Chapter 7 Aokang: anti-dumping breakthrough

On October 5, 2006, the European Union made a final ruling and formally imposed a 16.5% anti-dumping duty on leather shoes originating in China for a period of two years.Such a high tax rate is self-evident what it means for the export of Chinese shoe companies. China's shoe industry will suffer a devastating blow!This is not alarmist talk.Because China, as the largest shoe manufacturing country in the world, has always been the OEM product processing place for major trading countries such as Europe and the United States, most shoe factories in the southern region do business with "OEM" (Original Equipment Manufacturer).But for most small and medium-sized enterprises without stable sales channels, the increased cost of the 16.5% anti-dumping duty means that they will be forced to abandon the EU market.And the two-year appeal time and the legal fee of one million yuan are not affordable for these low-profit enterprises, so they can only divert exports or close down.

In the face of such a serious blow, more than a thousand Chinese shoe companies have chosen a collective aphasia.This is not the first time.When encountering international trade disputes in the past, Chinese companies often showed helplessness, and even tried to blame each other.The reason for this is different: some people get rid of the "government dependence disease" in cognition, and always think that it is the government's business to deal with anti-dumping.In the face of "international lawsuits", enterprises pin their hopes on the government.In fact, the enterprise is the main body of direct participation and is the "protagonist", while the government is actually a "supporting role", and can only take indirect measures such as cooperation and guidance to help the enterprise out of the predicament; some do not understand the "rules of the game", and unclear rules directly lead to When confronted with anti-dumping, the vast majority of enterprises adopt the practice of evasion and concession; some lack strong organization as backing and insufficient capacity.Many Chinese companies that have encountered anti-dumping disputes have relatively small profit margins in the international market.Once a dispute arises, due to lack of awareness, high litigation costs, and the lack of professional talents and relevant experience in industry associations, many Chinese companies "lost without litigation."From the "scapegoat" of low employment in developed countries to the "winner" of trade disputes, Chinese companies have to go far longer than we imagined.

In the silence, Aokang once again stood up as a maverick.In fact, Aokang can completely ignore the matter and act as a "watch from the sidelines".Because as a well-known brand in the Chinese shoe industry that has been accumulated for many years, Aokang not only has more experience than other Chinese shoe companies, the key is the establishment of the brand and the establishment of sales channels.For example, Aokang cooperates with GEOX, the number one shoe brand in Italy. More than 25% of Aokang’s annual sales are exported to the EU, and more than 70% of Aokang’s annual exports are also exported to the EU. In 2006, the number exceeded 2 million pairs.Therefore, as a company that takes the high-end route and has stable sales channels, Aokang's impact in this anti-dumping turmoil is not as great as that of other small and medium-sized enterprises. Most of the cost of the 16.5% anti-dumping duty will be paid by Aokang's sellers in the EU and consumers in the EU, and Aokang itself will not increase the cost much.But in the end, Aokang chose to use legal means to sue the EU's anti-dumping measures in the European Court of Justice in order to fight for his own legitimate interests.

"In any case, we must let the EU hear the voice of the defense of Chinese shoe companies!" Aokang knows that the process of this lawsuit is more important than the result.As Wang Zhentao, President of Aokang said: "Look at what is behind the EU's 2-year 16.5% anti-dumping duty. In fact, in a sense, it is an attempt. That is to say, if this If Chinese companies can bear it for two years, then they will set a second step of five years, which is equal to seven years, and Chinese shoe companies will lose in a mess!" Wang Zhentao emphasized many times: "Regardless of whether this lawsuit wins or loses, the Chinese manufacturing As far as the shoe industry is concerned, if you lose, you win, and if you win, you win more." "If we win, the EU will not lose, because they tax for two years. Chinese companies may also cancel the next five years. Even if we lose Yes, we have also learned a lot from it. I believe that if the EU does not come, other countries will come. After all, we have joined the WTO for a short time and do not understand the rules of the international game. Even if we lose this time, other countries will come next time , we will at least know what to do.” In his view, what matters is what happens two years later. "During the entire defense process, we were very proactive. In doing so, we first let them listen to our voice from the perspective of the industry. In addition, we also want to learn a lot through this example. We can use this Understand the rules of the game. I think this is very important. The earlier the anti-dumping appears, the earlier we can learn the rules of the WTO game.”

Wang Zhentao believes that Aokang's approach is far-reaching, at least he understands what to do when encountering such problems when going international. "This anti-dumping incident is just the beginning for the internationalization of China's shoe industry. If we face anti-dumping with a positive attitude, don't think that anti-dumping is a blow to us. After a few years, we may thank the Europeans for their anti-dumping , because it gave Wenzhou shoes and even Chinese shoes a second chance to reincarnate. The sooner the anti-dumping comes, the sooner we may be able to learn the rules of the WTO game.” In fact, with the expansion of Chinese shoe companies’ overseas markets, Anti-dumping and other trade barriers are unavoidable. Without the EU this year, there may be the US next year.Now that anti-dumping is coming, Chinese shoe-making companies can use this to increase independent innovation and improve industrial institutions.There is pressure and development. From this perspective, anti-dumping may be a good thing.

Aokang, who has always valued "social responsibility", seems to be full of heroism this time.Although earlier, people were generally worried that Aokang International's "marathon" lawsuit was just a "thin counterattack", but Wang Zhentao remained calm and demeanor in the face of doubts: our anti-dumping lawsuit this time may cost a lot, but Aokang, as the largest domestic As a private shoe-making enterprise, we have this responsibility.We have done a meaningful thing for the country and the industry.For me, I have also fulfilled my promise of "doing what I say and doing what I do."

In fact, this "heroic act" is not alone when the appealing businesses stand together.We clearly felt this unique responsibility, confidence, mind, and lofty sense of mission. Known as the "No. 1 Anti-dumping Lawyer", Pu Lingchen is the attorney representing the four Chinese shoe companies in the shoe anti-dumping case. Four years ago, he was the attorney representing China's "first WTO accession case" - the Wenzhou lighter anti-dumping case; four years later, he represented a Chinese company again in the "first defense" after the end of the five-year transitional period of China's accession to the WTO China challenged the EU.

Regarding Aokang's lawsuit, Pu Lingchen believes that it is not an easy task to win such a lawsuit. The key is to prove two points: First, the European Commission did not expect that after launching an anti-dumping investigation against China, there will be more than 150 companies Respondent.Therefore, it launched a sampling survey procedure that is recognized by both WTO law and EU law, and selected the top ten companies in terms of export volume for investigation.More than 140 enterprises also filled out the questionnaire, but were not audited. The same result was obtained directly because the former enterprises did not obtain market economy status.The question is, do the remaining companies still need to fill out the questionnaire?As a party, if there is no predictability of the procedure, why do it?When the anti-dumping investigation was filed, the European Commission required all parties involved to provide proof of market economy status, but did not say anything about the more than 140 companies that submitted the materials.Therefore, Pu Lingchen believes that there is no connection between the provisions on market economy status (Article 2, paragraph 7) and the provisions on sampling (Article 17) in the EU Anti-dumping Regulations, and there are imperfections.The court should have a clear interpretation of these two clauses.Second, in terms of damage identification, the EU has some practices that are not in line with WTO regulations and its own anti-dumping laws, such as determining the causal relationship between sales and damage, investigation methods, and anti-dumping duty ranges. Sure superior.Regarding these methods, the WTO does not have very detailed regulations, but only stipulates principles and frameworks.But we can work backwards and prove that the EU's approach is flawed.

The anti-dumping lawsuit is actually a comprehensive challenge to the management of Chinese enterprises.According to reports, past anti-dumping lawsuits have exposed that some companies did not have sound financial records, and some companies did not follow the EU requirements to record the price and cost of each batch of products exported.These issues, which Chinese companies paid little attention to in the past, will become Achilles' heels in litigation.From this point of view, only excellent companies with long-term standardized operations can stand the test of anti-dumping lawsuits.It requires that enterprises have clear property rights, are not subject to government control, and can freely decide to purchase production factors; accounting standards and bookkeeping, and independent auditing; costs and asset values ​​​​are not distorted by non-market economic factors; the operation and sustainability of enterprises are governed by the "Company Law" And "Bankruptcy Law" protection and so on.Regarding these aspects, the person in charge of the publicity department of Aokang Group replied to the reporter: "Since Aokang decided to stand up, he must have confidence!"

But Pu Lingchen also expressed some concerns. "We believe that the law is fair, but after all, it is a lawsuit on someone else's territory, and the pressure is still great. But no matter what the result is, this case shows the progress of Chinese companies' awareness of protecting their own rights and interests. This is its significance. And anti-dumping It’s not a bad thing either, the industry will clearly recognize its past, present and future.” Pu Lingchen said. So, if China wins and the EU loses, what will happen?It is understood that the European Commission must then adjust the anti-dumping tax rates of these appealing companies in accordance with the court's judgment, such as re-investigating and calculating, granting market economy status or differential treatment, and reducing the anti-dumping tax rate to zero.The European Commission must return the anti-dumping duties paid to the EU Customs by relevant companies during the two-year period.At the same time, the losing party has to bear the direct and reasonable litigation expenses of the winning party.

The three fires related to Chinese shoes are the traces of the growth of Chinese shoes. Wang Zhentao and his Aokang "burned out" from these three fires. The first fire was the fire that burned Wenzhou shoes on August 8, 1987, which woke up Wang Zhentao and thoroughly tempered Wang Zhentao.He said that without this fire, Aokang would not be as big as it is today. The second fire was on December 15, 1999. At that time, Wang Zhentao met someone who said that a Wenzhou product exhibition would be held in Hangzhou. Wang Zhentao was keenly aware that this was an opportunity not to be missed.He said, if we go to the exhibition, can we do some publicity, and then the person said: Mr. Wang, there is no need for any publicity, just make the product well.Wang Zhentao didn't see it that way. He said that making products is easy. Everyone knows that Wenzhou shoes were the first fire. Now that the world is so cold, should we light the fire again?Then everyone said yes, so we started to act immediately. The third fire was the fire that burned Chinese shoes in Spain in September 2004.The unreasonable fire shocked the whole world, but what was left to the Chinese shoe industry was endless worries.Seven years have passed since the big fire in Hangzhou. "We are going to burn the fourth fire now." Wang Zhentao showed his heroic qualities again, and his demeanor is still the same. "The fire lit today is a fire that pushes Aokang to internationalization." This fire certainly points to the anti-dumping lawsuit.Since November 29, 2006, Aokang has reached a strategic partnership with Sina.com, one of the world's largest Chinese portals.In addition to providing Aokang with an advanced network marketing platform, Sina.com will continue to pay attention to the anti-dumping lawsuits of several shoe companies such as Aokang, and support Chinese companies to fight for their legitimate rights and interests. On January 8, 2007, Aokang Group and Taima Group, several Chinese shoe-making companies that appealed to the European Union, joined forces. They will provide the most direct and effective experience for Chinese shoes to deal with international trade barriers. More importantly, it expresses It has demonstrated the determination and courage of Chinese shoemaking to go global. "I don't think it's important to spend some money. What's important is to tell them that our Chinese shoes are not worse than them or even better than them. At the International Footwear Conference in Shanghai on September 5 last year, the chairman of the US retail industry said: With this sentence, consumers all over the world do not feel that Chinese shoes are relatively inferior. This concept has now begun to change. I think that Aokang and Chinese companies with brands and influence can go out. Now it is It's time." At this moment, Wang Zhentao showed the foresight and vision of an outstanding leader. In his opinion, anti-dumping is not a blow to Aokang, but an opportunity. After a few years, Chinese people may thank the Europeans for their anti-dumping because Their "making things difficult" gave birth to Wenzhou shoes and even Chinese shoes for the second phoenix nirvana.Therefore, any enterprise must always maintain a positive, optimistic, and upward attitude to seek innovation, lead the trend, and influence the trend.In the face of this turmoil, Aokang first embarked on the journey of breaking international trade barriers. It not only provides valuable experience for the industry and other industries in the future, but also announces to the world that China's anti-dumping has started an "ice-breaking journey"— —Aokang once again practiced its corporate philosophy: "Dreams come out." On June 30 and July 7, 2005, the European Commission launched an anti-dumping investigation on my country's labor insurance shoes and some leather shoes. At the end of November 2005, the European Union completed the anti-dumping sampling inspection of 13 leather shoe companies and 4 labor insurance companies in my country. Among them, Guangdong was the hardest hit area for leather shoes, and Wenzhou accounted for the main part of labor insurance shoes. On February 23, 2006, EU Trade Commissioner Mandelson stated that since the investigation showed that leather shoes produced in China and Vietnam were dumped to the EU at a price lower than the production cost of the country, the European Commission suggested that leather shoes produced in China and Vietnam should be imposed on Chinese and Vietnamese leather shoes from April 7. A half-year temporary anti-dumping duty will be imposed. On March 8, 2006, the Shoe Leather Association of the three major shoe production bases of Wenzhou, Guangzhou and Quanzhou jointly established the "Anti-dumping Response Alliance" and issued a preliminary position paper in Guangzhou. On March 23, 2006, EU members voted to impose a 4.8% tariff on all Chinese leather shoes exported to the EU from April 7, 2006, and increased to 19.4% in October of the same year. On October 7, 2006, the European Union officially launched a two-year anti-dumping duty of 16.5% on leather shoes originating in China. On October 23, 2006, Aokang Group formally decided to hire Pu Lingchen, the "No. 1 Anti-dumping Lawyer", to file a lawsuit with the European Court of First Instance, suing that the 16.5% anti-dumping duty issued by the Council of the European Union does not comply with relevant EU laws.Subsequently, three companies including Wenzhou Taima, Guangdong Nanhai Jinlu and Guangdong Wanbang followed up and announced their appeal.