Strasbourg, 25 June 2007

Dear Mr W.,

On 31 March 2006, Mr Ron Jansen made a complaint to the European Ombudsman against the European Commission, on behalf of Ferro Footwear B.V ("the complainant").

The complaint concerned the procedure leading to the adoption of provisional anti-dumping measures on imports of certain footwear with uppers of leather originating in China and Vietnam (Regulation (EC) 553/2006 of 23 March 2006 imposing a provisional anti-dumping duty on imports of certain footwear with uppers of leather originating in the People's Republic of China and Vietnam (OJ 2006 L 98, p. 3), initiated by the Commission on 5 July 2005 (Notice published in OJ 2005 C 166, p. 6).

On 7 April 2007, the complainant completed its complaint with new information.

On 10 May 2006, I forwarded the complaint to the Commission.

On 9 August 2006, Mr Ron Jansen informed me that the lawyer dealing with the case had been changed and that you were now representing the complainant.

On 26 September 2006, the Commission sent an opinion on the complaint, which I forwarded to you with an invitation to make observations.

On 29 November 2006, you sent me your observations.

On 19 February 2007, you sent me additional information concerning your client's complaint.

I am now writing to inform you of the results of the inquiries that have been made.

THE COMPLAINT

The complaint may be summarised as follows:

Ferro Footwear B.V. ("the complainant") is a company active in the design and trading of leather footwear. It purchases its leather footwear in China and Vietnam. Almost 50% of its turnover and profits are derived from leather footwear, which was subject to an anti-dumping investigation.

On 7 July 2005, the Commission announced the initiation of an anti-dumping investigation concerning imports of certain footwear with uppers of leather originating in China and Vietnam, following the complaint made by the European Confederation of the Footwear Industry ("the Confederation") pursuant to Article 5 of Council Regulation (EC) 384/96 of 22 December 1995 on protection against dumped imports from countries not members of the European Community ("the Basic Regulation")(1) as amended by Council Regulation (EC) 461/2004(2). Pursuant to Article 7(1) of the Basic Regulation, the Commission may adopt provisional measures. According to the complainant, the provisional anti-dumping measures normally become definitive measures. If, in very exceptional cases, provisional measures are revised or levied, the harm to companies has already been done. In the first place, the provisional duties have been paid or set aside by bank guarantee and therefore cannot be used for business. Second, the orders are often placed in advance and re-sale prices of these orders are already fixed, (this is the case in the footwear industry), and therefore the provisional measures render all business calculations invalid. In such situations, the impact of such measures is irreversible, especially as far as small and medium-sized enterprises are concerned. In this respect, the complainant argued, on the basis of relevant figures, that the current anti-dumping provisional duty imposed by the Commission for a period of six months is higher than its net profit for the complete year. Therefore, the complainant stated that, if it is not able to increase its profits in its other activities, it would go bankrupt.

Given the crucial importance of the Commission's measures for the complainant's business, it decided to co-operate with the Commission's investigation and submitted, within the deadline set by the latter, a response to the Commission' questionnaire to importers.

The complainant also supported numerous submissions made by the Footwear Association of Importers and Retail Chains ("FAIR"), of which it is a member.

In particular, the complainant supported FAIR's opinion of 17 July 2005 that the selection by the Commission of Brazil as a reference country in order to determine the normal value for exporting producers in China and Vietnam (point 5.1 (d) of the Notice) was senseless given that the Brazilian footwear industry has different characteristics than the Chinese and Vietnamese footwear industry.

The complainant also supported FAIR's submission of 23 August 2005, which was followed by a hearing before the Commission on 4 October 2005. FAIR's submission stated that the complaint lodged with the Commission by the Confederation contained legal flaws. The complainant also supported FAIR's submission that the members of the Confederation did not suffer material injury as a result of the EU imports from China and Vietnam, or at least that this injury was not caused by dumping, and that the Community interests oppose the introduction of anti-dumping measures.

Furthermore, the complainant supported the comments made by FAIR on 3 August 2005 that the "Product Control Numbers" (PCNs) which were established by the Commission, and on the basis of which the Commission calculated the dumping and injury margin, were not correct.

Moreover, the complainant supported FAIR's submission of 7 November 2005, that the sample of exporting producers in China and Vietnam on which the Commission based its investigation was not representative since it focused on sports companies and failed to include other important suppliers.

Finally, the complainant supported FAIR's reaction of 25 November 2005 to the Commission's proposal to exclude certain sports footwear from the product scope of the anti-dumping investigation.

On 23 February 2006, the website of the Directorate-General for Trade announced that Commissioner Mandelson recommended imposing a progressive anti-dumping duty on leather footwear imported from China and Vietnam over a period of five months. The Commission also published the information concerning the anti-dumping measures on leather shoes. The complainant noted that some information referred to was, in its view, erroneous and/or misleading.

In the complainant's view, the Commission did not take into account the key structural differences between the Chinese and Brazilian footwear industries: the Brazilian producers are active in the whole manufacture and production process (design, to sales to independent customers), while Chinese producers are only involved in the basic manufacture of footwear. For these reasons, the complainant argued that the choice of Brazil as a reference country was not based on correct criteria, and was therefore wrong.

Furthermore, the complainant noted that the Commission's reference to the prices and costs in Chinese and Vietnamese markets gave the false impression of serious state intervention and subsidies to the Chinese and Vietnamese footwear producers.

It also noted that the statement that the anti-dumping measures concern only nine out of each 100 pairs of shoes sold on the EU market was misleading. In this regard, the complainant argues that the anti-dumping measures concern one third of the leather shoe market in Europe.

It noted that the statement that the margin in the supply chain is sufficient to absorb the duties imposed and that the retailers can balance this out across other product ranges is also misleading, given that the EU importer is in most cases also the retailer. It went on to point out that the Commission only investigated six EU importers whose shoes were expected to be excluded from the anti-dumping measures. Therefore, the Commission's findings do not, according to the complainant, reflect the situation of at least 50% of the sector.

Moreover, it noted the Commission's statement that children's footwear and Special Technology Athletic Footwear were to be excluded from anti-dumping measures. This was misleading because it suggests that due care had been taken of the interests of consumers and importers. The exclusion concerned in fact a very limited number of companies.

The complainant also found the Commission's statement that European footwear production has contracted by about 30 % and that there had been job losses of 40 000 was both unclear and misleading because it did not indicate which of these figures were caused by dumping and which not.

The complainant also took the view that the statement that the EU import prices of Chinese and Vietnamese footwear decreased, but that the retail prices remained stable, was not accompanied by an explanation as regards why this happened. Therefore, it was misleading. According to the complainant, the following factors explain the above statement: the new fashion trend involves cheaper solutions; increase of the EU-based costs of footwear industry; and different exchange rate.

The complainant attached to its complaint printouts of the Commission's website.

The complainant also noted that before the above information was published on the Commission's website, the complainant and FAIR had not received any communication from the Commission with respect to the findings of the investigation, even though they were involved in the procedure.

Therefore, on 13 March 2006, the complainant sent a fax to the Commission in which it expressed its concerns about the handling of the proceedings by the Commission. In particular, it stated that a Commissioner could not announce in the press the Commission's proposal to impose provisional anti-dumping duties without a prior formal communication of the Commission's findings and proposals to the interested parties. The complainant emphasised that it would like to express its view on the investigation since it believed that the decision to impose anti-dumping duties was based on a misunderstanding.

On 16 March 2006, the Commission sought the opinion of the Anti-Dumping Advisory Committee (ADC) on the proposed measures. According to the complainant, three members out of ADC's total membership of 25 voted for the proposal, nine members did not support the proposal, while 11 members abstained either because they considered that more stringent anti-dumping measures were required, or because they found that the proposed measures did not sufficiently balance the interests of all parties involved. Two members did not vote.

On 20 March 2006, the Commission replied to the complainant's fax of 13 March 2006. It stated that its normal procedure had been followed and that, given that the complainant was a co-operating interested party in this case, it would, in due time, receive the Commission's provisional conclusions and would be given the opportunity to comment on them.

On 22 March 2006, the College of Commissioners' adopted the proposed provisional measures, which provided for anti-dumping duties of 19.4 % on imports from China and 16.8% on imports from Vietnam.

On 6 April 2006, Commission Regulation 553/2006 imposing provisional anti-dumping measures on the imports of leather footwear from China and Vietnam(3) ("Regulation 553/2006") was published in the Official Journal and entered into force on 7 April 2006, for a period of six months.

The complainant took the view that provisional anti-dumping measures adopted by the Commission are not equitable for the whole industry and that the Commission should not have evaluated only pure manufacturing or pure trade activities. It also took the view that the Commission could have opted for a less restrictive and more equitable measures and could have allowed some imports without an anti-dumping duty. Finally, it pointed out the disproportionate effects of the measures in question by comparing their impact on the companies that profit from the imposition of anti-dumping duties ("A") to the impact on consumers and on the companies that suffer losses as a result of the introduction of these duties ("B"). In this respect, the complainant quoted the calculations made by the Danish Ministry of Economics and Business Affairs that the expected loss for "B"-type companies and consumers would amount to EUR 295 million per year. Moreover, the final losers would be consumers (according to the complainant, the above Ministry predicts an increase in prices of 25% for the shoes subject to anti-dumping measures).

In its complaint to the European Ombudsman, the complainant submitted four allegations and two claims.

The complainant alleged that the Commission failed to ensure the complainant's rights of defence and breached the principle of sound administration, by failing to disclose its findings prior to the formal adoption of provisional measures and by failing to accept the complainant's request of 13 March 2006 to present its comments.

The complainant alleged that the Commission infringed the principle of proportionality.

The complainant alleged that the Commission based its decision on erroneous information and wrongly selected Brazil as the reference country.

The complainant alleged that the Commission acted in a way that was not transparent, by failing to disclose the identity of the complaining EU producers and of the sampled EU producers.

The complainant claimed that that the Commission should withdraw its Regulation imposing provisional anti-dumping measures on certain leather footwear from China and Vietnam.

The complainant also claimed that the provisional anti-dumping duties which have already been collected should be released.

THE INQUIRY

The Commission's opinion

The Commission's opinion can be summarised as follows:

Following a complaint lodged by the Confederation, an anti-dumping investigation has been initiated against imports of certain leather footwear originating in China and Vietnam. The investigation provisionally confirmed (a) the Confederation's allegations of injurious dumping and (b) that the legal conditions for the imposition of provisional measures were met. Those measures were imposed by Regulation 553/2006.

The complainant fulfilled all the legal requirements to be considered an interested party in the investigation and has fully co-operated in it.

The anti-dumping procedures are governed by the Basic Regulation, as amended by Regulation (EC) 461/2004. The Basic Regulation is fully compatible with the corresponding WTO rules.

According to the Basic Regulation, as long as investigations are on-going, all interested parties enjoy extensive rights of defence by providing the Commission services with detailed information and specific comments which, if relevant and adequately supported by evidence, will be duly taken into consideration for the purpose of drawing definitive conclusions. They also have the right to inspect the files and to request hearings.

The Commission takes the view that as long as the investigations are on-going all claims made by various parties should exclusively be dealt with by the Commission and within the relevant specific legal framework, until definitive conclusions are drawn. At the time the complaint was sent to the Ombudsman, only provisional measures were imposed and the final outcome of the investigation remained unknown.

As regards the complainant's allegation concerning the breach of the right of defence and the principle of sound administration, the Commission referred to Article 20(1) of the Basic Regulation, according to which interested parties may request "disclosure of the essential facts and considerations on the basis of which provisional measures have been imposed" (emphasis added) and that "such disclosure shall be made in writing immediately following the imposition of provisional measures." It is therefore evident that according to the Regulation no pre-disclosure, that is, disclosure before any imposition of anti-dumping measures, should be provided.

In addition, the absence of disclosure of the identity of the complaining EU producers and of the sampled EU producers is in this case justified for the reasons set out in detail in Regulation 553/2006 and is in full compliance with the Commission's practice in comparable situations.

The Commission explained the above in its answer to the complainant dated 20 March 2006.

Moreover, the Commission provided the disclosure of its essential facts and considerations to all interested parties thus including the complainant after the provisional measures were taken.

As regards the breach of the principle of proportionality and duty of care, the Commission's provisional findings are based on facts, verified financial data and comments provided by the parties that co-operated in the investigation. The methodology including the choice of the reference country and the relevance and appropriateness of the measures imposed are strictly compatible with the relevant EC and WTO rules, the Commission's normal practice and the case law of the Community Courts'. The Commission noted that these acts can therefore be reviewed by the Community Courts and the WTO Dispute Settlement Body.

The Commission considered therefore that its decisions were not based on erroneous information and that the choice of the reference country was not wrong.

The Commission recalled, however, that, at that stage of the proceedings, it only drew provisional conclusions. Definitive conclusions were not yet available. In order to reach definitive conclusions, the Commission would have to complete its assessment of the comments concerning the provisional measures made up to that point, as well as the comments which would be made in various hearings that still had to be carried out. Its assessment of the various comments has to be carried out within the legal framework of the investigation as set out by the Basic Regulation.

If the definitive anti-dumping duty is higher than the provisional duty, the difference shall not be collected and if the definitive duty is lower than the provisional duty the duty shall be recalculated. Where a definitive finding is negative, the provisional duty shall not be confirmed.

The Commission concluded that the anti-dumping investigation had been carried out in full compliance with the Basic Regulation and that no maladministration had occurred. The procedural requirements of the Basic Regulation have been rigorously respected in this investigation, thereby ensuring a proper right of defence to the parties.

Therefore the Commission took the view that there is no ground to accept the complainant's claims that Regulation 553/2006 should be withdrawn and that any provisional duties collected should be released.

The complainant's observations

The complainant's observations may be summarised as follows: First, the complainant referred to the Commission's statement that, as long as the investigations are ongoing, all claims made by the various parties should exclusively be dealt with by the Commission, and within the relevant specific framework. The complainant underlined that, when conducting anti-dumping investigations, the Commission acts in an administrative capacity and that Regulation 553/2006 is based on an administrative assessment. Therefore, the Ombudsman is entitled to review at any time whether or not the Commission has carried out the anti-dumping investigation and has arrived at the establishment of its findings in accordance with the principles of good administration.

Furthermore, the complainant referred to the Commission's statement that, by refusing disclosure of its findings, it acted in accordance with the Basic Regulation. The complainant therefore quoted the Ombudsman’s view, expressed in one of his decisions (1219/2003/GG), that maladministration does not automatically entail illegality. Furthermore, the complainant stated that the Commission must respect fundamental rights pursuant to Article 6(2) EU Treaty and interpret and apply secondary legislation in a manner which does not violate those rights. The complainant pointed out that the rights of defense, including the right to disclosure, constitute fundamental rights and that the Court of Justice has called on the Community institutions, when applying Community anti-dumping rules, to be "all the more scrupulous in view of the fact that [the anti-dumping rules] do not provide all the procedural guarantees for the protection of the individual which may exist in certain national legal systems" (C-49/88 Al Jubail Fertiliser v Council(4)).

The complainant also took the view that the obligation to respect fundamental rights requires of the Commission that it refrain from any actions or inactions, even if they are allowed or not required by secondary legislation, that would impair the effet utile of the rights of defense, including the right of pre-disclosure. Respect for the rights of defense must be given priority even when express procedural requirements in the relevant legislation do not mention them in the context of specific administrative proceedings. Thus, the lack of a specific requirement of pre-disclosure is no defense. For this reason, by not providing pre-disclosure, the Commission infringed the complainant’s right of defense.

As regards the Commission's statement that the absence of disclosure of the complaining and sampled EU producers was "justified for the reasons set out in detail in the Commission Regulation imposing provisional measures", the complainant stated that it became aware of the Commission’s reasoning on 6 April 2006, when Regulation 553/2006 was published in the Official Journal. The complainant added that, contrary to the Commission’s statement in its opinion, the Commission did not refer to this issue in its answer to the complainant dated 20 March 2006. The complainant took the view that the Commission had erroneously treated confidentially the cases of the complaining and sampled EU producers. It quoted therefore Article 19(1) of the Basic Regulation that

"[a]ny information which is by nature confidential (for example because its disclosure would be of significant competitive advantage to a competitor or would have significant adverse effect upon a person supplying the information or upon a person from whom he has acquired the information) or which is provided upon confidential basis by parties to an investigation shall, if good cause is shown, be treated as such."

According to the complainant the names of the companies are not by nature confidential and the question arises whether disclosure of the names of the companies would have adverse effects upon a person supplying the information. The complainant took the view that there is no proof offered by the Commission that the disclosure of the names of the companies would have significantly adverse effects.

Moreover, the complainant noted that, in recital 8(a) of Regulation 553/2006, the Commission stated that "these companies are in a sensitive position since some of their clients may not be satisfied with them lodging or supporting a complaint against alleged injurious dumping", and that "the sampled Community producers as well as other cooperating Community producers requested (…) that their identities be kept confidential". The complainant took the view that the Commission considered that the potential dissatisfaction of certain customers that source from EU and Chinese suppliers sufficiently substantiated a risk of retaliation and therefore the Commission treated confidentially the cases of all complaining producers and not only the ones that made an explicit request for confidentiality. According to the complainant, however, the mere risk of retaliation is not sufficient under Article 19 (1) of the Basic Regulation. To meet the requirement of a direct causal link for establishing the "confidential nature" of the information at issue, the risk must be more substantial than mere possibility.

In the complainant's view, in the present case no evidence has been brought forward to prove the existence of adverse effects. In this regard, the complainant appears to refer to "[c]ertain footwear with uppers of leather or plastics from China, Indonesia and Thailand"(5). The complaining producers who requested confidentiality were not asked to demonstrate and have not demonstrated that that they are actually subject to commercial pressure to stop co-operating in the investigation and/or to withdraw their support for the complaint. In addition, they had not provided any evidence that there is a threat of retaliation that goes significantly beyond what can be considered "normal" in commercial relations ("Footwear with textile uppers from China and Indonesia"(6)).

The complainant further stated that the Commission is obliged to disclose all non-confidential information, that is, information which cannot be classified as confidential pursuant to Article 19(1) of the Basic Regulation, which was used in its investigation and which had an influence on its findings and decision (Case 264/82 Timex(7)). The Commission’s refusal to disclose such information constitutes a denial of rights of defense aggravated by the fact that the information was wrongly considered confidential. This information was necessary to verify, for instance, whether (i) the requisite threshold for standing has been met or (ii) the sample of EU producers is representative in terms of the types of footwear produced.

Moreover, the Commission failed to respond to, or to take into consideration, the information which was sent to it by the complainant on 17 July 2006 and 2 August 2006. This information was important for provisional and final conclusions and concerned the reliability of data submitted to the Commission by the EU producers.

The complainant also stated that, on 28 July 2006, that is, before the Commission sent its opinion to the Ombudsman, the latter had already submitted to the Council a proposal to introduce definitive anti-dumping measures. This proposal did not differ substantially from the provisional measures. It was accepted by the Council and became a Regulation on definitive measures, which was published on 6 October 2006. Therefore the Commission’s statement in its opinion that the provisional findings were still under review is inaccurate. It also noted that the Commission had not commented on the complainants' point that provisional findings and measures are often decisive for the underlying findings, as well as for the form and content of the definitive measures.

The complainant's letter of 19 February 2007

In its letter dated 19 February 2007, the complainant referred to the Commission's Communication dated 6 December 2006, entitled "Global Europe, Europe's trade defence instruments in a changing global economy- A Green Paper for public consultation" (COM(2006)763 final) ("the Communication"). The complainant stated that this communication addressed a number of points made in the complaint and, in particular, the issue of proportionality (on pages 6, 7 and 8). The complainant appeared to take the view that the Commission implicitly recognised the complainant's claims or at least acknowledged the "uncomfortable" position that it found itself in vis-à-vis the anti-dumping proceeding in question.

The complainant attached a copy of that communication.

THE DECISION

1 Preliminary remarks
Competence of the Ombudsman

1.1 The Ombudsman notes the Commission's statement that "as long as the investigations are on-going all claims made by various parties should exclusively be dealt with by the Commission and within the relevant specific legal framework, until definitive conclusions are drawn", and that the imposed measures "can be reviewed by the ECJ/CFI and the WTO Dispute Settlement Body."

The Ombudsman does not understand, however, that, in making these statements, the Commission wished to challenge the Ombudsman's competence to deal with the present case.

Specific statement in the complainant's observations

1.2 The Ombudsman notes the statement by Ferro Footwear B.V. ("the complainant"), in its observations, that the Commission ignored the information which the complainant sent to it on 17 July 2006 and 2 August 2006.

1.3 The correspondence referred to by the complainant occurred after the provisional measures were adopted.

1.4 The Ombudsman notes that the present complaint concerns only the first stage of the anti-dumping procedure, which culminated on 23 March 2006, with the adoption of provisional measures. There are no other statements in the complainant's observations which might suggest that the complainant wished the Ombudsman to extend his inquiry to the subsequent stage of the anti-dumping procedure, that is, the stage leading to the adoption of definitive measures. The Ombudsman will therefore not deal with the complainant's statement in the present decision.

2 Alleged breach of the principle of sound administration and failure to respect the rights of defence

2.1 The complainant alleged that the Commission failed to ensure the complainant's rights of defence and breached the principle of sound administration, by failing to disclose its findings prior to the adoption of provisional measures and by failing to accept the complainant's request of 13 March 2006 to present to the Commission its comments.

In support of its allegation, the complainant stated that, although it was given the opportunity to answer the importers' questionnaire sent by the Commission and to support the submissions made by FAIR, its request of 13 March 2006 submitted to the Commission and asking the latter to disclose its findings was not accepted by the Commission. The complainant also argued that the Commission divulged its proposal on anti-dumping measures to the press and published it on its website before formally informing the interested parties, before any formal decision was taken and even before the advice of the Anti-Dumping Committee had been requested. As a result, public opinion and the decision making process have been influenced.

2.2 The Commission stated that the procedural requirements as specified in Council Regulation (EC) 384/96 on protection against dumped imports from countries not members of the European Community ("the Basic Regulation")(8) as amended by Council Regulation (EC) 461/2004(9) have been rigorously respected in this investigation, thereby ensuring a proper right of defence for the parties.

The Commission pointed out that, in accordance with the Basic Regulation, it was not required to disclose its findings before the provisional measures had been taken. The Commission referred therefore to Article 20(1) of the Basic Regulation which states that interested parties may request "disclosure of the essential facts and considerations on the basis of which provisional measures have been imposed" and that "such disclosure shall be made in writing immediately following the imposition of provisional measures".

2.3 In its observations, the complainant noted the Ombudsman’s view expressed in one of his decisions (1219/2003/GG) that maladministration does not automatically entail illegality. He admitted that the Commission had, indeed, acted according to applicable legal provisions. However, it considered, in summary, that the Commission should have interpreted these provisions in the context of fundamental rights (Article 6.2 of the EU Treaty) and should have disclosed its findings before the decision on the provisional measures had been taken, in order to ensure respect for the complainant's fundamental right of defence. In the same context, the complainant examined the Commission's refusal to accept the complainant's request of 13 March 2006 to present its comments.

2.4 As regards the complainant's remark concerning the Ombudsman's view that maladministration does not automatically entail illegality, the Ombudsman wishes to point out that, while true, this remark does not appear to be relevant to the complainant's concrete arguments which, in the Ombudsman's understanding, concern the correct interpretation of legally binding procedural requirements.

In this context, the Ombudsman also points out that that the present complaint concerns the adoption of provisional measures. The Ombudsman takes note of the special character of provisional measures, which, by their nature, are taken by administrative authorities on the grounds of urgency and are based on preliminary evidence which, prima facie, points to a finding of injury.

Therefore, if the provisional measures are to serve their purpose, the procedural preconditions to their exercise should not be so restrictive as to impede their expeditious adoption.

2.5 The Ombudsman points out that there are procedural guarantees in the Basic Regulation applicable to the adoption of provisional measures. In particular, paragraphs 5, 6 and 7 of Article 6 of the Basic Regulation provides for interested parties to be informed and heard. Article 7 of the Basic Regulation states that "[p]rovisional duties may be imposed if proceedings have been initiated in accordance with Article 5, if a notice has been given to that effect and interested parties have been given adequate opportunities to submit information and make comments in accordance with article 5(10) (...)" (emphasis added by the Ombudsman).

2.6 However, while interested parties must be given "adequate opportunities" to submit relevant information and make comments prior to the adoption of provisional measures, nothing in Article 7 implies that the right to submit information and make comments must necessarily be exercised in relation to the precise content of the provisional measures which the Commission may intend to adopt. Rather, the right to submit information and make comments will be respected if interested parties are permitted, prior the adoption of provisional measures, to make their views known in relation to the issues set out in the notice of initiation of an anti-dumping investigation, in the non-confidential version of the complaint or in relation to questionnaires of the Commission. In doing so, third parties can ensure that information they consider to be relevant, and pertinent comments they may have are taken into consideration by the Commission when adopting the provisional measures.

This interpretation would seem to be confirmed by the fact that the right referred to in Article 7 must be exercised "in accordance with Article 5(10)". Article 5(10) states that ""[t]he notice of initiation of the proceedings shall announce the initiation of an investigation, indicate the product and countries concerned, give a summary of the information received, and provide that all relevant information is to be communicated to the Commission; it shall state the periods within which interested parties may make themselves known, present their views in writing and submit information if such views and information are to be taken into account during the investigation; it shall also state the period within which interested parties may apply to be heard by the Commission (...)" (emphasis added by the Ombudsman).

Moreover, this interpretation would seem to be confirmed by the fact that Article 20(1) of the Basic Regulation clearly implies that the Commission is under no obligation to issue disclosure prior to the imposition of provisional measures (it is only obliged to do so prior to the imposition of definitive measures). It follows that, if the Commission can, in accordance with Article 20(1) of the Basic Regulation, deny disclosure prior to the adoption of provisional measures, the right to make comments under Article 7 of the Basic Regulation cannot be interpreted as implying a right to make comments on the proposed provisional measures. In sum, to give a broad interpretation to the right set out in Article 7 of the Basic Regulation would be to presume that Article 7 of the Basic Regulation could be used to circumvent the application of Article 20(1) of the Basic Regulation, which it cannot. The Ombudsman recalls, however, with respect to the above observations, that the Court of Justice is the highest authority to interpret Community law. 2.7 In the present case, the complainant appears to have used the procedural rights referred to in Article 7, given that it provided information and comments to the Commission on numerous occasions prior the adoption of the provisional measures. Further, the Ombudsman notes that the complainant does not contest the statement contained in the Commission's opinion that, after the provisional measures had been imposed, the information in question was disclosed to the interested parties (including to the complainant), who could then submit their views before the definitive measures would be imposed. The Ombudsman does not, therefore, understand, on the basis of the evidence available, how the complainant's fundamental right to be heard could not have been respected.

2.8 The Ombudsman also notes the complainant's argument that the information in relation to the future imposition of provisional anti-dumping measures, which appeared on the Commission website on the 23 February 2006, was made public before the interested parties were formally informed, before any formal decision had been taken, and even before the advice of the Anti-Dumping Committee had been requested. As a result, according the complainant, public opinion and the decision-making process have been influenced.

2.9 The Ombudsman notes that the printouts of relevant Commission web-pages, which were submitted by the complainant together with its complaint, appear to contain general information on the anti-dumping procedure, and a summary of information about the Commission's findings in the anti-dumping procedure in question. These printouts do not contain a complete analysis of the investigation in question.

2.10 The Ombudsman notes that while the Commission is not obliged to disclose information in relation to the provisional measures prior to their adoption, there is nothing in the applicable rules which prevents the Commission from disclosing full or partial information relating to such measures, provided such disclosure does not breach the Commission's obligations as regards confidentiality set out in Article 19 of the Basic Regulation). Indeed, the Ombudsman considers that the disclosure of at least certain information at an early stage, even though such disclosure is not obligatory, will serve to make the administrative process more transparent.

2.11 As regards the argument that the provision of certain information "influenced" the decision-making process, the Ombudsman notes that, in contrast to the adoption of definitive anti-dumping measures, the adoption of provisional anti-dumping measures is taken by the Commission. The Commission is only obliged to "consult" with Member States before the adoption of provisional anti-dumping measures. In effect, in accordance with Article 7(4) of the Basic Regulation, "the Commission shall take provisional action after consultation or, in cases of extreme urgency, after informing the Member States" (emphasis added by the Ombudsman). In such circumstances, where the Commission itself has the sole power to adopt provisional anti-dumping measures, its decision to provide prior information regarding its intentions cannot be seen to be an attempt to "influence" the decision-making process(10). Rather, it should be viewed as an effort to increase transparency, which the Ombudsman applauds.

The Ombudsman is aware that, in exceptional circumstances, the Council, acting by a qualified majority, may overrule a Commission decision on provisional measures(11). However, given that no evidence has been provided indicating that the information contained on the web-pages was any different, in substance, from the information contained in the decision adopting provisional measures, the information contained on the webpages could not be deemed to have "influence[d]" the Council in any manner which is more significant than the arguments put forward in the Commission’s decision adopting provisional measures. Thus, its impact on the decision making process, if any, must be deemed to be neutral.

2.12 As regards the possible impact of the publication of the relevant information on the public, the Ombudsman understands that the complainant referred to a potential misleading effect of that information. The Ombudsman points out, therefore, that the purpose of the webpages in question was to provide information in relation to the proposed introduction of provisional anti-dumping measures. That information could only be deemed as "mislead[ing]" if it were, in essence, different from the information relating to the provisional measures that were eventually adopted on 22 March 2006.

No evidence has been provided to the Ombudsman indicating that the information contained on the web-pages was substantially different from the information relating to the provisional measures that were eventually adopted on 22 March 2006. It was thus not liable to "mislead" readers.

2.13 In light of his findings 2.5, 2.6, 2.7, and 2.10, 2.11 and 2.12, the Ombudsman does not find any instance of maladministration as regards this aspect of the complaint.

3 Alleged infringement of the principle of proportionality

3.1 The complainant alleged that the Commission infringed the principle of proportionality.

3.2 The Commission stated that the Commission's provisional findings were based on facts, verified financial data and comments provided by the parties that co-operated with the investigation. The Commission also stated that the appropriateness of the measures imposed is strictly compatible with the relevant EC and WTO rules, the Commission's normal practice and the Community Courts' case-law.

3.3 The Ombudsman notes that, in its original complaint, the complainant referred, on the one hand, to the interests of (a) consumers who, according to it, have to pay more for shoes as a result of the anti-dumping duties, and (b) those European companies that had legitimately outsourced part of their operations to China or Vietnam and to which the anti-dumping duties apply. On the other hand, the complainant also referred to the European companies which keep their entire production within the EU to which anti-dumping duties do not apply. The complainant argued that the Commission did not respect the “fair balance” between these two sides. In this respect, the complainant quoted the calculations made by the Danish Ministry of Economics and Business Affairs concerning the expected loss for the above-mentioned companies, to which the anti-dumping duties apply, as well as for consumers.

3.4 The Ombudsman first recalls the case-law, according to which the Community institutions enjoy a margin of discretion as regards the means of achieving the common commercial policy, and that judicial review is limited in such matters which involve an appraisal of complex economic situations(12). The Ombudsman considers it appropriate to adopt the same approach in his inquiry.

In this respect, the Ombudsman points out that a position taken by the Commission which evaluates opposing economic, social and commercial interests, through the analysis of facts, verified financial data and comments provided by the all parties that co-operated in the investigation, and thereafter opts to take greater account of one set of interests, can be deemed to be disproportionate, if it can be shown that, when adopting its position, the Commission ignored relevant facts, or committed a manifest error of assessment.

The complainant has not provided evidence that the Commission has ignored relevant facts or that the Commission's assessment was manifestly erroneous.

3.5 The Ombudsman also recalls that, as pointed out by the Commission in its opinion, provisional measures in the anti-dumping procedure may be changed following further assessment. The Basic Regulation leaves the definitive decision to be taken by the Council, which, as representative of the Member States governments, may be best placed to decide on policy considerations.

3.6 Moreover, the Ombudsman notes that, in its further letter to the Ombudsman dated 19 February 2007, the complainant referred to the Commission's Communication dated 6 December 2006 and entitled "Global Europe, Europe's trade defence instruments in a changing global economy - A Green Paper for public consultation" (COM(2006)763 final) ("the Communication"). In particular, it pointed to the specific segments of the text of the Communication contained in pages 6, 7 and 8 and stated that the Communication addressed the issue of proportionality and took the view that "the Commission recognised the complainant's claims or at least acknowledged the uncomfortable position of the Commission vis-à-vis the anti-dumping proceeding in question."

The Ombudsman welcomes the expression of the above concerns by the Commission and trusts that that the results of the public consultation launched in response to the questionnaire of the Green Paper could be helpful in improving good administration within the Commission(13). In particular, the Ombudsman trusts that the public consultation could lead to the clarification of the complainant's concerns regarding losses potential caused to small and medium businesses as a result of the imposition of provisional measures(14).

3.7 In light of his findings 3.4 and 3.6 above, the Ombudsman does not find any instance of maladministration as regards this aspect of the complaint.

4 Alleged erroneous basis for the Commission's preventive measures

4.1 The complainant alleged that the Commission based its decision on erroneous information and wrongly selected Brazil as the reference country.

In support of its allegation, the complainant referred to the information published by the Commission on 23 February 2006 on its website.

As regards the choice of Brazil as a reference country, the complainant argued that the Commission did not take into account the key structural differences between the Chinese and Brazilian footwear industries.

The complainant also argued that there were other substantive errors concerning: (i) state intervention and subsidies to the Chinese and Vietnamese footwear producers; (ii) the fact that the anti-dumping measures concerned only nine out of each 100 pairs of shoes sold on the EU markets; and (iii) the fact that the retailers can balance [the duties imposed] across other product range. The complainant also found that some statements were misleading, namely, that: (i) there have been job losses of 40 000 caused by dumping (the complainant argues that it was not demonstrated that all these job losses were the result of dumping); (ii) the retail prices remained stable even if the EU import prices of Chinese and Vietnamese footwear decreased (the complainant argues that the price stability resulted from other factors, such as new fashion trends or different exchange rates); and (iii) children's footwear and Special Technology Athletic Footwear were expected to be excluded from the anti-dumping measures (the complainant argues that this exclusion concerned a very limited number of companies).

4.2 In its opinion, the Commission stated that its decisions were not based on erroneous information and that the choice of the reference country was not wrong. The methodology employed, including the choice of the reference country and the relevance and appropriateness of the measures imposed, are strictly compatible with the relevant EC and WTO rules, the Commission's normal practice, and the Community Courts' case-law. The Commission's provisional findings are based on facts, verified financial data and comments provided by the parties that co-operated in the inquiry.

4.3 First, the Ombudsman points out, again, that the complainant did not provide any evidence to show that the information published on the Commission's website on 23 February 2006 was substantially different from the information relating to the provisional measures which were adopted in Regulation 556/2006.

Second, the Ombudsman reiterates that his review in matters which involve an appraisal of complex economic situations is necessarily limited.

When dealing with the present aspect of the complaint, the Ombudsman will therefore assess the internal coherency of the information given by the Commission on its website and the adequacy of the Commission's reasoning with regard to its context.

4.4 As regards the choice of Brazil as a reference country, the Ombudsman notes that, in point 4.3.1 of Regulation 553/2006, the Commission set out detailed, coherent reasons why it had chosen Brazil as a reference country, instead of Thailand, Indonesia or India (which were the countries proposed by some interested parties). The Ombudsman notes, in particular, recitals 119 and 120 of point 4.3.1 ("Difference in the costs of production structures") of the Regulation, which appear to answer the complainant's specific argument that the Brazilian producers are active in the entire manufacture and production process, from design up to the sale to independent customers, while Chinese producers are only involved in the basic manufacture(15). In effect, the Commission points out that Brazil is a suitable reference country, even though there may be structural differences between the Brazilian market and the markets under investigation, since adjustments can be made for such costs when establishing normal value.

4.5 As regards the complainant's arguments in relation to Special Technology Advanced Footwear leather shoes ("sport shoes") and children's shoes, the Ombudsman notes that, in recitals 12-19 and 28-31 of point 2.1 of Regulation 553/2006, the Commission gave coherent reasons as to why it excluded sport shoes and children's shoes from the anti-dumping investigation.

4.6 As regards the complainant's arguments in relation to the impact of duties on buyers, the Ombudsman notes the Commission's statement that there exists a sufficient margin within the supply chain to absorb the anti-dumping duty(16).

4.7 Further, the Ombudsman notes that the Commission's statements in relation to state intervention in the leather footwear sector in China and Vietnam(17), appear to be supported by coherent reasoning.

4.8 Finally, the complainant argued that the Commission's statement that European footwear production has contracted by about 30 % and that there had been job losses of 40 000 was unclear and misleading because it did not indicate which of these figures were caused by dumping and which were not. The Ombudsman notes that, the Commission stated that the loss of 40 000 jobs in the sector was "not related solely to dumped goods."(18) The Commission therefore states that these effects were not entirely due to dumping. In light of the wording used by the Commission, the Ombudsman does not agree that the absence of precise figures as regards the effects of dumping was likely to be mislead.

4.9 In light of the above, the Ombudsman does not find any instance of maladministration as regards this aspect of the complaint.

5 Alleged failure to act transparently

5.1 The complainant alleged that, by failing to disclose the identity of the complaining EU producers and the identity of the sampled EU producers, the Commission acted in a way that was not transparent.

In support of its allegation, the complainant noted that the Commission stated on its website that "for legal reasons the name of the companies in question and their location cannot be made public". In the complainant's view, by treating confidentially the above companies' cases, interested parties, including the complainant itself, could not confirm whether the requisite standing had been met or verify the contents of the files that were opened for inspection by interested parties. On the other hand, interested parties were not able to confirm whether the sample of the EU producers was indeed representative in terms of, for example, total EU production output, or product mix.

5.2 In its opinion, the Commission stated that nondisclosure of the identity of the complaining EU producers and of the identity of the sampled EU producers is in this case justified for the reasons set out in detail in Regulation 553/2006 and is in full compliance with the Commission's practice in comparable situations. The Commission also stated that it explained the above in its answer to the complainant dated 20 March 2006.

5.3 The Ombudsman understands that the Commission, in its opinion to the Ombudsman, referred to recital 8(a) of Regulation 553/2006, which reads as follows:

"(...) The sampled Community producers as well as other cooperating Community producers requested, on the grounds of the provisions of Article 19 of the Basic Regulation,(19) that their identities be kept confidential. They claimed that the disclosure of their identity could lead to a risk of significant adverse effects.

Certain complainant Community producers supply customers in the Community that also source their products from PRC and Vietnam, thus benefiting directly from these imports. Those complainants are therefore in a sensitive position since some of their clients may not be satisfied with their lodging or supporting a complaint against alleged injurious dumping. For these reasons, they considered that there was a risk of retaliation by some of their clients, including the possible termination of their business relationship. The request was granted as it was sufficiently substantiated.

The representatives of certain exporting producers and one related importer claimed that they could not properly exercise their right of defense because the identity of the complainants had not been disclosed. They argued that in those circumstances they could not verify that the complainants were truly representative. However, it is noted that the individual production volume of each complainant was made available for inspection by the interested parties, thus even if the names of those companies are blanked out, their representative quality could be verified. The claim was therefore rejected."

The Ombudsman finds that these arguments are coherent and convincing.

5.4 In its observations, the complainant argued, inter alia, that the Commission treated confidentially all complaining producers and not only those that made an explicit request for such confidentiality. Furthermore and contrary to the Commission's previous practice, complainants which requested confidentiality were not asked by the Commission to demonstrate, and in the present case did not demonstrate, that they are actually subject to commercial pressure to stop co-operating in the investigation and/or to withdraw their support for the complaint. In this regard, the complainant referred therefore to two documents "Certain footwear with uppers of leather or plastics from China, Indonesia and Thailand"(20) and "Footwear with textile uppers from China and Indonesia"(21).

5.5 The Ombudsman points out, therefore, that Article 19 of the Basic Regulation(22), concerning confidentiality, foresees two possibilities as regards this matter. First, information which is by nature confidential, for example, because its disclosure would be of significant competitive advantage to a competitor or would have a significantly adverse effect upon a person supplying the information or upon a person from whom he has acquired the information, must be treated confidentially. Second, information which is provided on a confidential basis by parties to an investigation, must be treated confidentially. It appears, therefore, that the Commission could, despite the fact that certain third parties may not have specifically requested confidential treatment, consider the identity of all complaining producers as confidential information if, by its nature, disclosure of this information would have significantly adverse effects upon a person supplying the information.

The Commission gave sufficiently coherent reasons in recital 8(a) of Regulation 553/2006 (as quoted in point 5.4 above) as regards why disclosure of this information would have a significantly adverse effect upon a person supplying the information. In this context, the Ombudsman considers the Commission's explanation as regards why it treated the names of complaining EU producers and of the sampled EU producers confidential appears to be adequate.

5.6 Finally, the Ombudsman points out that, according to recital 8(a) of Regulation 553/2006, "the individual production volume of each complainant was made available for inspection by the interested parties, thus even if the names of those companies are blanked out, their representative quality could be verified." Therefore, interested parties, including the complainant, could get the relevant information to defend their position.

5.7 In light of the above, the Ombudsman does not find any instance of maladministration as regards this aspect of the complaint.

6 The complainant's claims

6.1 The complainant claimed that that the Commission should withdraw Regulation (553/2006) imposing provisional anti-dumping measures on certain leather footwear from China and Vietnam.

The complainant also claimed that the provisional anti-dumping duties which have already been collected should be released.

6.2 The Commission stated that the anti-dumping investigation was carried out in full compliance with the Basic Regulation and that no maladministration occurred. The procedural requirements of the Basic Regulation have been rigorously respected in this investigation, thereby ensuring a proper right of defence to the parties. Therefore the Commission took the view that there is no ground to accept the complainant's claims that Regulation 553/2006 should be withdrawn and that provisional duties collected should be released.

6.3 The Ombudsman points out that in the meantime, on 5 October 2006, the Council adopted Regulation (EC) 1472/2006 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of certain footwear with uppers of leather originating in the People's Republic of China and Vietnam(23). Therefore following adoption of that Regulation, the complainant's claims had become devoid of purpose.

7 Conclusion

In light of the above, the Ombudsman does not find any instance of maladministration. The Ombudsman therefore closes the case.

The President of the Commission will also be informed of this decision.

Yours sincerely,

 

P. Nikiforos DIAMANDOUROS

---

(1) OJ 1996 L 56, p. 1.

(2) OJ 2004 L 77, p. 12.

(3) OJ 2006 L 98, p. 3.

(4) C-49/88 Al Jubail Fertiliser v Council [1991] ECR I-3187, paragraph 16.

(5) OJ 1998 L 60, p.1.

(6) OJ 1997 L 298, p.1.

(7) Case 264/82 Timex v Council and Commission [1985] ECR 849, paragraph 25.

(8) OJ 1996 L 56, p. 1.

(9) OJ 2004 L 77, p. 12.

(10) The Ombudsman notes that, while only 3 of the 25 Member States voted in favour of the Commission's proposal for provisional anti-dumping measures, this did not impede their adoption by the Commission. Thus, even if the information contained on the web-pages were to have "influenced" the Member States, it cannot, as regards the adoption of the provisional measures, be deemed to have "influenced" the "decision-making process".

(11) See of Article 7(6) of Regulation 384/96.

(12) Case C-150/94 United Kingdom v Council [1998] ECR-I-7235, paragraphs 53 and 54.

(13) The Ombudsman notes, therefore, that in the Communication, the Commission presented a case study on anti-dumping measures on leather shoes, and stated, in summary, that "the reflection should be made as how to better reflect the consumers interests in anti-dumping investigations and any measures taken". The Commission also recognised that the number of "EU companies that are moving elements of their production [outside of the EU] is growing and these companies account for thousands of jobs in the EU". The Commission added, however, that "under the existing anti-dumping rules only producers that keep their production within the EU were considered in determining whether the required proportion of Community industry for the case to be initiated was met." In this respect, the Commission put, inter alia, the following questions for consultation: Question 4: "Should the EU review the current balance of interests between various economic operators in the Community interest test in trade defence investigations (...)?", and Question 5: "Do we need to review the way that consumer interests are taken into account in trade defence investigations(..)?"

(14) In this respect the Ombudsman notes question 32 put for consultation: Are there any aspects of the EU's trade defence instruments that you would like to see addressed?

(15) "(119) Interested parties also claimed that the cost structure between Brazil and the countries concerned is different since some costs (Research &Development (R&D), design, etc.) supported by the costumers of the Chinese and Vietnamese exporters are incurred by the Brazilian producers and therefore included in their costs of production";

(120) It was indeed found that, in some cases, exporters in the countries concerned sold the product concerned to former Community manufacturers in the Community which still support the above mentioned components of the cost of production and sell the product under their own brand name. However, this is not a reason to reject Brazil as a suitable analogue country as adjustments can be made for such costs when establishing normal value."

(16) The Commission stated, inter alia, that "[t]here is clear evidence that although leather footwear import prices to the EU over the last five years have fallen by more than 20%, consumer prices have remained stable and even risen slightly. A duty would add just over 1.5 Euro on average wholesale prices of 8.5 Euro for leather shoes that retail between 30-100 euros. There is margin within the supply chain to absorb a small duty on import costs by spreading it across product ranges and the distribution chain." The relevant webpage is available on the Commission's website (http://europa.eu.int/comm/trade/issues/respectrules/anti_dumping/memo230206_en.htm).

(17) "Anti-dumping: What evidence does the Commission have of state interference in the leather footwear sector in China and Vietnam?". This document is available on the Commission's website (http://europa.eu.int/comm/trade/issues/respectrules/anti_dumping/pr230206_evi_en_htm).

(18) The relevant statement may be found on the Commission's webpage (http://europa.eu.int/comm/trade/issues/respectrules/anti_dumping/memo230206_en.htm).

(19) Article 19 of the basic Regulation: "Any information which is by nature confidential (for example because its disclosure would be of significant competitive advantage to a competitor or would have significant adverse effect upon a person supplying the information or upon a person from whom he has acquired the information) or which is provided upon confidential basis by parties to an investigation shall, if good cause is shown, be treated as such by the authorities."

(20) OJ 1998 L 60, p. 1.

(21) OJ 1997 L 298, p. 1.

(22) Article 19: "Any information which is by nature confidential (for example because its disclosure would be of significant competitive advantage to a competitor or would have significant adverse effect upon a person supplying the information or upon a person from whom he has acquired the information) or which is provided on a confidential basis by parties to an investigation shall, if good cause is shown, be treated as such by the authorities."

(23) OJ 2006 L 275, p. 1.