budgerigar wholegrain: Caixin Online: China shoe exporters stand tall with EU victory

Monday, January 14, 2013

Caixin Online: China shoe exporters stand tall with EU victory

By Qu Yunxu

BEIJING ( Caixin Online ) ? Shoe manufacturing executive Wang Zhentao says he could feel tension in Europe?s air on business trips over the past five years, all the while his Wenzhou-based company patiently fought a legal battle against import duties.

But the air cleared in November, when the European Court of Justice, the European Union?s highest court, overturned a lower court decision by ruling in favor of Wang?s Zhejiang Aokang Shoes Co., closing years of contentious litigation that pitted Chinese shoemakers and their European partners against the European Commission.

And as part of the court order, Aokang was to receive from the EC a 500,000 euro ($670,000) /quotes/zigman/4867933/sampled EURUSD +0.2232% ?reimbursement covering the company?s litigation costs.

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The court overturned and laid to rest a March 2010 decision by the general court of the European Union, or the Court of First Instance, which had rejected each of Aokang?s seven arguments against the duties imposed in 2006 against Chinese and Vietnamese shoemakers for alleged unfair trade practices.

The legal dispute began in 2006 when 150 Chinese companies appealed an EC decision to slap a 16.5% anti-dumping duty on all Chinese and Vietnamese-made shoes made of leather imported by European trading companies and sold in EU countries.

Because these duties proved too steep for European importers to bear, most canceled their orders with Chinese factories and pushed export-dependent Chinese companies out of business. Eventually, only Aokang, as the largest supplier for the Italian footwear company GEOX, was left to continue battling the duties in European courts.

Through the years, while the dispute dragged on, Wang continued doing business in Europe. But he could sense anti-Chinese sentiment during his frequent trips, particularly in Spain and Italy.

EU consumers are the target for 70% of his company?s exports. Aokang says about 20% of its revenues come from overseas sales. In 2011, the company reported total revenue of 3 billion yuan.

The tide started turning in April 2011, however, when the EC lifted duties on Chinese and Vietnamese shoe imports.

Shoemakers weren?t the only Chinese manufacturers benefiting from changing attitudes in Europe. That same month, Wenzhou-based makers of disposable lighters won a court fight against a French rival that wanted to extend duties on Chinese imports another five years.

Duties were first imposed on imported Chinese lighters in the 1990s, but Wenzhou manufacturers started fighting the restrictions in 2003. The 2011 decision closed the conflict.

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For Wang, the years of litigation by China?s shoemakers were worth the tension ? and expense. He called Aokang?s victory ?an ant?s triumph in a battle against an elephant? that?s certain to ?help us establish our brand.?

Legal options

When China joined the World Trade Organization in 2002, the EU won WTO permission to delay giving full market access to Chinese footwear makers for three years. In July 2005, though, the EC sought to continue market restrictions through duties after leveling anti-dumping charges affecting about 1,200 Chinese companies.

Some 150 among 1,200 Chinese companies decided to appeal against the decision. However, after reviewing 10 of the 150 shoe manufacturers who appealed the decision, EC investigators decided all companies were violating fair trade rules. The 16.5% duty that came on line in October 2006 ultimately forced many small firms in China out of business, Wang said.

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