As from 22 June 2018, additional customs duties will be applicable in the European Union ('EU') on certain products originating in the United States ('US'). This is part of the commercial policy measures taken by the EU in response to the additional customs duties as imposed by the US safeguard measures on steel and aluminium originating from the EU.
The relevant commercial policy measures are based in two implementing acts as adopted by the European Commission ('Commission'):
- Regulation 2018/724 which allows the EU to impose additional customs duties on certain products originating from the US within the legal framework of the World Trade Organization ('WTO'); and
- Regulation 2018/886 which provides for the actual application of the EU additional customs duties.
The EU commercial policy measures target selected products originating in the US as indicated in Annex I and Annex II of above mentioned Regulations, including steel and aluminium products, agricultural goods and a combination of various other products.
Lists of targeted US originating products
Annex I products
The products listed under Annex I of Regulation 2018/886 comprise among others:
- sweetcorn, maize, grain;
- peanut butter;
- -orange juice, cranberry juice;
- bourbon whiskey, whiskey;
- cigars, cigarettes, smoking tobacco;
- eye make-up preparations;
- t-shirts, trousers, cotton denim trousers, footwear;
- steel and aluminium and related products;
- sea-going sailboats and yachts, motorboats;
which become subject to additional customs duties of a rate of 10% or 25% as from 22 June 2018.
There is, however, an exemption whereby the additional customs duties are not to apply for goods listed in Annex I for which:
- customs duty exemptions or reductions were granted before 17 May 2018; and
- importers can prove that the relevant goods have been exported before 22 June 2018.
Annex II products
In addition, the EU is reserving a right to impose another set of additional customs duties on products listed in Annex II of Regulation 2018/886 will be enforced at a later stage, either as from 1 June 2021 or any time earlier in view of EU's initiated legal proceedings at the WTO Dispute Settlement Body ('DSB') that the US safeguard measures are inconsistent with WTO law.
How did it come so far?
In March 2018, the US announced its intentions to impose additional import tariffs on steel (25%) and aluminium (10%), including those originating in the EU.
The EU was granted consecutive exemptions from these tariffs on 22 March as well as 30 April 2018 (both for the period of 1 month).
On 31 May 2018 the EU was no longer exempted from these tariffs on steel and aluminium.
Main argument for imposing the US tariffs is that the national security of the US is at stake. Although the rules of the WTO provide for the possibility to introduce trade restrictions on the grounds of national security, the EU deems the imposed US tariffs as being safeguard measures to protect the domestic industry against foreign competition (and hence not as any kind of security measures).
According to WTO law, safeguard measures can be imposed when a WTO-member sees itself confronted with a product being imported:
- in increased quantities; and
- which causes or threaten to cause injury to the domestic industry that produces similar competitive products.
The EU considers the US safeguard measures inconsistent with WTO law as the mentioned WTO security exceptions do not apply to or justify such safeguard measures.
As a consequence, the EU reiterated that WTO law provides for the right to impose countermeasures (e.g. suspension of equivalent tariff concessions) when imposed safeguard measures are deemed not to be in conformity with WTO law. The EU therefore introduced the additional customs duties on the selected products listed in earlier mentioned Annexes I and II.
Remarks and conclusions
Besides the introduction of additional customs duties, the EU also launched legal proceedings against the US at the WTO in connection to the US safeguard measures regarding involving steel and aluminium tariffs. Further, in view of protecting the EU industry against possible trade diversion of steel and aluminium following the US tariff measures, the EU initiated also a safeguards investigation on steel imports and a surveillance system for aluminium.
Any companies performing trade activities with or operations related to the listed US originating products are encouraged to assess the consequences of the imposed EU additional customs duties with regard to their daily business, including assessing whether the earlier mentioned exemption might be triggered in practice. Our Trade & Customs experts will closely follow and report on any new developments. If you have any questions, please contact Brian Mulier at our office in The Hague.