New UK legislation on 'call-in' of trade remedy investigations
New primary and secondary legislation has recently come into effect changing the powers of the Secretary of State (SoS) in relation to transitioned trade remedies:
The Trade Remedies (Review and Reconsideration of Transitioned Trade Remedies) Regulations SI 2022 No.113) (‘call-in regulations’)
This post provides an initial analysis and comment on the call-in provisions. Please note that this is an initial analysis for discussion purposes. It does not represent the views of any stakeholder and it does not claim to make definitive conclusions. I am open to further consideration on any of these points!
Although it is an initial analysis, the issues are complex and there is a lot of detail here. If you just want a quick overview read the overview and analysis summaries below.
Three other posts are related to this topic and provide useful background to some of the key points made. These are:
Is there objective truth to be discovered in a trade remedy investigation?
Standard of review and discretion in trade remedy investigations
Overview and Background Summary
Overview of legislation giving the SoS call-in powers - This is a significant change in TRA independence but not a surprise that the system needs to be tweaked. Lack of consultation with stakeholders, though clarification of TRA powers was required.
Intention of the original legislation on SoS powers - Considerable effort went into creating independence for the TRA but SoS considered that the ability to only accept or reject TRA recommendations was too limited.
Rationale for a change in the power of balance between the TRA and SoS - No explicit rationale is given except in terms of acting “effecitively” and responding “appropriately”. However, I believe there is a rationale.
Where the idea of a call-in come from and how does that relate to trade remedies? - Similar provisions exist for planning applications. There are clear principles for call-in of planning applications but not for transition reviews.
Other trade remedy authorities and independence v political control - Some countries require that the final decision is made by a politician/Minister (e.g. Australia, India). Other regimes treat investigations as wholly technical and no politican is involved in the final decision (e.g. US). The EU has a kind of hybrid system with a primarily technical component but a political element at various stages. However, this is not the full picture. The paradigm within an investigating authority operates is also important.
The importance of the paradigm within which a trade remedy authority operates - It would be a mistake to treat trade remedies as purely technical. The justification or trade remedies has both economic and political dimensions. A trade remedy authority needs to understand the paradigm within which it is operating. There is always discretion in every investigation. The TRA’s paradigm may be similar to other trade remedy authorities, albeit with a nuance towards a more liberal approach than the US and EU.
The pros and cons of technical v political decision-making - It is important to get the right balance between technical and political elements of trade remedy investigations. Restricting the role of the SoS creates a strong tendency towards the technical over the political. There are pros and cons to this but, overall, there is logic to shifting the balance somewhat towards the SoS.
Is there a logic behind the new legislation? - Yes, the SoS should have more powers, though technical objectivity is still very important. The changes to the legislation may not go far enough. There are strong arguments in favour of the SoS being able to influence the outcome of a case from the start and that this should not only apply to transition reviews but to all cases.
Analysis and Comment Summary
Complexity of UK trade remedy legislation – The UK legislation is substantially harder to navigate and understand than EU trade remedies legislation. The fact that the call-in provisions are in the Finance Act 2022 adds to the difficulty of trying to read the UK legislation in a coherent way. There is a question whether provisions relating to trade policy receive adequate scrutiny in a much larger bill that relates to finance policy rather than trade policy
Why does the call-in only apply to transition reviews? - The new powers only apply to transition reviews and not new cases. However, there is no explanation as to why this is the case.
The SoS does not have to meet any threshold to call-in a transition review - SoS must set out the reasons for the call-in but there is no technical threshold to be met. For example, on the EIT test, the SoS must accept the TRA’s EIT determination unless it is not one that the TRA could reasonably have made. If there is no standard set, the decision may purely be a political one. One possibility would be to give the SoS the power in every investigation subject to certain conditions.
Transparency of SoS deliberations prior to announcing a call-in - There is a possible issue in terms of lack of transparency in the process before the SoS publishes the notice of the call-in. This could be avoided if the SoS was given the power to intervene in all cases. Another solution could be to put a note on the file if the SoS is considering a call-in.
Timing of the call-in - The timing of the call-in matters. Immediately after initiation, it is likely to be a purely political decision. Later in the investigation, risks uncertainty and delay but does mean that the decision can be made on the basis of some technical substance. Given the SoS more power in all cases would be more predictable and transparent. This could be done in a light-touch way.
What circumstances are likely to result in a call-in? - The circumstances when the SoS will use the call-in powers are not specified which creates uncertainty. There is a tension between an early call-in based on politics and a later call-in when there is some analysis. It is a mistake to create an authority that is only permitted to make technical decisions but has to use discretion which can be a political decision. Perhaps call-in could occur after a provisional statement of essential facts has been made public in order to avoid purely political decisions.
Functions of the TRA in a call-in investigation - All functions of the TRA are cancelled when a review is called in, though the SoS can still direct the SoS to provide analysis.
Information that can be considered by the SoS - The SoS can consider new information from parties that may not have cooperated earlier in the investigation.
Imprecision in terminology - There is some imprecision in terminology in relation to the terms ‘vary’ and ‘maintain’.
Overview and Background
Overview of legislation giving the SoS call-in powers
The new legislation gives the SoS the power to notify the TRA that they will decide the outcome of a particular transition review or reconsideration of a transition review. The call-in can take place at any point between initiation and conclusion of the review.
This is a significant change in the independence of the TRA. Under the original rules, although in all trade remedy investigations it is the SoS that takes the final decision on whether a trade remedy will be adopted or not, this was simply an ‘accept or reject’ decision. The SoS was prevented from having any influence over the TRA’s recommendation. In the context of the steel tariff rate quotas (TRQs) transition review, the SoS was of the view that more of the product category TRQs should be maintained than the number that the TRA was recommending. In this case, special legislation was adopted in order that the SoS could make a final decision that more product category TRQs should be maintained than the TRA had recommended. Obviously, this created considerable uncertainty about the role of the TRA in relation to what the original legislation had intended. The new legislation changes the balance of power to give the SoS the possibility to take over the decision in the case of all transition reviews. The Finance Act 2022 has been in effect since 3 November 2021, with the call-in regulations coming into force on 2 March 2022. Note that the new legislation only applies to transition reviews and not to new investigations. The new legislation was adopted quickly which meant that there was little, if any, consultation with stakeholders and limited opportunity for the new provisions to be scrutinised in detail. The speedy adoption of the legislation did serve the purpose of ensuring that the position in relation to the TRA’s powers was clarified which is helpful compared to the SoS adopting ad hoc extraordinary legislation. Further, DIT is currently undertaking a more detailed review of the whole trade remedies framework:
The UK Government will also review the Trade Remedies framework as an urgent priority. The Trade Remedies framework was first introduced in 2018 under the previous Government. The current Government will review it to ensure it is up-to-date, champions WTO rules and is fit for purpose in the post-COVID world.” Statement made by the SoS on 30.6.21
Therefore, it is possible that these provisions may be further amended if necessary as a result of this review.
Intention of the original legislation on SoS powers
It is worth noting that there was considerable discussion around the powers of the SoS during the drafting of the original legislation. It was always the UK Government’s intention that the TRA should be as independent as possible. Although it was clearly intended that the final decision as to whether measures would be adopted would be made by the SoS, the ability of the SoS to influence the TRA’s recommendation was firmly restricted. In the first draft of the Taxation (Cross-Border Trade) Bill, paragraph 20 of schedule 4 set out the basic powers of the SoS:
20 (1) If the TRA makes a recommendation under paragraph 17(3) or (4), the Secretary of State must decide whether to accept or reject the recommendation. 20 (2) The Secretary of State may reject the recommendation only if the Secretary of State is satisfied that— (a) the application of an anti-dumping amount or a countervailing amount to goods in accordance with the recommendation does not meet the economic interest test...., or (b) it is not otherwise in the public interest to accept the recommendation.
In the original wording of the bill, the SoS was limited to either accepting or rejecting in the original legislation. However, the SoS was effectively given two possibilities to reject the TRA’s recommendation. First, the SoS was implicitly permitted to reject the measures based on their own view of the EIT and come to a different conclusion than the TRA. Second, the SoS could reject the measures on the basis of broader public interest considerations. In the final Act the drafting was changed to the following:
20 (1) If the TRA makes a recommendation......the Secretary of State must decide whether to accept or reject the recommendation. 20 (2) The Secretary of State may reject the recommendation only if the Secretary of State is satisfied that it is not in the public interest to accept it. 20 (3) .....the Secretary of State must accept the TRA’s determination that the application of an anti-dumping amount or a countervailing amount to goods in accordance with the recommendation meets the economic interest test....unless the Secretary of State is satisfied that the determination is not one that the TRA could reasonably have made.
As before, the SoS could reject the recommendation if they considered it not to be in the public interest. However, the ability to reject on the grounds of a different view of the EIT was restricted in comparison to the original drafting. The SoS was required to accept the TRA’s EIT determination unless they were “satisfied that the determination is not one that the TRA could reasonably have made”. In addition, paragraph 34 of schedule 4 of the Trade Act 2021, which establishes the TRA, sets out the provisions on guidance that the SoS can provide to the TRA.
34 (1) In performing its functions, the TRA must have regard to guidance published by the Secretary of State.
In this way, the SoS can influence the TRA in terms of interpretation of the law and methodology. The TRA is not necessarily obliged to follow SoS guidance, though it is obliged to have regard to it. In addition, there is an important limitation on the SoS’s ability to influence actual investigations:
34(4) In particular, the Secretary of State may not publish guidance in relation to a specific trade remedies investigation.
These are examples which indicate that considerable effort went into creating effective independence for the TRA. The power of the SoS was limited to a yes or no decision on the public interest and, to some extent, a similar accept or reject decision of the economic interest. In principle, the SoS could not take a different view on issues such as the product scope, the calculation of dumping/subsidy margins or the injury/causation analysis. In terms of transition reviews, therefore, it is a dramatic change that the SoS can completely take over the case by invoking these new call-in powers. Of course, the above limitations on SoS powers in an original legislation still apply in terms of new investigations but, in the case of transition reviews and reconsiderations of transitions reviews, the balance of power has completely changed
Rationale for a change in the power balance between the TRA and SoS
In terms of rationale for the new legislation, the explanatory notes to the Finance Bill make the following statement:
This measure is intended to ensure that the Secretary of State can act effectively in the interest of UK industry when considering the impact on the UK economy of dumped or subsidised imports, or of unforeseen surges in imports, and can respond to these events by applying appropriate measures to protect industry.
Implicit in this statement is the fact that the SoS considers that their power to act effectively or respond appropriately is not sufficient in the original UK trade remedies legislation. It might appear that the SoS immediately undermined the new system by undermining the independence of the TRA. However, it is my view that this is not the case. The creation of a fully-functioning Trade Remedies Authority has been a significant achievement but it is not surprising that the system has to be tweaked. Creating a new trade remedies authority is a considerable task but creating an authority with a massive existing workload is unprecedented. Because the UK already had EU trade remedies in place as part of EU28 trade policy, the transition of 43 of these measures created an extraordinary situation. Thus, it is desirable that the system is allowed to evolve to ensure that it is effective and appropriate. It is my view that the balance of power between the TRA and SoS needed to be adjusted, as I argue later in this post.
Where did the idea of a 'call-in' come from and how does that relate to trade remedies?
The term ‘call-in’ is not used in the Finance Act 2022. The first time it is used is in regulation 2 of the call-in regulations. Apparently, the trade remedy call-in powers have been somewhat modelled on similar provisions that exist in the context of planning applications. Section 77(1) of the Town and Country Planning Act 1990 states the following:
The Secretary of State may give directions requiring applications for planning permission, or for the approval of any local planning authority required under a development order, to be referred to him instead of being dealt with by local planning authorities.
According to a House of Commons Library Briefing Paper the planning call-in powers have been used sparingly.
In practice, however, it is (and has been for some time) Government policy only to call-in a very small number of planning applications every year and so the Secretary of State uses his powers sparingly.
The list of instances where the SoS might decide to use the planning call-in powers have been set out by Ministers. These are the so-called ‘Caborn Principles’, originally from 2009 but most recently set out in a Written Ministerial Statement of 26 October 2012:
The Secretary of State will, in general, only consider the use of his/her call-in powers if planning issues of more than local importance are involved. Such cases may include, for example, those which in his opinion:
may conflict with national policies on important matters;
may have significant long-term impact on economic growth and meeting housing needs across a wider area than a single local authority;
could have significant effects beyond their immediate locality;
give rise to substantial cross-boundary or national controversy;
raise significant architectural and urban design issues; or
may involve the interests of national security or of foreign government
Another interesting historical feature of the planning application “call-in” process is that, at one point, the Government decided that reasons for a decision not to call-in a planning application would be given, although this was not a legal requirement. In a House of Lords debate it was explained that this was “in the interests of transparency, good administration and best practice”. In the same debate, the intention to use the call-in powers sparingly was reiterated:
That approach is not to interfere with the jurisdiction of local planning authorities unless it is necessary to do so. Local planning authorities are normally best placed to make decisions relating to their areas and it is right that, in general, they should be free to carry out their duties responsibly, with the minimum of interference. (Lord Falconer of Thornton, House of Lords Debate, 12 December 2001)
We can make some comparisons between the above provisions on planning and the transition review call-in powers:
In the case of planning applications there is a clear indication of the circumstances when it may be appropriate for the SoS to call-in an application i.e. when issues beyond local importance are involved. There is a clear intention that local authorities are normally best placed to make decisions relating to their region and that they should be able to do this with minimum interference.
There is a strong logic that, given the regional nature of planning applications, the default process for decision-making is to rely on local expertise. The principles underlying the decision to call-in an application are clear.
In the case of the transition review call-in powers, there are no principles governing when the SoS can call-in a transition review as there is with a planning application.
The extent to which there is a logic to the SoS call-in of transition reviews is not set out beyond what is quoted from the explanatory notes of the Finance Act 2002 in the section above on the rationale for a change i.e. that it should be ensured that the SoS can act effectively and respond appropriately to protect UK industry from dumping, subsidies and import surges.
Whether there is a logic to the trade remedy call-in powers depends on what view is taken on the right balance between the technical and political aspects of a trade remedy investigation i.e. the pros and cons of TRA independence v political control by an elected politician.
Other trade remedy authorities and independence v political control
In considering this question it is useful initially to identify how decisions are made in other trade remedy authorities.
Some countries’ trade remedy systems require that the ultimate decision on whether trade remedy measures are adopted rests with a Minister (i.e. a political decision) e.g. Australia, India. Australia and India appear to have a system where the operational decisions of an investigation are made by one individual that heads up the organisation (e.g. Australian Commissioner and Indian Designated Authority). Thus, there is a clear technical/legal decision. It then goes to a minister to be approved.
In other regimes (e.g. those with bifurcated systems), at least some aspects of the investigation are treated as a technical analysis and there is no politician involved in the final decision.
In the case of the US, for example, both the Department of Commerce and the International Trade Commission do their respective work as a purely technical matter. If the requirements of the law are met, dumping and subsidy measures are adopted automatically. They do not have to be signed off by a politician. This is different for safeguards that must be approved by the US President.
The EU has a kind of hybrid system where the system is heavily weighted towards the European Commission technical analysis but there is the possibility for a political decision by EU Member States to reject the measures. In cases where the necessary votes are not in place to adopt the measure, there can be a kind of informal negotiation between the Commission and Member States to find solutions in terms of the areas where the Commission has discretion to vary the proposed measures. Particularly this might happen in terms of varying the duration or scope of measures. In this way, the Commission is not totally independent in what it proposes to the member states. That said, the Commission does have effective independence in terms of the substantive elements of the investigation i.e. dumping, subsidy calculations and injury/causation analysis.
The above information about other trade remedy authorities does not reveal the full picture in itself. The balance between the technical and political elements of decision-making has to be seen within the context of the paradigm within which the particular trade remedy system operates. This is covered in the next section.
The importance of the paradigm within which a trade remedy authority operates
Trade remedy investigations require sophisticated technical analysis, particularly in terms of dumping, subsidy and injury calculations. Thus, it is important that a trade remedy authority has sufficient independence to conduct the necessary technical analysis free of political influence. The robustness of the decision-making system should not vary according to the politics of the day. The focus of investigations must be on whether the technical criteria for measures (e.g. dumping, subsidy, injury, causal link) are met.
However, it is also important to note it would be a mistake to treat trade remedies as purely technical. The justification for trade remedies has both economic and political dimensions (see my post on the role of trade remedies). Thus, it does not make sense for a trade remedies authority to see itself purely as an independent arbiter of international pricing disputes. There is a politics to trade remedies and a trade remedy authority needs to have some clarity on where it stands with the politics.
I have a written a separate blog post on trade remedy paradigms which emphasises that it is important to understand the 'world view' or 'house style' within which trade remedy decision are taken. The main points from the post are summarised below:
There are different trade policy paradigms and this determines the approach to trade remedies.
The UK trade policy paradigm for decades has been based on an orthodox economic approach which placed a high value on free trade and was critical of almost any form of trade restriction. The UK opposed most trade remedies proposed by the European Commission, even though this did not stop the measures being adopted.
Brexit has changed the UK trade policy paradigm. Whilst there is still an emphasis on free trade, there is now an explicit recognition that free trade requires protection against unfair trade.
The UK was one of 28 members in an EU decision-making process on trade remedies. Member states range from liberal free trade positions to more protectionist approaches. The UK had a clear role in ensuring that the decision-making was balanced and the EU system works quite well.
As an autonomous trade remedy regime the UK is taking a more pragmatic view in line with all other major trading nations who use trade remedies.
The UK paradigm is perhaps a more liberal one than other regimes. The UK is the only major trade remedy authority to have both a mandatory lesser duty rule and public interest test in all cases.
In terms of the paradigm within the TRA, it is still early days but it appears that the TRA’s approach is similar to other major trade remedy authorities, albeit that there may be nuance towards a slightly more liberal approach than, say, the US and EU.
I don’t think that trade remedy investigations are ever black and white with only one clear answer (see my post on [truth] in trade remedy investigations). Attitudes and nuances do affect the analysis. It can perhaps be argued that it is unfair to ask the TRA to be independent and objective when there clearly are political aspects to the discretion that the TRA has to exercise even within the constraints it has to operate. What determines the paradigm for the many issues where the TRA has discretion to interpret the law and to decide which particular methodologies it will use? It is my view that the balance of power between the TRA and SoS needed to be amended and may need to be further changed beyond the call-in powers for transition reviews. This is why a re-consideration of the SoS powers in trade remedy investigations is timely.
The pros and cons of technical v political decision-making
I would argue that both the technical and political elements of trade remedy decision-making are important. The trick is to get the right balance between the two.
Restricting the role of the SoS in the original legislation to an 'accept or reject' decision at the end of the investigation gave the UK trade remedy system a strong tendency towards the technical compared to the political. It is useful to consider the pros and cons of the original level of independence created for the TRA.
The pros for the current level of independence for the TRA are as follows:
It protects investigations from disproportionate lobbying and political pressures and allows the TRA to undertake the technical analysis in the most objective way possible. Trade remedies always have a political element, so the scope for political interventions is not wholly negative. However, given the importance of the technical aspects of a case, there are dangers in allowing the politics to disproportionately override the technical analysis.
It means that interested parties that do not have strong political connections have equal opportunity to influence the case.
It ensures transparency in that all interventions are recorded on the public file giving other interested parties the opportunity to present arguments in response. This is particularly important for SMEs that may not have the budget or capacity to engage with government in political campaigns.
It prevents parties that have not cooperated in the investigation and have not provided critical information to the TRA from coming into the case late in the day and affecting the outcome through heavy political lobbying.
The cons of the level of TRA independence created by the original legislation all relate to the fact that it is difficult for the TRA to make more subjective policy judgements which are required in terms of the discretion that it has on technical issues:
The technical analysis contains many points of discretion. For example, there is never one answer to the calculation of a dumping margin. From my experience I would say that it is often possible that a typical dumping margin calculation of 30% could be calculated in a range of 20% to 40% depending on how the discretion in terms of detailed calculation methodology is exercised. It is less likely that it could be made zero or 100% but there is sufficient discretion within WTO rules to treat different situations in different ways that would produce a different margin. Similarly, there is no scientific way of balancing the various causes of injury in checking the causal link between the investigated imports and any injury. See my blog posts on objective truth and discretion for more detail on this point.
The interpretation of UK law and WTO jurisprudence often involves policy decisions. Whilst the SoS can help the TRA out here by providing guidance, the level of guidance provided so far is not extensive and covers only specific issues leaving many points open to the TRA’s interpretation.
As I argue above (and in a separate post on trade remedy paradigms), the initial indications are that the TRA paradigm is similar to other major trade remedy authorities, albeit that there may be nuance towards a slightly more liberal approach than, say, the US and EU. These nuances are an attitude and are too specific to be covered by the law. It is arguable that only an elected politician should be deciding on such nuances. Note that I am not criticising the TRA here. In fact, my observation would be that the TRA is making considerable efforts to be as objective as possible. The TRA has to function within the law and guidelines and, to the extent that it has considerable discretion on key policy issues, it cannot be blamed for this and it must adopt its own views. I would argue that the TRA should not have been put in this position. See my post on objective truth for more detail on this point
SUMMARY OF THE PROS AND CONS OF THE CURRENT LEVEL OF TRA INDEPENDENCE
Protects investigations from disproportionate lobbying and political pressures
Equal opportunity to influence the case
Prevents parties that have not cooperated affecting the outcome through heavy political lobbying.
Technical analysis contains many points of discretion
Interpretation of UK law and WTO jurisprudence often involves policy decisions
It appears that the TRA has taken a position on general attitude that should have more input from an elected politician.
I don't think that there is a clear winner between the pros and cons of the original level of TRA independence. Getting the right balance between the technical and political aspects of the case is desirable. However, it is my overall view that there is a logic behind shifting the balance somewhat towards the SoS. I would go further and say that this logic applies in all cases and not just transition reviews. I would also argue that there are strong arguments in favour of the SoS being able to influence the outcome of a case from the start rather than having to use a call-in process. I expand on these points in the analysis and comment section below.
Let me stress that I do not think that purely political decision-making is desirable. Technical requirements provide an important constraint on protectionist forces and are critical in getting the balance between technical and political right.
As a final comment, it can be noted that more political decision-making involving the SoS does not necessarily advantage any particular party. It may be the case that either producers or importers may have a powerful lobby. Thus, interested parties with strong existing political engagement would presumably favour the SoS having more of a role in decision-making but other parties that are less politically connected would favour TRA independence because it puts them on an equal footing. From an objective point of view, it might be argued that it is not fair that those with political connections have better access to trade remedy decision-making. On the other hand, perhaps lobby groups that have invested in political engagement and have made good connections are representing sizeable constituencies whose voice has a right to be heard in the democratic process. Again there is no black or white answer here except that getting a good balance somewhere between the technical and political aspects of the case is desirable.
Is there a logic behind the new legislation?
Overall, although it was not perfect, the UK did a pretty good job of creating a trade remedy system that attempted to carefully balance the need for technical TRA independence with the ability of elected politicians to have the final say on measures. However, the steel safeguards/TRQs case indicated that the fact that the SoS can only accept or reject a TRA recommendation and that there may be cases where elected politicians are of the view that the conclusions in the recommendation should be different.
This was confirmed in a statement on 30 June 2021 by Liz Truss (then SoS) who pointed out that “current legislation means that the Government only has two choices: either to accept the TRA recommendation in full or reject it entirely”. For example, if the TRA was to recommend maintaining a measure but at a lower level of duty than that transitioned from the EU, but the SoS thought the measure should be maintained at the original level, the SoS only has the choice to accept the TRA recommendation or reject it outright. Another example is where the TRA recommends that a measure should not be continued, but the SoS thought that it should be continued, the SoS has no power to reverse the TRA recommendation.
The SoS did not set out any real logic for the decisions in the steel safeguards review. She was merely making a factual statement that her powers were restricted when she was of the view that more steel safeguard product categories should be protected than the TRA had proposed.
However, as stated in my consideration of the pros and cons in the previous section, it is my opinion that there is a logic to shifting the balance of power towards the SoS. In fact, I am not sure that the current amendments to the legislation go far enough. I think that there are strong arguments in favour of the SoS being able to influence the outcome of a case from the start and that this should not only apply to transition reviews but to all cases. SoS interventions are not permitted under the original law so a change does make sense. This does not mean that I support purely political decision-making. I reiterate that the technical requirements provide an important constraint on protectionist forces. The key issue here is the relative balance between the SoS and TRA.
Analysis and Comment
Complexity of UK trade remedy legislation
Links to all of the relevant UK legislation are provided under the references tab above.
Having worked with the relative simplicity of the EU legal system for many years, I am still getting used to UK law. At face value, it seems odd that the primary legislation implementing the UK trade remedies system is contained in three different acts. The TRA was established under the Trade Act 2021, while the procedures and practices were contained within the Taxation (Cross-Border Trade) Act 2018. Multiple statutory instruments containing relevant regulations (secondary legislation) have been adopted containing more detailed provisions.
The call-in powers are set out in the Finance Act 2022 and a new statutory instrument, The Trade Remedies (Review and Reconsideration of Transitioned Trade Remedies) Regulations 2022.
I can't rule out that this may make perfect sense to experts in the UK legal system. However, at face value this seems like a strange way to adopt trade policy legislation. One issue relates to trade remedies being treated as taxation/finance. I assume that the reason for this is that it relates to import duties which in turn means that it is the Treasury that assumes responsibility rather than the Department for International Trade.
The Finance Act 2022 is the primary legislation enacting the UK Government’s budget from last year. As confirmed on the title page, all of its provisions are related to finance.
A BILL TO Grant certain duties, to alter other duties, and to amend the law relating to the national debt and the public revenue, and to make further provision in connection with finance.
Thus the Finance Act 2022 contains financial provisions relating, amongst other things, to income tax, corporation tax, capital gains tax, and residential property developer tax.
Trade remedies are usually in the form of import duties (effectively a tax on certain imports) and in this regard do form part of the UK public finance. However, the purpose of trade remedies is not to raise revenue but, rather, to remedy situations of unfair trade.
I make this point because at face value it strikes me as odd that trade remedies are treated as finance policy rather than trade policy. However, the precise legal procedures by which trade remedy legislation is adopted are not necessarily relevant to the government policy issues addressed within the provisions of the legislation. Perhaps this is perfectly appropriate in terms of the UK legal system.
That said, there are a couple of issues that I think are particularly important to raise:
There is a question whether provisions relating to trade policy receive adequate scrutiny in a much larger bill that relates to finance policy rather than trade policy.
It is extremely difficult for a lay person with no experience of the legal system to read through the UK trade remedies legislation. This is complicated further by the fact that there have been numerous amendments to the various regulations relevant to trade remedies. This is a more general issue and does not only relate to the call-in powers. But it is worth mentioning as the inclusion of the new legislation within the Finance Act has added to the confusion.
I have not researched this issue at length. But a quick google search for 'complexity of UK law' revealed that this is clearly a problematic issue.
In a lecture in June 2021, Lord Justin Haddon-Cave said the following:
Complex legislation comes in principally in two forms. The first is outdated legislation drafted in another era which is badly in need of reform for the modern age…..The second is legislation which is born complex and then repeatedly amended to make it even more unintelligible......It is worth reminding ourselves of the audience of legislation. Formerly, legislation was principally accessed by lawyers; but over the last 20 years legislation has become far more accessible. Legislation.gov.uk has between 2 and 3 million visitors per month. This group of people will range from small businesses trying to understand their regulatory environment, to litigants in person who are bringing a small personal injury claim to students who volunteer in Citizen Advice Bureaus. All these users have the same needs: that legislation is simply drafted and easy to understand.....Clear, accessible and effective legislation is fundamental to the health and good- functioning of democratic government.
As far as I can see, UK trade remedy legislation falls into the 'born complex and then repeatedly amended to make it even more unintelligible' category.
This issue was also addressed in the forward to a 2013 cabinet office report:
....the digital age has made it easier for people to find the law of the land; but once they have found it, they may be baffled. The law is regarded by its users as intricate and intimidating.....That experience echoes observations that have been made about statute law for many years. The volume of legislation, its piecemeal structure, its level of detail and frequent amendments, and the interaction with common law and European law, mean that even professional users can find law complex, hard to understand and difficult to comply with.
Phew, I don't feel so bad that I'm finding keeping up with UK trade remedies law so complex! I'm not the only one. Clearly this is a broader issue than trade remedies. But, in the context of trade remedies, it would be useful if the legislation could be clearer and more accessible.
For the purpose of providing a contrast, EU anti-dumping legislation is contained in one 'basic anti-dumping regulation' which currently has one regulation that amends it.
Basic EU anti-dumping regulation
Codified basic anti-dumping regulation
In addition to the two regulations, the European Commission website contains a document that consolidates the text of the basic regulation and amendment. It has no legal effect but the Commission has always done this when regulations amend the basic regulation. The fact that the EU legislation is contained in one document and follows the structure of the WTO agreements makes it substantially easier to navigate and understand than the UK trade remedy legislation.
It might be unfair comparing UK and EU legislation in this way. Perhaps it is like comparing a metro system for a brand new city with the London Underground. The latter has existed for more than 150 years and constrains what can be done in terms of modernisation. However, as a non-lawyer, I would ask why the UK trade remedy legislation should not be as easy to read as that of the EU? The call-in provisions of the Finance Act 2002 and the call-in regulations complicate the UK legislation even further.
Why does the call-in only apply to transition reviews?
The new powers only apply to transition reviews and not to new trade remedy investigations. They also apply to TRA reconsiderations of transition reviews.
There is no indication, either in the act or explanatory notes, why the SoS has been given these powers only in relation to transition reviews.
Of course, there is a difference between transition reviews and new UK investigations in that the UK industry is currently protected from the trade problem by the existing measure in the case of a transition review whereas this is not the case in a new investigation. It is possible that DIT decided that the reduction or removal of an existing measure is potentially more problematic than the non-adoption of a measure in a new investigation. However, similar issues that arose in the steel TRQs case could arise in relation to new investigations. It is possible that the SoS could take a different position on the level a measure recommended by the TRA or the non-adoption of a measure (i.e. where the TRA makes no recommendation to the SoS). As set out later in this analysis, the new powers allow the SoS to take into account broader policy considerations that may give a different perspective than that of the TRA which is not a policy body but is only attempting to make objective technical decisions on the basis of the UK trade remedies legislation. This could equally apply to a new investigation as in a transition review.
The SoS does not have to meet any threshold to call-in a transition review
Section 74(4) of the Finance Act 2022 requires that the SoS publishes a notice to give effect to a call-in decision. Regulation 4(2) of the call-in regulations also requires that a notice is published. The notice does not have to give reasons for the call-in. The regulations do require that the notice sets out the review process that will be carried out by the SoS.
The SoS must also lay a statement before the House of Commons, which does require some reasons to be given. Regulation 4(1) of the call-in regulations sets out what the notice must include. The most substantial provision is in regulation 4(1)(c) which requires that the SoS sets out the “reasons why the SoS is to decide on the matters under review or reconsideration”.
Aithough it is required that the SoS state the reasons to Parliament, it can be noted that there is no technical or legal threshold that must be met in order for the SoS to call-in a review. To be honest I am not sure what an appropriate threshold would be in this case. But I am slightly uncomfortable with the SoS, on an ad hoc basis, being able to make this decision on any grounds whatsoever.
Whilst not directly relevant there is an example of a threshold set for the SoS to reject the TRA’s analysis in the existing legislation. As highlighted earlier in section 2 of this paper, a threshold is set by Paragraph 20(3), Schedule 4, Taxation (Cross-Border Trade) Act 2018:
…the Secretary of State must accept the TRA’s determination that the application of an anti-dumping amount or a countervailing amount to goods in accordance with the recommendation meets the economic interest test (see paragraph 25), unless the Secretary of State is satisfied that the determination is not one that the TRA could reasonably have made.
The SoS cannot just say that they disagree with the TRA’s economic interest test determination. The legislation is such that the SoS would have to explain why they believe that the TRA’s determination could not reasonably have been made if they reject the measure on a different assessment of the economic interest.
I conclude earlier that there is a logic for giving the SoS more control over the outcome of trade remedy investigations. Thus, in itself, it may not be considered problematic that the SoS can call-in the case easily. However, if there is no standard set for which cases will be called-in, it is likely that the decision will purely be a political one i.e. where there is a strong lobby, the likelihood of a call-in would be greater. Whilst I point out above that political lobbies can play an important role in democractic outcomes, it is worth questioning whether the new legislation creates a potential problem in terms of equality of access and transparency.
A possible change to the new legislation would be to give the SoS this power in every investigation subject to certain conditions. This would provide a more consistent approach as well as more certainty and transparency. This is further explored below.
Transparency of SoS deliberations prior to announcing a call-in
Although the SoS must publish a notice and lay a statement before Parliament once they have decided to call-in the review, there is a possible issue in terms of a lack of transparency in the process before the notice is published.
When a transition review has been initiated, interested parties would make a judgement call on whether they perceive it to be advantageous that the SoS takes control of the investigation rather than the TRA. This is surely an issue that will be driven by interested parties lobbying the SoS because otherwise the SoS would not have any basis on which to make the decision to call-in the review.
This process could involve significant lobbying efforts and include submissions/meeting etc. By the time the notice is published, therefore, a non-transparent process will have taken place which only certain parties will have engaged with.
One solution to this would be to give the SoS call-in powers in every transition review rather than on an ad hoc basis when there is political pressure to do so. This would make SoS involvement in the process more transparent and is discussed further below.
Another solution would be to introduce at least some level of transparency around the decision to call-in a review. One possibility could arise from Regulation 5 of the call-in regulations which requires that the TRA maintains the public file for a called-in review. This must include evidence that the SoS requires to be included on the file. Would there be a benefit of a note being put on the file if an interested party approaches the SoS to ask for the review to be called in? This would allow other interested parties the opportunity to make comments on this to the SoS and make the pre-call-in process more transparent.
Timing of the call-in
The new powers can be exercised any time after the TRA has initiated a transition review. Section 74(3)(b) states that the SoS’s decision need not be based on a recommendation or decision of the TRA.
This means that the SoS can take over a transition review from the beginning of the investigation. However, it can be called in at any point until the investigation is concluded. Thus, it is also possible that the call-in could occur after the TRA has made its recommendation to the SoS.
Some of the issues that would arise if a case is called in at different times of the investigations are set out below:
Call-in immediately after initiation
From an efficiency perspective an early call-in means that there is less waste and duplication of effort and the case can be run under control of SoS.
It also means that the case would have more chance of being completed within the expected time frame.
However, the problem with an early call-in is that the SoS does not have any analysis on which to base the call-in decision. Thus, it is inevitable that an early call-in will be a predominantly political decision. As discussed above in the pros and cons section, the possibility of political engagement with the process is not necessarily negative. However, disproportionate political influence in a case at the expense of technical substance is not desirable.
During the investigation
The earlier in the investigation that the call-in occurs brings the advantages outlined in the previous point.
However, as the case develops, issues emerge which allow the SoS to make the decision on the call-in on the basis of at least some technical substance. The later that the call-in takes place, the more that the TRA could report on its technical findings up to that point of the investigation.
There is a risk of some uncertainty during this period because there will always be a possibility that the SoS will use the call-in powers creating some unpredictability in the decision-making process.
In addition, intense lobbying of the SoS could occur from interested parties worried that the case wasn’t going their way.
After the statement of essential facts or TRA recommendation
The big advantage of this timing is that the call-in would be based more on substance. This would allow the SoS to be specific about the circumstances that justify the call-in based on the evidence collected.
There would also be some efficiency in that the SoS would not have to review all aspects of the case. The call-in would likely be based on specific issues where the SoS might make a different decision on the basis of already completed analysis.
However, the big disadvantage of a call-in at this point is that it is highly likely to significantly hold up the conclusion of the transition review and it is going to duplicate work that the TRA has already done.
As discussed above, the best system will get the right balance between technical and political aspects of the case. I have argued that a change in the balance of power between the TRA and SoS is desirable.
I believe that a more predictable and transparent solution would be to give the SoS the same powers in all transition reviews. This would create predictability in the decision-making process and would allow the TRA to get on their work knowing that they have to keep the SoS briefed on the issues of the case. Further, it would permit the SoS to be involved, perhaps in a light-touch way, on all the major decisions made throughout the case so that stepping in and out of the case is easy. This would allow the SoS to avoid purely political interventions and to influence the substance as appropriate throughout the investigation. As stated earlier, I think that this should apply to all investigations and not just transition reviews.
I know that these proposals are a radical change from the original attempts to create an independent TRA. However, the fact that the SoS already had to extraordinarily intervene in a transition review is an indication of the fact that the political and policy elements of an investigation should be overseen by an elected politician.
What circumstances are likely to result in a call-in?
As discussed above, unlike in the case of planning call-ins, there is no guidance on the type of situations where the SoS might call-in a transition review.
It is actually quite difficult to identify the specific situations that may trigger the SoS calling-in a review under the new legislation. As mentioned in the previous section, how can an early call-in be based on anything substantial? Interested parties will not know whether they need the SoS to intervene unless the TRA has made a conclusion that they disagree with. In principle, this will only occur after the statement of essential facts (SEF) has been issued but this then brings other problems in terms of efficiency and timing.
The truth is that, if the SoS calls the review in at the start of the investigation, it would be based on a concern that there is a risk that the wrong decision is made if it is left to the TRA. This feels like a flaw in the process because either the TRA is trusted in every review or it is not. When I use the word ‘trust’ it is not related to competence. Clearly, all the technical expertise and competence lies in the TRA. I imagine that is highly unlikely that the SoS or DIT officials are going to get heavily involved in detailed dumping and subsidy calculations. The trust relates to the ability to make decisions on the areas of discretion that may arise in the case. And here is a critical point about trade remedies. In many cases, the technical facts will not give a clear answer whether measures should be adopted or not. As I have argued above, I would go so far as to say that, in most cases, an authority can produce a WTO-consistent analysis that would allow either the adoption or rejection of measures. Although I know this sounds crude put in this way but in effect a trade authority has to make a decision whether it thinks that measures should be imposed or not and then produce the analysis and conclusions that justify this decision. I don't mean that the decision should be plucked out of the air. Obviously the technical facts will influence the authority's view as to whether measures should be adopted or not.
This may seem like I am saying that trade remedy investigations are a sham and that any outcome can be produced. I am absolutely not saying this. The technical analysis is still important. And I think that there are some cases where the dumping calculation is relatively unambiguous in producing either zero dumping or a positive dumping result. In most cases, however, there is enough discretion in the data, especially where there is poor or partial cooperation (which is often the case), that give considerable discretion in the final conclusiosn that might be made.
My experience is that a trade remedy authority will approach a new case with an open mind but will have a feel for the extent to which there is a real problem. The data will be important in giving the authority that feel but ultimately there is a lot of discretion at this point in deciding whether it feels like a case where there will be measures or not.
All of this confirms what I said earlier that there is a political element to making trade remedy decisions, even during the technical investigation, and it is perhaps a mistake to create an authority that is only permitted to make technical decisions but, in fact, has to make political decisions because of the level of discretion in most cases. In fact, one might go as far as saying that it is unfair to do this to the TRA because it will inevitably run into problems on the most political cases.
As with some of the issues raised previously, I think that a solution to this is to give the SoS the call-in powers automatically in every investigation.
An alternative solution would be for early call-in to be discouraged in order that the SoS only gets involved when there is sufficient analysis that the SoS can be more specific about taking a different review on technical substance. I think that there are strong arguments for the call-in to only occur after the SEF. However, in order to ensure that the review was not held up too much, interested parties could be required to identify the specific finding of the TRA’s analysis that they disagreed with. This would have the benefit that the SoS would only have to concern themselves with a specific issue of the investigation and hopefully would be able to make a quicker determination than if they had to review all aspects of the case.
One possible idea is that there could be a provisional SEF relatively early in the process that gives an indication of the issues that the TRA is addressing and the current direction of travel. This could be made public and could summarise extremely provisional findings.
Functions of the TRA in a called-in investigation
Subsection 74(3)(a) of the Finance Act 2022 cancels all functions of the TRA in relation to a case when the SoS notifies TRA that they will decide the outcome of the transition review.
However, this is subject to subsection 6(d) which allows regulations to be made specifying “things of any kind” for the TRA to assist the SoS to make the call-in decision. This can include things specified by the SoS in 'directions'. 'Directions' is not defined in the Finance Act 2022 but the call-in regulations set out what the TRA must do in assisting the SoS in making the decision to call-in the review (Regulation 7(1)). This includes:
TRA investigates/analyses impact of trade remedy
TRA gathers evidence
TRA provides report to SOS including summary of investigations/analysis, TRA assessment of issues, EIT analysis, and advice on matters under review with reasons.
Section 74(3)(b) of Finance Act 2022 provides that the SoS decision does not have to be based on a TRA recommendation or decision. Regulation 11(1) requires that the SoS must take the TRA’s findings into account but is not bound by them. This obviously is relevant if the SoS call-in arises after the TRA has reached any conclusions.
Information that can be considered by the SoS
Regulation 6(2)(a) of the call-in regulations states that the SoS can consider information supplied by any person. The significance of this depends on the timing of the SoS call-in. If early, no information will have been collected by TRA. However, if later in the review, the TRA will already have collected information from interested parties within the appropriate deadlines. This means that the SoS can consider new information from parties that may not have cooperated earlier in the investigation.
Regulation 11(2) also allows the SoS to consider any evidence that they consider material and 11(3) requires that they the SoS must give interested parties the opportunity to comment on any new evidence.
Imprecision in terminology
There seems to be some imprecision in terminology in subsection 74(2)(a) of the Finance Act 2022.
(2) The Secretary of State may notify the TRA in writing that….. the Secretary of State is to decide whether to—
(a) vary, maintain or revoke a tariff rate quota, anti-dumping amount or countervailing amount….
The term ‘vary’ has a different meaning in dumping/subsidy regulations and the safeguard regulations. For safeguards, regulation 50 sets out the options in relation to a tariff rate quota (i.e. continue unvaried, be varied, replaced by a duty or revoked). In this context, if the measure is maintained in the same form as when it was transitioned from the EU, this would mean that the safeguard was continuing unvaried in terms of regulation 50. If some aspect of the safeguard is changed, it would be ‘varied’ under regulation 50. For dumping and subsidies, regulation 100(1) only gives the choice to vary or revoke the measures. Thus, if an anti-dumping duty is continued with no change, this would still be considered as ‘varied’. Therefore, ‘varied’ includes both keeping the measures unchanged and changing the measures in some way under the dumping/subsidy regulations.
This is confirmed in the SoS guidance to the TRA on transition reviews where the following statement is made:
A preliminary decision that the application of a duty to goods should be varied may take the form of a preliminary decision where the expiry date of a measure is extended whilst the duty level is maintained at its current level.
TRID can make a preliminary decision that a measure applies for up to 5 years as a result of a transition review, in accordance with regulation 100A(3)(d) of the dumping and subsidisation regulations.
Maintaining a measure at its current level with the same expiry date is not an option as part of a transition review.
Thus, it is clear that, in the context of dumping, “maintenance” of the measure cannot exist and to ‘vary’ the measure includes keeping the measure unchanged albeit with a new expiry date.
The wording of subparagraph 2(a) makes logical sense but legally there is some ambiguity here because the term ‘vary’ means something different for safeguards and dumping/subsidies. That said, it is unlikely that this will cause any substantive legal problems in the conducting of transition reviews
Similar issues arises in relation to regulation 14(1) of the call-in regulations.