29 June 2018
EU Issues Guidance on Surveillance Mechanisms for Steel and Aluminium Imports
On 12 June 2018, the European Commission published guidelines clarifying how industry participants should comply with the ‘prior surveillance’ regimes which have been imposed on imports of steel and aluminium products. These monitoring regimes are felt to be an essential element of the European Commission’s response to US tariffs on steel and aluminium products, as they provide relevant data for investigations into whether European producers require protection from global imports.
Hong Kong companies may recall that the ‘prior surveillance’ regime has applied to the importation of certain iron and steel products since 30 April 2016, pursuant to Implementing Regulation 2016/670 (the Steel Surveillance Regulation). Imports of aluminium have only been subject to the ‘prior surveillance’ regime since 27 April 2018, pursuant to Implementing Regulation 2018/640 (the Aluminium Surveillance Regulation).
The surveillance regimes require a ‘surveillance document’ to be completed and presented before customs clearance will be granted for imports (from all countries, including Hong Kong and mainland China) of certain steel and aluminium products.
Thus, these surveillance regimes give the European Commission quantifiable evidence about imports of steel and aluminium products entering the EU. The European Commission is, in turn, using this information to assess its concerns that, in response to the US tariffs on steel and aluminium products, certain countries will redirect their exports to the EU, flooding the market and depressing prices.
More particularly, the statistical information gathered from the steel imports surveillance regime was the basis upon which the European Commission was able to initiate its safeguard investigation into whether or not European steelmakers, such as ArcelorMittal and ThyssenKrupp, require trade protection.
As previously reported, this safeguard investigation began on 26 March 2018 in response to President Trump’s decision to impose a 25% ad valorem tariff on certain steel products and a 10% ad valorem tariff on certain aluminium products.
Under WTO rules, the European Commission will be entitled to impose ‘safeguard measures’ if it finds that the 26 categories of steel products covered by the investigation are being imported in such increased quantities that they are causing, or are threatening to cause, serious injury to the EU industry producing directly competing products.
If this investigation concludes that such injury is being caused by increased imports, the EU will be entitled to impose safeguard measures, which could take the form of tariffs on global imports of steel products and may be attached to quotas. Importantly, any safeguard measure imposed will be applied to imports of certain steel products from all countries in a non-discriminatory manner. Hong Kong traders should therefore be aware that imports of steel products from Hong Kong and the Chinese mainland would also be subject to these safeguard measures.
The European Commission can impose provisional measures for up to 200 days if it makes a preliminary finding that increased imports have caused or are threatening to cause serious injury to European steel producers. If the European Commission confirms such finding at the completion of the safeguard investigation in December, it can impose definitive safeguard measures for a period of four years, which can also be extended for another period of four years in certain circumstances.
The European Commission has not yet opened a safeguard investigation into aluminium products because it does not have the import data and evidence to satisfy the WTO criteria for initiating a safeguard investigation. The surveillance regime on imports of aluminium products may, therefore, provide the European Commission with the required evidence to initiate a safeguard investigation into aluminium products.
The newly issued guidelines, published on 12 June 2018, on the steel and aluminium surveillance regimes do not create any new rules, but rather clarify the application of the existing rules and regulations. Of particular relevance to Hong Kong traders are the following clarifications contained in the guidelines:
- Use of representatives: Surveillance documents can be requested through representatives who are not established in the European Union, provided they have a valid EORI number.
- Number of surveillance documents: Each TARIC code must have a separate surveillance document, but one surveillance document can cover several shipments or purchase orders. An order or invoice with multiple TARIC codes must have separate surveillance documents for each TARIC code.
- Application of exemption thresholds: The exemption thresholds contained in the Steel Surveillance Regulation and the Aluminium Surveillance Regulation only apply to individual TARIC codes; so, generally, any import under a specified TARIC code with a net weight below 2,500 kg may enter the customs territory of the European Union without a surveillance document. This figure is 5,000 kg for each individual TARIC code subject to prior surveillance and falling under HS heading 7318.
- Required evidence of intention to import: Any supporting commercial evidence will satisfy the requirement to provide evidence of an intention to import; this could include a copy of the contract of sale, a purchase order, or any other commercial evidence such as correspondence (including email exchanges) confirming the order of the goods concerned.
Hong Kong traders who would like more information about the application of the prior surveillance regimes can click on the following hyperlink to access the European Commission’s Guidelines.