The European Union (EU) is working with the International Trade and Industry Ministry (Miti) and other related agencies in Malaysia in its investigation into illegal transhipment of Chinese screw exports to Europe, says a EU senior trade official.

"We are working closely with Miti and related agencies, including the Port Klang Authority, and they are very cooperative," said Sandro Paolicchi, head of section, trade and economic relations, delegation of the EU to Malaysia.

"It's true that we are conducting an investigation, but there is nothing to worry about because it's not an investigation against Malaysia, but to uncover illegal trading by exporters," he told Bernama when contacted today.

Malaysia was informed about the ongoing investigations by the EU anti-fraud officials on the possibility of China exporters exporting steel fasteners to Europe via Malaysia using fake counterfeit certificate of origin, he said.

He was responding to questions on reports that Chinese exporters are using Malaysia as an illegal transhipment hub to evade EU import duties on steel screws and bolts, prompting possible EU action against exports of the products from Malaysia.

In January 2009, the EU imposed a five-year tariff on imports of Chinese iron or steel fasteners worth an estimated 575 million euros in 2007, which the 27-member grouping justified for prevention of "further distortions" and to "restore fair competition".

China, however, did not agree that the EU had been significantly harmed to defend the trade protection. China and the EU are negotiating to sort out the issue through the World Trade Organisation.

In the year that the EU imposed duties against Chinese fasteners, Malaysia's exports of the same product nearly tripled to 32,700 tonnes last year from 13,700 tonnes in 2008.

The boom continued this year, with Malaysia supplying some 20,000 tonnes, more than 10 per cent of Europe's demand, in the first three months of this year.

In 2008, Malaysia's market share in the EU was less than one percent.

In the same period, China's sale of fasteners to Europe dwindled by 80 percent, and rose more than five-fold in Malaysia's favour.

- Bernama