EU Anti-dumping duties after Brexit – UK’s duty to dump?
The EU currently has around 100 anti-dumping (“AD”) measures in place on imported products originating in over 25 countries, some of which may be of importance to UK industry.1 After the transition period ends (or if the UK leaves with no deal), these measures will cease to apply to products imported into the UK unless proper action is taken. The UK’s Department for International Trade (“DIT”) ran a call for evidence between 28 November 2017 and 30 March 2018 with a view to identifying which measures should be maintained once EU law no longer governs AD measures in the UK. In its provisional findings published in July 2018, the DIT found that 34 existing AD measures – including measures on certain aluminium, iron, steel, ceramic and glass products, as well as biodiesel – met the relevant criteria for maintenance.2
What potential legal issues could the UK encounter if it seeks to grandfather the existing EU AD measures in the event of a “hard” Brexit?
Conditions on imposing and maintaining AD measures
As an instrument to address “unfair trade practices”, AD measures arguably constitute an exception to the WTO principles of most-favoured-nation (“MFN”) treatment and maximum tariffs, and are thus subject to rigorous requirements. Under Article VI of the General Agreement on Tariffs and Trade (“GATT”) and the AD Agreement, a WTO Member can apply an AD measure only if the following conditions are met: first, an investigation must be initiated and conducted in accordance with the AD Agreement; second, as a result of that investigation, a determination must be made (a) that dumping is occurring; (b) that the domestic industry is suffering material injury or threat thereof, or that the establishment of a domestic injury is materially retarded; and (c) that there is a causal link between the dumping and the injury suffered by the domestic industry.
Further, Article 11.1 of the AD Agreement permits a WTO Member to maintain an AD duty “only as long as and to the extent necessary to counteract dumping which is causing injury”. If the UK would like to carry over the existing EU AD measures, this “general necessity requirement” must be fulfilled.
Hard Brexit and existing EU AD measures
In case of a hard Brexit, the division of the original EU market, i.e. EU-28 market, into the UK market and the EU-27 market would alter the underlying foundation of the existing EU AD measures. Indeed, once the UK leaves the EU, the “domestic industry” must be redefined in line with Article 4 of the AD Agreement; the original injury determination would no longer meet the basic requirements contained in Article 3 because the volume and the price effect of dumped imports as well as their consequent impact on domestic producers of the like product would be different; and consequently, the original causation determination would become inconsistent with Article 3.5. Accordingly, the existing EU AD measures must be reviewed and adjusted to reflect the reduced size of the relevant market and the changed circumstances. This reasoning would apply equally to the EU-27 and the UK, although of course the impact is likely to be larger for the UK given it is a smaller market.
Reviews under the AD Agreement
Article 11.2 of the AD Agreement provides a review mechanism to ensure that Members comply with the “general necessity requirement” contained in Article 11.1.3 Read literally, Article 11.2 obliges the authorities to “review the need for the continued imposition of the duty, where warranted, on their own initiative” or upon request by any interested party. The Panel in EC – Tube or Pipe Fittings understood the phrase “where warranted” to “denote circumstances furnishing good and sufficient grounds for, or justifying, the self-initiation of a review.4 The Panel further emphasised that where the authorities determine such circumstances to exist, the authorities “must self-initiate a review.5 The separation of the UK market from the EU-28 market could constitute a circumstance warranting and compelling the self-initiation of a review pursuant to Article 11.2.
Helpfully, there is no explicit requirement in the AD Agreement that the “authorities” in Article 11.2 be the same as the “authorities” in the original investigations. The fact that the European Commission conducted the original investigations that led to the imposition of the existing EU AD measures does not necessarily preclude the UK trade remedy authorities from reviewing the existing measures concerning their application to the UK. Further, a review pursuant to Article 11.2, once initiated, will examine “whether the continued imposition of the duty is necessary to offset dumping, whether the injury would be likely to continue or recur if the duty were removed or varied, or both”. The UK authorities would have to conduct both examinations in order to determine whether it could carry over the existing EU AD measures. If, as a result of the review under Article 11.2, the UK authorities determines that the existing EU AD duties are no longer warranted, the duties will need to be terminated immediately.
Work to be done upon Brexit
If there is a no-deal Brexit, the UK will no longer be bound by the EU’s basic anti-dumping regulation. The European Commission will no longer conduct AD investigations on behalf of the UK. If the UK seeks to maintain the existing EU AD measures, its authorities will have to conduct a review of such measures in accordance with the standards and requirements set forth in Article VI of the GATT and the AD Agreement on day one of Brexit.
If the UK seeks to introduce new AD measures, it must establish its own trade remedy authorities and AD regulation in accordance with WTO rules. Notably, the Taxation (Cross-border Trade) Act 2018 envisages the Trade Remedy Authority (the “TRA”) with the appropriate authority. One slight issue is that, whilst DIT has been laying the groundwork for the TRA, the Authority has not yet been formally established absent parliamentary approval. Nevertheless, this is expected before Brexit; as a result, in the event of a no-deal Brexit, the UK should be able to conduct an independent AD policy from the first day.
Written by Wei Zhuang, Counsellor with PRAXIMONDO, practitioners for development, environment and trade (Geneva).
Edited by the Linklaters Trade Practice. The views and opinions expressed here are the personal opinions of the author(s) and do not necessarily represent the views and opinions of Linklaters.1.UK Department for International Trade, “Provisional findings of the call for evidence into UK interest in existing EU trade remedy measures”, updated 24 July 2018, available at: https://www.gov.uk/government/consultations/call-for-evidence-to-identify-uk-interest-in-existing-eu-trade-remedy-measures/provisional-findings-of-the-call-for-evidence-into-UK-interest-in-existing-EU-trade-remedy-measures#fn:1.
3.Panel Report, EC – Tube or Pipe Fittings, para. 7.112