The United States' ('US') Department of Commerce ('DOC') initiated a so-called "section 232" investigation on 23 May 2018 into the possible national security effects of imports of cars (including SUVs, Vans and Light Trucks) and automotive parts. The European Commission ('Commission') has taken the opportunity to submit comments on this investigation and is inclined to participate in a DOC public hearing scheduled for 19 and 20 July. If the pending US investigation concludes that the US national security is impaired by such imports, the US can impose trade restrictions such as the imposition of additional customs duties on cars and parts thereof. Media reports suggest that such additional customs duties could amount to 20-25%.
Earlier this year, the US imposed additional customs duties following a "section 232" investigation on steel and aluminium. This triggered countermeasures from the European Union ('EU') on which we have briefed earlier.
Similar to the US additional customs duties on steel and aluminium, the Commission determines the possible US additional customs duties on the automotive sector as protective measures against foreign competition, rather than as national security measures. In its comments on the DOC's investigation, the Commission further observes that the automotive sector is not limited to big producers, but rather is a complex ecosystem of multidimensional companies. Manufacturing plants and upstream factories are interdependent and EU-US trade (e.g. in cars and automotive parts) and/or EU-US foreign direct investment in the automotive sector (e.g. EU companies with car production plants in the US) could be hit by changes in trade policies. In the US for example, additional customs duties on e.g. automotive parts will likely lead to higher costs for US based manufacturers, as well as for EU companies with manufacturing plants in the US.
Besides the prospect of being faced with additional customs duties when exporting to the US, the EU based automotive sector could also be confronted with higher costs in the EU. Due to possible trade diversions of steel and aluminium resulting from the imposed US additional customs duties mentioned earlier, the EU is investigating whether the imposition of protective measures (i.e. safeguard measures) in the form of import quota or tariffs on the import of steel and aluminium would be necessary. In addition, the EU announced that the imposition of US additional customs duties on the automotive sector will result in EU countermeasures.
Besides the EU, various other members of the World Trade Organization indicated that US additional customs duties on the automotive sector will likely trigger countermeasures, resulting in a more restrictive global trading environment. Our Trade & Customs experts closely follow and report on any new developments and have extensive experience with trade and customs related matters. If you have any questions, please contact Brian Mulier at our office in The Hague.