9 DE OCTUBRE DE 2017

PEDRO RUIZ GALLO NATIONAL

UNIVERSITY

TRADE AND INTERNATIONAL BUSINESS

Dumping Chinese continues to relegate the

Peruvian textile sector

COURSE: TECHNICAL ENGLISH V

TEACHER: DEJO AGUINAGA SUSAN

STUDENT: AGUILAR RAMIREZ SMITH

Dumping Chinese continues to relegate the Peruvian textile
sector
Dumping, a practice of unfair competition, consists in selling a product at a price lower
than the cost incurred to produce it, in order to compete effectively. In its most common
form, it deals with the sale of a certain product to the external market at a price cheaper
than the normal one of the domestic market.
Between 2009 and 2011, domestic producers of garments and clothing accessories
suffered significant damage to their industry because of this commercial practice by
Chinese suppliers; this was verified in an ex officio investigation by the Commission of
Dumping and Subsidies of the National Institute of Defense of the Competition and the
Protection of the Intellectual Property (Indecopi).
The investigation which examined the above mentioned period provided sufficient
evidence to support the application of anti-dumping duties on imports of five types of
garments and clothing accessories (shirts, stockings, trousers, t-shirts and underwear)
from China.
Table 1: Total imports of Chinese clothing. Period 2009-2016

YEARS 2009 2010 2011 2012 2013 2014 2015 2016

Total Import $97396.000 $133824.000 $191107.000 $234364.000 $305513.000 $290762.000$300341.000 $295274.000

SOURCE: SUNAT
ELABORATION: OWN

TESTS FOUND
1. The National Production Branch suffered a contraction of 18.7% in market share
between 2009 and 2011; while the market share of dumped imports increased by
7%.
2. Peru's demand for garments and clothing accessories increased significantly
from 180,202 million garments in 2009 to 263,968 million garments in 2011,
representing a cumulative growth of 46.5%
3. Imports of garments and clothing from China grew significantly during the period
2009-2011; from importing 119,475 million garments in 2009 to 187,036 million
garments in 2011, representing an increase of 56.5%.
4. Between 2009 and 2011, garments and clothing accessories originating in China
entered our country at dumping prices, being significantly below the selling price
of the similar product manufactured by the National Production Branch. Thus, the
difference between the price of the domestic product and the price of the Chinese
imports investigated remained at levels of 37.1% and 38.4% in the indicated
period.
Once the investigation was completed, Indecopi concluded, through Resolution No. 297-
2013 / CFD-INDECOPI, to apply anti-dumping measures on the aforementioned
products to ensure fair competition, in addition to protecting domestic industry. Said
resolution was issued on December 6, 2013 and entered into force on December 23 of
the same year.
After a year and a half of its validity, the Specialized Chamber in Defense of Competition
issued Resolution No. 293-2015 / SDC-INDECOPI, in which it decided to withdraw the
anti-dumping duties imposed, arguing inter alia that the Commission ruled by failing to
show conclusively that all the articles that make up the products under investigation
(shirts, socks, trousers, underwear and t-shirts) competed in a single market.
It also argued that the similarity of the domestic product to the product in question as
defined by the first instance was not properly determined, since it failed to carry out an
analysis of the existence of a competitive relationship involving consumers' perceptions
and considering an examination of substitution and rivalry of the products. According to
the Chamber, the latter was necessary given the breadth and heterogeneity of the
articles that make up the product under investigation. This resolution came into force on
June 7, 2015.
In order to understand the dimension of the effect of this measure on the Peruvian
market, considering all the countries that supply these same products, including those
from China, back to 2009 and compare the values until 2013. This will allow us to
observe that imports grew at an annual average of 33% (see Table 1) before the anti-
dumping measure is imposed (December 2013). By the year 2014, total imports
contracted by 5%, completely cutting the continued growth they showed. However,
during the year 2015 the behavior changed, returning to show growth rates, although
this only represented 3%. As mentioned, in June 2015 the measure was withdrawn and
the behavior of imports of the two semesters of that year were different. In the first one
was imported $ 71, 183,000 while in the second one was imported $ 110, 361,000, which
is equivalent to a 55% increase over the previous half year.
In view of this, it was considered desirable to further investigate dumping practices of
the main garments imported from China.
With a view to being able to establish the dimensions of this possible distortion, the tariff
headings for each type of product in its value - weight ratio were identified in order to
put an average price per kilogram, which served as a basis for comparison with the
declared values of all importers; and thus determine which of them were bringing
merchandise at a price lower than average. For this it was established that any importer
that imports at a value less than or equal to a quarter of the average value would be
immersed in acts of unfair behavior. As a period of study we limit ourselves to observe
the imports of 2016, for being the most current. It was also considered to identify and
discriminate by type of importer, that is to say if they were natural persons with business
(RUC numbers that start with the number 10) or if it is a business block (RUC numbers
that start with number 20).
 Table 2: Main items by type of product with higher import values. 2016

AVERAGE
#
PRODUCT ITEM DESCRIPTION IMPORTERS PRICE PER
KG

62.05.20.0000 Men's or boys' shirts, of 6 56

cotton, other than knitted
or crocheted. 88 41
Women's or girls' 32 25
SHIRTS 62.06.40.0000
blouses, shirts and shirt-
blouses, of synthetic or
artificial fibers, other than 138 43
knitted or crocheted.
Women's or girls' blouses, 22 25
61.06.20.0000
shirts and shirt-blouses,
knitted or crocheted, of
synthetic or artificial fibers. 124 39

62.04.62.0000 Women's or girls' trousers, 30 23

bib and brace overalls,
PANTS breeches and shorts
(other than swimwear), 110 37
knitted or crocheted.
62.03.42.9010 Other trousers, bib and 11 18
brace overalls, of cotton,
other than knitted or 61 32
crocheted.
62.03.42.1010 Trousers, bib and brace 1 14
overalls, breeches and
shorts, knitted or
crocheted, other than 38 44
knitted or crocheted
61.09.90.9000 T-shirts, singlets and 24 30
T-SHIRTS other vests, other than of
cotton and of acrylic or 179 43
modacrylic fibers.
61.09.10.0031 T-shirts of cotton, knitted 1 38
or crocheted, of single
uniform color, including
white or red, for men or 72 28
women.
61.09.10.0039 Other cotton t-shirts for 18 40
men or women. 166 34

SOURCE: SUNAT
ELABORATION: OWN
As can be seen in Table 2, in the case of imports of shirts, the average values of its
main imported tariff (cotton shirts) was $ 56 per kg, for natural persons with business
and $ 41 per kg., for legally constituted companies.
From the analysis of the data obtained, it was determined that those importers of the
said tariff heading, whose average value is an amount less than or equal to a quarter of
the said value, would be dumping.
As a result of this, the number of importing companies was obtained, determining the
number of companies that were dumping.
TABLE 3: COMPANIES THAT REALIZED DUMPING FROM CHINA, BY PRODUCT

NUMBER OF TOTAL NUMBER OF IMPORTING

PRODUCT IMPORTERS COMPANIES PRACTICING %
DUMPING
SHIRTS 1.001 98 10%
PANTS 1.202 146 12%
T-SHIRTS 638 85 14%
Based on the price / kilogram analysis, the number of importers that would continue to be involved in
this unfair practice is determined.

SOURCE: SUNAT
ELABORATION: OWN

There would be a greater incidence of importers involved in these bad practices in the
trousers product, with up to 146 importers (representing 12% of the total importers of
that product), followed by shirts (98 importers - 10% of the total) and finally t-shirts (85
importers - 14% of the total).
This results in unfair competition that is reflected in the closure of companies dedicated
to the domestic production and sale of these products.
In this regard, we believe that it is appropriate for the Indecopi authorities to initiate ex
officio the investigation of these products imported from the Republic of China, taking
into account the comments made by the Specialized Chamber in Defense of
Competition, since the latter's decision does not prevent re-initiation of the investigation.