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EU: Tariff measures to address “trade diversion” of steel imports

EU: Tariff measures to address “trade diversion”

The European Commission today announced provisional safeguard measures concerning imports of a number of steel products. These measures are intended to address the diversion of steel from other countries to the EU market as a result of the recently imposed U.S. tariffs. The safeguard measures will be effective 19 July 2018. Traditional imports of steel products will not be affected.

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As noted in an EC release, the U.S. tariffs on steel products are causing trade diversion that may harm EU steelmakers. The safeguard measures are part of the three-pronged response to import duties applied by the United States under section 232 of the Trade Expansion Act of 1962. Because exporting steel to the United States has become less attractive, there are indications that certain steel suppliers have diverted some of their exports from the United States to the EU. In order to avoid a sudden increase of imports that would cause further economic problems for EU steel producers, the EC has found that provisional safeguard measures are necessary.

The safeguard measures are intended to protect the EU domestic industry against a surge of imports. The provisional measures concern 23 steel product categories and will take the form of a “tariff rate quota” (TRQ). 

  • For each of the 23 categories, tariffs of 25% will only be imposed once imports exceed the average of imports over the last three years.*
  • The quota is allocated on a first-come first-serve basis (thus at this stage not allocated by the individual exporting country). 
  • The measures are imposed against all countries, except certain developing countries with limited exports to the EU. 
  • As European Economic Area (EEA) countries, Norway, Iceland, and Liechtenstein are also exempted from the measures. 
  • There are 12 steel product categories covered by the provisional safeguard measures (including imports from China, Russia, and Ukraine) currently subject to anti-dumping and countervailing duties. In order to avoid the imposition of "double remedies" whenever the tariff quota is exceeded, the EC will consider the suspension or the reduction of the level of these duties so that the combined effect of these measures does not exceed the highest level of the safeguard or anti-dumping/anti-subsidy duties in place.

The provisional safeguard measures are to remain in place for a maximum of 200 days. All interested parties will now have the opportunity to comment, and the EC will consider these comments in reaching its final conclusion, at the latest by early 2019. If all conditions are met, definitive safeguard measures may be imposed as a result.

* An additional duty of 25% will be levied only after the usual level of imports over the last three years has been reached. The 25% tariff has been calculated by using an economic so-called partial-equilibrium model which is a standard tool for trade policy analysis by investigating authorities, including the EC. On the basis of certain facts and assumptions (exclusion of U.S. imports, expected trade diversion, import substitution, etc.) the model is used to establish an out-of-quota tariff that provides a deterrent for imports that go beyond the historic import level.

For more information on this topic or to learn more about KPMG’s Trade & Customs Services, contact:

Doug Zuvich
Partner, Global Practice Leader
T: 312-665-1022
E: dzuvich@kpmg.com

Andy Siciliano
Partner, National Practice Leader
T: 631-425-6057
E: asiciliano@kpmg.com

Irina Vaysfeld
Principal
T: 212-872-2973
E: ivaysfeld@kpmg.com

Robert Waldrop
Principal
T: 212-954-8117 
E: rwaldrop@kpmg.com

Christopher Young
Principal
T: 312-665-3229
E: christopheryoung@kpmg.com

George Zaharatos
Principal
T: 404-222-3292
E: gzaharatos@kpmg.com

John L. McLoughlin
Principal, East Coast Leader
T: 267-256-2614
E: jlmcloughlin@kpmg.com

Luis (Lou) Abad
Principal, WNT
T: 212-954-3094
E: labad@kpmg.com

Amie Ahanchian
Managing Director
T: 202-533-3247
E: aahanchian@kpmg.com

Gisele Belotto
Managing Director
T: 305-913-2779
E: gbelotto@kpmg.com

Andy Doornaert
Managing Director
T: 313-230-3080
E: adoornaert@kpmg.com

Jessica Libby
Managing Director
T: 612-305-5533
E: jlibby@kpmg.com

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