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EU Plans Introduction of Surveillance Mechanism on Aluminium Imports, Paving Way for Possible Safeguard Investigation

On 9 April 2018, it was reported that the European Commission will soon put into place a surveillance mechanism on imports of aluminium products, which could pave the way for a possible safeguard investigation. Representatives of aluminium makers, including Rio Tinto and Alcoa, have been pushing EU investigators to open an investigation into the potential injury that the recently imposed US tariffs could have on the EU industry.

On 8 March 2018, the US issued two Presidential Proclamations on adjusting imports of steel and aluminium into that country, announcing President Trump’s decision to impose a 25% ad valorem tariff on certain steel products and a 10% ad valorem tariff on certain aluminium products as from 23 March 2018. For the time being, only Canada, Mexico, the EU, Australia, Argentina and Brazil have received a temporary exemption from the US tariffs until 1 May 2018, while South Korea is the only country to date which has managed to obtain a permanent exemption from the US’s ad valorem tariffs imposed on steel.

Hong Kong traders may recall that in response to the US tariffs on steel products, the European Commission initiated a safeguard investigation into certain steel imports entering the EU market on 26 March 2018, in order to examine whether European steelmakers such as ArcelorMittal and ThyssenKrupp need protection from a boost in global imports entering the EU market. The safeguard investigation covers 26 categories of steel products. This swift action by the Commission, which followed hot on the heels of the US measures, was made possible by the surveillance mechanism on imports of steel products, which the EU opened in 2016 and through which the Commission had already gathered solid evidence to warrant a safeguard investigation.

The ongoing safeguard investigation does not include aluminium products, precisely due to the fact that the data on aluminium, which is currently available to the Commission, does not yet meet the strict criteria to open a safeguard investigation. This is, amongst others, due to the lack of a surveillance mechanism to monitor imports of aluminium products.

Under WTO rules, safeguard measures are 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. Amongst others, 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.

While the Commission is preparing to put in place an EU surveillance mechanism on imports of aluminium products, which could pave the way for a possible safeguard investigation on the basis of the suffered injury to the EU aluminium industry, it appears that EU aluminium makers want a stronger reaction. Rather than waiting for concrete figures to back up a case based on suffered injury, the industry representatives are urging the Commission to open a safeguard investigation on aluminium products based on the “threat of injury”.

While the EU and WTO rules on safeguards do provide for the possibility of opening a safeguard investigation based on a threat of serious injury, such cases – which are based on predicted figures – are more difficult to defend.

However, industry representatives argue that bringing such a case is the best way to protect the EU market from goods that were initially intended for the US market.

Safeguard measures must be applied to imports from all countries in a non-discriminatory manner. Thus, if safeguard measures on certain aluminium products were to materialise, the measures would be applied to imports from Hong Kong and the Chinese mainland just as from any other non-EU country.

Content provided by Picture: HKTDC Research
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