April 29 (Bloomberg) -- The European Union extended to Macau a tariff on shoes from China, saying Chinese exporters use the former Portuguese colony to evade the levy and undercut EU producers in countries such as Italy.

The EU said Chinese exporters of leather footwear ship the goods via Macau or assemble them there to dodge the duty of 16.5 percent. Macau, a special administrative region of China, wasn't subject to the levy, which Chinese shoemakers including Aokang Group and European retailers such as C&J Clark Ltd. opposed.

``There is clear circumvention of the measures,'' the 27- nation EU said in a decision today in Luxembourg. The extension of the trade protection to Macau follows an eight-month probe and will take effect after publication in the EU Official Journal in the coming days.

The EU imposed the duty for two years in October 2006 to punish Chinese exporters for selling leather shoes in Europe below prices in China or below production costs, a practice known as dumping. The bloc also introduced an anti-dumping duty of 10 percent on imports of the footwear from Vietnam.

The aim is to shield the EU's 8,000 leather-shoe manufacturers, mainly small businesses in southern Europe, from cheaper imports. Four-fifths of the bloc's leather shoes come from Italy, Portugal and Spain.

The levies applied to 174 million pairs of shoes from China and 103 million pairs from Vietnam. In 2006, before the two-year duties were imposed, the EU said those shoes had an average retail price of 35 euros ($54.53) a pair.

`Trans-Shipment Operations'

Macau, with a population about 500,000, imported 5.1 million pairs of shoes from China between April and December 2007 compared with 40,000 during the same period in 2005, according to the EU.

``A large proportion of such footwear was re-exported'' to the European market, said the bloc. ``Large scale trans-shipment operations were performed.''

In addition, Macau's imports of shoe parts from China grew to 800 metric tons in April-December 2007 from 30 tons in the same 2005 period, the EU said.

``The importation of shoe parts increased by a massive amount,'' the bloc said. ``A large assembly operation was being set up.''

Deadline

The findings are based on an inquiry opened in early September by the European Commission, the EU's regulatory arm in Brussels.

The extension of the anti-dumping duty to Macau comes a month after the commission alerted the European shoe industry about the option of seeking to prolong the levies against China and Vietnam. In the March 26 Official Journal, the commission said EU producers face a July 7 deadline to submit any requests for an investigation into whether to reimpose the trade protection after the scheduled Oct. 7 expiry date.

Nobody at the European Confederation of the Footwear Industry, the Brussels-based lobby group that filed the original request for trade protection against China and Vietnam, was immediately available to comment about a possible request for a prolongation of the duties or about today's EU decision on Macau.

By Jonathan Stearns

To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net

Last Updated: April 29, 2008 09:30 EDT

Source: www.bloomberg.com