Brazil faces a flood of footwear from Indonesia and Vietnam of questionable origin

In March 2010, Brazil slapped a surtax of $13.85 on each pair of shoes imported from China under antidumping legislation because in 2009 over 21 million pairs of shoes poured into Brazil from China at prices below market prices. In 2010, after the surtax, those imports fell to 7 million.

However, during the same period, as footwear imports from China fell, imports from Vietnam and Indonesia skyrocketed (“cresceram substancialmente”). In 2009, Brazil imported 4 million pairs of shoes from Vietnam and in 2010 that had almost doubled to over 7 million. At the same time, shoe imports from Indonesia jumped from 1.7 million pairs to 7 million.

The Ministry of Development, Industry and Foreign Trade (“MDIC”) believes something is amiss and it is called triangulation: a bit of international commercial legerdemain in which one country exports goods to other countries and the same goods are exported again to a third country as if they did not originate in the first country. In this case, shoes from China go to Vietnam and Indonesia where they are exported to Brazil as if made there and, therefore, do not have to pay the Chinese-shoe surtax.

Besides the Chinese shoes from Indonesia and Vietnam, the MDIC is also looking into another possibility. There is the fact that shoes can be broken down into parts (soles, heels, upper part) and the shoe parts exported separately. The plot thickens because shoe parts are exempt from import surtaxes. The MDIC suspects that China is exporting shoe parts to Brazil where they are put together and then sold. Without paying import surtaxes, of course.

The ministry has begun an official investigation, which is to be concluded in nine months. During that period, suspect shoe and shoe part imports will be removed from the automatic import license list, which means that importation of those goods will be delayed for up to 60 days.

Another MDIC investigation of suspected Chinese imports circumventing Brazilian antidumping efforts concerns blankets coming into Brazil from Paraguay and Uruguay. That investigation, based on provisions in the Circumvention Law (“Lei da Circunvenção”), is scheduled to conclude this month.