Overview
Originally published in the University of East Anglia: International Law Blog.
The EU has a trade defense regime and a large number of trade remedies (anti-dumping, anti-subsidy, and safeguard measures). UK industries at present are protected by these measures.
The purpose of this note is to briefly review what will be the impact of Brexit on these measures, and what industries in the UK and abroad should do to prepare.
There are three main scenarios: the Withdrawal Agreement is ratified (which may require a short extension); the Withdrawal Agreement is not ratified and the UK leaves without a deal; or exit day is postponed for a long time either by the agreement of the UK and EU council or by the revocation of Article 50.
Scenario 1: The Withdrawal Agreement is Ratified
On November 25, 2018, two important texts were endorsed by European leaders at a special meeting of the EU Council:
- The agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (the Withdrawal Agreement);
- The Political Declaration setting out the framework for the future relationship between the European Union and the United Kingdom
Both texts need to be approved by the UK Parliament and the European Parliament, before the Withdrawal Agreement can come into force. At the time of writing, there is still a significant degree of uncertainty as to whether this will happen, to say the least even with a short extension until the European elections on May 23, 2019.
If the Withdrawal Agreement does come into force in the form it is in at the time of writing (or a form similar in the respects, below), then the UK will remain subject to the EU’s trade remedy regime until the end of the transition period (end of 2020,[1] possibly extended to end of 2022)[2], and there is a possibility that the UK would remain under the EU’s regime permanently after that.
Rationale: the Withdrawal Agreement states that: “Unless otherwise provided in this Agreement, Union law shall be applicable to and in the United Kingdom during the transition period.”[3] As there is no express exclusion of the EU’s basic anti-dumping, anti-subsidy, and safeguard regulations and the Commission implementing regulations imposing anti-dumping, anti-subsidy, and safeguard measures, the entirety of the EU’s trade remedy environment will remain in place under the withdrawal agreement.
The EU’s trade remedy regime, and the EU’s trade remedies would continue to apply to the UK even after the end of the transition period if the provisions in the ‘Northern Ireland Backstop’ were to apply.
Rationale: the Withdrawal Agreement contains the Protocol on Ireland and Northern Ireland (the Protocol).
The Protocol will only begin at the end of the transitional period if no final agreement has been reached and will apply until the Protocol has been superseded by a new agreement.[4]
The Protocol states that a ‘single customs territory’ will be created comprised of the UK and the Union and the rules set out in Annex 2 to the Protocol shall apply in respect of all trade in goods.[5]
Article 4(3) of Annex 2 states that: ‘The Union's trade defence regime, as well as the Union's Generalised Scheme of Preferences (GSP), shall cover both parts of the single customs territory. The Union shall consult the United Kingdom on any trade defence measures or actions under the GSP regime which it considers taking. At least 6 months before the end of the transition period, the Joint Committee shall set up the procedures for the application of this paragraph.’[6]
On this basis, should the backstop provision apply (they will if the withdrawal agreement is ratified by the UK, and no new agreement is reached at the end of the transition period), the EU trade remedies regime and orders would still continue to apply in some form to the UK.
Scenario 2: Hard Brexit
Should the Withdrawal Agreement fail to come into force, then EU law, including its trade remedies regime, would cease to apply on April 12, 2019, with no transition. This is hard Brexit.
Under such a scenario, the European Union (Withdrawal) Act 2018 would transpose EU law into the UK. But the Taxation (Cross-border Trade) Act 2018 (the Customs Act), which contains a skeleton framework for a new UK trade regime, along with associated legislation, will displace the transposed EU rules on trade remedies and maintain only certain remedies.
Maintenance and Review by the UK of Existing EU Trade Remedies
Immediately on April 12, 2019, under scenario 2 above, or when the Northern Ireland Protocol is superseded by a new agreement bringing the UK out of the EU’s trade remedy regime, under scenario 1, the UK will have to operate an independent trade remedies framework.
With this in mind, the UK’s Department for International Trade (DIT) launched a call for evidence in November 2017 on whether existing EU remedies should be maintained in the UK and reviewed to decide the appropriate level of duty once the UK is operating its own independent trade remedies framework.
The DIT’s position was to maintain those remedies that met three criteria: (i) the Government has received an application to maintain those measures from UK businesses which produce products in the UK that are subject to EU trade remedies measures; (ii) that a sufficient proportion of UK business support the application; and (iii) the market share of the UK businesses which produce those products is above a certain level.
Measures which met the criteria would be maintained until the new Trade Remedies Authority (the TRA) would review them based on UK-specific market data, after which the measures would be adjusted if necessary.
In February 2019, the UK Government published a list of the 43 trade remedies it considered had met its criteria and the 66 that had not.
The EU trade remedies that the UK has decided to maintain will then have to be reviewed by the TRA. It is expected that this process will begin once the UK leaves the EU with or without a deal on 12 April 2019 (unless Brexit is postponed).
The legislation which lays out the process and tests for these reviews is contained in the following acts and instruments: in the Taxation (Cross-border Trade) Act 2018, the Trade Remedies (Dumping and Subsidisation) (EU Exit) Regulations 2019 and The Trade Remedies (Increase in Imports Causing Serious Injury to UK Producers) (EU Exit) Regulations 2019. The UK Government has also published guidance on the review process.[7]
The process for a transitional review will be as follows:
- Notice of Initiation: TRA will publish a notice online with details of the review (including the period of time that is being investigated)
- Registration of interest: Businesses and interested parties can register an interest (trade-remedies.service.gov.uk/) so that they can contribute to the investigation. The period within which they can do so is set by the TRA
- Questionnaires and sampling: The TRA will send a questionnaire to all those who have registered interest to collect evidence or, to a sample, if there are too many interested parties. The date by which a party must send in the questionnaire will be specified by the TRA
- Deficiency Letter: If the TRA considers that certain information is missing or not clear from the questionnaire then they can send you a deficiency letter which will set out the deadline for applying.
- Verification Visits: The TRA may visit a party to verify their evidence.
- Hearings: Interested parties can request a hearing or the TRA can decide to hold one (these can be formal or informal depending on the needs of the case).
- Analysis of evidence and calculation of the duty: Given the evidence, the TRA will calculate the level of dumping/subsidy and injury.
- Economic Interest Test: If the TRA considers that dumping/subsidy is harming UK producers, they will consider if the measure is in the wider interest of the UK economy.
- Statement of essential facts and opportunity to comment: TRA will set out the evidence and its findings and offer interested parties the opportunity to comment along with the deadline for doing so.
- Notice of final determination: Once the TRA has considered any comments from interested parties they will give their final determination
- Appeals: any interested party can appeal a decision.
All maintained measures will be reviewed. Adjustments to the existing measures could be granted if, for instance, the export price to the UK, and consequently the level of injurious dumping on the UK market differs markedly from the export price and level of injurious dumping previously found by the European Commission for sales to the EU28. Or, it may be that the UK industry is not suffering injury in the same way the EU28 industry was, or that the interests of users have less, or more weight in the UK than they had in the EU28 as a whole. All these could be ground for interested parties, domestic and exporting producers alike, to request a modification, or the termination of EU trade remedies taken over by the UK.
EU Reviews
Brexit will also impact the EU’s own measures. Indeed, these measures were adopted based on an assessment of the dumping/subsidisation, injury and EU interest for the 28 EU member states. The departure of the UK will impact all of these assessments. When the impact is material, there will be grounds for requesting a review of the EU’s measures from the European Commission.
For instance, the dumping margins of sampled exporting producers were calculated based on sales to 28 countries, including the UK. The export price to the EU27 will be different from the export price to the EU28 anytime an exporting producer sold to the UK. A different export price means a different margin. This in turn may impact the assessment of the injury caused by the imports to the EU27, compared to the situation that prevailed for the EU28. If it can be demonstrated that the UK export price was lower (and brought down the EU average) or higher (and increased the EU average) or that injury was particularly concentrated in the UK, or in the rest of the EU27, reviews should be requested.
In the past, when the EU grew to include new member states (the last times in 2004, 2006 and 2013), the Commission has permitted interested parties to request reviews of the EU’s measures. It is expected that the same will happen in this reverse situation, when a member state leaves the Union.
What Should Business Do?
Should the UK exit the EU on April 12 (in either scenario), businesses with reasons to believe that their level of injurious dumping is different in the UK and the EU27 should register their interest in the case within the time period set out by the TRA once the notice of initiation has been published, as well as contact the European Commission, with a view to obtain a recalculation of the duty in the UK, in the EU, or in both places.
Scenario 3: Long extension
The UK will continue to be a member of the EU and the legal regime will remain as it is. In this scenario there will nothing for business to do until there is further clarity on how the UK and EU intend to proceed.
[1] Article 126 of the Withdrawal Agreement
[2] Article 132 of the Withdrawal Agreement
[3] Article 127 of the Withdrawal Agreement
[4] Article 185, Article 1 and 2 of the Protocol to the Withdrawal Agreement
[5] Article 6 of the Protocol to the Withdrawal Agreement
[6] Note, the use of EU trade defence regulations with respect to Northern Ireland in particular is already expressly referred to in Article 6(2) and Annex 5 of the Protocol to the Withdrawal Agreement
[7] https://www.gov.uk/government/consultations/call-for-evidence-to-identify-uk-interest-in-existing-eu-trade-remedy-measures/outcome/final-findings-of-the-call-for-evidence-into-uk-interest-in-existing-eu-trade-remedy-measures