32 Are there any emerging trends or hot topics in trade and customs law and policy in your jurisdiction?
On 29 March 2017, the United Kingdom (UK) invoked article 50 of the Treaty of the European Union (TEU), according to which the country was deemed to leave the EU within two years. However, after three unsuccessful attempts to get a Withdrawal Agreement agreed with the European Commission ratified by the House of Commons, the UK Government requested an extension of article 50 in order to avoid leaving the EU without a deal. On 10 April 2019, the EU leaders of the remaining 27 member states agreed to grant the UK an extension until 31 October 2019 to allow for the ratification of the Withdrawal Agreement. As a result of this extension, the UK took part in European Elections on 26 May 2019.
The Withdrawal Agreement foresees a transitional period until 31 December 2020, which could be extended by up to two more years if both parties agree. The transitional period is meant to provide citizens, businesses and administrations time to adapt to the new situation, and for the UK and the EU to negotiate a new trade deal. During the transitional period, the UK will remain in the EU Customs Union and the Single Market, but it will not be represented in the EU decision-making bodies.
If the Withdrawal Agreement is ratified by both sides before 31 October 2019, the UK will leave on the first day of the following month. The European Council has reiterated that there can be no reopening of negotiations on the Withdrawal Agreement, and that any unilateral commitment, statement or other act should be compatible with the text and the spirit of the Withdrawal Agreement and must not hamper its implementation. The decision was taken in agreement with the UK. Until 31 October 2019, the UK still has the possibility of revoking its invocation of article 50 and cancel Brexit altogether.
US tariff increase on imports of certain steel and aluminium products
On 8 March 2018, the US adopted safeguard measures in the form of a tariff increase on imports of certain steel and aluminium products. The tariff increase became effective with respect to the EU on 1 June 2018, with an unlimited duration.
Commission Implementing Regulation (EU) 2018/724 mandated the Commission to give written notice, no later than 18 May 2018, to the WTO Council for Trade in Goods that, absent disapproval by the Council for Trade in Goods, the EU suspends the application to the trade of the US of import duty concessions under the GATT 1994 in respect of certain products (listed in Annex I and Annex II to the Regulation), so as to allow for an application of additional customs duties on the importation of these products originating in the US.
On 18 May 2018, the Commission gave the above written notice and the WTO Council for Trade in Goods did not disapprove within 30 days. The EU thereby suspended, in the WTO, the application of import duty concessions to the trade with the US under the GATT 1994 in respect of these products.
Consequently, having regard to article 2 of Regulation 2018/724, the Commission imposed additional customs duties on the products listed in Annex I and Annex II through Commission Implementing Regulation (EU) 2018/886 of 20 June 2018.
Safeguard measures on certain steel products
On 1 February 2019, the European Commission published Regulation 2019/159 imposing definitive safeguard measures on imports of various steel products. The measures concern 26 steel product categories and consist of tariff-rate quotas above which a duty of 25 per cent will apply.
According to Regulation 2019/159, the measures should remain in place for a period of up to three years, but can be reviewed in the case of changed circumstances. Anti-dumping duties on several steel products have been suspended for the period of application of the safeguard measures. On 17 May 2019, the Commission published a notice of initiation of the review of the safeguard measures due to questions related to the Union interest.
Safeguards in free trade agreements
On 13 February 2019, the Council and the European Parliament adopted Regulation 2019/287 concerning bilateral safeguard measures in trade agreements.
The EU regularly concludes trade agreements with third countries, most of which include bilateral safeguard clauses or other mechanisms for the temporary withdrawal of tariff preferences or preferential treatment. Before February 2019, the bilateral safeguard mechanism had been decided separately for each trade agreement. Regulation 2019/287 brings a consistent horizontal framework for the inclusion of such provisions in future agreements.
Regulation 2019/287 currently covers the implementation of the EU-Japan, EU-Singapore and EU-Vietnam free trade agreements. Further agreements can be added to the scope of Regulation 2019/287 by means of future delegated acts.
In August 2018, the EU revived the Blocking Statute in response to the US reimposing sanctions against Iranand withdrawing from the Joint Comprehensive Plan of Action (JCPOA). The Blocking Statute shall protect EU operators doing legitimate business in and with Iran from the impact of the re-imposed US sanctions. It prohibits compliance by EU operators with any requirement or prohibition laid down in (certain) US Iran embargo legislation (Iran Sanctions Act of 1996 (ISA); Iran Freedom and Counter-Proliferation Act of 2012 (IFCA); National Defence Authorization Act For Fiscal Year 2012 (NDAA); Iran Threat Reduction And Syria Human Rights Act of 2012 (TRA); and Iranian Transactions and Sanctions Regulations (ITSR)). (The Commission can, however, grant exceptions.) EU natural and legal persons that incur losses because a (contracting) party is complying with the named US rules can claim damages from the latter in EU courts.
In addition, on 31 January 2019, France, Germany and the UK (the €3) set up INSTEX SAS (Instrument for Supporting Trade Exchanges), a special payment mechanism to supporting legitimate European trade with Iran. INSTEX essentially works like a barter trading or offsetting mechanism. For example, a Spanish company buys goods from an Iranian company A for €1 million. A German company sells goods to an Iranian company B for €1 million. Via INSTEX (in the EU and an Iranian counterpart) the sums would be offset and money can be paid from the Spanish company via its bank 1 to INSTEX and by INSTEX via bank 2 to the German company (and likewise on the Iranian side). This way no international (outside EU) payment transaction would be required on the EU side (and the Iranian side, respectively). So far INSTEX has only been used for humanitarian goods, such as medicines, medical equipment and agricultural equipment, which are in any event exempt from the US’s Iran sanctions. However, the idea is ultimately to use INSTEX also for other goods and in particular oil exports from Iran. The US has voiced concerns about the use of INSTEX and not excluded sanctioning the mechanism and parties using it. For further information, the Commission has published a Guidance note to help EU companies with the understanding of the relevant legal acts and the implementation of the Blocking Statute (http://www.gard.no/Content/26003686/Guidance%20note%20on%20blocking%20statute.pdf).
EU creates framework to sanction parties for cyber-attacks threatening the Union or its member states
On 15 May, the EU published Decision 2019/797 and Regulation 2019/796 concerning restrictive measures against cyber-attacks threatening the Union of its member states. The laws sets up a framework to impose travel bans, the freezing of accounts and a prohibition to provide economic and financial resources to natural or legal persons that are considered involved in cyber-attacks (including attempted attacks) on the EU and its member states.
Cyber-attacks are actions originating from outside the EU involving the following:
- access to information systems;
- information system interference;
- data interference; or
- data interception, where such actions are not duly authorised by the owner or by another right holder of the system or data or part of it, or are not permitted under the law of the EU or of the member state concerned.
The cyber-attacks covered are those that represent an external threat. This includes cyber-attacks that:
- originate, or are carried out, from outside the EU;
- use infrastructure outside the EU;
- are carried out by any natural or legal person, entity or body established or operating outside the EU; or
- are carried out with the support, at the direction or under the control of any natural or legal person, entity or body operating outside the Union.
Cyber-attacks constituting a threat to member states include those affecting information systems relating to, inter alia:
- critical infrastructure, including submarine cables and objects launched into outer space, which is essential for the maintenance of vital functions of society, or the health, safety, security, and economic or social well-being of people;
- services necessary for the maintenance of essential social and economic activities, in particular in the sectors of: energy (electricity, oil and gas); transport (air, rail, water and road); banking; financial market infrastructures; health (healthcare providers, hospitals and private clinics); drinking water supply and distribution; digital infrastructure; and any other sector which is essential to the member state concerned;
- critical state functions, in particular in the areas of defence, governance and the functioning of institutions, including for public elections or the voting process, the functioning of economic and civil infrastructure, internal security, and external relations, including through diplomatic missions;
- the storage or processing of classified information; or
- government emergency response teams.
Cyber-attacks constituting a threat to the EU include those carried out against its institutions, bodies, offices and agencies, its delegations to third countries or to international organisations, its common security and defence policy operations and missions and its special representatives. In addition, restrictive measures can also be imposed in response to cyber-attacks on third countries and international organisations where deemed necessary to achieve common foreign and security policy objectives in the relevant provisions of article 21 of the Treaty on European Union.
First trade defence measures based on new anti-dumping methodology
On 3 May 2019, the Commission published its first anti-dumping and anti-subsidy measures based on the new anti-dumping methodology for imports from countries with significant market distortions. The measures were adopted following an expiry review investigation on imports of organic coated steel from China.
In line with the new anti-dumping methodology, when establishing the normal value, the Commission assessed the existence of significant distortions in the Chinese market, taking into account the potential impact of factors such as:
- the market in question being served to a significant extent by enterprises which operate under the ownership, control or policy supervision or guidance of the authorities of the exporting country;
- state presence in firms allowing the state to interfere with respect to prices or costs;
- public policies or measures discriminating in favour of domestic suppliers or otherwise influencing free market forces;
- the lack, discriminatory application or inadequate enforcement of bankruptcy, corporate or property laws;
- wage costs being distorted; and
- access to finance granted by institutions that implement public policy objectives or otherwise not acting independently of the state.
The analysis showed that prices or costs, including the costs of raw materials, energy and labour, are not the result of free market forces in China, since they are affected by substantial government intervention within the meaning of article 2(6a)(b) of the Basic Anti-Dumping Regulation. On that basis, the Commission concluded that it was not appropriate to use domestic prices and costs to establish normal value and consequently proceeded to construct the normal value exclusively on the basis of corresponding costs of production and sale in an appropriate representative country. The Commission considered Mexico to be the most appropriate representative country since it has a substantial production of the product under review, a complete set of data available for all factors of production, manufacturing overheads, SG&A and profit and a higher level of social and environmental protection.
Temporary suspension of EU GSP preferences for Cambodia
In February 2019, the European Commission launched a procedure that could lead to the temporary suspension of Cambodia’s preferential access to the EU market under the EBA trade scheme. The Commission did so on the grounds that there is evidence of serious and systematic violations of core human rights and labour rights in Cambodia. The aim of the Commission’s action is to improve the situation for the people on the ground by getting Cambodia to comply with its obligations under the core United Nations (UN) and International Labour Organization (ILO) Conventions.
Further developments in the EU-US WTO Boeing-Airbus dispute
On 28 March 2019, the WTO Appellate Body ruled that the US had failed to remove the massive and trade distorting subsidies that it had been granting to Boeing. On 9 April 2019, the US proposed to impose US$11 billion tariffs in retaliation for the EU’s illegal aid to Airbus. On 11 April 2019, the DSB of the WTO adopted the reports of the Appellate Body. The decision marked the final step in the compliance proceedings launched in 2012 in this long-running dispute. On 17 April 2019, the European Commission launched a public consultation on a preliminary list of products from the US on which the EU may take countermeasures in the context of the Boeing dispute. The list covers a range of items, from aircraft to chemicals and agri-food products, that overall represent around US$20 billion of the US’s exports to the EU.
The EU is currently taking steps towards requesting a WTO-appointed arbitrator to determine the exact appropriate level of countermeasures. Once the arbitrator delivers a decision, the EU will prepare a final list and request authorisation from the DSB to take countermeasures against the US.
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