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Final Determination - Waterproof Footwear

OTTAWA, November 8, 2000

File No. 4261-123
Case No. AD/1241

STATEMENT OF REASONS

Concerning the making of a final determination of dumping with respect to

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 REVIEW NO. RR-97-001

DECISION

Pursuant to paragraph 41(1)(a) of the Special Import Measures Act, the Commissioner of Customs and Revenue has today made a final determination of dumping with respect to 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 Review No. RR-97-001.

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

Summary

On May 12, 2000, the Commissioner of Customs and Revenue (Commissioner) initiated an investigation respecting the alleged injurious dumping into Canada of certain waterproof footwear and waterproof footwear bottoms, originating in or exported from the People's Republic of China.

The investigation was initiated in response to a complaint filed by the Shoe Manufacturers' Association of Canada (SMAC) of Beaconsfield, Quebec. A preliminary determination of dumping with respect to the subject goods was made on August 10, 2000.

The investigation continued after the preliminary determination and the Commissioner is now satisfied that the margin of dumping is not insignificant and that the volume of dumped goods is not negligible. Accordingly, the Commissioner has made a final determination of dumping in accordance with paragraph 41(1)(a) of the Special Import Measures Act (SIMA).

INTERESTED PARTIES

Complainant

The complainant, SMAC, has its office located in Beaconsfield, Quebec. The names and addresses of producers which are part of the complaint are listed in Appendix I.

Exporters

The Canada Customs and Revenue Agency (CCRA) has identified 27 exporters of the subject goods. Their names and addresses are listed in Appendix II.

Importers

The CCRA has identified 16 importers of the subject goods. Their names and addresses are listed in Appendix III.

BACKGROUND

On April 13, 2000, SMAC filed a complaint alleging the injurious dumping of certain waterproof footwear and waterproof footwear bottoms. On April 14, 2000, SMAC was informed that its complaint was properly documented and, at the same time the Government of the People's Republic of China (China) was notified of the filing of the complaint. A dumping investigation was subsequently initiated on May 12, 2000.

On August 10, 2000, the Commissioner made a preliminary determination of dumping with respect to the subject goods pursuant to subsection 38(1) of SIMA.

Product Definition

For the purpose of this investigation the subject goods 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 Review No. RR-97-001.

Additional Product Information

The distinctive feature of waterproof footwear is that both the sole portion and a portion of the upper, sufficient to give waterproof protection to the foot, are incorporated in a single component which may be made of rubber or plastic. Styles include footwear manufactured for men, women, youth, misses and children.

Subject goods include waterproof plastic footwear made from plastic resins by injection moulding or other processes. The term "plastic" includes polyvinyl chloride (PVC) and other plastics. PVC is the plastic most commonly used in this class of footwear. The external surface may be made entirely of plastic, as in the case of rainboots. In other styles, such as duck shoes or winter boots, a boat-like waterproof bottom may have trimmings, attachments, liners, cuffs or tops of nylon or other materials.

Subject goods also include certain styles of waterproof rubber footwear. The term "rubber" refers to natural and synthetic rubber, including thermoplastic rubber. Rubber-bottom footwear with leather tops, waterproof rubber riding boots and waterproof rubber safety footwear are subject to this investigation.

Waterproof bottoms of plastic or rubber are subject to this investigation. Waterproof bottoms are normally boat-like components which are intended for incorporation in finished waterproof footwear.

Subject goods include moulded clogs. Such goods are typically made from plastic or rubber and may be open or closed at the heel, depending on the design of the sole.

Exclusions

Ski-boots and skating boots are excluded from the definition of subject goods.

All footwear subject to the order made in Canadian International Trade Tribunal Review No. RR-97-001 is specifically excluded from the definition of subject goods for this investigation. The order covers certain waterproof rubber footwear constructed wholly or in part of rubber, including thermoplastic rubber, worn over the foot or shoe, with or without liners, linings, fasteners or safety features.

Classification of Imports

The subject footwear are usually classified under one of the following 10-digit Harmonized System (HS) classification numbers listed below:

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

The majority of subject goods imported during the period of investigation were classified under HS heading 6401. These goods can be described as waterproof footwear with outer soles of plastic.

CANADIAN INDUSTRY

The Canadian industry consists of 10 known producers of subject goods. Five producers, all of them members of SMAC, are actively supporting this complaint and collectively account for more than 95 per cent of the total Canadian production.

At the initiation of the investigation, SMAC identified six fully integrated major producers of waterproof footwear and waterproof footwear bottoms in Canada. All six producers were members of SMAC. Since the initiation, Kaufman Footwear of Kitchener, Ontario, went into receivership on July 20, 2000, and bankruptcy on July 21, 2000.

There are five secondary producers of waterproof footwear. These producers do not produce their own bottoms, but purchase them from major domestic producers or import them from foreign producers, and attach uppers of various materials to produce finished waterproof footwear. The total production of these producers represent about 1 per cent of the production of the major producers.

All of the producers are listed in Appendix I.

CANADIAN MARKET

Statistical information on the total apparent Canadian market for the calendar years 1997 to 1999 is included in Appendix IV. The information was taken from the Canadian International Trade Tribunal Pre-Hearing Staff Report of September 27, 2000.

The Investigation

The dumping investigation covered all subject goods released from customs' possession into Canada during the period of investigation of April 1, 1999 to March 31, 2000.

Initiation

At the time of initiation of this investigation, a Request for Information was sent to the Chinese government and exporters in China to provide them the opportunity to submit information so that the Commissioner could form an opinion concerning the domestic market conditions of the waterproof footwear sector in China. In the past, the CCRA has considered China to be a non-market economy and has determined normal values for imports from China on the basis of sales of like goods in a surrogate country.

Where the goods being investigated are imported from a country with a non-market economy, that is, where the government has a monopoly or substantial monopoly of its export trade and domestic prices are substantially determined by the government, normal values are generally determined on the basis of sales of like goods in a surrogate country with an open market economy under paragraph 20(1)(c) of SIMA.

Generally, the normal value is the price of like goods in a surrogate country adjusted to reflect the differences in terms and conditions of sale, in taxation and other differences relating to the price comparability of the goods sold in the surrogate country and the goods sold to the importer in Canada. Alternatively, the normal value may be established based on the aggregate of the cost of production, an amount for administrative, selling and all other costs, and profit in the surrogate country.

At the time of initiation, the CCRA also sent a Request for Information to importers requesting that they identify the supplier(s) in China from which they imported the subject goods, as well as the total volume and value of imports during the period April 1, 1999 to March 31, 2000. In addition, the CCRA requested that the largest importers provide samples of the most popular styles, by volume, of the subject goods.

Preliminary Determination

Prior to the preliminary determination, a submission had not been received from the government of China. As such, the CCRA could not determine whether the footwear industry in China is operating under the conditions of an open market economy. Accordingly, the CCRA contacted 31 producers in five potential surrogate countries in an attempt to obtain information which could be used to establish normal values. Unfortunately, none of the producers who responded produce waterproof footwear similar to the products being imported from China.

In the absence of sufficient information from the government of China and the producers in the surrogate countries, the normal values were estimated on the basis of the best available information, which, in this case, was the information supplied in the complaint.

For purposes of estimating the margin of dumping, the CCRA compared the 12 different waterproof footwear samples provided with the complaint with the 38 samples provided by importers of the subject goods and found four exact matches. These four samples represented 14 per cent of the total volume of subject goods imported from China. The estimated normal values for the four different styles were based on the cost of producing and selling such goods in Canada, with an amount for profit. Adjustments were then made to reflect lower costs of production in a country which was under consideration for use as a surrogate, in this case, Mexico.

Based on the estimated normal values, as well as the export prices obtained from customs' documents, the CCRA estimated that all of the goods imported from China during the period of investigation were dumped by a weighted average margin of dumping of 40 per cent, when calculated as a percentage of the total normal value. Therefore, normal values at that time were determined to be equal to the export price plus an amount equal to 66 per cent of the export price.

Results of the Investigation

Final Determination

No information was received from the government of China subsequent to the preliminary determination. Therefore, the Commissioner remained in a position where he was unable to determine whether the footwear industry in China is operating under the conditions of an open market economy. The CCRA, therefore, contacted an additional 16 producers in Indonesia, Malaysia and Thailand, in a second effort to obtain information from producers in a surrogate country. These requests yielded no information.

In addition, the CCRA sent questionnaires to importers to obtain information respecting the resale prices of similar goods which they may have imported from countries other than China. This information was requested for purposes of determining normal values under paragraph 20(1)(d) of SIMA. Under this section, normal values are determined by using the importer's selling price in Canada of like goods produced in a third country as a starting point. From this price, deductions are made for costs resulting from the importation and sale of the goods, costs related to the preparation of the goods for shipment to Canada and incurred as a result of their shipment to Canada and an amount for the profit of the importer on the sale in Canada. No information was provided pursuant to these requests.

Normal Values

In the absence of sufficient information to enable the determination of normal values under section 20 of SIMA, normal values were determined pursuant to a ministerial specification under section 29 of SIMA on the basis of the export price advanced by 49 per cent.

The methodology used in the ministerial specification resulted from the analysis outlined below made by the CCRA using the available information:

• an aggregate of the cost of production and an amount for general, selling and administrative expenses (GS&A) and profit in a surrogate country was estimated for three styles of subject footwear, determined to be most representative of the goods being imported. The cost of production in Canada (material, labour and factory overhead) of these three models was adjusted to reflect lower costs of production in a surrogate country. Specifically, the Canadian labour costs were reduced by 90 per cent, material costs by 5 per cent and factory overhead costs by 75 per cent. A gross margin of 25 per cent of the total production cost was added to cover GS&A, and an operating profit of approximately 10 per cent.
• an aggregate of the cost of production and an amount for GS&A and profit for each of 23 other styles was determined using the three base styles as a starting point. Comparisons were made between the three base models and the 23 other styles and adjustments were made by a panel composed of three members (a Canadian industry representative, an importer and a retailer representative) to account for differences in quality between the base styles and the imported footwear. As a result of this exercise, our sample included 26 styles of imported footwear which represents 64 per cent of the total volume of goods imported during the period of investigation.
• the aggregate cost of production, GS&A and profit for each of the 26 styles was then compared with the export price for each of the shipments of those goods which entered Canada during the period of investigation.

Based on the above exercise, the overall margin of dumping for the 26 models was 33 per cent of normal value or 49 per cent expressed as a percentage of export price. The 49 per cent advance formed the basis of the specification.

Export Prices

The export prices were based on the importers' declared purchase prices pursuant to section 24 of SIMA.

Margins of Dumping

All of the subject goods from China during the period of investigation were reviewed and found to be dumped by 33 per cent of normal value. The margin of dumping of the subject goods is 49 per cent, expressed as a percentage of export price and, therefore, is not insignificant.

Volume of Dumped Imports

Before making a final determination of dumping, the Commissioner must be satisfied that the actual or potential volume of dumped goods is not negligible. If the volume of dumped goods of a country is less than 3 per cent of the total volume of like goods that are released into Canada from all countries, the volume is considered to be negligible. The volume of dumped imports from China represents 96 per cent of all imports of like goods and, therefore, exceeds this negligibility threshold.

Decision

On this date, pursuant to paragraph 41(1)(a) of SIMA, the Commissioner has made a final determination of dumping with respect to 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 Review No. RR-97-001.

In making this decision, the Commissioner is satisfied that the subject goods have been dumped, that the margin of dumping is not insignificant and that the volume of dumped goods is not negligible.

Future Action

The Canadian International Trade Tribunal's (Tribunal) inquiry concerning the question of injury to production in Canada is continuing. The Tribunal will issue its finding by December 8, 2000.

Subject goods imported during the provisional period will continue to be assessed provisional duty as determined at the time of the preliminary determination of dumping. The provisional period began on August 10, 2000, the date of the preliminary determination, and will end on the date the Tribunal issues its finding. For further details on the application of provisional duties, refer to the Statement of Reasons issued at the time of the preliminary determination of the investigation which is available on the CCRA internet web site at:

www.cbsa-asfc.gc.ca/sima-lmsi/

If the Tribunal finds that the dumped goods have not caused injury and are not threatening to cause injury, all proceedings relating to this investigation will be terminated. In this situation, all provisional duty or security posted by importers will be returned and future imports will not be subject to anti-dumping duties.

If the Tribunal finds that the dumped goods have caused injury, the CCRA will finalize the anti-dumping duty payable on subject goods released from customs' possession during the provisional period pursuant to section 55 of SIMA. If the provisional duty paid is in excess of the final amount of anti-dumping duty payable, the excess duty paid will be refunded. Imports released from customs' possession after the date of the Tribunal's finding will be subject to anti-dumping duty equal to the margin of dumping. If anti-dumping duty is payable, such duty is hereby demanded pursuant to section 11 of SIMA.

If the Tribunal finds that the dumped goods threaten to cause injury, all provisional duty paid or security posted by importers will be returned. However, imports released from customs' possession after the date of the Tribunal's finding will be subject to anti-dumping duty equal to the margin of dumping. If anti-dumping duty is payable, such duty is hereby demanded pursuant to section 11 of SIMA.

Publication

Notice of this final determination of dumping is being published in the Canada Gazette pursuant to paragraph 41(3)(a) of SIMA.

Information

This Statement of Reasons has been provided to persons directly interested in these proceedings. A free copy may be obtained upon request or from the CCRA's Web site at the address below. For further information, please contact Mr. Michel Desmarais or Mr. Jan Smith as follows:

Mail -
Canada Customs and Revenue Agency
Anti-dumping and Countervailing Directorate
19^th Floor, Sir Richard Scott Building
191 Laurier Avenue West
Ottawa, Ontario K1A 0L5
Canada

Telephone -
Michel Desmarais: (613) 954-7188
Jan Smith: (613) 954-7409

Fax -
(613) 954-2510

E-mail -
MichelD.Desmarais@cbsa-asfc.gc.ca
Jan.Smith@cbsa-asfc.gc.ca


Web site -
www.cbsa-asfc.gc.ca/sima-lmsi/

R.A. Séguin
A/Director General
Anti-dumping and Countervailing Directorate

Appendix I

CANADIAN MANUFACTURERS OF WATERPROOF FOOTWEAR

Manufacturers who belong to the Shoe Manufacturers' Association of Canada:

Acton International Inc.
255, boul. Crémazie est, RC #1
Montréal, QC H2M 1L5

Baffin Inc.
346 Arvin Avenue
Stoney Creek, ON L8E 2M5

Genfoot Inc.
554 Monté de liesse
Montréal, QC H4T 1P1

Les Chaussures Régence
655, rue de l'Argon
Charlesbourg, QC G2N 2G7

Rallye Footwear Inc.
10310, boul. Ray Lawson
Ville D'Anjou, QC H1J 1M1

Manufacturers who do not belong to the Shoe Manufacturers' Association of Canada:

Alliance Mercantile Inc.
3451 Wayburne Dr.
Burnaby, BC V5G 3L1

Chaussures Vercorp Inc.
1569, rue St Georges, C.P. 9
St. Bernard, QC G0S 2G0

Hichaud Inc.
2485, boul. Neuviale
Québec, QC G1P 3A6

Les Entreprises J. E. Goulet Enrg.
(2973-7160 Quebec Inc.)
17 St Alphonse, C.P. 639
Luceville, QC G0K 1E0

Viberg Boot Manufacturing Ltd.
662 Herald Street
Victoria, BC V8W 1S7

Appendix II

EXPORTERS OF WATERPROOF FOOTWEAR

Beauty Class Footwear (Bao An) Ltd.
Second Industrial Center, Man Ao
Bao An
Guang Dong
People's Republic of China

China National Light Industrial Products
Import and Export Corporation, Guangzhou Branch Footwear and Headgear Company
No. 87, The Bund
Guangzhou, People's Republic of China

Enca Shoe Factory Co., Ltd.
Inn Sun Industrial Zone
Ching His Town
Dongguan City
Guang Dong
People's Republic of China

Fujian JinJiang Hengdali Hoes Industrial Co., Ltd.
Fujian JinJiang Air Force Ground Station (By the Xucuo, Qingyane)
Fujian, People's Republic of China

Hangzhou Huasui Rubber Products Co., Ltd.
Jiandin Road
Hangzhou, People's Republic of China

Heilongjiang Yangshan Import Export Corp.
116 Zhongshan Rd.
Harbin, People's Republic of China

Hualong Shoe Co., Ltd.
Cheung Chun
Shi-Jin Town
Guangzhou, People's Republic of China

Mudanjiang Baiyue Shoe-Making Co., Ltd.
56-A Guang Hua St.
Mudanjiang City
Heilongjiang Province
People's Republic of China
Panyu Yuexing Footwear and Packing Co., Ltd.
No 3 Gongye Road, Dagang
Panyu Guangzhou
People's Republic of China

Qingdao OMG Rubber Co., Ltd.
Wangjiantiugu-Cun, Liuting
Chengyang, Qingdao
People's Republic of China

Shuai Kwo Shoes Factory
Xiaxi Industry Area
Pinghou
Nanhai, Guangdong
People's Republic of China

San Lick (Kam Kee) Rubber Factory
No. 8 Xiao Lan Road North
Xiao Lan Town, Zhong Shan City
Guang Dong
People's Republic of China

Sparks Enterprises Ltd.
17c Floor, South Tower Jinhou Mansion
#88 Muxuyuendajie
Nanji, Jiangsu
People's Republic of China

Asco General Supplies (Far East) Ltd.
13/F., Harbour Crystal Centre
100 Grenville Road
Tsimshatsui East
Kowloon, Hong Kong

B.A.R.T.E.R. Worldwide Ltd.
Room 401, 4/F Tower III
Silvercord, 30 Canton Road
Tsimshatsui
Kowloon, Hong Kong

Condav International Ltd.
Unit 5, 3/F., Westlands Centre
20 Westlands Road
Quarry Bay, Hong Kong

Globe-Link Resources Ltd.
Room 1202, Tung Ming Building
42 des Voeux Road
Central, Hong Kong

Kam Kee Rubber Ware Works Ltd.
Block A/B, 1/F, wing Chai Ind. Bldg.
222, Choi Hung Road
San Po Kong, Kowloon
Hong Kong

Kind Pine Limited
Unit 1, 28^th Floor, Jupiter Tower
9 Juniper Street
North Point, Hong Kong

Liang Shing Industries (HK) Limited
306-310, 3^rd Floor Island Place Tower
510 Kings Road
North Point, Hong Kong

Sears Buying Services Inc.
11/F, New World Office Building, East Wing, Block B
24 Salisbury Road
Tsimshatsui
Kowloon, Hong Kong

Winhop Industrial Limited
Unit B, 9/F, Lockville Commercial Building
27 Lock Road
Tsimshatsui
Kowloon, Hong Kong

Eusfull Industrial Co., Ltd.
No. 9, 20 Road, Industrial Park
Taichung
Taiwan

Unifong Corporation
18F-6, No. 123, Sec. 3
Taichung Kang Rd.
Taichung
Taiwan

PREL Taiwan
10/F #51, Section 2, Keelung Rd.
Taipei
Taiwan

E.S. Originals Inc.
450 West 33^rd Street
New York
NY
10001, U.S.A.

North American Boot Co.
1325, Eagandale Court
Eagan
MN
55121, U.S.A

Appendix III

IMPORTERS OF WATERPROOF FOOTWEAR

Allard Sécurité
12-1470, boul. Jutras ouest
Victoriaville, QC G6P 5R8

Bata Retail Canada
59 Wynford Drive
Toronto, ON M3C 1K3

Brandsteps Ltd.
4 Brookdale Dr.
Barrie, ON L4N 1N5

G H Factory Sales Ltd.
19114 95A Ave.
Surrey, BC V4N 4P2

Good View Trading Ltd.
City Square, West Tower
488-555 West 12^th Ave.
Vancouver, BC V5Z 3X7

Groupe Yellow Inc.
5665, boul. St-Laurent
Montréal, QC H2T 1S9

Hichaud Inc.
2485, boul. Neuviale
Quebec, QC G1P 3A6

Hudson's Bay Company
10^th Floor, 401 Bay Str.
Toronto, ON M5H 2Y4

M & M Footwear Inc.
699 Gougeon Street
Ville St-Laurent, QC H4T 2B4

Norimco
Suite 200, 445 Apple Creek Blvd.
Markham, ON L3R 9X7

Sears Canada Inc.
Dept. 702 I
222 Jarvis Street
Toronto, ON M5B 2B8

Tai Lung (Canada) Ltd.
478 Finchdene Square
Scarborough, ON M1X 1C2

Talbots Canada Inc.
7941 Jane Street
Unit 3
Concord, ON L4K 2M7

Wal-Mart Canada Inc.
1940 Argentia Rd.
Mississauga, ON L5N 1P9

Wholesale Sports of Canada Ltd.
225 58 Avenue S.E.
Calgary, AB T2H 0N8

Zellers Inc.
Suite 601, 401 Bay St.
Toronto, ON M5H 2Y4

Appendix IV

TOTAL APPARENT CANADIAN MARKET
VOLUME IN 000 PAIRS:

Year:	1997	Per Cent of Total Market	1998	Per Cent of Total Market	1999	Per Cent of Total Market
Total Cdn Production:	5,732	91%	4,744	89%	4,108	85%
Imports
China	418	7 %	494	9 %	672	14%
All others	116	2%	85	2%	26	1%
Total Imports:	534	9%	579	11%	698	15%
Total Apparent Cdn Market:	6,265	100%	5,323	100%	4,806	100%