Vietnam Deals with Anti-dumping Footwear Court Case in EU

On October 14, 2005, a European Commission (EC) investigation commission finished its investigation relating to an anti-dumping court case against Vietnamese footwear makers. Eight companies selected for the investigation include Pou Yuen Vietnam, Pou Chen Vietnam, Taekwang Vian, the Son Quan Joint venture Company, the Footwear Company N⁰ 32, Dona Biti’s, the Binh Tien Import and Export Company and the Haiphong Leather Shoe Company.

 

The investigation was conducted based on statistics and the financial books of Vietnamese footwear makers and the possibility of the Government’s price subsidies, and some other conditions imposed by the EC. According to the EU’s regulations, the investigation commission will make a final decision within 15 months from July 7, 2005 to October 2006. This will be a challenge for Vietnamese enterprises as within the waiting period, their production levels may slowdown as enterprises and their partners may be unhappy to sign any contracts. The Vietnam Leather and Footwear Association (LEFASO) has proposed that the Government canvas the EU to accelerate final decision.

 

Vu Cham, chief executive of the board of Vietnam Shoes Joint stock Company (Vina Shoes), said that most of his company’s products were sold in the domestic market and a small quantity of them were exported to Eastern European countries. Even though the company has not exported its products to the EU yet, it had been listed as a dumping enterprise in the market. Apart from enterprises which have not exported their products to the EU, some enterprises specialising in manufacturing materials and machines have been filed as dumping enterprises. However, according to Nguyen Duc Thuan, vice chairman of LEFASO, all enterprises subject to the EC’s investigation should express their co-operative behaviour, make good preparations, and more importantly, co-operate with each other in the interest of the whole local footwear industry.

According to the EC’s accusation, the import volume of footwear products and shoes from Vietnam doubled in 2004 and the first quarter of 2005, up by 80 per cent against 2002. The boom in the import of footwear from Vietnam has led the European Leather and Shoes Makers’ Association to cut their production output and increase their inventory, leading to serious consequences among European footwear makers.

 

In 2000, the EU had around 4,000 shoe and footwear making enterprises empooying around 450,000 workers. In 2005, the number has dropped by 50 per cent. As a result, the EU has to prevent the import wave of footwear products and shoes from China and Vietnam. Export prices from Vietnam and China are 40 per cent lower than prices of European makers and the EU concluded that Vietnam had dumped footwear and shoes in the market. However, according to the Ministry of Trade, the export of footwear and shoes to Europe, in particular to the UK - Vietnam’s largest market in Europe - has dropped.

 

The export volume of State-owned enterprises has seen a sharp fall and many private enterprises have shifted to the Chinese market. As a result, a double increase in the export of footwear and shoes to the EU, as is accused by the block, mainly came from foreign firms in Vietnam. For example, Nike hires Taiwanese and Korean companies in Vietnam to make shoes with an annual output of 25 million pairs, accounting for 10 per cent of the sales of Nike. The local footwear industry mainly implements subcontracts for Taiwanese and Korean enterprises, with 70 per cent of contracts. These enterprises use the Vietnamese certificates of origin to enjoy preferential tax rates of 4.5 per cent for footwear products the EU grants to developing countries.

 

It is predicted that up to 70 per cent of footwear products exported to the EU would have three anti-dumping tax rates imposed. This would lead to many difficulties among the local footwear industry. Will Vietnamese enterprises stand firm before high anti-dumping tax rates apart from an increase of prices and production costs?

 

One solution for Vietnamese footwear makers to reduce the effect of the court case on their production activities is to expand and develop their export to other markets. However, this would be of great difficulty as so far, Vietnamese enterprises have concentrated mainly in the EU, the US and Eastern Europe. Nguyen Van Khanh, general secretary of the Ho Chi Minh City Shoe and Leather Association (SLA), said that Viet Hoi Shoes and Leather Industry promotion Corporation (VSP) had boosted market expansion for member enterprises. Recently, VSP has co-operated with a Vietnamese enterprise in Hungary to introduce Vietnamese footwear products to the market.

According to LEFASO, a high growth rate in rubber and plastic shoes has been seen in Japan with estimated revenues of US$21.61 million, up by 24.3 per cent against 2004. These are mainly exported footwear products from Vietnam to Japan, accounting for 36 per cent of total export turnover to the country. Also, this year, the export of shoes and footwear products to the US, Canada and Mexico, has seen a high growth rate, so a high increase in export turnover of the whole footwear industry will be high. The US has become the largest footwear market for Vietnam. Mexico is the largest importer of cloth shoes in North America. Eight month’s export turnover to Canada reached US$50.5 million, up by over 50 per cent over the same period last year.

 

Apart from diversifying export markets, a new development orientation is to promote sales in the domestic market. Some famous trademarked enterprises, Vina Shoes, T&T and Biti’s have boosted their promotion campaigns in the domestic market. The An Lac Shoes Company, which made its debut in the domestic market three years ago with cloth shoes, has diversified its products to meet the demand of various customers in the domestic market, in particular young people. However, the biggest difficulty of the local market is a lack of professional distribution channel. Supermarkets or distribution networks of famous enterprises have not yet met the distribution demand of local footwear makers. Supermarkets sell mainly imported products while distribution networks of Vina Shoes and Biti’s are not yet professional because they act as both distributors and competitors.