19 Aug 2016
Important Precedent Set as EU Levies Anti-Dumping Duties Retroactively for the First Time in Its Trade Defence History
Hong Kong traders will be interested to hear that for the first time in the history of EU trade defence investigations, the Commission has decided to impose anti-dumping duties retroactively. On 4 August 2016, the EU published Regulations 2016/1328 and 2016/1329 imposing a definitive anti-dumping duty on imports of certain cold rolled flat steel products originating in mainland China and the Russian Federation and levying these duties retroactively on registered imports.
The product concerned is flat-rolled products of iron or non-alloy steel, or other alloy steel but excluding stainless steel, of all widths, cold-rolled (cold-reduced), not clad, plated or coated and not further worked than cold-rolled (cold-reduced), currently falling within CN codes ex 7209 15 00, 7209 16 90, 7209 17 90, 7209 18 91, ex 7209 18 99, ex 7209 25 00, 7209 26 90, 7209 27 90, 7209 28 90, 7211 23 30, ex 7211 23 80, ex 7211 29 00, 7225 50 80, 7226 92 00. Cold-rolled steel is used in packaging, white goods, general industry, construction and the car industry.
The anti-dumping investigation was initiated on 14 May 2015, following a complaint lodged by Eurofer, the European Steel Association, on behalf of European steel producers Arcelor Mittal, Salzgitter, Tata Steel, ThyssenKrupp and others.
In addition to the complaint, Eurofer had also lodged a request with the Commission to register mainland Chinese and Russian imports of the same product, namely, cold-rolled steel. The registration of imports gives the Commission the possibility to subsequently apply measures against those imports as from the date of registration. The Basic Anti-Dumping Regulation provides that imports may be made subject to registration following a request from the Union industry which contains sufficient evidence to justify such action. In its request, Eurofer pointed to the fact that, after initiation of the investigation, imports from mainland China and Russia kept increasing, thereby causing further injury to EU producers.
The Commission considered the request for registration to be justified and made imports of the product concerned originating in mainland China and Russia subject to registration by Commission Regulation 2015/2325, published in the EU’s Official Journal on 12 December 2015. Registration of imports ceased the moment that provisional duties were imposed on 12 February 2016.
Hong Kong traders may recall that this is not the first time that imports have been made subject to registration in an EU trade defence investigation, yet it is only in recent times that the Commission has started using this tool more frequently. Registration of imports was requested and granted in the solar panels investigations and in several steel cases, including the recent investigation concerning mainland Chinese rebar. More recently, the Commission made imports of certain heavy plate of non-alloy or other alloy steel originating in mainland China subject to registration by Regulation 2016/1357, published in the EU’s Official Journal on 10 August 2016.
The main purpose of registration is to warn importers that duties could be imposed retroactively and, as a result, that continuing imports carries a risk of duties. By registering imports, the Commission hopes to limit or prevent further increases in imports that would undermine the remedial effect of definitive duties imposed later.
In the cold-rolled steel case, the Commission has now, for the first time, decided to proceed with the retroactive imposition of duties on all imports made during the registration period, holding that such retroactive imposition is necessary to prevent the undermining of the remedial effect of the duties.
The position of the Commission is controversial, as the retroactive imposition of duties predominantly – or only – affects EU importers and not the exporting producers found to be dumping. Moreover, duties are levied on goods that have already entered the EU customs union and are likely to have already been sold. The measure is thus perceived as a punishment for importers.
In addition, the retroactive application of a legal measure is highly exceptional and strict conditions need to be complied with. One of these conditions is that importers are or should have been “aware” of the existence of dumping and injury. While several importers have argued that they could not have been aware of any dumping from mainland Chinese and Russian producers, the Commission has held that the importers’ awareness test in this case was met because importers were warned about the possible existence of dumping and injury by way of the initiation of the investigation.
Traders should take due account of the fact that, with this broad interpretation, importers can always be considered to be aware of the existence of dumping and injury in a trade defence investigation, as the opening of the investigation necessarily requires a notice of initiation with prima facie evidence. As a result, when the Commission decides to proceed with registration of imports, one of the conditions, i.e. the awareness of importers, will always be deemed to be met.
The second condition that needs to be complied with to proceed with the retroactive levying of duties is the presence of a “further substantial rise in imports” which, in the light of its timing, volume and other circumstances, “is likely to seriously undermine the remedial effect of the definitive anti-dumping duty to be applied”. In the cold-rolled steel case, the Commission noted that imports of cold-rolled steel increased after the initiation of the investigation and that these imports aggravated the injurious situation of the Union industry, hence undermining the remedial effect of the definitive anti-dumping duty.
The direct consequence of the Commission’s decision in the cold-rolled steel case is that importers of cold-rolled steel will be requested to pay anti-dumping duties on all imports made during the registration period.
Hong Kong traders, especially those with interests in mainland China, may be alarmed over the consequences of this landmark decision for future investigations. In fact, traders can expect that the registration of imports will become a lot more effective and that EU importers will be extremely reluctant to take the risk of continuing to import a product under investigation once the Commission has made imports of that product subject to registration. While the threat of retroactive duties appeared merely theoretical before, the Commission has now shown that retroactive application is a scenario that importers will seriously need to take into account. Moreover, the broad interpretation put forward by the Commission in the cold-rolled steel case suggests that the conditions for the retroactive levying of duties can easily be considered to be met.
As a result, it can be presumed that the Commission’s decision in the cold-rolled steel case will have the effect that imports may completely grind to a halt the moment there is a request for registration in future investigations, to prevent goods being cleared at EU customs after registration. In such scenario, the actual retroactive levying of duties may prove not to be necessary in future investigations as the mere fact of registration will have the desired effect of stopping imports.
At the same time, if registration becomes a more efficient tool in trade defence investigations, it is likely that complaining EU producers will rely more and more on it and will be more inclined to submit requests for registration in investigations.
The Commission’s decision to levy duties retroactively in the cold-rolled steel case, thereby giving a clear warning for future cases, should be seen as a response to complaints about the long duration of an EU trade defence investigation as a result of which exporters can flood the market with dumped goods before duties are imposed. Without retroactive levying of duties, imports can enter the EU market “risk free” until the moment provisional duties are imposed, generally around nine months after the initiation of the investigation. When imports are registered, duties can go back until the moment of registration, but not more than 90 days prior to the date of application of provisional measures.
The registration of imports and the threat of retroactive imposition of duties will thus clearly provide more protection for EU producers that are claiming to be suffering from dumped imports. At the same time, however, Hong Kong traders will note that this development will impact the market situation to the detriment of EU importers and foreign exporters at a moment when it has not yet been decided, even on a provisional basis, that dumping has indeed occurred.