3 Oct 2019
European Commission to Implement Adjustments to Steel Safeguard Measures
On 27 September 2019, the European Commission confirmed that it will adjust its current steel safeguard measures in accordance with its proposal, communicated on 14 August 2019. Importantly, this decision makes certain that the liberalisation of import-restrictive measures will be slowed down from the previously anticipated 5% increase in import quotas a year to only 3%. It also means that the Commission will adjust the functioning of its quotas for certain steel products, including the capping of hot-rolled flat steel imports at a global quota of 30% per quarter, and the redefining of a steel product category destined for use in the automotive sector. Additionally, certain changes to the exclusion list for developing countries will come into force. These adjustments, which took effect on 1 October 2019, reflect the Commission’s wide support from EU Member States to better align the steel safeguard measures with the current situation (as perceived by them) affecting the EU’s steel industry.
New Commission Implementing Regulation 2019/1590 follows the conclusion of the Commission’s review investigation that was launched on 17 May 2019, into the definitive safeguard measures imposed on certain steel products back in February 2019. It is this ‘definitive Regulation’ (Regulation 2019/159) that currently imposes the country-specific quotas and global (residual) quotas on the 26 different product categories, used, among others in cars, construction and household appliances.
Results from this review investigation, including the Commission’s projected changes, were first published on the WTO’s website on 14 August 2019, as a notification to WTO Members potentially affected by the EU’s proposed adjustments. Hong Kong traders may recall (see: Issue 170/2019 of the Regulatory Alert-EU) that the Commission’s overall view of this review investigation was that the current tariff-rate quota (TRQ) levels did not unduly restrict trade flows but rather ensured that traditional trade flows were maintained.
Nonetheless, for hot rolled flat products, under product category 1, the Commission has chosen to install a global quota of 30% on the global quota usage per quarter. This was due to the fact that the level of imports affected by the current measures were considerably lower than expected and so the risk of a potential shortage of supply in the EU market was substantially reduced. The new global quota adjustment is hence justified by the Commission as a way to strike an appropriate balance between giving exporting countries enough room to fill the market shares left open from countries subjected to safeguard measures, and preserving as much as possible traditional trade flows. A 30% cap on rebars and wire rods (product categories 13 and 16 respectively), have similarly been approved in order to overcome the crowding out of traditional trade flows.
As for metallic coated sheets under product category 4, the Commission concluded that its previous distinction of products for the automotive sector was not effective, because it had disrupted traditional trade flows. This was particularly the case for mainland China, which had exhausted its country-specific TRQ in one quarter (2 February – 31 March 2019) and subsequently used over 75% of the global TRQ in the last quarter of that same period (1 April – 30 June 2019). Accordingly, the Commission has decided to adjust the functioning of the TRQ for category 4, in such a way that the use of category 4B (products which are not subject to anti-dumping duties) is restricted to only imports that can demonstrate an end-use in the automotive sector. In other words, the scope of category 4A (products subject to anti-dumping duties) has now been extended, since previous imports of products under category 4B that are not destined for use in the automotive industry need to be treated as category 4A, effective 1 October 2019.
Significantly, the Commission has also decided to reduce the pace of its commitment to progressively increase its import quotas from 5% to 3%. This means that the level of TRQ for all product categories will be increased by 3% for the second period of measures (1 July 2019 – 30 June 2020), and again for the last period of measures (1 July 2020 – 30 June 2021), effective 1 October 2019. Since the EU apparently experienced substantially greater than expected imports from trade diversion flows in steel before the provisional measures were adopted in July 2018, the Commission has determined that it needs to adapt the liberalisation of safeguard measures at a slower pace to ensure the most effective protection of the EU steel industry.
Lastly, the Commission has also decided to update the list of exclusions from specific safeguard measures for developing countries, based on more recent import statistics. Hong Kong traders should be informed that seamless stainless tubes and pipe imports from mainland China will no longer be subject to the EU’s safeguard measures, as the 2018 level of imports fell below the nominated cusp of 3%. This effectively transfers mainland China to a more relevant residual TRQ.
To conclude, as of 1 October 2019, three important adjustments to the current steel safeguard measures have come into effect. These include the improvement (in the Commission’s view) of the functioning of the TRQ for some products, particularly hot-rolled flat steel, and steel intended for the automotive sectors; the slowing down of the liberalisation of import quotas to 3% from 5%; and updating the list of exclusions from safeguard measures for some developing countries, including mainland China.