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EU steel safeguard: Quota volumes reduced, new countries targeted

Hot rolled steel imports to the EU will face new country-specific quotas.

The European Union is revising for the second time a steel safeguard it applies to 26 product categories since February 2019.

Differentiated approach to quota volumes

In an approach that raises interesting World Trade Organization compatibility questions, the EU is not announcing an expansion. In fact the EU is reducing the volume of import quotas applied in certain product areas.

Last September the Commission reduced an originally planned annual 5% expansion of the overall quotas to 3%. Now some products will see a decrease in volumes permitted for imports, whilst others will see the quota volumes increased.

The Commission is also shifting to a new system of monitoring steel imports that would allow it to revise import quotas targeting specific countries every three months, instead of annually as has been the case so far.

The new adjustments are bound to ruffle feathers with major steel producers in the EU’s neighbourhood and in Asia. Brazil is also being hit by news restrictions and bound to protest at the WTO.

Note that the EU is not going for a full tightening of the lid on steel imports of steel. The product category “stainless steel hot-rolled sheets and strips” will see country-specific import caps removed altogether.

In its explanation of the move on stainless steel hot-rolled sheets, the Commission indicates, among others, that it had “confirmed a consistent very low use of the country-specific TRQ [tariff-rate quota] by the USA”, which is already hit by a 25% duty on the product category as part of its bilateral retaliation against the US Section 232 steel restrictions.

Country-specific products for hot-rolled flat products

However, product category “hot-rolled flat products”, which benefited from a global quota with no quotas for specific exporting countries, will now face 5 new country-specific quotas for exports from Russia, Turkey, India, Korea and Serbia at the EU border.

Product category “metallic coated sheets” will see a 30% cap on a specific quota from products from China opened during the last revision to suit automotive industry needs.

Large welded tubes will now also face new country specific quotas for imports not used for engineering products – in a presumed bid to avoid stockpiling by importers in the EU. The countries now facing these new restrictions will be Turkey, China, Russia, Korea and Japan.

Tunisia, North Macedonia, UAE face quotas

The Commission is also adding some more developing countries to the list of countries that will be covered by the safeguard. Developing countries responsible for less than 3% of imports of a product targeted by a safeguard are exempted from the measures. Brazil will be hit not only with a country-specific restriction on hot-rolled flat products, but will also be captured by quotas affecting tin mill products and quanto plates. Turkey will now be covered by the quota on tin mill products.

North Macedonia will be hit by the quota on merchant bars.  Tunisia will be captured by the quota on metallic coated sheets. And the United Emirates will be covered by the existing quota on hollow sections.

Access to generic quota restricted in four product categories

Some countries having filled their country-specific quotas were allowed to use up space in a generic quota open to all in a given product category. The EU is now shutting the doors to this generic quota in product categories “organic coated sheets”, “wire rods”, “gas pipes”, “cold finished bars”.

Countries affected by this measures will be Turkey, Switzerland, North Macedonia, Russia, Ukraine, Belarus, India, Korea and China.

This second revision is part of a standard annual revision procedure for a safeguard measure that is meant to be in place for three years.

The safeguard was introduced following the US decision to impose import duties on steel imports in the summer 2018. The EU feared global steel products would be redirected and flood its own market at a time when the sector is reeling from severe overcapacities.

The COVID-19 crisis has however hit the steel sector in Europe badly and is shedding jobs. This, to the Commission, justifies the new measures. The Commission also wants to prepare the ground for recovery and give the EU industry enough space to fill the needs in the EU market.

The revisions tabled on Friday evening to stakeholders and to relevant WTO members would come into force on 1 July.

The EU invited relevant WTO members to a consultation process that will last until 11 June.

Turkey WTO case in making

Turkey, which will be hit strongest by the whole package of new measures foreseen has already filed a dispute at the World Trade Organization. The legal dispute is still in early stages and Turkey has not yet requested the establishment of a panel in Geneva. However today’s measures will confirm Ankara’s concerns over the new EU approach to its steel safeguard.

 

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