ARCHIVED - Statement of Reasons

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OTTAWA, December 31, 2004
RR-2004-002

4366-20

Concerning a determination under paragraph 76.03(7)(a) of the
Special Import Measures Act regarding

WOMEN’S LEATHER AND NON-LEATHER BOOTS
ORIGINATING IN OR EXPORTED
FROM THE PEOPLE’S REPUBLIC OF CHINA

On December 16, 2004, pursuant to paragraph 76.03(7)(a) of the Special Import Measures Act, the President of the Canada Border Services Agency determined that the expiry of the order made by the Canadian International Trade Tribunal on

May 1, 2000, in Review No. RR-99-003, concerning women’s leather and

non-leather boots originating in or exported from the People’s Republic of China, was likely to result in the continuation or resumption of dumping of the goods into Canada.

This Statement of Reasons is also available in French.

Cet énoncé des motifs est également disponible en français

TABLE OF CONTENTS

• SUMMARY
• BACKGROUND
• PRODUCT DESCRIPTION
• CLASSIFICATION OF IMPORTS
• PERIOD OF REVIEW
• CANADIAN INDUSTRY
• CANADIAN MARKET
• ENFORCEMENT DATA
• PARTICIPANTS
• INFORMATION USED BY THE PRESIDENT
  • Administrative Record
• PROCEDURAL ISSUES TO NOTE
  • Information not Considered after Closing of the Record
• POSITION OF THE PARTIES
  • Parties Contending that Resumed or Continued Dumping is Likely
  • Party Contending that Resumed or Continued Dumping is Unlikely
  • Party that does not Express an Opinion on the Likelihood of Resumed or Continued Dumping
• CONSIDERATION AND ANALYSIS
• REQUEST FOR EXCLUSION
• CONCLUSION
• FUTURE ACTION
• INFORMATION

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SUMMARY

[1] On August 18, 2004, the Canadian International Trade Tribunal (Tribunal), pursuant to subsection 76.03(3) of the Special Import Measures Act (SIMA), initiated an expiry review of its order made on May 1, 2000, in
Review No. RR-99-003 (Order). The Order concerns women’s leather and
non-leather boots originating in or exported from the People’s Republic of China (China). The Order is scheduled to expire on April 30, 2005.

[2] The Canada Border Services Agency (CBSA) initiated an expiry review investigation on August 19, 2004, to determine whether the expiry of the Order is likely to result in the continuation or resumption of dumping of the subject goods.

[3] On December 16, 2004, the President of the CBSA determined pursuant to paragraph 76.03(7)(a) of SIMA, that the expiry of the Order in respect of the subject goods from China was likely to result in the continuation or resumption of dumping.

BACKGROUND

[4] As a result of an anti-dumping and subsidizing investigation initiated on August 25, 1989, and following a preliminary determination of dumping and subsidizing made on January 3, 1990, the Deputy Minister of National Revenue for Customs and Excise (now the President of the CBSA) made a final determination of dumping respecting women’s leather boots and shoes originating in or exported from Brazil, China and Taiwan; women’s leather boots originating in or exported from Poland, Romania and Yugoslavia; and women’s leather and non-leather boots originating in or exported from China and Taiwan; and, a final determination of subsidizing respecting women’s leather boots and shoes originating in or exported from Brazil.

[5] The final determination was made on April 3, 1990. On May 3, 1990, the Tribunal issued injury findings respecting the dumping and the subsidizing.

[6] On May 2, 1995, in Review No. RR-94-003, the Tribunal issued an order continuing its findings in respect of the dumping in Canada of women’s leather and non-leather boots and shoes originating in or exported from China. The Tribunal excluded a selection of women’s shoes from China on the basis that imports of these goods did not compete with domestic production of women’s shoes.

[7] In addition, the Tribunal rescinded the findings in respect of the dumping in Canada of:

- women’s leather boots originating in or exported from Brazil, Poland, Romania and the former Yugoslavia;

- women’s leather and non-leather boots originating in or exported from Taiwan;

- women’s leather shoes originating in or exported from Brazil;

- women’s leather and non-leather shoes originating in or exported from Taiwan;

and, the subsidizing of women’s leather boots and shoes from Brazil.

[8] On May 1, 2000, the Tribunal continued the order in respect of the dumping in Canada of women’s leather and non-leather boots originating in or exported from China. The Tribunal rescinded the portion of the order covering women’s leather and non-leather shoes originating in or exported from China.

[9] On June 29, 2004, the Tribunal issued a notice of expiry of the
May 1, 2000 Order. Based on the available information and the information submitted by the interested parties, the Tribunal decided that an expiry review of the Order was warranted and on August 18, 2004, the Tribunal initiated an
expiry review (RR-2004-002).

[10] On August 19, 2004, the CBSA initiated an expiry review investigation to determine whether the expiry of the Order is likely to result in the continuation or resumption of dumping of the subject goods from China.

PRODUCT DESCRIPTION

[11] The goods under review are defined as “women’s boots with uppers made of leather and non-leather materials and manufactured in sizes 4 and up, originating in or exported from the People’s Republic of China.”

[12] Footwear covering the ankle is considered a boot. The class of boots includes booties, bootlets, winter boots, cowboy boots, utility and work boots. Leather boots are defined as boots that have leather as the main component of the upper. Additional pieces such as tongues, scuff pads, toecaps, counters, logos, decorations, trims, heels, etc., are not considered to be part of the main component. Non-leather boots have uppers that are made from materials such as satin, polyurethane, vinyl coated fabrics, etc.

[13] The following goods are not included in the product definition:

(a) sports footwear – generally defined as footwear which is designed for a sporting activity and has, or has provision for, the attachment of spikes, sprigs, stops, clips, bars, or the like. It also includes skating boots,
ski boots, cross-country ski footwear, wrestling boots, cycling boots, and moto-cross racing boots;

(b) waterproof rubber footwear;

(c) waterproof plastic footwear;

(d) safety footwear incorporating protective metal toe caps;

(e) orthopedic footwear designed for corrective or compensatory purposes, and sold under medical prescription;

(f) canvas footwear – in which canvas is defined as a fabric made of cotton or other vegetable fibre, and does not extend to synthetic textile materials. The fabric must have a heavy, plain weave or basket weave, and a weight of 200 g/m² or more, excluding coatings or laminations;

(g) disposable footwear which is generally designed to be used only once;

(h) unassembled footwear; and

(i) overshoes worn over other footwear.

CLASSIFICATION OF IMPORTS

[14] Women’s boots are normally imported into Canada under the following Harmonized System (HS) classification numbers:¹

Footwear having uppers of rubber or plastic

· 6402.91.00.10

· 6402.91.00.22

· 6402.91.00.92

Footwear having uppers of leather

· 6403.51.00.10

· 6403.51.00.22

· 6403.51.00.92

· 6403.91.00.10

· 6403.91.00.22

· 6403.91.00.92

Footwear having uppers of textile materials

· 6404.19.90.92

· 6404.20.90.92

PERIOD OF REVIEW

[15] The period of review (POR) for the expiry review is January 1, 2001 to
June 30, 2004.

CANADIAN INDUSTRY

[16] The Canadian industry for women’s boots is comprised of the following producers:

Members of the Shoe Manufacturers Association of Canada (SMAC):

· Alfred Cloutier Ltée of Saint-Émile, Quebec (*);

· Chaussures Régence Inc. of Charlesbourg, Quebec;

· Chaussures Saute-Mouton Inc. of Charlesbourg, Quebec;

· DeLuca Shoes Inc. of Montréal, Quebec;

· Gestion Pierre-Deux Inc. of Saint-Émile, Quebec;

· Pajar of Montréal, Quebec;

· Santana Inc. of Sherbrooke, Quebec; and

· TT Group Ltd. of London, Ontario;

(*) Alfred Cloutier, a producer of subject goods for many years, ceased production of subject goods at the end of 2003.²

and the following producers which are not members of SMAC:

· Auclair & Martineau Inc. of Saint-Émile, Quebec;

· Boucher-Lefaivre Inc. of Montréal, Quebec;

· Penshu Inc. of Town of Mount Royal, Quebec; and

· Maxime Footwear of Port Colborne, Ontario.

[17] As well, in its public submission to the Tribunal requesting the initiation of an expiry review, SMAC reports that six Canadian companies which produced the like goods have also shut down since 2002: The Brown Shoe Company, Grenico, Barbo (a Division of Cloutier mentioned above), SM Footwear, Perfect Footwear and HH Brown.

CANADIAN MARKET

[18] As there was a low rate of participation in the expiry review investigation, there was limited information on the administrative record. As a result, it was not possible to accurately determine the size of the Canadian market for women’s leather and non-leather boots. As well, the use of the data available to the CBSA through the Customs Commercial System (CCS), with the exception of data concerning China, presents challenges since the HS code numbers include goods that are not subject to this review. The CCS data concerning Chinese goods is readily available and reliable given that it is maintained for enforcement purposes.

[19] Nonetheless, the CBSA has examined trends in the Canadian production of women’s and girl’s footwear overall (dress and casual boots, shoes, and sandals) and imports of subject goods. As seen in the table below, the annual Canadian production of women’s and girl’s footwear has decreased by approximately
451,000 pairs or 16.2% from 2001 to 2003. A similar trend is demonstrated by the sales statistics provided by the four Canadian producers who provided a response to the CBSA questionnaire. The sales figures for these companies are included in the table as “sales of subject goods by Canadian respondents”. While the annual Canadian production has decreased, the annual Chinese imports of subject goods have increased significantly by approximately 806,000 pairs or 93.2% from 2001. This indicates that Chinese exporters have an increasing presence and interest in the Canadian market.

	January-December
Category	2001	2002	2003
	(in 000’s of pairs)	(in 000’s of pairs)	(in 000’s of pairs)
Domestic Production (*) of Women’s and Girl’s (Dress and Casual Boots, Shoes, and Sandals)	2,789	2,689	2,338
Change (from 2001)	-	-3.6%	-16.2%
Sales of Subject Goods by Canadian Respondents	560	451	432
Change (from 2001)	-	-19.5%	-22.9%
Imports of Subject Goods Only from China	865	1,470	1,671
Change (from 2001)	-	69.9%	93.2%

(*) These domestic production figures include exports of the subject goods.

Source: Exhibit 19 (NC) – Shoe Manufacturers Association of Canada Public Submission and CCS Data.

ENFORCEMENT DATA

[20] As seen in the following table, 4,187,240 pairs of subject goods were imported into Canada during the period of review.³ All goods were subject to
anti-dumping duty as the normal value, pursuant to the ministerial specification, was determined by advancing the export price by 29%.

Imports of Women’s Boots from China

October 5, 2004

Year ended December 31	Quantity	Value for Duty (CAD)	SIMA Duties Paid (CAD)
2001	865,371	11,855,533	3,474,538
2002	1,469,697	20,196,685	5,857,835
2003	1,671,025	20,368,791	5,896,604
2004 YTD*	181,147	2,747,997	813,447
Period of Review Total	4,187,240	55,169,006	16,042,424

* January 1 to June 30 only – Source: CCS

[21] It should be noted that the figures reported for 2004 are not representative of the full year as the majority of women’s boots are imported during the second half of the year.

PARTICIPANTS

[22] At the start of this expiry review, the Tribunal distributed a notice of the initiation of the expiry review and an expiry review schedule to interested persons including the Canadian producers, importers and exporters. At the same time, any person or government having an interest in the CBSA’s review was invited to provide a submission containing information that they deemed relevant.

[23] Expiry Review Questionnaires (ERQs) were sent to the Canadian producers of women’s leather and non-leather boots, known exporters of the goods originating in or exported from China, and known Canadian importers of the goods to request information necessary for the President to consider the factors listed in
subsection 37.2(1) of the Special Import Measures Regulations (SIMR) to determine the likelihood of continued or resumed dumping. Interested persons were also invited to provide case arguments regarding the likelihood of continued or resumed dumping of the goods if the Order expired. In addition, persons were provided an opportunity to submit reply submissions providing their comments in respect of the case arguments submitted by other persons.

[24] The following Canadian producers participated in the expiry review and provided a response to the producer ERQ: Gestion Pierre-Deux Inc., Santana Inc., TT Group Ltd., and Penshu Inc. SMAC, on behalf of their members, provided case arguments⁴ and a reply submission.⁵

[25] No exporter from China provided information in response to the exporter ERQ. A distributor of Chinese goods, located in the United States of America (United States) provided a response. No case arguments or reply submissions were received from any exporters.

[26] While 17 importers provided responses to the importer ERQ, only the
Aldo Group Inc. (Aldo) submitted case arguments⁶ and a reply submission.⁷

INFORMATION USED BY THE PRESIDENT

Administrative Record

[27] The information to be used and considered by the President for purposes of this expiry review proceeding is contained on the administrative record. The administrative record includes the exhibits listed on the CBSA’s Exhibit Listing, which is comprised of the Tribunal’s administrative record at initiation of the expiry review, CBSA exhibits and information submitted by interested persons, including information which they believe is relevant to the decision as to whether dumping is likely to continue or resume. This information may consist of expert analysts’ reports, excerpts from trade magazines and newspapers, orders and findings issued by authorities of Canada or of a country other than Canada, responses to the ERQs submitted by Canadian producers, importers and exporters and any other information contained on the Exhibit Listing.

[28] For purposes of an expiry review, the CBSA sets a date after which no “new” information may be placed on the administrative record. This is referred to as the “closing of the record date”. For this expiry review, the administrative record closed on October 7, 2004. This allowed participants time to prepare their case arguments and reply submissions prior to the conclusion of the review.

PROCEDURAL ISSUES TO NOTE

[29] Normally, the President will not consider any new information submitted by participants subsequent to the closing of the record date. However, in certain exceptional circumstances, it may be necessary to permit new information to be submitted. The President will consider the following factors in deciding whether to accept new information submitted after the closing of the record date:

(a) the availability of the information prior to the closing of the record date;

(b) the emergence of new or unforeseen issues;

(c) the relevance and materiality of the information;

(d) the opportunity for other participants to respond to the new information; and

(e) whether the new information can reasonably be taken into consideration by the President in making the determination.

[30] Participants wishing to file new information after the closing of the record date, either separately or in case arguments or reply submissions, must identify this information so that the President can decide whether it will be included on the record for purposes of the determination.

Information not Considered after Closing of the Record

[31] On October 18, 2004, counsel for SMAC submitted additional information for the CBSA’s consideration in the present proceeding.

[32] Counsel for SMAC was advised that the additional information would not be placed on the administrative record and thus not taken into consideration by the President in rendering his decision. The request was denied for the following reasons:

· the information which was presented was available prior to the closing of the record;

· the information did not contain any new or unforeseen issues, and was of minor relevance and materiality; and

· the acceptance by the President of such information would have diminished the opportunity for other participants to respond to the new information.

POSITION OF THE PARTIES

Parties Contending that Resumed or Continued Dumping is Likely

Positions of the Canadian Producers (SMAC)

[33] As previously indicated, four Canadian producers provided responses to the ERQs. In addition, case arguments and a reply submission were submitted by SMAC’s counsel on behalf of the SMAC members. These arguments are summarized in the following paragraphs. It is SMAC’s position that the dumping of subject goods would continue or resume should the Order be allowed to expire.

[34] SMAC submitted that 100% of the subject goods imported from China during the POR were dumped.⁸ They declared that this, in fact, demonstrates an inability on the part of the Chinese producers to compete without dumping.

[35] SMAC argued that the fact that no exporters have cooperated in the CBSA’s most recent normal value reinvestigation suggests that the margin of dumping would be, or is expected by the exporters to be more than the current advance of 29%.⁹

[36] SMAC added that Chinese imports of subject goods increased over the POR and that this fact suggests the Chinese exporters have an interest in the Canadian market.¹⁰ Imports of subject goods increased by 93% from 2001 to 2003 according to statistics compiled by the CBSA.¹¹

[37] They submitted that the average value of Chinese subject goods imported into Canada has declined over the POR and that this fact suggests the Chinese exporters will continue to export goods at lower prices.¹² This statement was based on the CBSA’s enforcement statistics that show the average value for duty per pair of subject goods has decreased by 11% from 2001 to 2003.¹³

[38] SMAC contended that the production capacity of footwear producers in China is large enough that even a minimal amount of unused capacity is enough to supply the entire Canadian market of subject goods.¹⁴ SMAC added that Chinese producers may also be expanding to increase their production capacity of footwear.¹⁵

[39] SMAC stated that Chinese producers export mass volumes of footwear around the world and are, in fact, dependent on these exports to maintain their rates of capacity utilization.¹⁶ They support this by citing statistics that show that China’s exports represented 60% of their production in 2000. They also referred to articles that show China is exporting significant quantities to other countries such as the Russian Federation, Hungary and the United States.¹⁷

[40] They added that Chinese mills have continued to dump footwear products into other jurisdictions since the last expiry review and have continued to dump similar footwear products into Canada. They stated that this demonstrates a practice of low pricing to export markets to achieve high sales volumes in those markets.¹⁸

[41] SMAC argued that there is evidence of circumvention of the Order by parties.¹⁹ They stated that “the fact that circumvention exists demonstrates that a resumption or continuation of dumping will occur if the Order is allowed to expire.”²⁰

[42] SMAC also stated that Chinese exports have been more injurious in the United States market, which is not protected by a dumping finding. They added that this penetration of the United States market indicates that even lower prices would occur in Canada without the protection of the Order.²¹

[43] They argued that the increase in imports of Chinese footwear of all types have caused overall Canadian footwear production to decline by 7% from 2002 to 2003 (9.4 million pairs to 8.8 million pairs).²²

[44] SMAC stated that similar trends exist in the ‘all women’s footwear’ category. Chinese imports in this category have increased from 2001 to 2003. The average value for duty of Chinese imports per pair was less than half of the value for duty of other imports. Additionally, the average value of Chinese imports dropped in the first half of 2004, and was then less than a third of the average value of other imports.²³

[45] They submitted that volumes of women’s footwear imports into the
United States have increased by 78% from 1996 to 2003, and by 41% from 2000 to 2003.²⁴ They noted that Chinese imports declined in average value from 1996 to 2004. SMAC stressed the importance of the difference in value between the Chinese imports and imports from all other countries.²⁵ SMAC added that the significant increase in imports from China into the United States over that period demonstrates the fact that a similar trend will occur in Canada without the protection of the Order.

[46] They also argued that subject good pricing will likely decline if the Order is terminated. The pricing of subject goods ranged from $12.19 CAD to $13.74 CAD from 2001 to 2003. The average for all women’s footwear from China ranged from $9.58 CAD to $10.92 CAD per pair, while the average footwear prices (all gender) ranged from $8.45 CAD to $9.15 CAD. They argued that Chinese producers would likely lower the prices of the subject goods to a more comparable level if the Order were rescinded.²⁶

[47] SMAC also referred to other anti-dumping findings or trade measures against Chinese footwear in other countries. This included anti-dumping findings in Venezuela, Peru and Mexico, additional import duties in Poland and possible dumping investigations by the European Union (EU). They stated if the EU did impose an anti-dumping finding, Chinese-produced subject goods would be diverted to Canada.²⁷

[48] They added that there are three anti-dumping measures in place in Canada concerning similar goods produced in China (certain waterproof footwear and bottoms of plastic or rubber, certain leather footwear with metal toe caps and certain waterproof rubber footwear). Chinese producers were also found to have dumped footwear in the certain waterproof footwear and waterproof footwear bottoms investigation.²⁸ They stated that these findings demonstrate a significant interest in the Canadian market and a propensity to dump by Chinese exporters.

[49] SMAC also added that Canadian manufacturers produce the full range of subject goods, both leather and non-leather, and within the leather boots category, both waterproof and non-waterproof boots. Chinese imports are comprised of similar goods. Additionally, although Chinese-made goods generally sell at lower prices, they do compete with Canadian-made goods in other price categories.²⁹

[50] In response to Aldo’s Case Brief, SMAC stated that the President should not exclude products on the basis that they are not being produced in Canada
(i.e. various types of women’s boots). SMAC added that goods imported by Aldo and sold to consumers in their stores should not be excluded from the Order.³⁰

Party Contending that Resumed or Continued Dumping is Unlikely

Positions of the Importers (Wal-Mart Canada Corp.)

[51] Wal-Mart Canada Corp. stated in response to the ERQ that there is no propensity to dump and/or no likelihood of injury from the non-leather boots. They also stated that there is no production in Canada of non-leather boots to the best of their knowledge. Wal-Mart did not express an opinion on the likelihood of resumed or continued dumping regarding leather boots.

Party not Expressing an Opinion on the Likelihood of Resumed or Continued Dumping

Positions of the Importers (Aldo)

[52] Aldo was the only importer to provide case arguments and a reply submission.

[53] It was stated that the design quality and range of winter type boots from Canadian production is of a very high quality.³¹ Aldo submitted that the women’s boot industry contains several different categories. They stated that the market for women’s boots should be separated into four categories. These are “winter”, “city”, “dress” and “sport”.³² Aldo stated that the Canadian producers of boots essentially offer a product that is designed for winter. They also stated that regardless of the outcome of this expiry review, they will continue to purchase the winter type boots from Canadian producers by virtue of consumer demand.³³

[54] The company added that they have seen steady demand for Canadian-made winter type boots, but have not seen any demand for Canadian-made
non-waterproof, non-winter type boots.³⁴ Aldo stated that it would be reasonable
to say that boots other than winter type boots are not available from domestic producers.³⁵

[55] It was submitted that they have reduced imports from China in recent years and have not increased purchases from Canadian producers as a result.³⁶ The company stated that they chose to source from other countries.³⁷

[56] Aldo requested that the CBSA define what is available from domestic production. Additionally, they requested that based on the realities of market differentiation, the CBSA should consider the exclusion of certain categories of non-waterproof ladies boots on the basis of price and/or product categories. Aldo additionally requested that the CBSA exclude women’s boots sold under the Aldo banner by virtue of its international presence and name brand recognition.³⁸

[57] It was stated that no other G8 nation has anti-dumping findings in place for imports of Chinese footwear. The company also stated that this includes the EU, which is, in fact, a leading producer of footwear worldwide.³⁹

CONSIDERATION AND ANALYSIS

[58] Subsection 76.03(7) of SIMA requires the President to determine whether the expiry of the order or finding in respect of the goods of a country or countries is likely to result in the continuation or resumption of dumping or subsidizing of the goods. In this case, the President was required to determine whether the expiry of the Order in respect of leather and non-leather women's boots from China was likely to result in the continuation or resumption of dumping of the goods. When making this determination, the President may consider the factors set out in subsection 37.2(1) of the SIMR.

[59] Guided by the factors in the SIMR and based on the documentation submitted by the various participants and the consideration of the information on the administrative record, the following list represents a summary of the analysis:

· the significant volume of goods imported from China and the significant amount of market share they have obtained;

· the low price at which the goods are being offered to Canada and the competitive nature of the market;

· the decrease in pricing of Chinese footwear to the United States market where there is no anti-dumping measures in place regarding footwear;

· the increasing Chinese footwear capacity and reliance on export markets to maintain capacity utilization;

· the competition for market share among Chinese footwear producers has forced them to compete based on low prices;

· anti-dumping measures on other Chinese footwear products in Canada such as certain waterproof footwear and bottoms of plastic or rubber, certain leather footwear with metal toe caps and certain waterproof rubber footwear; and

· anti-dumping measures in place in other countries on footwear from China, which include the subject goods.

[60] A discussion of these factors is presented below.

[61] There are no specific normal values in place that would allow Chinese exporters to export to Canada without importers incurring anti-dumping duties. This is the result of anti-dumping duties being determined pursuant to a
ministerial specification. Chinese exporters have not requested a review of normal values and export prices. As a result, a significant amount of duties have been collected. Despite the application of these duties, exports from China have increased along with their apparent share of the Canadian market.

[62] As part of its enforcement responsibilities regarding the Order, the CBSA initiated a normal value and export price reinvestigation on June 23, 2004, respecting women’s leather and non-leather boots from China. The Chinese exporters were requested to provide sales and costing information that, if submitted and verified, could potentially have allowed for the determination of normal values. No Chinese exporter has provided a substantially complete response to the CBSA’s request for information.

[63] Based on information on the administrative record, the CBSA could not accurately determine the size of the Canadian market for women’s leather and
non-leather goods. Only 4 of the 12 Canadian producers of women’s boots provided a submission to the CBSA. Statistics regarding imports of subject goods from the rest of the world are included in a broader footwear category, as the
HS codes for women’s boots is not exclusive to subject goods and statistics for imports of subject goods are difficult to segregate accurately. It is understood that the overall market for women’s boots has increased during the 2001 to 2003 period.

[64] Statistics contained in the public submission of SMAC to the Tribunal⁴⁰ indicate that the Canadian production of women’s dress and casual boots and shoes and sandals has decreased by 16.2% in the same period. While the category is larger than the subject goods, the CBSA nonetheless considers it a reasonable gauge for trends in the domestic production of subject goods.

[65] Statistics regarding the imports of subject goods imported from China are complete for the POR, and indicate that imports from China of the subject goods increased by 93% in volume between 2001 and 2003,⁴¹ despite an anti-dumping duty advance rate of 29% on the export price being applied to all imports.
(Note: while statistics regarding the subject footwear are included in a broader category of footwear and can not generally be segregated, the statistics regarding the subject goods from China are available from the CBSA enforcement data banks.) During the same period, the average value for duty decreased from
$13.70 CAD/unit to $12.19 CAD/unit, a decline of 11%.

[66] While part of the decrease in subject goods pricing may be attributable to an improvement in productivity of Chinese producers or a different product mix, this indicates the aggressive nature of Chinese exporters in their efforts to obtain a greater share of the Canadian market.

[67] If the Order were rescinded, Chinese exporters would continue to price aggressively in order to compete with other producers from around the world. Additionally, imports of subject goods from China would likely increase.

[68] China has an interest in the North American market for footwear, which includes the United States. No anti-dumping measures are in place in the
United States regarding Chinese footwear, and the average unit “export price” for Chinese footwear declined from $6.64 USD to $6.48 USD⁴² from 1996 to 2003. Those prices allowed Chinese exporters to capture a greater share of the
United States market (from 942 million pairs to 1.6 billion pairs) over the same period at the expense of local producers and other foreign producers.⁴³

[69] Similarly, the average unit “export prices” for women’s footwear from China to the United States, which is more representative of the category of goods subject to the expiry review investigation, decreased slightly from $6.35 USD in 1996, to $6.16 USD in 2003. This is another indication that Chinese exporters put an emphasis on selling footwear at aggressive prices in order to maintain and increase market share.

[70] China has an enormous footwear production capacity and that capacity is still increasing. Developments in the Chinese footwear industry will likely have an effect on supply, demand and prices in global footwear markets.

[71] According to Aldo, the world footwear market has been affected by a large increase in both the volume and quality of Asian goods. Aldo states that the reasons for this increase are the investment in equipment, import of know how from western entities, hiring of specialists and the use of high quality materials.⁴⁴

[72] China’s footwear production accounts for approximately 60% of all footwear made in the world.⁴⁵ In the region of Wenzhou, known as the shoe capital of China, 1,500 enterprises are exporting footwear. Wenzhou, along with four other regions in China, house more than 20,000 shoe manufacturers.⁴⁶ Together they produce over 6 billion pairs per year.

[73] Information provided by the China International Footwear Fair shows that the annual growth in footwear production in China is expected to be 19% in the five years following China’s World Trade Organization accession in 2002.⁴⁷

[74] In this regard, new footwear factories are being built in the western part of China.⁴⁸ These facilities, with projected annual production capacity of
100 million pairs, are scheduled to be completed sometime in 2006.

[75] As evidenced by the above, China has a large footwear production capacity. This significant capacity is more than enough to supply the entire Canadian footwear market as well as the entire Canadian market for subject goods many times over. The Tribunal shared a similar view in
Expiry Review No. RR-2001-005, concerning certain waterproof rubber footwear.

[76] It is clear that the Chinese footwear manufacturing industry is
export-dependent and many sources confirm this statement. For instance, one footwear fair website states that Chinese footwear manufacturers exported
3.4 billion pairs of shoes in 1999, out of a total production figure of 5.9 billion pairs. Exports in that example were approximately 58% of total production.⁴⁹

[77] A press release stated that exports from Wenzhou, were up more than 25% from the previous year (2002).⁵⁰ In Guangdong province, manufacturers produced approximately 3 billion pairs of shoes, while exporting more than 70% or
2.21 billion shoes.

[78] China has also exported significant quantities to other areas including
the United States, Poland, Hungary, the EU, Mexico, Venezuela, the
Russian Federation,⁵¹ Japan, the Middle East and South Africa.⁵²

[79] As the level of production has increased significantly in recent years, the level of competition has also increased. Winners Merchants International L.P., an importer, states that the world market for subject goods since January 1, 2000, has become very competitive from a quality and pricing perspective.⁵³ This fierce competition has resulted in companies employing price undercutting and cost cutting strategies to maintain or increase market share. Many Chinese producers lack brand names or competitive products, resulting in the lowering of prices to obtain sales.⁵⁴ The President of the Guangdong Chamber of Commerce of
Shoe Manufacturers stated that such tactics have resulted in “falling prices, dwindling profits and growing risks of anti-dumping litigation”.⁵⁵ The CBSA believes such strategies are likely to result in instances of dumping.

[80] It is likely that the growing Chinese capacity and resulting supply of footwear will increase the level of competition among Chinese producers to secure export market share. They are dependent on these markets to maximize their productivity and profitability. In addition, producers in other countries will fight to maintain their share of their own domestic market. As expanding Chinese exports and domestic production compete over market share, domestic producers, including those in Canada, will likely experience lower prices and lost sales.

[81] The CBSA considered other anti-dumping measures involving similar goods when determining the likelihood of continued or resumed dumping. Anti-dumping measures on similar goods indicate a propensity to dump subject goods.

[82] The CBSA is currently enforcing three additional cases involving footwear (not including women’s boots) from China. Manufacturers from China have dumped product into Canada in each of these cases. These cases are listed below with the year of the final determination indicated in brackets:

- Certain Waterproof Footwear and Bottoms of Plastic or Rubber (2000);⁵⁶

- Certain Leather Footwear with Metal Toe Caps (2001);⁵⁷ and

- Certain Waterproof Rubber Footwear (1992).⁵⁸

[83] Several Chinese exporters of subject goods in the case under review also export footwear subject to the above-mentioned anti-dumping measures. While these measures do not apply to the subject goods and do not provide concrete evidence of future dumping, they reveal a strong indication that Chinese exporters have the propensity to dump footwear products into Canada.

[84] The CBSA also took into consideration anti-dumping measures by other jurisdictions in determining the likelihood of continued or resumed dumping. Other anti-dumping measures that include goods of the same description (or in respect of similar goods) indicate a propensity to dump by Chinese exporters.

[85] Venezuela, Peru and Mexico⁵⁹ currently have anti-dumping measures in place concerning footwear originating in or exported from China.

[86] The Venezuelan measures concern a wide range of goods, that is, “Footwear with outer soles of rubber, plastics, leather or composition leather and uppers of leather or textile materials; and other footwear with outer soles and uppers of rubber or plastics.”⁶⁰ The anti-dumping measure has been in place since 2000,⁶¹ and includes the goods that are subject to this expiry review.

[87] The Peruvian and Mexican measures concern (Chinese) “footwear” in general, which encompasses the goods subject to the CBSA review. These measures have been in place since 1997.⁶²

[88] While it is recognized that Venezuela, Mexico and Peru, having warmer climates, may not import as large quantities of winter boots as Canadian importers, other types of boots are subject to anti-dumping measures when imported into those countries.

[89] While they have been terminated, the EU had anti-dumping measures in place on Chinese imports of certain non-sports footwear with leather or plastic uppers and non-sports footwear with textile uppers.⁶³ These measures expired while the EU had import quotas on Chinese footwear in place. These quotas are scheduled to expire in 2005.

[90] These instances of anti-dumping measures during the POR indicate the global concern among footwear manufacturers regarding the dumping of Chinese footwear.

[91] Based on the evidence contained on the administrative record including, the volume of goods imported from China, the price at which the goods are being offered to Canada, the pricing of Chinese footwear to the United States market, the Chinese footwear production capacity and the reliance on export markets to maintain capacity utilization, the competition for market share among Chinese footwear producers, anti-dumping measures on other Chinese footwear products in Canada, and anti-dumping measures in place in other countries on footwear from China, the President determined that the expiry of the Order was likely to result in the continuation or resumption of dumping into Canada of leather and non-leather women’s boots originating in or exported from China.

REQUEST FOR EXCLUSION

[92] The President will normally make the determination regarding the likelihood of resumed or continued dumping or subsidizing on the basis of each country named in the finding or order under review. However, where the situation warrants, the President may make a determination in respect of certain goods or exporters.

[93] It should be noted that exclusions are granted under exceptional circumstances and the case for an exclusion must be adequately demonstrated.

[94] Aldo requested that the CBSA base its finding on market differentiation in Canada and requested consideration for the exclusion of certain “categories” of women’s boots on the basis of price points and/or “sub-groupings”. The basis for this request is the reported lack of domestic production of certain “sub-groupings” and/or low-priced goods.

[95] Aldo also requested that all of the imports sold in Canada by Aldo be excluded based on its “international presence and name brand recognition”.

[96] The case for exclusion has not been adequately demonstrated by Aldo and in absence of evidence provided to the contrary and based on information contained on the administrative record, the President was not persuaded that the requested exclusions should be granted.

CONCLUSION

For purposes of making a determination in this expiry review, the CBSA conducted its analysis within the scope of the factors set forth in subsection 37.2(1) of the SIMR. Based on the foregoing consideration of pertinent factors and analysis of evidence on the record, on December 16, 2004, pursuant to paragraph 76.03(7)(a) of SIMA, the President of the CBSA determined that the expiry of the order by the Canadian International Trade Tribunal made on May 1, 2000, in
Review No. RR-99-003, concerning women’s leather and non-leather boots originating in or exported from the People’s Republic of China, was likely to result in the continuation or resumption of dumping of the goods.

FUTURE ACTION

[97] On December 17, 2004, the Tribunal commenced its inquiry to determine whether the expiry of the Order in respect of these goods is likely to result in injury or retardation to the domestic industry. The Tribunal will make its decision by April 30, 2005.

[98] If the Tribunal determines that the expiry of the Order in respect of the goods from China is likely to result in injury or retardation, the Order will be continued in respect of those goods, with or without amendment. If this is the case, the CBSA will continue to levy anti-dumping duty on dumped importations of the subject women’s leather and non-leather boots.

[99] If the Tribunal determines that the expiry of the Order in respect of the goods from China is unlikely to result in injury or retardation, the Order will be rescinded in respect of those goods. Anti-dumping duty would no longer be levied on importations of women’s leather and non-leather boots.

INFORMATION

For further information, please contact Scott Felx or Gilbert Huneault at:

Mail	Canada Border Services Agency Anti-dumping and Countervailing Directorate 100 Metcalfe Street, 11th Floor Ottawa, Ontario K1A 0L8 Canada
Telephone	Scott Felx (613) 954-7359 Gilbert Huneault (613) 954-7376
Telefax	(613) 948-4844
Email	simaregistry-depotlmsi@cbsa-asfc.gc.ca
Web site	www.cbsa-asfc.gc.ca/sima-lmsi/

Pierre Richard
Vice-President
Admissibility Branch

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1 Exhibit 8 (NC) Customs Tariff - Schedule.

2 Exhibit 118 (NC) SMAC case arguments.

3 Exhibit 107 (NC) Import statistics prepared by the CBSA. Source: CCS.

4 Exhibit 114 (NC) SMAC case arguments.

5 Exhibit 122 (NC) SMAC reply submission.

6 Exhibit 115 (NC) Aldo Group case arguments.

7 Exhibit 121 (NC) Aldo Group reply submission.

8 Exhibit 114 (NC) SMAC case arguments (page 5).

9 Exhibit 114 (NC) SMAC case arguments (page 6).

10 Exhibit 114 (NC) SMAC case arguments (page 6).

11 Exhibit 114 (NC) SMAC case arguments (page 11).

12 Exhibit 114 (NC) SMAC case arguments (page 6).

13 Exhibit 114 (NC) SMAC case arguments (page 11).

14 Exhibit 114 (NC) SMAC case arguments (page 6).

15 Exhibit 114 (NC) SMAC case arguments (page 17).

16 Exhibit 114 (NC) SMAC case arguments (page 6).

17 Exhibit 114 (NC) SMAC case arguments (page 18).

18 Exhibit 114 (NC) SMAC case arguments (page 6).

19 Exhibit 114 (NC) SMAC case arguments (page 6).

20 Exhibit 114 (NC) SMAC case arguments (page 21).

21 Exhibit 114 (NC) SMAC case arguments (page 6).

22 Exhibit 114 (NC) SMAC case arguments (page 13).

23 Exhibit 114 (NC) SMAC case arguments (page 14).

24 Exhibit 114 (NC) SMAC case arguments (page 15).

25 Exhibit 114 (NC) SMAC case arguments (page 16).

26 Exhibit 114 (NC) SMAC case arguments (page 20).

27 Exhibit 114 (NC) SMAC case arguments (page 25).

28 Exhibit 114 (NC) SMAC case arguments (page 26).

29 Exhibit 114 (NC) SMAC case arguments (page 27).

30 Exhibit 122 (NC) SMAC reply submission (page 4).

31 Exhibit 115 (NC) Aldo Group case arguments (page 3).

32 Exhibit 115 (NC) Aldo Group case arguments (page 4).

33 Exhibit 115 (NC) Aldo Group case arguments (page 4).

34 Exhibit 115 (NC) Aldo Group case arguments (page 4).

35 Exhibit 115 (NC) Aldo Group case arguments (page 5).

36 Exhibit 115 (NC) Aldo Group case arguments (page 4).

37 Exhibit 115 (NC) Aldo Group case arguments (page 4).

38 Exhibit 115 (NC) Aldo Group case arguments (page 6).

39 Exhibit 121 (NC) Aldo Group Reply Submission (page 5).

40 Exhibit 19 (NC) – CITT Administrative Record, SMAC Public Submission.

41 Exhibit 14 (NC) – Import and enforcement statistics.

42 Exhibit 104 (NC) US Footwear Imports (1996 to 1st Half 2004).

43 Exhibit 104 (NC) US Footwear Imports (1996 to 1st Half 2004).

44 Exhibit 93 (NC) Aldo Group response to ERQ.

45 Exhibit 31 (NC) Donnor Fair footwear exhibition information (page 1).

46 Exhibit 40 (NC) TDCTrade.com article discussing Chinese production of footwear and new opportunities (page 1).

47 Exhibit 26 (NC) – China International Footwear Fair Introduction (page 1).

48 Exhibit 42 (NC) Article from the China Daily on the competiveness of footwear industry in China (pages 1-2).

49 Exhibit 26 (NC) China International Footwear Fair Introduction (page 1).

50 Exhibit 38 (NC) New Feature on China Shoes 2004 - Wenshou (page 1).

51 Exhibit 37 (NC) Russian production treads on Chinese shoe import domination (page 1).

52 Exhibit 31 (NC) Donnor Fair footwear exhibition information (page 1).

53 Exhibit 103 (NC) – Winners Merchants International L.P (page 9).

54 Exhibit 41 (NC) – News article - “Guangdong’s shoemakers fear moves” (page 2).

55 Exhibit 41 (NC) – News article - “Guangdong’s shoemakers fear moves” (page 2).

56 Finding – Waterproof Footwear and Bottoms of Plastic or Rubber Originating in or Exported from the People's Republic of China, (8 December 2000), File No. NQ-2000-004 (CITT).

57 Finding – Leather Footwear with Metal Toe Caps, Originating in or Exported from the People’s Republic of China,

(27 December 2001), File No. NQ-2001-003 (CITT).

58 Order – Certain Waterproof Rubber Footwear Originating in or Exported from the People’s Republic of China, (18 October 2002), File No. RR-2001-005 (CITT).

59 Exhibit 19 (NC) – CITT Administrative Record, SMAC Public Submission (pages 3-4).

60 Exhibit 19 (NC) – CITT Administrative Record, Payless Shoe Source Public Reply Submission (page 4).

61 Exhibit 19 (NC) – CITT Administrative Record, SMAC Public Submission (pages 3-4).

62 Exhibit 19 (NC) – CITT Administrative Record, SMAC Public Submission (pages 3-4).

63 Exhibit 33 (NC) – TDCTrade.com article, “Hong Kong’s Footwear Industry” (page 1).