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Commission Imposes Provisional Safeguard Measures on Steel Products

On 18 July 2018, Commission Implementing Regulation 2018/1013 imposing provisional safeguard measures with regard to imports of certain steel products was published in the Official Journal of the EU. Hong Kong and mainland Chinese exporters of the steel products covered by the safeguard measures may be affected by them.

By means of new Regulation 2018/1013, the EU has started to impose – as from 19 July 2018 – provisional safeguard measures on 23 categories of steel products, including hot-rolled and cold-rolled sheets and strips, metallic coated sheets, quarto-plates, and different kinds of wire rod, tubes and pipes. The provisional safeguard measures will apply for a period of 200 calendar days, that is, until 3 February 2019.

The provisional safeguard measures take the form of a system of tariff quotas per product category, in excess of which an additional duty of 25% will be levied. The tariff quotas are based on the average of the annual level of imports in the years 2015, 2016 and 2017 and will be allocated on a first come first served basis.

At this stage, the quotas are global, meaning that they apply to products regardless of their country of origin and are not allocated by individual exporting country. Once the tariff quota is exhausted for a certain product category, an additional duty of 25% will be levied. This additional duty shall apply to the customs value of the imported product.
Regulation 2018/1013 stipulates that imports of the relevant product categories which are already on their way to the Union on 19 July 2018 and whose destination cannot be changed shall not be subject to the tariff quotas, or subject to the additional duty of 25%, and may be put into free circulation.

In principle, the provisional safeguard measures apply with regard to all countries. However, in line with WTO and EU law, imports from developing countries are excluded from the scope of the provisional safeguard measures, provided that these imports do not exceed 3% of imports from that product category, and that imports from all developing countries collectively do not account for more than 9% of imports from that product category.

Annex IV to Regulation 2018/1013 contains a list of 121 countries which the Commission qualifies as “developing countries”. This list includes, amongst others, mainland China, Hong Kong, Brazil, Malaysia, Turkey, and Vietnam. Annex IV also indicates, for each of the 23 categories of steel products, the developing countries to which the provisional safeguard measures apply. These product categories are marked with an “X”. For example, despite being recognised as a developing country, the provisional safeguard measures apply to mainland China for 13 of the 23 product categories. For Hong Kong, the provisional safeguard measures do not apply for any product category, meaning that Hong Kong-origin imports will not be subject to the tariff quota or the additional duty.

Given the close economic links between the EU and the European Economic Area countries, being Norway, Iceland, and Liechtenstein, these countries have also been exempted from the measures.

For the steel products which are already subject to EU anti-dumping or countervailing duties, Regulation 2018/1013 provides that the imposition of “double remedies” will be avoided. In this respect, whenever the tariff quota of the safeguard measures is exceeded, the level of the existing anti-dumping and countervailing duties will be suspended or reduced to ensure that the combined effect of those measures does not exceed the highest level of the safeguard or anti-dumping/countervailing duties in place.

Hong Kong traders may recall that the EU safeguard investigation on steel products was initiated in response to the US Section 232 measures on steel products. Indeed, as of 23 March 2018, the US has been imposing a 25% ad valorem tariff on certain steel products and a 10% ad valorem tariff on certain aluminium products. While the EU received a temporary exemption from the US tariffs until 1 May 2018, it did not manage to obtain a permanent exemption from the US tariffs on steel.

Subsequently, on 26 March 2018, the Commission initiated ex officio a safeguard investigation concerning imports of certain steel products into the EU. The products subject to the ongoing safeguard investigation are the 28 categories of steel products listed in the Annex to the notice of initiation (as amended by the Commission’s notice of 28 June 2018). For the time being, the Commission has excluded five product categories from the scope of the provisional safeguard measures, including grain-oriented electric sheets and railway material.

As stated by Trade Commissioner Cecilia Malmström, “the US tariffs on steel products are causing trade diversion, which may result in serious harm to EU steelmakers and workers in this industry. We are left with no other choice than to introduce provisional safeguard measures to protect our domestic industry against a surge of imports.

It should be recalled that safeguard measures are, under WTO rules, extraordinary remedies. While a WTO Member may, in emergency situations, impose temporary emergency tariffs and/or quotas to protect its domestic industry, the right to do so only arises if certain substantive conditions are fulfilled. Safeguard measures can only be justified when, as a result of unforeseen developments, a product is being imported in such increased quantities and under such conditions as to cause or threaten to cause serious injury to the domestic industry that produces like or directly competing products.

Content provided by Picture: HKTDC Research
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