Specialist consultancy in Brexit, WTO, anti-dumping and market access issues
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12 things UK industry should know about UK trade remedies
Note that this briefing refers to new investigations. Most of the TRA investigations have covered reviews of existing measures that have been transitioned from the EU. Further, the briefing principally only covers anti-dumping and countervailing duties because these are likely to be the most common remedies used by the UK. Safeguard investigations are relatively rare in major economies such as the EU and US and this is likely to be the case in the UK also.
1. What possibilities are there to deal with unfair imports?
There are two possibilities to deal with unfairly priced imports. Anti-dumping deals with the situation of unfair pricing practices where exports are made to the UK below a ‘normal value’. Countervailing duties (anti-subsidy) deal with subsidised imports. There can be some overlap between the two. If a subsidy has the effect of reducing the export price, it could also be classified as dumping. In such cases, either anti-dumping or countervailing duties might be used. Sometimes it is possible that parallel dumping and subsidy investigations will be opened alongside each other. In such situations it must be ensured that anti-dumping and countervailing duties are not applied to the same situation, thus creating a double penalty.
Dumping and subsidy investigations are initiated against all exports from specific countries. It is down to applicants to identify the source of problems and to submit sufficient evidence to the TRA such that it could initiate a formal investigation.
In addition to the above, it is also possible to deal with a sudden surge in imports with safeguard measures. There does not have to be any evidence of unfair trade in such situations. Unlike dumping and subsidy investigation, safeguard measures can only be applied against all sources of imports. Individual countries cannot be targeted as they are not based on any unfair trading practices.
2. How can an industry monitor whether unfair trade is occurring?
Usually an industry will learn from the market that a particular source of imports are being made at low prices and/or are significantly increasing in volume. This does not mean that dumping or subsidy is taking place but it does provide an initial indicator that may be worth looking into further.
A useful source of information are official UK trade statistics. This is available at an 8 digit tariff code level. Although in many cases the particular product that may be facing an issue is narrower than the full 8 digit code, the import data is very useful as a monitoring device. Import volumes and unit values can be monitored on a monthly basis. If it becomes clear that a problem is emerging this will form primary evidence in the application.
In addition to trade statistics, it is also worth doing regular web searches on other countries’ trade remedy activity. If other countries have initiated dumping or subsidy investigations against the countries concerned, this could also indicate that the risk of the unfair trade spilling into the UK market is high. Where the investigations have been completed, useful information can often be gained from the determinations of the trade remedy authority concerned. This is particularly the case in relation to subsidy schemes where another authority may already have presented detailed information on the scheme.
3. What is required in application?
Aniti-dumping and countervailing duty investigations must include the following:
Detailed description of goods and identification of relevant tariff codes
Identification of exporters and other interested parties known to the applicants
Representiveness of the applicants - The application must at least be represented by a minimum of 25% of UK production of the product concerned and the UK industry must have a market share of at least 1%.
Information about the allegedly dumped/subsidies imports including evidence of dumping and/or subsidy.
Evidence that the UK industry has been injured and that there is a causal link between the dumping and/or subsidy and this injury.
In most situations there are multiple UK producers that will make the application. However, because it is necessary for the companies to provide confidential information on how they have been affected by the measures (in terms of prices, market share, profitability etc), commercial sensitivity and competition concerns mean that the applicant companies cannot merely prepare the application between themselves. Thus, it is normally the case that an industry association will prepare the application on behalf of the whole industry. In such situations, the individual companies feed the data through to the association who aggregates so that the individual company data is protected. In some situations, there may not be an industry association or the association may be conflicted with both manufacturing and importing interests. In these cases, applicants will usually engage a trade remedy expert (consultant/lawyer etc) to fulfil the role of aggregating the individual company data and prepare the application.
4. What is the role of the pre-application office?
The TRA has a pre-application office where UK industries can discuss the issues they are facing and explore the possibility of submitting an application for an investigation. The office will not help UK industries prepare an application but they will give advice on what information needs to be provided. They will also review evidence prepared by the applicants and will give feedback on whether the TRA would be likely to consider it to be sufficient to initiate an investigation.
This is a really useful resource for UK industry. As soon as a UK industry has some initial evidence of a problem it can make contact with the pre-application office. Early contact is advisable to ensure that work is focused on the key issues that the TRA will help the UK industry concerned to identify.
5. The crucial role of product definition
The definition of the product defines the scope of the investigation and any ultimate measure. The product is normally defined by a description of the technical characteristics and specifications. In addition, the exact tariff codes covered by the definition will be specified.
It is down to the applicants to provide a coherent product definition. The TRA does not necessarily have significant expertise in a particular industry and, therefore, the applicants play an important role in determining the scope of the investigation.
In some cases, other trade remedy authorities may have had investigations on similar products and the definitions used in those cases could be useful in providing a starting point for a UK application.
6. What is involved in completing the TRA questionnaire?
The UK industry/applicant questionnaire requests information including the following key data:
Technical information on the product concerned and comparison with the product imported from the country subject to investigation.
Company structure and operations.
Detailed data on domestic sales prices and cost of production.
Much of this data will have to be specially calculated for the purposes of the investigation. It is therefore extremely important that careful notes and paper trails are maintained on how the data has been calculated. This will make the verification process much smoother and will help in satisfying the TRA that you have provided accurate data.
The questionnaire requests a considerable amount of data, much of which is commercially sensitive. Thus, it is possible to submit some data in confidentiality. This is done by preparing a confidential and non-confidential version of the questionnaire response. The confidential data can be excluded and summarised in a way that gives some understanding of the data submitted without breaching business confidentiality.
7. The importance of monitoring the public files
The bulk of UK industry’s role in the investigation will be completed once the original application has been submitted and the UK producer questionnaire has been provided and verified. UK industry does not formally have to play any further role in the investigation.
However, interested parties opposed to measures (exporters and UK importers) will submit arguments and evidence in support of their case. It is therefore important to review all submissions on the file to assess whether other parties are making claims which are inaccurate. The TRA’s approach is to be as thorough and evidence based as possible. Thus, if they receive some written information arguing against measures, they will review it seriously. If the information is inaccurate, it is really important for UK industry to put in submissions that counter the argument with backup evidence.
8. The role of hearings or meetings with the TRA
In addition to written submissions, there is also the possible for hearings or meetings with the TRA.
Hearings are more formal than meetings, though both are part of a formal process. Even in the case of a meeting, the TRA will require a note that the meeting took place and the issues discussed to be placed on the file.
If a written submission is made it is definitely worth following it up with a meeting or a hearing when the arguments can be presented orally. This allows for the key points to be stressed and allows the TRA to clarify issues to ensure that they fully understand the information submitted.
The TRA currently seems to be encouraging parties to request meetings rather than hearings. Meetings can take place in person in Reading at the TRA’s offices or can be held by video call.
9. Is there a chance to comment on the TRA’s findings?
Once the TRA has made initial findings it will publish a statement of essential facts (SEF). This will present their initial conclusions on all of the issues considered and will include the proposals they would make to the SoS on the basis of this analysis. The SEF is put on the public file and is therefore available to all. The TRA will specify a period within which comments should be submitted.
10. Is there a role for political strategy and lobbying?
The TRA is an executive non-departmental public body under the sponsorship of DIT. This means that it makes legally and economically independent recommendations on the basis of the evidence rather than a political decision. In principle, therefore, a political strategy in relation to the TRA does not really make sense. That said, the TRA is happy to receive views and information from all interested parties. If a local MP has a manufacturing plant in their constituency, a letter from that MP could be useful in influencing the economic interest test. However, even this kind of letter should include whatever data can be provided. Information on the number of jobs and the importance of the jobs to the region will be directly relevant to the TRA’s economic interest determination.
It is the Secretary of State for Trade that makes the final determination as to whether anti-dumping or countervailing duties will be applied on the basis of the TRA’s recommendation. According to the current law, the Secretary of State only has the possibility to accept or reject the TRA’s recommendation. If the TRA recommends no measures, the Secretary of State cannot decide that measures should be imposed.
In addition to the economic interest determination made by the TRA, the Secretary of State must decide whether there are other matters of public interest that affect their decision. If there are public interest issues, therefore, it is important that these are communicated to the Secretary of State or the relevant DIT officials.
Special rules apply in relation to the transition reviews. In these cases the Secretary of State has the ability to ‘call-in’ an investigation so that they can make the final determination. It might well be appropriate, therefore, for UK industry to make a formal request to the Secretary of State to call the case in if there are good grounds for this to occur.
11. At what point do measures apply?
Measures are only applied when the TRA makes provisional findings and they are published on the TRA and DIT websites. Importers will not actually have to pay duties at this stage but will have to provide a guarantees such that, if the final determination is that duties should be applied, they will be collected from the date of provisional application.
As a general rule, exports made after initiation but before provisional duties will not be subject to any measures. However, in exceptional cases, duties may be backdated for a period prior to the date of provisional measures. This can only happen when the TRA has published an intention to register imports. In addition, duties can only be backdated for a maximum period of 90 days prior to the provisional determination. If UK industry believes it to be likely that imports will surge in the window between initiation and provisional measures, they should make that case to the TRA and apply for registration of imports so that the TRA has the possibility to backdate the duties.
12. What issues can arise once measures are in place?
Measures will be adopted for a specified period, normally 5 years. However, various issues can arise once the measures are in place;
Changed circumstances - where circumstance change, interested parties can request an interim review that will consider whether some aspect of the measures should be adjusted.
Absorption review - If exporters lower their export price to absorb the measure, the TRA can initiate an absorption review which could result in the measure being increased. This only applies to anti-dumping duties.
Circumvention - Where exporters or importers attempt to circumvent measures through non-legitimate means, the TRA can initiate an anti-circumvention investigation to see whether the duty is being undermined. This could include customs violations such as misdeclaration of the tariff code or country of origin (which could also be investigated by HMRC as customs offences) or assembly operations that import parts and components to avoid duty and undertake only simple assembly operations in the UK.
Newcomers - Exporters that did not export during the original investigation period, and are not related to any of the companies in the original investigation, can request a newcomer review to get a specific duty rather than being subject to the residual (highest) duty.
Suspension - measures can be temporarily suspended where market conditions have changed.
Expiry review - The TRA will recommend how long measures will apply. This will be normally be five years. The measures will automatically expire at this date unless UK industry requests an expiry review. An expiry review will consider whether dumping/subsidy and injury are likely to re-occur if the measures are removed. This will be a full investigation like the original investigation so UK industry applicants will again be required to complete questionnaires.