ARCHIVED - Statement of Reasons

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OTTAWA, August 5, 2005
RR-2004-008

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

THE DUMPING OF WATERPROOF FOOTWEAR AND BOTTOMS OF PLASTIC OR RUBBER ORIGINATING IN OR EXPORTED FROM THE PEOPLE'S REPUBLIC OF CHINA

On July 21, 2005, 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 finding made by the Canadian International Trade Tribunal on December 8, 2000, in Inquiry No. NQ-2000-004, in respect of waterproof footwear and bottoms of rubber or plastic originating in or exported from the People's Republic of China, was likely to result in the continuation or resumption of dumping into Canada of the goods from the People's Republic of China.

This statement of reasons is also available in French. Cet énoncé des motifs est également disponible en français.

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TABLE OF CONTENTS

• SUMMARY
• BACKGROUND
• PRODUCT DESCRIPTION
• CLASSIFICATION OF IMPORTS
• PERIOD OF REVIEW
• CANADIAN INDUSTRY
• CANADIAN MARKET
• CASE ENFORCEMENT
• ENFORCEMENT DATA
• PARTICIPANTS
• INFORMATION USED BY THE PRESIDENT
  • Administrative Record
  • Information not Considered after Closing of the Record
• POSITION OF THE PARTIES
  • Parties Contending that Resumed or Continued Dumping is Likely
  • Parties Contending that Continued or Resumed Dumping is Unlikely
• Positions of the Importers
• CONSIDERATION AND ANALYSIS
• Other Factors
• CONCLUSION
• FUTURE ACTION
• INFORMATION

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SUMMARY

[1] On March 23, 2005, 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 finding made on December 8, 2000, in Inquiry No. NQ-2000-004 (finding). The finding concerns waterproof footwear and bottoms of plastic or rubber originating in or exported from the People's Republic of China (China). The finding is scheduled to expire on December 7, 2005.

[2] The Canada Border Services Agency (CBSA) initiated an expiry review investigation on March 24, 2005, to determine whether the expiry of the finding is likely to result in the continuation or resumption of dumping of the subject goods.

[3] On July 21, 2005, the President of the CBSA (President), determined, pursuant to paragraph 76.03(7)(a) of SIMA, that the expiry of the finding is likely to result in the continuation or resumption of dumping into Canada of the goods from China.

BACKGROUND

[4] As a result of a dumping investigation initiated on May 12, 2000, and following a preliminary determination of dumping made on August 10, 2000, the Commissioner of the Canada Customs and Revenue Agency (now the President of the CBSA), made a final determination of dumping respecting waterproof footwear and bottoms of plastic or rubber, including moulded clogs, originating in or exported from China, excluding
ski-boots, skating boots and all footwear subject to the finding made in the Tribunal Review No. RR-97-001.

[5] The final determination was made on November 8, 2000. On December 8, 2000, the Tribunal issued an injury finding respecting the dumping of the subject goods. In its finding, the Tribunal excluded two styles of waterproof footwear from China, on the basis that imports of these goods did not compete with domestic production of waterproof footwear or that there was no substitutable products available from domestic production.

[6] On February 1, 2005, the Tribunal issued a notice of expiry of the
December 8, 2000 finding. Based on the available information and the information submitted by the interested parties, the Tribunal decided that an expiry review of the finding was warranted and on March 23, 2005, the Tribunal initiated an expiry review (RR-2004-008).

[7] On March 24, 2005, the CBSA initiated an expiry review investigation to determine whether the expiry of the finding is likely to result in the continuation or resumption of dumping of the subject goods from China.

PRODUCT DESCRIPTION

[8] The goods under review are defined as "Waterproof footwear and bottoms of plastic or rubber, including moulded clogs, originating in or exported from the
People's Republic of China, excluding ski-boots, skating boots and all footwear subject to the order made in the Canadian International Trade Tribunal's Review No. RR-97-001."

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

• (a) fully waterproof polyvinyl chloride injection-moulded footwear consisting of a one-piece construction where the entire surface, other than the sole portion, is coated with an adhesive and flocked with small particles of suede, suede dust or suede powder, whether or not trimmed with other materials and however fastened; and
• (b) women's waterproof footwear consisting of a polyvinyl chloride or polyurethane injection-moulded sole of non-boat-like construction and a polyurethane or nylon upper that is treated and affixed to the sole in a manner that makes the boot fully waterproof, whether or not trimmed with other materials and however fastened.

CLASSIFICATION OF IMPORTS

[10] Waterproof footwear and bottoms of plastic or rubber are normally imported into Canada under the following Harmonized System (HS) classification numbers¹:

6401.10.19.00	6402.19.90.90	6403.19.90.90	6404.11.99.90
6401.10.20.00	6402.91.00.10	6403.40.00.10	6404.19.90.20
6401.91.20.00	6402.91.00.91	6403.91.00.10	6404.19.90.91
6401.92.11.00	6402.91.00.92	6403.91.00.91	6404.19.90.92
6401.92.12.00	6402.91.00.93	6403.91.00.92	6404.19.90.93
6401.92.92.90		6403.91.00.93
6401.99.21.00
6401.99.29.00
6401.99.30.10
6401.99.30.90

PERIOD OF REVIEW

[11] The CBSA's period of review (POR) is January 1, 2002 to December 31, 2004.

CANADIAN INDUSTRY

[12] During the POR, the Canadian industry for waterproof footwear and bottoms was comprised of the following producers:

• AirBoss-Defense (Acton International Inc.), Acton Vale, QC
• Baffin Inc., Stoney Creek, ON
• Chaussures Régence Inc., Charlebourg, QC
• Chaussures Yeti Inc., Montreal-North, QC
• Genfoot Inc., Montreal, QC
• Hichaud Inc., Quebec, QC
• Les Chaussures Rallye Footwear Inc., Ville d'Anjou, QC

[13] AirBoss-Defense (AirBoss) of Acton Vale, Quebec, is a subsidiary of AirBoss of America Corp., Toronto, Ontario, which acquired Acton International Inc. in 1999. In 2004, the company sold its entire commercial footwear line, with the exception of the firefighter boot line.²

[14] Baffin Inc. (Baffin) of Stoney Creek, Ontario, was incorporated in 1997. It is a privately owned corporation with a production facility in Stoney Creek, Ontario, where the manufacturing, sales and administration functions are located. The plant produces industrial and outdoor waterproof footwear.³

[15] Chaussures Régence Inc. (Régence) of Charlebourge, Quebec, was founded in 1979 and from its inception has produced leather boots. In 1999, it started the production of boots made of thermoplastic. In 2004, it acquired Acton's trademark and started selling rubber boot products (overshoes, work boots and winter boots).⁴

[16] Chaussures Yeti Inc. (Yeti) of Montreal, Quebec, was incorporated in
October 1995 and operations commenced in January 1996. They produce duck shoes and winter boots for children and adults.⁵

[17] Genfoot Inc. (Genfoot) is a privately owned company with headquarters in Montreal, Quebec. In 1944, the General Footwear Company Ltd. (subsequently renamed Genfoot Inc.) was founded as a wholesaler of Canadian manufactured footwear. Genfoot's manufacturing operation began with the purchase of the Lafayette Shoe Manufacturing Company Limited, Contrecoeur, Quebec, and was later amalgamated with Genfoot. In 1975, Genfoot purchased the Hamburg Felt Company (New Hamburg, Ontario) which produces felt for various uses and for use in Genfoot's plants in Canada and the United States. In 2004, it closed the rubber footwear sewing and assembly plant in Contrecoeur due to falling capacity utilization.⁶

[18] Hichaud Inc. (Hichaud) is a private non-profit organization set up in August 1980. It took over facilities in Loretteville, Quebec. The main objective is to operate a work centre adapted in such a way as to permit handicapped people to earn a living and to realize that they could practice a trade adapted to their condition. The company produces snowmobile style winter boots for men, women and children.⁷

[19] Les Chaussures Rallye Footwear Inc. (Rallye) of Ville d'Anjou, Quebec, was incorporated in November 1990 and began production in 1991. Initially it produced waterproof footwear only for children but expanded to cover adults. In 1994, they started producing thermoplastic rubber (TPR) waterproof footwear and in 2002, they expanded to produce red sole boots for youths, boys, women and men. In 2003, they introduced the hunting boot for men (TPR) and in 2004, introduced a line of men's waterproof safety footwear (CSA approved). The company is a custom manufacturer for major retailers.⁸

CANADIAN MARKET

[20] With the exception of data concerning imports from China, which is readily available from enforcement monitoring, data on imports from other sources presents challenges since the HS code numbers include goods that are not subject to this review. As a result, it was not possible to accurately determine the size of the Canadian market for waterproof footwear and bottoms of plastic or rubber.

[21] The following table contains data concerning the apparent Canadian market for waterproof footwear and bottoms of plastic or rubber during the POR. The volume of the Canadian market for these goods was based on information provided by domestic producers and import data generated from the CBSA's enforcement monitoring.

	January-December
Category	2002	2003	2004
	(in 000's of pairs)	(in 000's of pairs)	(in 000's of pairs)
Domestic Production (*) of Subject Goods	4,010	4,343	3,976
Change (from 2002)	-	8.3%	-0.9%
Imports of Subject Goods Only from China	129	140	247
Change (from 2002)	-	8.5%	91.5%

(*) These domestic production figures are based on declared sales volume from domestic production.

Source: Exhibit 68 (NC) - Revised Import and Enforcement Statistics and Exhibit 70 (Protected) - Consolidation of Available Canadian Market Information.

CASE ENFORCEMENT

[22] In the past, the CBSA used section 20 of SIMA to determine normal values for goods from China because the Commissioner (now the President) was, at that time, of the opinion that the Government of the People's Republic of China (GPRC) was controlling prices in the domestic market. However, normal values were not determined under section 20 of SIMA for this investigation as information could not be obtained from a surrogate country. Therefore, the normal values for subject goods from China had to be calculated pursuant to section 29 of SIMA, by means of a ministerial specification.

[23] Pursuant to that specification, the normal value of goods shipped subsequent to the finding would be calculated by advancing the export price by the average margin of dumping that had been calculated. During the original investigation the average margin of dumping was calculated for 26 models shipped from China during a period of investigation by comparing a constructed section 20 normal value to the export price of the goods. The average margin of dumping was determined to be 49%, when expressed as a percentage of export price.

[24] Since the date of the finding, none of the Chinese exporters have requested a review of the assessment of the 49% margin of dumping placed on subject goods entered into Canada.

[25] As part of its enforcement responsibilities regarding the finding, the CBSA initiated a normal value and export price review on November 10, 2004, respecting waterproof footwear and bottoms of plastic or rubber from China. The Chinese exporters were requested to provide sales and costing information that, if submitted and verified, would allow for the determination of normal values pursuant to sections 15 to 19 of SIMA.

[26] During the review, two exporters provided complete responses to the CBSA. At the conclusion of the review on May 11, 2005, these two exporters, Mudanjiang Baiyue Shoe-Making Co. Ltd. and Fuzhou Light Industry Import and Export Co. Ltd., were provided with normal values for certain specific models as well as a methodology for the calculation of normal value for new models.

[27] For all other exporters and for all subject goods where information was not provided or was unavailable, the normal value continues to be based on the export price of the goods advanced by 49% under authority of a ministerial specification.

ENFORCEMENT DATA

[28] As seen in the following table, 517,399 pairs of subject goods were imported into Canada during the period of review.⁹ 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 49%.

Imports of Waterproof Footwear and Bottoms From China

Year ended December 31	Quantity	Value for Duty (VFD)	Unit Value for Duty (CAD)	SIMA Duties Paid
2001	147,765	$1,198,686	$8.11	$596,862
2002	129,422	$607,567	$4.69	$298,639
2003	140,488	$585,806	$4.17	$286,589
2004	247,489	$1,308,162	$5.28	$643,498
Total 2002-04	517,399	$2,501,535		$1,228,726

Source: Exhibit 68 (NC) Import and Enforcement Statistics.

PARTICIPANTS

[29] On March 23, 2005, the Tribunal's expiry review notice and an expiry review questionnaire were sent to the Canadian producers, importers and exporters.

[30] The Expiry Review Questionnaire (ERQ) requested information needed to evaluate the factors, as listed in subsection 37.2(1) of the Special Import Measures Regulations (SIMR). Any person or government having an interest in this investigation was also invited to provide a submission regarding the likelihood of the continuation or resumption of dumping of the goods should the finding be allowed to expire.

[31] AirBoss, Baffin, Régence, Yeti, Genfoot, Hichaud and Rallye, participated in the expiry review and provided responses to the producer ERQ. The Shoe Manufacturers Association of Canada (SMAC), on behalf of their members, provided case arguments,¹⁰ as did Rallye,¹¹ claiming that the dumping of subject goods would likely continue or resume should the Tribunal finding be allowed to expire.

[32] No exporter from China provided information in response to the exporter ERQ. No case arguments or reply submissions were received from any exporters.

[33] Nine importers provided responses to the importer ERQ. No case arguments or reply submissions were received from any of the importers.

INFORMATION USED BY THE PRESIDENT

Administrative Record

[34] 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.

[35] 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 May 12, 2005. This allowed participants time to prepare their case arguments and reply submissions based, on the information that was on the administrative record as of the closing of the record date.

Information not Considered after Closing of the Record

[36] On May 27, May 31, June 3 and June 9, 2005, counsel for SMAC submitted additional information on behalf of two producers for the CBSA's consideration in the present proceeding.

[37] Counsel for SMAC was advised that the additional information would not be taken into account nor used by the President for purposes of this proceeding in light of the fact that, given the point in time when the information was submitted, other participants, if they so wished, would not have the opportunity to respond to the information.

POSITION OF THE PARTIES

Parties Contending that Resumed or Continued Dumping is Likely

Positions of the Canadian Producers

[38] Case arguments were submitted by SMAC's counsel on behalf of SMAC members. In addition, counsel for one producer, Rallye, also submitted case arguments. These arguments are summarized in the following paragraphs.

Arguments by SMAC and Rallye

[39] It was argued that 100% of subject goods from China in the period 2001 to 2004 were dumped,¹² which, in their opinion, demonstrated an inability of the Chinese to compete without dumping.

[40] It was alleged that, prior to the recently concluded CBSA review of normal value and export price, where only two Chinese exporters cooperated, no Chinese exporter had sought a normal value, and that this suggested that the real margin of dumping would be, or was expected by Chinese exporters to be, greater than the current advance of 49%.¹³

[41] It was alleged that the volume of Chinese imports of subject goods has continued to increase, demonstrating a continuing and increasing interest in the Canadian market.¹⁴ SMAC cited statistics compiled by the CBSA showing that imports of the subject goods from China increased by 67% between 2001 and 2004.¹⁵

[42] It was submitted that the average value of the Chinese imports of subject goods into Canada has continued to decline, demonstrating a willingness of Chinese exporters to make export sales at increasingly lower prices.¹⁶ This claim was based on the CBSA's enforcement statistics which indicated that the average value for duty per pair of subject goods declined by 34.8% between 2001 and 2004.

[43] It was noted that the production capacity of the factories in China is so large that even a small percentage of that capacity utilization would be several times greater than the size of the Canadian market for the subject goods.¹⁷

[44] SMAC claimed that producers in China export huge volumes of footwear and depend on exports to maintain capacity utilization.¹⁸ SMAC cited references noting China's huge production capacity for footwear and its export dependence, since exports represented more than 60% of production.¹⁹ In addition, Rallye also argued that Chinese producers/exporters have continued to dump footwear products in other jurisdictions since the time of the injury finding in 2000, which is illustrative of a practice of selling at low prices in export markets to achieve injuriously high sales volumes in those markets. ²⁰

[45] SMAC and Rallye alleged that Chinese factories have continued to dump footwear products in other jurisdictions since the time of the original enquiry, and that this demonstrates a practice of low pricing in export markets to achieve high sales volumes in those export markets, resulting in injury.²¹ SMAC cited countries where anti-dumping findings are in place against similar footwear products from China.²²

[46] They also note that Chinese factories have continued to dump other footwear products into Canada since the time of the original inquiry.²³ They cited the case of Certain Leather Footwear with Metal Toe Caps and Certain Waterproof Rubber Footwear, arguing that the findings of dumping in these cases demonstrate a significant on-going interest in the Canadian footwear market by Chinese producers and exporters and a propensity to dump in the Canadian market. SMAC also cited the cases of
Certain Women's Leather and Non-Leather Boots, Expiry Review No. RR-2004-02,
and Certain Waterproof Footwear and Waterproof Footwear Bottoms,
Inquiry No. NQ-2002-002, where dumping was found but there were negative injury findings.²⁴

[47] SMAC alleged that evidence exists which demonstrates that Chinese footwear producers and/or brokers of Chinese footwear producers are mislabelling Chinese subject goods and making minor superficial changes to the subject goods in order to circumvent the finding, thereby reducing the amount of anti-dumping duties that would otherwise have been levied.²⁵

[48] SMAC and Rallye also stated that Chinese footwear imports have been even more injurious in the market of the United States, which is not protected by a dumping finding. They allege that, in a similar way, even greater penetration of the Chinese product at even lower prices will occur in Canada, if the finding is permitted to expire.²⁶ In this regard they noted that between 1996 and 2003, the volume of Chinese footwear imports into the United States increased by 70% while the volume of imports from all other sources actually declined by 16%.²⁷ They further stated that by the first half of 2004, Chinese imports accounted for 83.1% of the volume of footwear imports into the United States, while accounting for only 68.8% of the value of all imports.²⁸

Parties Contending that Continued or Resumed Dumping is Unlikely

[49] No case arguments were received from any such party.

Positions of the Importers

[50] None of the importers in their response to the ERQ made any comment on the likelihood of resumed or continued dumping, nor was any case brief filed.

CONSIDERATION AND ANALYSIS

[51] 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. When making this determination, the President may consider the factors set out in
subsection 37.2(1) of the SIMR.

[52] Guided by the above factors and based on the documentation submitted by the various participants and the consideration of the information on the administrative record, the following is a list of factors considered in this analysis:

• dumping of goods while the finding is in effect;
• 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 US market;
• the Chinese footwear production capacity and the reliance on export markets to maintain capacity utilization;
• anti-dumping measures on other Chinese footwear products in Canada;
• efforts to avoid application of the finding; and
• anti-dumping measures in place in other countries on footwear from China.

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

Dumping of goods while finding in effect

[54] During the POR, there were 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. In effect all subject goods imported into Canada were dumped. As a result, a significant amount of duties have been collected but, despite the application of these duties, exports from China have increased along with their share of the Canadian market.

[55] As a result of the recently concluded review of normal value and export price, two exporters have now obtained normal values for certain models and have been provided with a methodology for calculating normal values for new models released from Customs on or after May 11, 2005. However, any exports from any other companies continue to be subject to the 49% advance and any imports assessed under the advance are considered dumped.

[56] Both SMAC and Rallye have argued that, the fact that no Chinese exporter had sought normal values prior to the recently concluded review of normal value and export price, suggests that the real margin of dumping is, or was expected by Chinese exporters to be, greater than the current advance of 49%. While such an assertion is generally true in such situations, in the recent review, one of the two exporters who received specific normal values was found not to be dumping, while the other one was found to be dumping by a margin much lower than 49%.²⁹

The volume of goods imported from China

[57] Based on information on the administrative record, the CBSA could not accurately determine the size of the Canadian market for waterproof footwear and bottoms of plastic or rubber. As noted earlier, the use of the data available to the CBSA through the Canada Customs System (CCS), presents challenges since the HS code numbers include goods that are not subject to this review. Statistics regarding imports of subject goods are included in a broad footwear category, therefore, data for imports of subject goods are difficult to segregate accurately. However, the statistics regarding the subject goods from China are readily available, given that a databank is maintained for enforcement purposes.

[58] Statistics regarding the imports of subject goods from China are complete for the POR, and indicate that imports from China of the subject goods increased by 91% in volume between 2002 and 2004,³⁰ despite an anti-dumping duty of 49% being applied to all imports.

[59] The CBSA's data on the importation of waterproof footwear and bottoms from all countries show that imports from China represented 67.9% of the volume of all waterproof footwear and bottoms imported into Canada in 2004, an increase from the level of 65.7% in 2002 (note that the data include more than subject goods).³¹

[60] While Chinese imports were increasing, domestic producers were not doing as well. Statistics contained in the individual submissions by the producers show that, in a year over year comparison, sales volume from domestic production rose by 8% in 2003 over 2002, but this fell by 8% in 2004 from 2003 levels. The 2004 sales volume was lower than the volume in 2002 by about 1%.³²

The Price of the goods sold to Canada

[61] During the period (2002-2004), the average value for duty (VFD) of the subject goods decreased from $4.69 CAD/unit in 2002 to $4.17 CAD/unit in 2003, although there was a recovery to $5.28 in 2004.³³ However, despite this recovery, the average VFD in 2004 was lower than in 2001 (when it was $8.11) by almost 35%.³⁴

[62] 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 does indicate the aggressive nature of Chinese exporters in their efforts to obtain a greater share of the Canadian market.

[63] If the finding were rescinded, it is expected that Chinese exporters would continue to price aggressively in order to compete with other producers from around the world, likely leading to increases in imports of subject goods from China.

The pricing of Chinese footwear in the US market

[64] A statistical review submitted by SMAC shows that in the Untied States, where no anti-dumping measures are in place regarding Chinese footwear, between 1996 and 2003, the volume of imports of footwear from China rose by 70% and this upward trend continued into 2004, where first half 2004 figures were 10.5% higher than the same period in 2003.³⁵ The average unit price at which the Chinese footwear were valued declined from 6.64 USD to 6.49 USD³⁶ between 1996 and 2003. Those prices allowed Chinese exporters to capture a greater share of the US market (from 942 million pairs to
1.6 billion pairs) over the same period at the expense of local producers and other foreign producers.³⁷ In its analysis of the US footwear market situation, SMAC notes that in this period Chinese imports have consistently been half the price of other imports and that, while product mix can account for some variation in pricing, it cannot account for a consistent price differential of this magnitude.³⁸

[65] This is another indication that Chinese exporters are willing to sell footwear at low prices in order to maintain and increase market share.

Chinese production capacity and reliance on exports for capacity utilization

[66] China has an enormous footwear production capacity and that capacity is still increasing. It is likely that this production capacity will continue to result in Chinese footwear producers having a major impact on supply, demand and prices in global footwear markets. This production capacity is more than enough to supply the entire Canadian market for footwear. By way of example, Canadian factories annually produce approximately 4 million pairs of subject goods,³⁹ whereas, in western China alone, new facilities are projected to have an annual production capacity of 100 million pairs.⁴⁰

[67] China's footwear production in 2002 is said to have accounted for approximately 56% of all footwear made in the world,⁴¹ with some 40,000 shoe manufacturing plants.⁴² In 2000, China's production of footwear was 6.4 billion pairs, of which 3.9 billion pairs were exported, representing over 60% of production.⁴³

[68] It is clear that the Chinese footwear manufacturing industry is export dependent and many sources confirm this statement. It was also noted in an article that China not only ranks first in exports but also in terms of manufacturing in the world.⁴⁴ In addition, given the increase in production capacity noted in western China, there will be an increasing need to expand exports beyond the 60% of production noted earlier. As a result of this dependence on exports, Chinese producers constantly seek out new markets or try to capture increasing market share in existing markets.

[69] By way of example, China increased its footwear exports to Germany between 2003 and 2004 by 30 million pairs or 39.1%.⁴⁵ Also, as noted earlier, the Chinese share of the US market has also increased dramatically over time.

[70] Furthermore, a press release stated that exports in Wenzhou (a city well-known in the industry) were up more than 25% (by value) from the previous year (2002).⁴⁶ The article also notes that the main destinations to which China has exported are the European Union (EU), the United States, Japan, the Middle East, South Africa and South East Asia.

[71] The CBSA believes that China has enough production capacity to supply the entire Canadian market, including that for the subject goods. Its dependence on exports to support the use of this capacity is also clear.

Canadian anti-dumping measures on other Chinese footwear

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

[73] The CBSA is currently enforcing two additional footwear cases involving footwear from China. Manufacturers from China have dumped product into Canada in each of these cases. These are:

• Certain Leather Footwear with Metal Toe Caps; and
• Certain Waterproof Rubber Footwear.

In addition, the Expiry Review of the case on women's boots from China conducted by the CBSA (RR-2004-002) where the finding recently expired, concluded that continued or resumed dumping was likely.

[74] Some Chinese exporters of subject goods in the case under review also export the footwear covered by the other cases. These other cases have all had decisions within the last five years. While these other footwear findings or orders do not include the subject goods and do not provide concrete evidence of future dumping, they reveal a strong indication that Chinese exporters of footwear have a propensity to dump footwear products into Canada.

Anti-dumping measures in other countries

[75] The CBSA also takes into consideration anti-dumping measures by other jurisdictions when determining the likelihood of continued or resumed dumping.

[76] Venezuela, Peru and Mexico⁴⁷ currently have anti-dumping measures in place concerning footwear originating in or exported from China.

[77] The Venezuelan measures concern a wide range of goods and the anti-dumping finding has been in place since 2000, while the Peruvian and Mexican cases have been ongoing since 1997. ⁴⁸

[78] Furthermore, on February 1, 2005, the EU imposed import licensing and inspection regulations on footwear imported from China. The regulations were made in response to calls by several European countries, including Italy, Spain, Portugal and Poland, to initiate an anti-dumping investigation against Chinese footwear and will be in effect for one year.⁴⁹

[79] An article covering these measures notes that while the measures are not expected to have a major impact on Chinese shoemakers in the short term, if the inspection system reveals that there is a large increase in Chinese shoes into the EU, it is expected the EU would take measures, such as special safeguards and anti-dumping action, to protect its own businesses.⁵⁰

[80] These instances of anti-dumping and other measures are indicative of the global concern among footwear manufacturers regarding the low prices and dumping of Chinese footwear.

Other Factors

Efforts to avoid application of the Finding

[81] SMAC and some producers have made allegations that subject goods produced in China are being transhipped through third countries and are being mislabelled by declaring the third country as the country of origin.⁵¹

[82] In this regard, there is documentation submitted by SMAC which supports their allegation that subject footwear is being mislabelled as to country of origin, in order to evade the finding. Specifically, the evidence shows a note from an importer/broker (as identified by SMAC) stating that subject goods can be shipped through third countries and that all factories in China do this when they run into the problem of high duties or restrictions.⁵²

[83] Specific instances of allegations of third country circumvention have been raised with the CBSA in the past. Any such matters have been submitted to the
Investigations Directorate of the CBSA for their consideration.

[84] It has also been alleged that goods are being shipped to Canada with slight modifications to render them not waterproof and, therefore, not subject to the finding.⁵³ The CBSA has seen evidence of these practices. Were the finding to be rescinded, these practices would not be necessary and goods would likely be imported at even cheaper prices, as any costs incurred in taking these evasive actions would no longer be incurred.

CONCLUSION

[85] 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 July 21, 2005, pursuant to paragraph 76.03(7)(a) of SIMA, the President determined that the expiry of the finding made by the Tribunal on December 8, 2000, in Inquiry No. NQ-2000-004, is likely to result in the continuation or resumption of dumping of the goods exported to Canada.

FUTURE ACTION

[86] On July 22, 2005, the Tribunal commenced its inquiry to determine whether the expiry of the finding in respect of these goods is likely to result in injury or retardation to the domestic industry. The Tribunal will make its decision by December 7, 2005.

[87] If the Tribunal determines that the expiry of the finding is likely to result in injury or retardation, the finding 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 goods.

[88] If the Tribunal determines that the expiry of the finding is unlikely to result in injury or retardation, the finding will be rescinded in respect of those goods.
Anti-dumping duty would no longer be levied on importations of the subject goods.

INFORMATION

[89] For further information, please contact Robert Cousineau or Brian Hodgson at:

Mail	Canada Border Services Agency Anti-dumping and Countervailing Directorate 100 Metcalfe Street, 11th Floor Ottawa, Ontario K1A 0L8 Canada
Telephone	Robert Cousineau (613) 954-7183 Brian Hodgson (613) 954-7237
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 2 (NC) Customs Tariff - Schedule.

2 Exhibit 66 (NC) AirBoss Defense response to Expiry Review Questionnaire (pages 1 and 4).

3 Exhibit 35 (NC) Baffin Inc. response to Expiry Review Questionnaire (pages 1and 2).

4 Exhibit 60 (NC) Chaussures Régence Inc. response to Expiry Review Questionnaire (pages 1, 2 and 6).

5 Exhibit 58 (NC) Yeti Inc. response to Expiry Review Questionnaire (page 1).

6 Exhibit 39 (NC) Genfoot Inc. response to Expiry Review Questionnaire (pages 1, 2 and 7).

7 Exhibit 79 (NC) Hichaud Inc. response to Expiry Review Questionnaire (pages 1 and 2).

8 Exhibit 29 (NC) Les Chaussures Rallye Footwear Inc. response to Expiry Review Questionnaire (page 1).

9 Exhibit 68 (NC) Import statistics prepared by the CBSA. Source: CCS.

10 Exhibit 84 (NC) SMAC case arguments.

11 Exhibit 85 (NC) Rallye Footwear Inc.case arguments.

12 Exhibit 84 (NC) SMAC case brief (page 1); Exhibit 85 (NC) Rallye case brief (page 2).

13 Exhibit 84 (NC) SMAC case brief (page 2); Exhibit 85 (NC) Rallye case brief (page 2).

14 Exhibit 84 (NC) SMAC case brief (page 2); Exhibit 85 (NC) Rallye case brief (page 2).

15 Exhibit 84 (NC) SMAC case brief (page 6).

16 Exhibit 84 (NC) SMAC case brief (pages 2 and 6); Exhibit 85 (NC) Rallye case brief (page 2).

17 Exhibit 84 (NC) SMAC case brief (page 2); Exhibit 85 (NC) Rallye case brief (page 2).

18 Exhibit 84 (NC) SMAC case brief (page 2).

19 Exhibit 84 (NC) SMAC case brief (page 13).

20 Exhibit 85 (NC) Rallye case brief (page 2).

21 Exhibit 84 (NC) SMAC case brief (page 2).

22 Exhibit 84 (NC) SMAC case brief (pages 17 and 18); Exhibit 85 (NC) Rallye case brief (page 2).

23 Exhibit 84 (NC) SMAC case brief (page 2); Exhibit 85 (NC) Rallye case brief (page 13).

24 Exhibit 84 (NC) SMAC case brief (pages 19 and 20).

25 Exhibit 84 (NC) SMAC case brief (page 2).

26 Exhibit 84 (NC) SMAC case brief (page 2); Exhibit 85 (NC) Rallye case brief (pages 2 and 3).

27 Exhibit 85 (NC) Rallye case brief (page 8); Exhibit 84 (NC) SMAC case brief (page 11).

28 Exhibit 85 (NC) Rallye case brief (page 8); Exhibit 84 (NC) SMAC case brief (page 11).

29 Exhibit 63 (Protected) Confidential ruling letter for Mudanjiang Baiyue Shoe-Making Co Ltd.; Exhibit 64 (Protected) Confidential ruling letter for Fuzhou Light Industry Import and Export Co. Ltd.

30 Exhibit 68 (NC) - Import and Enforcement Statistics.

31 Exhibit 72 (NC) - Waterproof Footwear and Bottoms Originating in or Exported From all Countries.

32 Exhibit 70 (Protected) - Consolidation of Available Canadian Market Information.

33 Exhibit 68 (NC) - Import and Enforcement Statistics.

34 Exhibit 68 (NC) - Import and Enforcement Statistics.

35 Exhibit 13 (NC) - U.S. Footwear Imports1996 -1^st Half 2004.

36 Exhibit 67 (NC) - American Apparel and Footwear Association "Shoe Stats 2004" (page iv).

37 Exhibit 67 (NC) - American Apparel and Footwear Association "Shoe Stats 2004" (page iv).

38 Exhibit 84 (NC) - Case Brief submitted by SMAC (pages 11 and 12).

39 Exhibit 70 (Protected) - Consolidation of available Canadian Market Information.

40 Exhibit 67 (NC) - China Daily "Shoe industry takes step into west China" (pages 1 and 2).

41 Expiry Review RR-2004-002, CITT Statement of Reasons (page 15).

42 Exhibit 67 (NC) China Economic Net.

43 Expiry Review RR-2001-005, Statement of Reasons (page 5).

44 Exhibit 67 (NC) mdna.com press release, p. 2, "GDS -True Reflection of Footwear Market".

45 Exhibit 67 (NC) Shoeinfonet .com press release, p. 1, "The economic situation of the German footwear industry".

46 Exhibit 13 (NC) New Feature on China Shoes 2004 - Wenzhou (page 1).

47 Exhibit 13 (NC) - CITT Administrative Record, SMAC Public Submission (page 5).

48 Exhibit 13 (NC) - CITT Administrative Record, SMAC Public Submission (page 5).

49 Exhibit 67 (NC) - tdctrade.com, "EU footwear move sparks concern" (page 1).

50 Exhibit 67 (NC) - tdctrade.com, "EU footwear move sparks concern" (pages 1 and 2).

51 Exhibit 84 (NC) SMAC case brief (page 15); Exhibit 12 (P) CITT Administrative Record - Confidential Attachments to SMAC's submission; Exhibit 39 (NC) Genfoot Inc. response to ERQ (page 9); Exhibit 61 (NC) Chaussures Régence Inc. response to ERQ (page 10).

52 Exhibit 12 (C) - CITT Administrative Record, Confidential Attachment to SMAC's submission in favour of an expiry review; Exhibit 84 (NC) SMAC case brief (page 15).

53 Exhibit 29 (NC) Les Chaussures Rallye Footwear Inc. response to ERQ (page 8); Exhibit 12 (P) CITT Administrative Record - Confidential Attachments to SMAC's submission.