering the price level in the Union when compared to that in the Vietnamese domestic market as well as other export markets, it is likely that the imports of dumped products will increase further should measures lapse. As it is the case for China, even in the event that imports, as alleged, would decrease as a consequence of the economic downturn the import volumes would still be very significant.

As in the case of the PRC, the significant level of dumping and undercutting observed indicates that the export volumes to the Union mentioned above would be made at dumped prices which would lie significantly below the prices and costs of the Union producers. Similarly, the combined effect of such volumes and prices would as such be capable to lead to an deterioration of the Union producers’ already precarious situation

Several parties have held that the effects of the economic downturn should be distinguished from the alleged effects of imports as this event must be considered external to the likelihood of continuation/recurrence of injurious dumping. According to these interested parties, the Union industry would be particularly affected by the downturn as the consumer in such circumstances would typically switch to a lower quality/price product as a consequence of the decrease in purchase power.

The market downturn will most likely lead to a further decrease in consumption of the product concerned. While leather shoes still will have a strong position in the market, sales are likely to go down significantly, more than the 7 % already seen in the period before the downturn.

It is likely that the economic constraints will make consumers and retailers more sensitive to price and a decrease in purchasing power of the consumer could put a cap on prices at retail level. In turn this could trigger a segment shift (consumers moving from the high/medium segment to medium as well as from the medium to medium/low) and to more repairs. The competition between leather shoes and other cheaper products made of textile and synthetics would under such circumstances most likely increase.

In short, it cannot be ruled out that the downturn in the market will contribute to the deterioration of the situation of the Union industry given the related consumption and price effects. At the same time however, it is also likely that the economic downturn will magnify the effect of dumped imports even further. The reason for this is that the downturn is likely to put price pressure on all operators, including the exporters from the countries concerned, which may lower their already dumped prices even further. Even lower prices will put pressure also in the mid to high segment and would risk forcing Union producers back towards the mid to low segment. This in turn would lead to even fiercer product competition between Union production and the dumped imports.

Several interested parties claimed that any future decline in the performance of the Union industry, if any, would not be linked to imports from the countries concerned but rather to a decline in consumption in the Union. This decline in consumption would allegedly be linked, not only to changes in fashion trends that has moved from formal towards more casual footwear but also to the downturn in the market. This event would increase the tendency of the consumer to switch preference in favour of low price segment typically represented by imports from third countries

A drop in overall consumption would in all likelihood have a detrimental effect on the performance of the Union producers. It can however also be expected that a decrease in purchasing power of the consumer will make the market less responsive to short term fashion-trends leading to a revival of the classical ‘brown shoe’ which is the segment where the Union industry is the strongest. It can thus not be concluded that a drop in consumption would hit Union produced shoes harder than those imported. Overall, while the Union producers most likely will be affected by a drop in consumption the effect of large volumes of dumped imports from the countries concerned will still be a very significant cause of injury should measures be allowed to lapse.

It has also been argued by some interested parties that the economic downturn will be particularly hard felt on the export side in the Union production.

In this context it can be presumed that the financial downturn, which will be felt across the world, will also have an impact on Union exports. While a drop in export activity could certainly contribute negatively to the general development of the sector it should however be born in mind that three quarters of the Union producers’ activity is geared to the domestic Union market. Considering this, it cannot be concluded that the likely impact of the downturn of the export performance in itself would break the causal link between dumped imports and injury caused to the Union producers.

It has also been argued that the Union producers have had problems benefiting from measures in the past due to the fact that the source of the problems suffered are linked to structural problems and inefficiency in the industry rather than to the alleged dumping from China and Vietnam. According to these claims, the event of the economic downturn will deepen the structural problems in the sector and further dilute the link between the injury suffered and the dumping.

First and foremost it is recalled that the investigation has shown that, irrespective of their competitive position, the Union producers have been materially injured by the imports of dumped imports. In any event, it should be noted as demonstrated above, that the Union industry while still in a precarious situation has shown at least a partial recovery in the period considered and have been able to maintain a stable market share. Moreover a large part of the sector has been able to redefine business model or is trying to through (i) the grouping of resources in clusters making the most of specialisation and allowing the groups to benefit from economies of scale, (ii) the direct sales to retailers and (iii) the production of shoes in the mid-upper and upper segments. It is highly unlikely that the industry would have been able to carry through with this process had the measures not been in place and in any case those which are now in the process of changing their business model will in all likelihood not be able to complete it.

It can however also be expected that the market downturn will increase pressure and possibly also halt the process for the companies that have still not been able to refocus by way of a change in business model. The situation of these companies will risk deteriorating even further and many companies in this group may even be going out of business as competition intensifies. The companies that have adopted the more advanced business models are not likely to escape the effects of the market downturn either as the prices in the high/medium segment in which they are specialised, also is likely to be subject to an overall downward pressure.

Nevertheless, as for the assessment of the situation seen in the period considered, it would be difficult to argue that, on its own, the event of the economic downturn would break the causal link with dumped imports. On the contrary, as detailed above in recital 302 downward pressure on price sustained by cheap dumped imports will most likely also, generate a domino effect, forcing an even larger share of the Union production towards the same segment as the dumped imports so as to increase the pressure of the dumped imports on the Union producers. Under such circumstances Union producers would therefore be more dependent than ever on the existence of measures in the future.

It was also examined whether imports from third countries would be likely to have an impact on the situation of the Union industry should measures allow to lapse. In this context it has been held that third countries exports to the Union have been constantly growing and that in the wake of higher costs in China and Vietnam and coupled with the economic downturn, these would be the main cause of concern to the Union in the future.

Bearing in mind the price difference between the dumped imports from the countries concerned and those of third countries it would however rather be likely that Chinese and Vietnamese exports will gain a price edge over imports from third countries. This would in turn point to a relative decrease of such imports in the future. As demonstrated above in sections C.3 and C.4 there are no signs that the Chinese or Vietnamese exporters are likely to withdraw their presence on the Union market. On the contrary, the large capacities at hand would suggest that they have an incentive to stay in the market as long as possible.

In view of the above, imports from third countries would in all likelihood have less of an impact on the situation of the Union industry should measures lapse.

It has also been argued that the injury to the Union producers is likely to decrease as a result of the appreciation of the USD to the EURO. The fluctuation in currency would push up the prices of the dumped imports that are traded in Euro so as to close the price gap between the dumped imports and Union producer prices.

In this context it should be noted that the investigation has to establish whether the dumped imports (in terms of prices and volume) have caused (or are likely to cause) material injury to the Union industry or whether such material injury (or likelihood thereof) was due to other factors. In this respect, Article 3(6) of the basic Regulation states that it is necessary to show that the price level of the dumped imports cause (or are likely to cause) injury. It therefore merely refers to a difference between price levels, and there is thus no requirement to analyse the factors affecting the level of those prices.

The likely effect of the dumped imports on the Union industry's prices is essentially examined by establishing price undercutting, price depression and price suppression. For this purpose, the dumped export prices and the Union industry's sales prices are compared, and export prices used for the injury calculations may sometimes need to be converted into another currency in order to have a comparable basis. Consequently, the use of exchange rates in this context only ensures that the price difference is established on a comparable basis. From this, it becomes obvious that the exchange rate can in principle not be another factor of the injury.

The above is also confirmed by the wording of Article 3(7) of the basic Regulation, which refers to known factors other than dumped imports. The list of the other known factors in this Article does not make reference to any factor affecting the price level of the dumped imports.

However, even in the event that this factor were taken into account, given the likely pressure on consumer prices in a context of a market downturn, it is unlikely that importers buying from the countries concerned would be able to increase prices to retail as a result of the appreciation of the USD. Furthermore, exchange rates as such are very difficult to predict and a depreciation of the USD against the Euro has been seen post RIP making it impossible to conclude that the currency fluctuations will have an upwards effect on prices of dumped imports from the countries concerned.

In view of the foregoing it cannot be concluded that the development of exchange rate could be another factor causing injury.

Several interested parties repeated their concerns as to the confidentiality treatment granted to the complainant, claiming that there was no trace in the file in support of the allegation that the situation of the complainant would be negatively affected should their identity be disclosed. One interested party added that in order not to be disclosed, WTO practice would require that good cause be demonstrated for all documents, whether considered confidential by nature or not. According to this party no such good cause had been shown in this case.

The same party also argued that should the request for confidentiality nevertheless be granted, this should in turn mean that at least the full details on unit price and profitability indicators of the sample could be disclosed.

As indicated in recitals 40-42 the confidentiality concerning the identities of the complainant and the producers selected for the sample was based on a duly justified request further to Article 19 in the basic Regulation. It is therefore not correct that due cause was not demonstrated by the complainant. As concerns the argument that full details of unit price and profitability should be disclosed it is maintained that this, seen in context with publicly available information, could indirectly reveal the identity of the complainant. Moreover within the group of the sampled companies, such disclosure would affect the commercial interests of the other sampled companies that are also competitors on the market.

In view of the above, the comments received would not be such as to alter the conclusion to grant confidential treatment to the identity of the Union producers supporting the request.

Several interested parties argued that the Commission had applied the definition of Union industry and Union production incorrectly.

Two parties claimed that an injury assessment has to be based on information on the complainant and supporters of the complaint and not on the basis of the total Union production. According to these parties, this meant that the macro indicators used were not representative.

It was also held that the Commission had failed to exclude from the sample a company that had discontinued production in the Union in the RIP. Some parties maintained that the inclusion of this company had distorted the micro indicators as well as the undercutting and underselling analysis. Conversely, another interested party that did not object to the inclusion in the sample of this party, held that all data of this company and not only that relating to its activity in the Union should be taken into account for the injury analysis.

The same interested parties claimed that the Commission had failed to exclude from the definition of Union industry companies that imported up to 25 % of the total production from third countries. According to these interested parties this constituted a change in methodology when compared to recital 231 of the Regulation imposing provisional measures in the original investigation, stipulating that all companies that had delocalised had been excluded. It was also claimed that the Commission practice in general as concerned the application of Article 4(1) of the basic Regulation, would require the exclusion of companies that import around 25 % of the total production. In this context one party also claimed that the Commission had wrongly concluded that none of the CEC members had outsourced production even when a submission showing the contrary had been submitted in the course of the investigation.

Several interested parties also indicated that the general disclosure document was inconsistent as recital 3 indicated that the support for the complaint was 35 %, while recital 193 indicated 25 %.

As seen above in recitals 193-200 the Union industry was defined as provided for in Article 4.1 of the Basic Regulation. The assessment of the situation of the entire Union production complies with the basic Regulation. The argument that the injury assessment was based on an incorrect definition of the Union industry must thus be rejected.

As to the failure to exclude one of the sampled companies, it is recalled that recitals 23 and 196 provides the reasons why the company should be retained in the sample. It is further concluded that a possible exclusion would not have any effect, on standing or on the injury situation, including undercutting, of the sample. This was due to the very small weight of this company in the sample. Whether the company is formally excluded or not has therefore no practical implications on the outcome of the analysis.

As seen in recital 195, Union production was based only on companies that fall under the definition of Article 4 (including 4(1). Based on the information on record, no legal entities were taken into account that had delocalised and that should have been excluded from the definition of Union producer under Article 4(1). In this context it is recalled that limited imports as such do not amount to delocalisation. While a small number of complaining producers did import, these volumes were very limited and in any event at most 25 % of the total output of the company concerned. In view of the foregoing the claim that the Commission has deviated from the practice in the original case or from the provisions of the basic Regulation is not correct.

As to the alleged inconsistency between the figure of support of the complaints mentioned in recitals 3 and 193, it should be noted that recital 193 simply states that the support is over and above the legal minimum of 25 % and is therefore not an indication of the actual support over and above this threshold.

Several interested parties claimed that the period for assessing injury was incoherent. In particular, it was held that using the period under consideration for certain indicators, while referring back to the OIP and to 2005 for other injury indicators, would lead to an inconsistent result. Other interested parties claimed that the Commission had relied on data for 2005 and the OIP without disclosing these data.

The assessment of the injury analysis was based on the findings in the period concerned i.e. from 2006 up to and including the RIP. References to the OIP and 2005 were made only to complement the analysis but did not have a decisive impact on the conclusions. In view of the foregoing the claim that the period for assessing injury led to an inconsistent analysis will have to be rejected.

Several parties maintained that the sample of Union producers was not representative in term of product types, size and geographical spread.

In this context it was held that the Commission had not given sufficient explanation for the geographical spread of the sample and that this in any event was not representative as footwear is produced in at least 7 Member states out of which only four were part of the sample. In addition it was claimed that one Member state in particular was overrepresented. One interested party also requested that the Commission provided information on the level of tolling arrangements found with the Union industry.

One party also claimed that women's shoes were overrepresented in the sample and another party recalled that the profitability of the sample was unrepresentative when compared to the figure deduced from the complaint.

Recital 28 provides details of the geographical spread of the sample and its representativeness as compared with the overall spread in the Union. In this context it is recalled that the sample largely mirrored the geographical spread of the entire population and that an exactly identical geographical spread would not be necessary. Furthermore, the investigation revealed that around 60 % of the sample production was made through so-called ‘subcontracting’ or ‘tolling’ arrangements.

In addition, as such ‘subcontracting’ or ‘tolling’ occurs also amongst companies in different Member States, care was taken to ensure that production was allocated to the Member state of the company that had ordered the service.

Considering the foregoing, a degree of variation as to the weight of one Member State will not render the sample unrepresentative. Similarly, considering the subcontracting arrangement and the fact that two thirds of the production is concentrated in three Member States, there can be no requirement to include representatives from 7 producing countries.

It is recalled from recital 29 that the sampled Union producers were found to include a cross-section of product ranges which largely reflected that of the overall population. The same holds true for the gender division and although there are variations in all categories, men, women and children's shoes are sold in significant quantities by the sampled companies as well as by the overall population. As concern the profit level, the fact that there is a variation between the sample and that of the request does not render the sample unrepresentative. In any event, it should be noted that the profitability of the sample is in the same range as the one established when analysing all information in the complaint.

Some parties argued that China has been discriminated vis-à-vis Vietnam already since the original case, because a higher duty was applied on Chinese imports although the dumping margin established for China was lower than the one for Vietnam. It was also claimed that China was discriminated against by the method used to adjust the injury margin in the original investigation.

First, it is law in the Union that duties are established in line with the lesser duty rule, which means that the injury margin may be setting the duty, instead of the dumping margin. Second, in the original case it was found necessary in order to impose the lowest possible remedy of injurious dumping to take into account non-injurious volumes and values, which were calculated to arrive to the lowest possible level of remedy of injury caused by both China and Vietnam, and which resulted in the duties imposed. In this context, it is recalled that the purpose of an expiry review is to assess whether the facts at hand would warrant that measures in their current form be kept in place for a further period. Considering that there is no scope for change in the level of measures in the context of this review, arguments to this effect cannot be taken into account.

One interested party claimed that the conditions for cumulation were not fulfilled as the trend concerning Vietnam was very different from that of China. It was also claimed that imports from Vietnam could no longer be considered to cause injury as the volumes in the RIP were below those of the non-injurious volumes as established in the original investigation.

It is recalled that an extensive analysis was carried out above in recital 216 and onwards showing that the conditions for cumulation were met. In view of this fact, the argument on the non injurious volume is not relevant.

One interested party indicated that the disclosure document showed that the Union industry is continuing to delocalise. According to these parties, this showed that the duties in place had not been able to stop the delocalisation process.

In this context it is recalled that the purpose of the duties is not to stop or promote any delocalisation process, but to correct trade distortions caused by dumped imports. It is also to be noted that several companies have delocalised to other Member States or to third countries which are not under measures. In view of the foregoing, this argument cannot be taken into account.

One interested party considered that responses from national associations were not sufficient as a source for injury indicators since only information pertaining to some of the injury indicators could be deduced from some of their responses. The fact that only nine responses were obtained, was also challenged.

Several parties challenged the macro indicators due to the fact that these were based on Union production as a whole rather than on information from complainants and supporters. The justification for the establishment of the macro indicators were already explained above in recital 337 and would therefore require no further assessment. One interested party indicated that the macro indicators in any event were not reliable. The fact that an increase of employment of 359 % had been seen since the original investigation was given as an example of why the figures had to be considered unreasonable. This claim was supported by the observation showing that the macro indicators on several occasions were different from those observed in the sample.

Several interested parties indicated that the consumption trends disclosed were incoherent as one part of the document mentioned a decrease of 7 % while a 14 % decrease is mentioned in another part of the document. Similarly, the data on production capacity and the data on employment were considered inconsistent as these showed different trends even if the disclosure document concluded that the two were linked.

As to the sources and as explained above in recital 225-226, the Commission requested and obtained from national associations the information that was reasonably at their disposal. The fact that this does not cover all injury indicators is in no way an anomaly, but rather a reflection that such bodies simply do not have access to data pertaining to some specific indicators. This is why the investigating authority obtains such data from a representative sample of companies. The nine replies obtained from the national associations account for a large majority of production (above 80 % of total Union production) and were further complemented from available statistical information and other data provided by interested parties.

Concerning the level of employment it is recalled that in the original investigation, the figure of 57 000 workers was based on the complainants’ figures. The current employment figure of 262 000 is a macro indicator and pertains to the Union industry as defined above. As for the differences between the indicators for the sample and for the whole Union Industry, it is recalled that those indicators do not need to perfectly mirror each other to be representative. The fact that they followed the same trends further attest to their representativeness. As to the alleged inconsistency for the consumption, the 7 % decrease referred to the period 2006 — RIP while the 14 % decrease referred to the period 2005 — RIP.

In view of the above, the comments with regard to the composition and the analysis of the macro indicators must be rejected.

One interested party indicated that the 3 % profit reached by the Union industry should be considered as a good result, in particular when considering that the market is contracting. It was also indicated that the claim that the Union industry is facing price pressure from the Chinese and Vietnamese imports was not supported by the findings that the Union industry managed to raise prices by 30 % in the period considered.

As established in the original investigation, the profit level expected in the absence of injurious dumping is 6 %, well above the ca. 3 % level achieved by the Union industry, which is furthermore not high enough to assure the viability in the medium term and to finance the ongoing restructuring process This is also to be compared with the very healthy profit level of importers. As for the Union Industry's sales prices, their increase did not prevent direct competition between the products and therefore undercutting and underselling have been affected. The low profit margin proves the price pressure, as the Union industry cannot apply a higher mark-up.

In view of the above, the arguments with regard to the analysis of the micro indicators must be rejected.

Several interested parties indicated concerns as to the undercutting analysis carried out by the Commission. In this context it was held that the Commission had artificially increased the matching of product control numbers, PCN's by a reclassification of certain shoes from product group E to A.

Several interested parties considered that the Commission had failed to disclose why the level of adjustment for R&D as established in the original investigation had now been decreased. Similarly, it was considered that the Commission had not disclosed to which extent adjustments had been made for sales to unrelated trading companies..

The claim that an artificial matching was obtained through a reclassification to the PCN's is not correct. As detailed in recital 57 and onwards there was no re-classification however, where appropriate, a correction had to be done when parties had declared the shoes in the wrong category.

In respect of the claim that no justification was given for the change in the R&D adjustment, it should be noted that this was established using the same method as in the original investigation, i.e. on the basis of verified information supplied by the cooperating parties which refers to the RIP. The CIF price of the exporters was established based on data provided by the companies themselves and corrected where necessary.

In view of the above, the claims that the undercutting analysis was deficient must be rejected.

Several interested parties claimed that the overall injury indicators were all positive and that the Commission had based the conclusion of continuation of injury solely on the profitability. Moreover, considering the fact that the profitability in the RIP was the highest since 2001, also this indicator should have to be interpreted as indicating that the Union industry is no longer suffering injury. Several interested parties did furthermore name and provide specific examples of companies that were doing well in support of their claim that Union industry was not injured.

Another interested party considered that the Commission had failed to take into account the impact of change in the business model when assessing the production and sales as well as the injury picture in general. It was similarly claimed that the effects of outsourcing had not been taken into account and according to this party the average profit of the sample would have been much higher had the outsourced activities been taken into account.

In this context, it is underlined that the analysis of injury indicators is global by nature and not all indicators have to show deterioration in order for injury to be found. It should also be taken into consideration that measures were in force during the period analysed, and that therefore a certain mitigation of the injury is to be logically expected. This notwithstanding and as already established in recital 257 and onwards, consumption, production, sales,capacity utilisation showed a deterioration over the period, undercutting and underselling continued at significant levels, and profitability remained at very low levels, substantially below the normal profit to be expected in the absence of injurious dumping. Together, the picture showed a partial removal of injury by the measures — but by no means its disappearance.

In an industry with over 18 000 companies, it is natural that there will be a spread in the performance of individual companies however, his does not imply that injury does not exist for the industry as a whole. It is recalled that the analysis of macro indicators for the whole industry and micro indicators for a representative sample of producers (both as per Article 4(1) of the basic Regulation), showed that injury had continued.

As concern the impact of the change in business model, the calculated average profit refers to the sampled Union producers. All the changes (i.a. business model, level of trade) were included in the analysis. As per the requirements of the law, an operator's activity as an importer can not be ascribed to its situation as producer.

In view of the foregoing, the conclusions on injury as established in recitals 257-260 remain unchanged.

The review investigation confirmed that two main categories of importers can be distinguished. One category mainly consists of companies that import and resell their own branded shoes, the production of which they have outsourced in third countries. These companies usually have significant activities in the Union, e.g. in design, research & development, sourcing of raw materials, and sometimes even their own distribution chain. It follows from this, that this category of importers have important ‘adding value’ activities in the Union where they usually employ a relatively high number of people. The second category consists of importers which are pure traders focussing their trading more on volumes and less on brand — they predominantly trade ‘private label’ shoes. These importers in general have lower structure costs and less added value activities in the Union.

It was found that within these two main categories, there are different business models. For example, in the first category one can distinguish brands with a European origin, but also non European brands and formal footwear as well as casual footwear. In the second category one can find importers which have their own retail stores, but also importers which only sell to wholesalers/distributors. Some of the companies in this second category will only trade private label shoes, but others will also have specific sourcing agreements with established brands and/or licensing agreements, and/or joint ventures.

In view of the diversity amongst importers, as described above, and in order to capture a picture as complete as possible, the situation of importers has been analysed from several different angles. Firstly, the comments received by importers and their associations have been analysed. In addition, statistical data as well as relevant publications have also been consulted and used in this respect. Finally, for some economic key data, the verified information of the importers’ sample was used.

As mentioned above, for establishing some economic key data it was decided to sample importers. This decision was taken based on the fact that the original investigation showed that the number of cooperating importers was high and many of them had sent in a questionnaire reply. It was therefore considered appropriate, in this expiry review, to apply sampling.

As already mentioned in recital 37, from the 21 Union importers that came forward and showed a willingness to cooperate with the investigation, eight were sampled. The sample consisted of the five largest companies in terms of volumes and value of imports and re-sales in the Union plus a few smaller importers; the latter in order to have a more representative cross-section of the parties offering cooperation with their different business models, geographical location and traded product segments. The sampled companies constituted the maximum number of companies that could reasonably be investigated within the time available. According to the figures available at that stage of the investigation, the sampled importers accounted for around 18 % of Union imports of the product concerned during the RIP. One of the sampled companies, although it had indicated a willingness to be included in the sample, did finally not reply to the questionnaire and all efforts to secure the cooperation of this small importer were fruitless. Therefore, this company eventually had to be excluded from the sample. The seven other sampled importers fully cooperated with the investigation and sent questionnaire responses within the deadlines.

As mentioned above, the verified data of the sampled importers, on an aggregate basis, has, inter alia, allowed for a detailed analysis of certain key economic parameters which, in view of the large number of operators, could reasonably only be achieved via sampling. However, the analysis of the situation of the importers has not been limited to the information provided within the framework of the sampling exercise. Specialized press and market studies as well as information sought and received from interested parties has also been taken into consideration in the Union interest analysis. The use of that information further ensured that all main business models active in this sector were sufficiently represented in the analysis.

Based on the verified information of the sampled importers and other information on file, it is estimated that the importation and resale to distributors/retailers of the product concerned provided employment to around 23 000 people in the Union during the RIP.

As already reflected in table 4, Eurostat data show that, since 2005, imports of the product concerned decreased significantly by ca. 90 million pairs. During the same period, imports of leather shoes from other countries increased by ca. 43 million pairs to 201 million pairs. The result is that, whereas in 2005 the volume of imports from the PRC and Vietnam was much higher (+ 80 %) than the volume of imports from all other countries, during the RIP the level of imports from other countries had exceeded the level of imports from the PRC and Vietnam by 4 %. Eurostat data also show that since 2005 overall imports of the product in question decreased by 11 %.

A large importer which cooperated with the investigation but did not participate in the sampling exercise reported a similar evolution of imports. This company submitted that its purchases of the product concerned declined by 25 % since 2005, whereas imports of leather shoes from other countries increased significantly.

In line with the general statistical data the sampled importers significantly increased their purchases of leather shoes from other countries. Imports volumes from the PRC and Vietnam have remained fairly stable since 2005, with a certain dip in 2007, but recovery in the RIP to almost the same level as in 2005. It follows that, as regards the sampled importers, overall the volume of traded leather footwear has increased by nearly 1/3 since 2005, with a stable trend from the countries concerned, notwithstanding the imposed anti-dumping measures, and an increasing trend from third countries. Out of the third countries that have benefited from these increased import volumes, Indonesia and India have benefited the most.

The sample's purchase trend from the countries concerned is stable which does not correspond to the trend observed in Eurostat (significant decrease). A closer look into the sample suggests that the stable trend for the imports from the countries concerned stems from the fact that one of the larger sampled importers — against the trend not only of Eurostat but also of the other sampled importers — not only strongly increased its purchases from third countries but, in order to meet demand, also increased its imports from the countries concerned significantly, thereby offsetting the overall decreasing trend of such imports in the sample. Taking this into account, it is concluded that the evolution of imports of the product in question in the sample is in line with the quantitative analysis of the Eurostat database, i.e. a general decrease of imports from the countries concerned.

As shown in tables 5 and 8, Eurostat data suggests that average import prices of leather shoes from the countries concerned and third countries have both increased since 2005, and CIF import prices of leather shoes from third countries even slightly more than CIF import prices of leather shoes from the countries concerned. However, given that the mix of the imported shoes has a significant impact on the prices and that this mix for all exporting countries may have changed considerably, the average prices which can be calculated from reported Eurostat volumes and values are not necessarily the most accurate for establishing price trends. In this respect, the price trend of the importers’ sample can be considered more meaningful as the importers’ product mix has likely changed to a lesser extent given that those companies are all specialised in certain types and styles of footwear for a long period of time.

As described in recitals 412 and 408 et seqq., the sampled importers represented various different business models which resulted, inter alia, in significant differences in average prices per importer. Moreover, some of the importers traded many millions of pairs per year, whereas others traded ‘only’ a few hundred thousand pairs per year. Thirdly, for some of the individual importers the traded volumes –and, consequently, their weight in sample- fluctuated strongly throughout the period considered. For those reasons, it was considered that weighted average results should be complemented with an arithmetic average analysis in order to acquire a complete picture of the relevant trends.

An analysis of CIF import prices from the PRC and Vietnam from 2005, i.e. the last year without anti-dumping measures, until the RIP shows an increase by 2 % (arithmetic average) or a decrease by 9 % (weighted average). Overall, the analysed data would point to stable or somewhat decreasing import prices before import and anti-dumping duties. In both scenarios, import prices before duties increased strongly in 2006 and decreased afterwards.

At the same time, average CIF import prices of leather shoes from other countries fell in both assessments (– 20 % to – 6 %). Consequently, the gap between the import price of leather shoes before duties from the countries concerned and other countries has decreased, roughly from EUR 2,00 per pair to EUR 1,00 (in percentages: from ca. 20 % to ca. 10 % — arithmetic averages) or from EUR 2,00 to EUR 0,50 (in percentages: from ca. 20 % to ca. 5 % — weighted averages). Anti-dumping duties are added only in case of the PRC and Vietnam. The average landed prices (i.e. import prices inclusive of importation costs, import duties and, if applicable, anti-dumping duties) of leather shoes from the PRC and Vietnam on the one side and from other countries on the other side can therefore now be considered as being at more comparable levels. Ergo, the prices of leather shoes produced in other countries become more attractive as compared to the prices of shoes produced in the countries concerned.

The above data points to stable or slightly increasing resale prices over the period 2005 - RIP. In 2006, resale prices increased by 7 % to 10 % which is an increase similar to the increase of CIF purchase prices in 2006 (see recital 422 above). From 2006 to the RIP, resale prices decreased.

The investigation did not bring any information or evidence to light, indicating that the resale prices of other importers would have developed in a different direction than described above.

The document sent in after the verification only mentioned a global profit level for ‘Europe’ and included all products and probably also those operations outside the 27 Member States, but geographically within Europe (Switzerland, Balkans). This form could also not be linked to the verified data on spot and thus the claim was rejected. In its submission after disclosure the company provided more details in this respect, but due to its late submission and lack of substantiated evidence it could not be considered. The second claim of that company related to some cost items that should have been taken into account, two of which could not be linked to the information verified on the spot. However, it was accepted to take into consideration a third cost item that was fully verified during the verification but that was omitted in the table. The impact on the overall profitability was however limited. The third importer originally only submitted profit data for a small part of its Union operations. The data submitted cannot be regarded as representative for the company Union operations in general given that significant differences between the regions existed as concerns costs and income. Thus, the profit data was complemented during the on-spot verification by the remaining Union operation figures based on all verifiably information available. The company contested the result of that computation and submitted at the end of the verification visit a revised profitability table which only differed in one item from the Commission's computation, i.e. the purchase cost. As this proposed purchase cost could not be linked to the information available, contrary to the purchase costs as established by the Commission, the revised table was not accepted. The claim was thus rejected and the profitability data as established during the on spot verification was used. Following disclosure, the fourth importer contested its own profitability data submitted, verified and accepted without further adjustments during the on spot verification visit, arguing that the whole methodology used would not be accurate. As the company however did not suggest a different methodology to be applied to establish the profit on the product concerned, the claim has to be rejected as unsubstantiated.

It is recalled that in the original investigation, the questionnaire replies from the cooperating importers indicated a weighted average net profit of 12 % for the period of 1 April 2004 until 31 March 2005. In this review investigation, the verified data of the sampled importers however showed that the weighted average profit of those sampled importers in 2005 was above 20 %. In 2006, a significant drop in profitability occurred, by more than 18 percentage points on a weighted average basis and by close to 12 percentage points on an arithmetic average. It appeared that most of the sales contracts had already been agreed before the imposition of the provisional measures in March 2006 and in many cases the agreed sales prices did not take account of the possible imposition of anti-dumping duties. Consequently, the profit of the sampled importers achieved on the product concerned declined in 2006. In 2007 and RIP the profit increased again, but it is still 8-16 percentage points below the profit achieved in 2005.

Given that after March 2006, most of the sampled importers adapted their sourcing channels and pricing policy to the changed circumstances, i.e. the imposition of anti-dumping duties, a closer analysis of the factors impacting the profitability as of 2007 was carried out. The following can be noted. First, whereas the profit drop in 2006 could largely be attributed to the anti-dumping duties, in 2007 and the RIP other, company-specific factors were also having an important negative impact on the profit of the importers’ sample. In 2007 and the RIP certain sampled importers incurred significant increases in SG&A expenses, resulting in strongly deteriorating gross margins. This had a bearing on the calculated profit for the sample as a whole. No common reason, such as e.g. higher marketing costs for sporting events, could be found for this increase in SG&A cost for those sampled importers.

At the same time, it is noted that the Euro — US dollar exchange rate development has helped the importers in keeping their purchase cost down, including the cost of the product concerned. From the end of 2005 until the end of the RIP, the Euro appreciated by almost 30 % as compared to the US dollar and, as the importers’ contracts with their suppliers are usually set in US dollars and only limited hedging has been reported by the importers, this ‘gain’ cushioned the effect of the anti-dumping duties and other cost increases. On the basis of information provided by one of the sampled importers, profit levels during the RIP could have been up to 6 percentage points lower had the exchange rates remained stable.

Moreover, an alternative profitability analysis was made, distinguishing the profit achieved on private label footwear from profit made on branded footwear. To this end, the verified data available from the sampled importers was complemented by the information obtained by another large importer of private label shoes, which did not come forward in the sampling exercise, but cooperated with the investigation by submitting its views. This information suggests that the profit levels of the private label shoe importers were in general significantly lower than the profit levels of most of the branded shoe importers, but they were still high and within the range of 11 % to 17 % during the RIP. This confirms the findings of the original investigation in which this category of importers reported to realise a profit level of 17 % on average. On the other hand, this refined analysis also showed that for importers of branded footwear, the profitability has improved since the original investigation. In that investigation, those importers had reported on average a profitability of around 10 % whereas the profit of the sampled importers of branded footwear during the RIP amounted to more than 20 %. It can thus be concluded that, in general, the economic situation of the group of private label footwear importers has remained largely the same since the original investigation, whereas the situation of the branded footwear importers appeared to have even improved.

In any case, under any scenario the profit levels achieved by the sampled importers were relatively high, and they did not show a decreasing trend after 2006. It is also noted that the overall level of the sampled importer profits, i.e. always above 10 %, points at a rather stable and sustainable business.

The investigation did not bring any information or evidence to light, indicating that the profit level of other importers would have developed in a different direction than the profit trends as described above.

In view of the global financial and economic crisis which started just after the RIP, it was considered appropriate to analyse the situation of the importers beyond the RIP. In several of the submissions received reference was made to the direct negative impact that this economic downturn would have on the sector, aggravating the negative impact of the anti-dumping duties. On the basis of additional information and comments provided by parties, as well as publicly available information such as Eurostat, market intelligence etc., the following picture emerges.

From the available statistical data it appears that imports from the countries concerned continue to drop, although the decline is moderate as compared to the decrease in the period from 2005 to the RIP (– 15 % post-RIP). At the same time, imports from third countries continue to increase. In other words, the process of shifting production from the countries concerned to third countries is still on-going. Eurostat data also point at strong increases in import prices, notably as concerns footwear from the countries concerned (+ 21,5 % as compared to RIP).

A similar post-RIP evolution was reported by the sampled importers, which continued to increase their sourcing from other countries and decrease sourcing from the countries concerned. Overall, their imported volumes of the product in question remained rather stable. The importers explained that due to the approximately 6-month lead time, purchases after the RIP were a result of orders placed before the start of the economic downturn. The sampled importers’ average purchase prices in Euros of the product concerned increased as compared to the RIP, by 15 % approximately. The reasons for this price increase as reported by the importers are first the appreciation of the USD at the end of 2008 and the beginning of 2009 which increased the sourcing costs in EUR terms of products from the countries concerned and second, the increased cost of production in the countries concerned, specially the increase in labour costs.

As the resale prices remained stable or increased slightly only, it appears that the profitability of the sampled importers on their trading of the product concerned might have been further affected. Moreover, importers have claimed that due to the advance purchase orders and the subsequent contraction in demand, their inventories have increased considerably. However, a calculation of importers’ post RIP profit levels based on the provided price data showed that the fall in profit would most likely be moderate (by 2 percentage points approximately), resulting in still healthy profit levels overall.

It was however mentioned by several importers that, since autumn 2008, consumer demand has significantly weakened and that this weakened demand is not yet reflected in import volumes as orders had been made 6 to 9 months before, i.e. before the economic downturn. Thus, importers expected more significant drops in import volumes in the next season. In addition, several importers reported that some of the major distribution chains either have gone into insolvency or have financial difficulties as a result of which orders have been cancelled, the importers’ stocks are increasing and they need to grant special discounts to their customers. Some of the sampled importers had yet announced major restructuring plans in view of the downturn, others reported that they increasingly tried to control costs by other means.

It follows from the above that until July 2009 the impact of the crisis was still limited in terms of import and sales volumes given that orders were placed before the crisis kicked in at the consumer level and were made based on more optimistic consumption expectations. In terms of profitability, it appears that most importers have, so far, managed to limit the impact of the crisis also by taking various measures aimed to control costs.

Should measures continue, it is highly likely that those will affect importers more in the future as the economic parameters have changed significantly: with the purchase price increases recently observed and the expected overall decrease in consumption the effect of the anti-dumping duty would become more apparent than it was in the past, even if the exchange rate development would cushion the purchase price increase as happened during the period considered. Moreover, several importers indicated that other important cost increases occurred in the countries concerned, such as higher labour costs etc. All in all, profits on the product concerned are likely to decrease in the near future, but also to a large part due to other cost increases than the anti-dumping duties. However, as the importers generally generated healthy margins, this decrease would in all likelihood not endanger those companies.

As evidenced since 2005, importers would probably continue or start to source even higher quantities from other third countries, given that the anti-dumping duty will affect them more. At the same time, importers will likely try to pass on a higher proportion of any general cost increase to retailers/distributors. However, given the relative importance of those retailers/distributors for the importers (as further explained in recital 472 below), importers are not likely to fully pass on eventual cost increases to their clients. This has also been observed in the period July 2008 — March 2009.

The effect of the maintained anti-dumping duties in a period of shrinking demand, rising purchase prices and increased cost awareness of consumers on the importers would however be different depending on the flexibility of the importer. It is recalled that some importers have already proven a large flexibility in their sourcing strategies and in their product mix (more STAF and/or textile/plastic shoes and/or accessories). This allows them to mitigate the effect of the duty in the future. Other importers which maintain their traditional sourcing channels in the countries concerned and are focussing on leather footwear might indeed experience an overall drop in profitability and/or sales.

As mentioned in recitals 60 et seqq., several interested parties claimed the exclusion of specific shoe types from the product scope. In addition, most parties submitted that, should it not be possible to revise the product scope in the current investigation, their imported shoe types should be excluded from the measures under Article 21 of the basic Regulation. The latter claims were mostly based on the alleged lack of production (production capacity and willingness to produce) of these types of shoes in the Union, which would entail the absence of competition with and injury to the Union industry, and the unfavourable economic environment in which the measures would have an increasingly negative effect on importers, distributors, retailers and consumers within the Union.

In this respect it is important to underline that significant competition was found between the imports from the countries concerned and the type of footwear produced in the Union, as set out in recital 267 et seqq. This also means that there is still a significant production of leather footwear in the Union. More in general, it is also noted that the product scope cannot be modified, extended or reduced in the framework of an expiry review irrespective of the eventual evolution of the production pattern in the Union during the existence of the measure.

Despite the above, the Commission contacted the relevant footwear associations in order to have a clearer picture of the types/quantities of certain footwear that is produced in the Union. From that information collected, it appears that most of the shoes for which the above claim was made are (still) produced in the Union and that the production pattern has not significantly changed during the period of the existing measures. The information gathered does not allow a final general determination whether certain niche product types produced in the Union cover the demand for these products.

Most of these products are specific niche products sold to specialized consumers in small quantities, have high quality and complex technical features and belong to the high price category i.e. horse riding shoes, bowling shoes or special sizes/narrow feet shoes. Therefore these product types would in principle fit in the general specification pattern of the Union producers. By imposing or maintaining measures, Union producers could be encouraged to invest again in such niche product type production or to increase their existing production capacities. Otherwise there would be no incentive at all for Union producers to invest in such product lines. Moreover, as measures are not meant to stop imports and did not do so in the case at hand, it is justifiable to have anti-dumping measures also on those niche product types, as long as no clear dividing line can be drawn between the different product types. In any event, as far as the niche products are concerned, the limited data available indicates that their share in the overall imports is very limited and that therefore the impact of the measures on those product types is not considered to be disproportionate in relation to the vast majority of the imports.

Certain importers of sports footwear as well as their association submitted that they would not have a viable alternative for their sourcing in the Union.

In this respect it is firstly noted that the information collected from the national footwear associations suggests that there is still significant production of sports footwear in the Union, although it cannot be excluded that demand would surpass supply in that segment. Even assuming that there was insufficient production of sports footwear in the Union, the investigation showed that alternative sources of supply exist, such as Indonesia and India offering increasingly competitive prices, as shown above.

It has been further argued by several sampled importers, notably the larger global footwear brands, that they have long-term strategic relationships with certain factory groups in the PRC and Vietnam on the basis of high quality, social, safety and environmental standards which took years to cultivate. Therefore, changing sources by relocating production would incur high costs and long lag times (12 to 18 months).

In this respect it is important to underline that the anti-dumping measures concerned are not prohibitive; in other words, the fact that the measures have been imposed — to correct a trade distortion — has not resulted in a cessation of imports from the countries concerned and a consequent need for importers to source from other countries. Notwithstanding the above, the investigation showed that a significant degree of flexibility exists: importers usually purchase from supplier groups with production bases in several Asian countries. These groups are flexible and can change sourcing from one country to another, if there is an incentive to do so. The details provided through the sampling exercise on the sourcing of the product in question since 2005, as summarized on an aggregated basis under recital 417 above, demonstrate that most of the sampled importers have, within 1 to 2 years, changed origin of a significant part of their sourced leather footwear. A large non-sampled importer also reported increased imports from other Asian countries, at the expense of imports from the countries concerned. Therefore, the information on the file demonstrates that, although extra costs might be involved, shifting production from one country to another is not considered too cumbersome and it appears to be rather common. The argument is therefore dismissed.

It was also submitted by the importers’ associations and some importers that the importers were not anymore in a position to absorb the effect of the duties. It was claimed that during the period 2006-RIP, the negative effect of the measures to the consumers had been (partly) compensated by the effect of the exchange rate development since 2006, but, according to these submissions, the reversal of the exchange rate development since the end of the RIP would have made an increase in their resale prices inevitable and result in higher prices for the consumers in the shops if duties be maintained.

It is acknowledged that the appreciation of the Euro versus the US dollar since the imposition of the anti-dumping measures has been significant as described also in recital 432 above. Indeed the exchange rate development has been beneficial to the importers of the product concerned from the end of 2005 until the end of the RIP, as contracts with their suppliers are usually set in US dollars and the Euro appreciated by almost 30 % as compared to the US dollar in the course of that period.

As concerns the importers alleged inability to absorb the duty in view of a different exchange rate development since mid-2008, leading to higher import prices in Euro's, it is to be noted that the profit level that importers achieve on the trading of the product concerned, as analysed through the sample (see table 22 above), was still healthy in the RIP. It suggests that importers would be in a position to continue to operate in a sustainable manner even if for a certain period the exchange rate developments would be to their disadvantage. Moreover, as concerned the exchange rate developments, there are no signs that the Euro is in a free fall as compared to the US Dollar; on the contrary, whereas the Euro depreciated vis-à-vis the US Dollar from July to November 2008, it moved up again since then. It is therefore speculative to anticipate a depreciation of the Euro for the short and medium term. As concerns retail prices of leather shoes it should further be noted that there are several other sources for leather footwear and these sources are increasingly used by importers. There are therefore no data on the file which would point at the necessity for importers to fully pass on the duty to wholesalers/retailers, resulting in significant increases in prices at retail level. Therefore, the argument is not convincing.

Some of the importers, most of them pertaining to the group of branded footwear producers, submitted that the measures would harm the significant ‘manufacturing value added’ by them in the Union through their significant activities in the areas of notably design, development, branding and sourcing. In this respect the investigation confirmed that indeed many importers do not just simply trade shoes but are also engaged, in the Union, in value-adding activities as those mentioned above. Such activities are generating significant high level employment.

In this respect it is noted that the information provided by the sampled importers did not point at any decline in these companies’ employment allocated to the product concerned during the period 2005 — RIP. On the contrary, the aggregated employment figures of the sampled branded footwear producers point rather at a slight increase in such employment. This follows from the fact that, in line with their purpose, the anti-dumping measures have not blocked entrance to the Union market of leather shoes originating in the PRC and Vietnam, but rather adjusted their price level in order to restore a level playing field. Moreover, the level of the duties is in this case modest and the importers can, in addition, switch origin — as they have in some cases indeed done. In view of the above, the argument that the anti-dumping measures would jeopardize the high level jobs that these importers have generated in the Union is dismissed.

On the basis of the above analysis it is definitively concluded that, during the period 2006-RIP, the anti-dumping measures have had an impact on the economic situation of the importers of the product concerned in the Union, but this impact is not considered to be disproportionate given the overall strong market position of the importers found in the investigation. The limited deterioration of the economic situation of the importers appears to have continued during the nine months following the RIP. However, the sector is generally speaking in a good shape and the profits obtained on the product under review are still high. It is therefore considered unlikely that maintaining the measures would have a significant adverse effect on the interests of importers.

To conclude, based on the limited information available, there are no indications that the measures had a significant adverse effect on the financial situation of distributors/retailers during the period 2006-RIP. Taking into consideration the likely effects of the economic downturn post-RIP, notably in view of the retailers’ sandwich position between importers and consumers and the possibly modest profits of retailers, it can however not be excluded that the financial situation of those retailers which are predominantly selling the product concerned will deteriorate. It is however noted that the retailers are free to source their products from other origins and to diversify the products offered so that they can mitigate the effects of anti-dumping duties in their turnover. In general, retailers are in a much more favourable market position than Union producers as they have the above described flexibility whereas the Union producers are fully exposed to the price pressure exerted by the imported dumped products.