It is generally known that EU anti-dumping and anti-subsidy measures are usually imposed for a period of five years, and that they can be (and usually are) extended for further five-year periods further to expiry review investigations. Similarly, operators facing trade defense measures will typically be aware that the repeal or the reduction of the duties can be obtained with interim review investigations or duty refund procedures. It is instead far less known that there is another, temporary, and, until very recently, long unexploited solution available to EU importers and end-users to ease the pressure of EU trade defense measures, namely the suspension thereof. This tool can be particularly relevant to EU importers and end-users of goods that are currently suffering from supply chain disruptions.
Ordinary import duties can be suspended for an unlimited quantity (tariff suspension) or a limited quantity (tariff quota) pursuant to Article 31 of the Treaty on the Functioning of the European Union. Importantly, this does not provide a basis for the suspension of anti-dumping or countervailing duties. The latter trade defense measures are typically a more important restraint for the affected importers than ordinary import duties. However, even though largely unused since recently, there is a separate legal basis to temporarily suspend trade defense measures. Specifically, the European Commission’s assessment regarding the suspension of trade defense measures is made pursuant to Article 14(4) of the EU basic anti-dumping Regulation and/or Article 24(4) of EU basic anti-subsidy Regulation. These provisions provide that, in the Union interest, anti-dumping or countervailing measures may be suspended where market conditions have temporarily changed to an extent that injury would be unlikely to resume as a result of the suspension. Inherently a temporary measure, such a suspension can cover a period of nine months, which can be extended for another year.
After not having being used for over a decade, the suspension of trade defense measures made a comeback in the context of the global supply chain disruption amid the COVID-19 pandemic. In early September 2021, the EU Chief Trade Enforcement Officer Denis Redonnet stated that “[t]here is now a high level of disorganization of some supply chains, which is the result of very large swings and temporary changes in market conditions. [These are] linked to the way in which different parts of the world are coming out, or not, of the pandemic”, and “[i]n some cases we have observed significant swings in fortune of certain industrial sectors and operators in the EU, from a situation of a very clear injury to rapidly going back into the black over the last few months”. According to Mr Redonnet, in the latter circumstances where the EU industry is no longer suffering from unfairly priced imports as a result of the market disruption whilst the supply chains are under pressure from shortage of goods, a suspension of the trade defense measures can be merited.
The European Commission thus sent a strong signal to the industry affected by the supply chain disruption of its readiness to offer a merit-based interim relief by suspending anti-dumping and countervailing duties. This has triggered a number of requests for duty suspension of trade defense measures, both in the framework of ongoing investigations leading to imminent imposition of duties and in relation to duties already in force.
In the recently concluded anti-dumping investigation targeting aluminium flat-rolled products from China, the European Commission accepted the claims of importers and downstream users of the product under investigation that a change of market conditions after the original investigation period warranted the suspension of the proposed definitive duties. It decided to suspend the measures as from the day of their imposition for a period of nine months. Consequently, imports are not subject to duties until July 2022, despite an affirmative finding of injurious dumping.
By contrast, requests for suspension were turned down in the anti-dumping investigations concerning birch plywood from Russia and mono ethylene glycol (MEG) from USA and Saudi Arabia, as well as in the anti-subsidy investigation on imports of aluminium converter foil from China
At the time of writing, the European Commission is also in the process of examining suspension requests in relation to the potential trade defense measures on steel fasteners and graphite electrode systems from China, as well as regarding the existing anti-dumping duties on urea and ammonium nitrate (UAN) from the USA, Russia, and Trinidad and Tobago, polyvinyl alcohol (PVA) from China, and various stainless steel goods from China, India, and other countries.
The suspension of the anti-dumping duties on aluminium flat-rolled products from China received strong criticism from some EU industries. AEGIS Europe has described the European Commission’s approach as “contradictory” and setting “a dangerous precedent for the use of the trade defense instruments”. Furthermore, on 17 December 2021 European Aluminium, the EU domestic industry association that had lodged the anti-dumping complaint, brought actions before the General Court of the European Union against the suspension decision and the European Commission’s related decision not to collect provisional duties. The exact legal grounds underpinning the actions have not been made public yet. However, European Aluminium believes that the suspension is “unjustified” and takes issue with alleged procedural irregularities and unevenness in the European Commission’s handling of the matter.
Notwithstanding the existing debate and legal challenges, EU importers and end-users of the imported goods currently or potentially hit by EU anti-dumping or countervailing duties should consider to reach out to the European Commission and inform it of any supply issues they encountered in the recent past.
Substantive conditions for granting duty suspension
Importers and users would have to verify whether the following substantive criteria are met before lodging a request for suspension.
Under Article 14(4) of the EU basic anti-dumping Regulation or Article 24(4) of EU basic anti-subsidy Regulation, and in light of the European Commission’s practice in recent investigations, anti-dumping or countervailing duties can be suspended only when three cumulative conditions are satisfied.
First, market conditions must have temporarily changed in a sharp and unforeseen manner in the favor of the EU industry benefitting from the measures since the latest period on the basis of which the imposition of the duties is decided, i.e. since the original investigation period or the review investigation period (IP).
The changed market conditions would typically be temporary in nature, as opposed to systemic or structural changes. In case of structural changes of a lasting nature, a permanent relief such as a repeal or reduction of the measures through an interim review may be worth considering.
Second, the changed market conditions must be such that a recurrence of injury following suspension of the measures is unlikely. The European Commission usually performs two analyses in this respect, i.e. (i) whether the post-IP data already shows a significantly improved situation for the EU domestic industry; and (ii) whether the overall performance of the EU domestic industry during the period of suspension would not be negatively impacted.
In the first analysis, the European Commission will request post-IP information for certain injury indicators relating to EU domestic industry in order to investigate whether there is a significant improvement in its situation after the period in the original or review investigation. Such an improvement in injury indicators is not limited to profitability, but encompasses production and sales level, prices, market share, capacity utilization and other performance indicators.
In case it establishes that the situation of the EU domestic industry has significantly improved, the European Commission then also has to establish that the suspension is not likely to harm or reverse the improved situation of the EU domestic industry. In other words, the changed market conditions must provide a sufficient degree of certainty that the EU domestic industry would not lose significant business to dumped imports, and that its prices are likely to stay at a sufficiently high level.
Third, in case the two prior cumulative conditions are met, any decision to suspend the trade defense measures must be in the interest of the EU. In this regard, the European Commission will assess the Union interest by balancing the interest of the downstream industry and the interest of the EU domestic industry regarding the suspension of the measures.
As an illustration, in aluminum flat-rolled products from China the European Commission assessed evidence pointing to increased lead times for importers and users, the impossibility to go beyond contractual agreements, and the fact that certain EU producers had reached capacity for orders in 2021 and the first half of 2022. The measures were therefore found to produce no protective effect for the EU domestic industry, while they were harmful to the downstream users of the goods that were suffering from the market shortage and abnormal price increases. The European Commission also considered that the 9-months duty suspension was in the EU interest as it would allow the EU domestic industry to adjust to the new market situation in a context of strong economy recovery and would give users an additional period to ensure a smooth transition from imports to an EU local source of supply, if necessary.
Procedural aspects concerning duty suspension
The European Commission enjoys a wide discretion with respect to the request for, assessment, and implementation of the suspension. Below are some procedural aspects to keep in mind when considering to lodge a suspension request:
- Any interested party can lodge request for suspension. Articles 14(4)/24(4) do not foresee any legal requirement regarding representatively or standing. The European Commission can also decide to assess the potential suspension of measures on its own initiative.
- There is no official channel for lodging suspension requests. Articles 14(4)/24(4) do not refer to the need for interested parties to lodge their suspension request to the European Commission’s ‘Complaints Office’ for trade defense measures. Nor do they mandate a specific internal procedure for the European Commission to examine whether the relevant conditions for suspension are met. In the framework of an ongoing investigation, interested parties have typically started by making a request for suspension to the case team in charge of the investigation, whilst for trade defense measures already in force, the Complaints Office is the logical point of contact. However, in recent investigations the case team has been passing on the suspension file to the Complaints Office. Therefore, it appears best practice (in the interest of time) to, also in ongoing investigations, contact the Complaints Office, as well as the case team.
- There is a lot of flexibility in terms of timing. A request can be lodged at any stage of a proceeding, including after the final disclosure or well after the measures have been adopted.
- Articles 14(4)/24(4)) do not foresee the formal possibility for all interested parties to comment on a request for suspension, although interested parties do sometimes comment when a request for suspension is made to the case team and placed on the file for inspection by interested parties. Articles 14(4)/24(4) do require the European Commission to give the Union industry an ‘opportunity to comment’, without specifying any mandatory deadline in this respect.
- The suspension request can be examined and concluded in within a very flexible time-frame. Articles 14(4)/24(4) do not contain any reference to specific deadlines or other relevant provisions in this respect. Articles 14(4)/24(4) also give the European Commission full discretion as to the appropriate timing for when the suspension should take effect.
- Articles 14(4)/24(4) provide for the suspension with respect to the product concerned as a whole, and not part thereof. In other words, a suspension request cannot be limited to only one subset of the products subject to trade defense measures, but must cover the full product scope.
- Duty suspension is a temporary solution. Articles 14(4)/24(4) provide for a maximum initial 9-month duration for the suspension of trade defense measures. That suspension can only be extended if all the conditions stipulated in the same Article are still fulfilled after that period, for at most another year.
- Not only is the suspension of trade defense measures for a limited period, measures can be reinstated at any time if the conditions for suspension are no longer applicable. To this purpose, a post-decision monitoring mechanism is usually put in place in order to enable the European Commission to quickly respond to any subsequent changes to market conditions. Interested parties may also draw the European Commission’s attention to relevant developments. The suspension would be lifted immediately if it results in increased import volumes leading to further injury to the Union industry.
Market conditions are constantly changing in this turbulent period in the context of the COVID-19 pandemic, whether favorably or unfavorably. The resilience of supply chains is increasingly being tested. Businesses should be ready to swiftly react to these changes and challenges. The renewed focus on the suspension mechanism for trade defense measures may provide opportunities for affected market players.