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European Commission Publishes Regulation Imposing Definitive Safeguards on Imports of Certain Steel Products

On 1 February 2019, the EU published Commission Implementing Regulation 2019/159 (“Regulation 2019/159” or the “Definitive Regulation”) by means of which it imposes safeguard measures on imports of certain steel products. According to the provisions of Regulation 2019/159, the safeguard measures take the form of tariff-rate quotas combined with a 25% ad valorem duty. The ad valorem duty will become payable once the tariff-rate quota is used up. The safeguard measures entered into force on 2 February 2019. They will remain in force until 30 June 2021, although they can be renewed. 

As reported previously, the Commission initially conducted the investigation grouping the products concerned into 28 different product categories. Regulation 2019/159 provides that no measures are imposed on imports of grain-oriented electrical steel sheets and bearing tubes and pipes (defined as product categories 11 and 23, respectively, in the framework of the investigation). With regard to hot-rolled flat steel products (defined as product category 1 in the investigation), a global quota is established. Country-specific quotas are established for all other product categories. The country-specific quotas for the remaining 26 product categories are determined on the basis of imports during the past three years plus 5%.

While the measures could have been applied globally, imports originating in several countries are not subject to the measures for different reasons. The Definitive Regulation, in its Annex III.1, includes a list of developing countries – all of which are members of the WTO – which are excluded from the scope of application of the measures. According to EU and WTO safeguards law, safeguard measures shall not be applied against a product originating in a developing country as long as the share of imports of such country of the product concerned does not exceed 3%. This is the case, provided that developing country members with less than a 3% import share collectively account for not more than 9% of total imports of the product concerned. With this rule in mind, the Commission excluded various developing countries from the scope of application of the measures including, amongst others, Hong Kong.

Mainland China has been included in the list of developing countries of Annex III.1 of the Definitive Regulation. However, pursuant to Annex III.2, imports of some of the product categories originating in mainland China will fall under the scope of the safeguard measures due to mainland China being one of the most prominent exporters across product categories. In particular, imports of product categories 3, 4, 6, 8, 10, 12, 15, 18, 19, 21, 22, 24, 25, 26, 27, and 28 originating in mainland China will be subject to the measures. 

Regulation 2019/159 provides that the Commission, at the very least at the end of each year of imposition of the safeguard measures, will carry out an assessment of import trends to examine whether any developing country has exceeded the 3% threshold and should, therefore, be subject to the safeguard measures. 

Furthermore, Norway, Iceland and Liechtenstein are excluded from the scope of the measures on account of the close integration of markets with EU members, the overall figures of imports from these countries, and the low risk of trade diversion. Additionally, Botswana, Cameroon, Fiji, Ghana, Ivory Coast, Lesotho, Mozambique, Namibia, South Africa and Eswatini are also excluded from the scope of the measures in order to comply with bilateral obligations resulting from the EU’s Economic Partnership Agreements currently in force.

The Definitive Regulation includes a provision that allows the Commission to adjust the level or allocation of the quotas in case of a “change of circumstances” during the period of imposition of the measures. Such review could concern any product category subject to measures. Examples of a “change of circumstances” are: (i) an overall increase or contraction in Union demand for some product categories that would require a reassessment of the level of the tariff-rate quota; or (ii) any development concerning the US Section 232 measures that may have a direct impact on the conclusions of the investigation. 

It is expected that the Commission will carry out an assessment of the situation on a regular basis and consider a review at least at the end of each year of the imposition of measures. The Commission will initiate the first review investigation no later than on 1 July 2019. The Commission may also review whether the operation of the measures could have detrimental effects in achieving the integration objectives pursued with preferential trading partners, such as substantially risking their stabilisation or economic development.

The safeguard measures entered into force on 2 February 2019 and will remain in force until 30 June 2021. They can be renewed so as to continue applying after this date.

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