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While Trilogue Talks on New EU Anti-dumping Rules Continue, Fresh Investigation on Tyres Begins

On 11 August 2017, the European Commission initiated a new anti-dumping investigation on imports of new and retreaded tyres for buses or lorries originating in mainland China, currently classified under CN codes 4011 20 90 and 4012 12 00. According to the Commission, Chinese manufacturers may be gaining market share from their EU competitors, such as Goodyear Dunlop, Michelin and Continental, in an unfair manner.

The anti-dumping investigation on new and retreaded tyres for buses or lorries is the second EU anti-dumping investigation initiated against mainland China since the expiry of certain provisions of its WTO Accession Protocol on 11 December 2016. The first one was the anti-dumping investigation on low carbon ferro-chrome originating in mainland China, Russia and Turkey initiated on 23 June 2017.

In parallel, the European Parliament and EU ministers have started negotiations on the final text of new EU anti-dumping rules, with the final reform of the EU’s anti-dumping legislation advancing ever closer. The European Commission is still expected to circulate a compromise proposal on 31 August 2017 to ease the way for the talks, which should tackle the most contentious issues.

In an intensification of the trade tensions between mainland China and the EU, the European Commission opened its probe on lorry and bus tyres, arguing that Chinese manufacturers may be unfairly gaining market share from EU competitors.

The complaint was lodged on 30 June 2017 by the anonymous coalition against unfair tyres imports, on behalf of producers that are said to be representing more than 45% of the total Union production of new and retreaded tyres for buses or lorries.

The information available to the European Commission indicates significant dumping margins. Moreover, it appears that the complainant has provided prima facie evidence that imports of the products from mainland China have increased overall in absolute terms and have increased in terms of market share, having a negative impact on the quantities sold and the market share held by the Union industry and resulting in substantial adverse effects on the EU’s overall performance and employment situation.

When lobbying for the anti-dumping duties, European tyre makers warned the European Commission that growing volumes of cheap imports from mainland China have already led to job cuts on the EU market and that the EU industry will suffer further job losses if anti-dumping duties are not imposed.

By means of the notice of initiation, it is clear that the European Commission continues to automatically treat mainland China as a non-market economy, despite the expiry of certain provisions of mainland China’s WTO Accession Protocol on 11 December 2016 (on the basis of which Beijing insists that it should be treated as a market economy in EU anti-dumping investigations as from 12 December 2016).

In accordance with the currently applicable Article 2(7)(a) of the basic anti-dumping Regulation, the European Commission states that the normal value of the imports concerned from mainland China will be determined on the basis of the price or constructed value in an appropriate market economy third country. The United States has provisionally been chosen as the comparison market, while other options are Turkey, Japan and South Korea. Individual exporting producers from mainland China that disagree with the third country methodology, due to the fact that they consider that market economy conditions prevail for them, may submit a market economy treatment  (MET) claim. Any such producer will only be granted MET if the criteria laid down in Article 2(7)(c) of the basic Regulation are fulfilled.

If the European Commission’s anti-dumping investigation leads to the finding of dumping, injury and a causal link between them, the EU can impose provisional anti-dumping duties no later than nine months from the publication of the notice of initiation, i.e. by 10 May 2018. Definitive anti-dumping duties, which typically last for five years, can be imposed within 15 months from the publication of the notice of initiation, i.e. by 10 November 2018.

If the investigation leads to the imposition of duties, mainland China may decide to challenge the EU at the WTO, arguing that the law on which the anti-dumping duties are based, which automatically treats mainland China as a non-market economy, is illegal. In addition, Chinese exporters could challenge the EU at the European courts in Luxemburg in order to obtain a refund of their paid anti-dumping duties.

While the EU is in the process of reforming its anti-dumping legislation in order to bring EU law into line with the change in mainland China’s WTO Accession Protocol, it is not there yet.

As previously reported, the European Commission’s proposal on the EU’s new methodology to combat dumping from third countries was presented on 9 November 2016. The negotiating position of the Council was approved on 3 May 2017, and the European Parliament determined its definitive negotiating position on 5 July 2017. The trilogue talks on a final text for the EU’s new anti-dumping regulation started on 12 July 2017.

The talks could prove difficult, due to the fact that the European Parliament’s negotiating position goes far beyond the proposals put forward by the European Commission and the EU Member States. Until the moment at which the Council and the European Parliament reach an agreement, the old EU anti-dumping methodology continues to apply.

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