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EU’s Highest Court Confirms No Threat of Injury from Imports of Chinese Tubes and Pipes

Traders will be relieved to hear that the EU’s highest Court has confirmed that the EU illegally imposed anti-dumping duties on tubes and pipes exported by mainland Chinese producer Hubei Xinyegang. In a judgment of 7 April 2016, the Court confirmed that the Commission’s findings of threat of injury were based on insufficient evidence.

It will be recalled that the EU had, in 2009, imposed duties worth up to 39.2% on certain Chinese-origin steel tubes, including those commonly used in the oil industry, by Regulation 926/2009, published in the EU’s Official Journal on 6 October 2009. Steel tubes produced by Hubei Xinyegang were subject to duties of 27.2%, the rate applicable to companies listed in the Annex to the Regulation.

Following the imposition of anti-dumping duties, Hubei Xinyegang, reportedly one of the biggest and oldest tube producers in mainland China, successfully challenged the imposition of duties on its products before the EU General Court. The company argued that the EU industry had in fact shown signs of being in good health, with increased sales volumes and productivity being reported.

In a judgment of 29 January 2014 (Case T-528/09), the EU General Court accepted this argument. The EU’s lower Court found that the European Commission had wrongly concluded that low-priced imports from mainland China threatened to harm European rivals.

According to the Court, the conclusion “that the Community industry was in a vulnerable situation at the end of the investigation period” was not supported by the relevant economic data. The Court subsequently annulled the Regulation as far as Hubei Xinyegang was concerned.

The European industry, including companies like ArcelorMittal, Benteler, TMK-Artrom SA, Vallourec, Voestalpine and others, subsequently appealed this decision before the EU’s highest court. The European steel pipe makers argued that, while no material injury was found within the EU industry, the EU institutions had rightly found that there was a threat that such injury would occur in the future.

In a judgement of 7 April 2016, the EU’s highest court dismissed this appeal and confirmed that the General Court could rightly hold that the evidence relied on by the EU institutions was not sufficient to support a conclusion that there was a threat of injury. 

The Court recalled that duties could be imposed in certain circumstances on the basis of a “threat of injury”, meaning that no actual injury was established during the anti-dumping investigation. However, such finding must be based on facts and “not merely on allegation, conjecture or remote possibility”. A change in circumstances which would create a situation in which the dumping would cause injury must be clearly foreseen and imminent.

While the EU Courts side with the EU institutions in the majority of cases where the imposition of trade defence measures is challenged, referring to the broad margin of discretion of the institutions in this field, the Hubei judgments notably limit the Commission’s ability to impose duties when no material injury can be established.

Traders will note that this judgment is a significant development for companies targeted by EU trade defence proceedings: the judgment has far-reaching consequences for the EU’s plans to increase the number of trade defence cases that it launches on threat of injury alone.

In most cases, anti-dumping or anti-subsidy investigations are only initiated when European producers can provide prima facie evidence that they are suffering injury as a result of dumped or subsidised imports.

On 13 February 2016, however, the EU started an investigation into imports of hot-rolled steel from mainland China, without evidence of material injury to the EU industry being available. The Commission justified the initiation of this investigation by stating that there was a “threat” of injury in the future.

Traders will also recall that in the fasteners saga, where measures were withdrawn following a ruling from the EU Court, the Commission suggested that it would be in favour of opening a new investigation to reinstate duties, based solely on threat of injury. 

Similarly, duties will normally only be imposed when – after an investigation – the findings of dumping or subsidy and material injury are confirmed. In cases where a threat of injury has been found to exist, it is normally in combination with an actual injury finding.

Before the tubes and pipes investigation, there was another investigation, in 1997, where definitive anti-dumping duties had been imposed. The case targeted imports of leather handbags from mainland China. No material injury to the EU industry had been found, only a threat of injury. Given the recent EU Court ruling, it will henceforth become more difficult for the Commission to impose definitive duties in such cases.

The initiation of trade defence investigations and the imposition of duties based on threat of injury alone is a dangerous development as it can expose economic operators, including traders from Hong Kong, to arbitrary measures of a purely protectionist nature. First of all, it becomes easier to start investigations as EU producers are only required to show a threat of potential injury in the future, rather than any current injury.

Second, the imposition of duties on the basis of threat of injury alone essentially means that punitive tariffs are imposed on imports that are not actually causing any harm to the EU industry.

It is noteworthy that the EU Courts have set the bar higher for the European Commission, making clear that it will not accept the imposition of duties to counter the threat of injury if there is no sufficient evidence to support such measures.

Content provided by Picture: HKTDC Research
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