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EU Regulation Imposes Extra Duties on Vast Number of US-origin Goods; Other EU Safeguard Measures on Steel Products Set to Follow

On 21 June 2018, Commission Implementing Regulation 2018/886 was published in the EU’s Official Journal, putting in place the EU's “rebalancing measures” in response to the US tariffs on steel and aluminium. The Commission adopted the Regulation on the previous day, and it entered into effect on 22 June 2018. The Regulation immediately began to target a list of US-origin products said to be worth €2.8 billion.

The list of US-origin imports that therefore currently face an extra duty at the EU border includes steel and aluminium products, agricultural goods and a combination of various other products. By putting these duties in place the EU claims that it is exercising its rights under WTO rules. European Commissioner for Trade, Cecilia Malmström, commented that “we did not want to be in this position. However, the unilateral and unjustified decision of the US to impose steel and aluminium tariffs on the EU means that we are left with no other choice.” All EU Member States have expressed their unanimous support for this approach.

The EU intends to rebalance bilateral trade with the US, taking as a basis the value of its steel and aluminium exports affected by the US measures. Those are worth €6.4 billion. Of this amount, the EU will – pursuant to the new Regulation adopted by the Commission – rebalance on €2.8 billion worth of exports immediately. The remaining rebalancing of trade, valued at €3.6 billion, will take place at a later stage, namely, in three years’ time or after a positive finding under the WTO dispute settlement procedure if that should come sooner.

The EU rebalancing measures will remain effective for as long as the US measures are in place. This, according to the Commission, is in line with the WTO Safeguards Agreement and with EU legislation.

Hong Kong sellers may be wondering exactly which products have been targeted for extra duties under the new measures. The list of products is the same as in a previous Implementing Regulation which was published in the EU’s Official Journal on 17 May 2018. The list includes orange juice, smoking tobacco, cosmetics, jeans, T-shirts, trousers, bedlinen and men’s leather footwear. Please click on the list, which was notified to the WTO on 18 May 2018, for each specific product description and CN code that is targeted.

In essence, therefore, the EU will impose additional customs duties on the products listed in Annex I and Annex II of new Regulation 2018/886, as follows:

a. The additional ad valorem duties at a rate of 10% and 25% on imports of the products listed in Annex I, from the Regulation’s date of entry into force (i.e., from 22 June 2018).

b. Further additional ad valorem duty of a rate of 10%, 25%, 35 % and 50% shall be applied on imports of products listed in Annex II as specified therein: from 1 June 2021, or from the fifth day following the date of the adoption by, or notification to, the WTO Dispute Settlement Body of a ruling that the United States' safeguard measures are inconsistent with the relevant provisions of the WTO Agreement, if that is earlier. In the latter event, the Commission will publish a notice indicating the date on which such ruling is adopted or notified.

It is reported that the EU response to the US tariffs on aluminium and steel has been closely coordinated with Canada and Mexico, which have apparently stated that they will also be imposing tariffs on US products in July. The products subject to extra tariffs will differ in the other jurisdictions, but they have been chosen to hurt certain industries and electoral districts as a means of putting political pressure on US President Donald Trump to repeal the higher tariffs on his side.  

The European Commission’s decision to adopt Regulation 2018/886 is part of the three-pronged response which had been outlined by it earlier this year. This includes the launch on 1 June 2018 of legal proceedings against the US at the WTO, and safeguard action to protect the European market from alleged disruptions caused by the diversion of steel from the US market. The safeguard action will impact global imports of the products covered by the action, entering the EU, and not only those that are being imported from the US.

In that regard, Hong Kong traders will recall that the EU launched a safeguard investigation earlier this year, on 26 March. The safeguard investigation is looking into steel imports, and will be completed by 26 December 2018, but recent news reports have suggested that provisional measures could be imposed as early as mid-July 2018. Unconfirmed reports suggest that while the investigation covers 26 categories of steel products, up to four of these may be excluded, but it is not known which. In addition, the reports suggest that an EU tariff of 25% may be set on imports exceeding yet-unknown quota levels. The quotas will, it is expected, be based on an average of the volumes imported over the last three years.

As regards aluminium, the Commission has put in place a surveillance system for imports of aluminium, in case safeguard action is required in that sector.

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