European Union: Contributions From Nctm Offices Around The World Shipping & Transport Bulletin April-May 2018

Last Updated: 25 April 2018
Article by Bernard O'Connor

Section 232 Tariffs on Steel and Aluminium

The United States has decided to impose tariffs on the import of all steel and aluminium products from all countries except Canada and Mexico on the basis of national security. WTO trade rules, and in particular GATT Article XXI allows WTO Members to disregard most other GATT rules when an issue of national security arises. The rules do not provide an easy mechanism to allow other Members to second guess actions taken on those grounds.

The EU has to address two issues: i) the likely surge in exports to the EU caused by the blocking of the US market to large exporters like Brazil, Turkey and others, this is known as the deflections of trade problem; and ii) whether or not to take retaliatory action against the US for blocking EU steel and aluminium exports to the US.

The EU is on much safer legal ground in taking safeguards to protect the EU market against import surges due to deflections of trade. It is not clear that the EU has the right to take retaliatory actions. In an attempt to make retaliation legal the EU is choosing to classify the US measures not as national security measures but as safeguard measures. GATT Article XIX allows WTO Members to take retaliatory action.

The EU has drawn up a list of US products on which it will impose prohibitive tariffs. These include Harley Davidson motorbikes from Wisconsin, where House leader Paul Ryan comes from, Levi jeans, thanks to which Nancy Pelosi has her Congressional seat (the jeans no longer come from California but that's where the profits go to) and Bourbon Whiskey from Kentucky where Mitch McConnell, the Senate majority leader is based.

What is certain is that these developments will have an impact on shipping patterns and port usage.

Modernisation of EU Trade Defence Instruments

The EU's trade defence instruments are the anti-dumping law, the anti-subsidy law and the safeguards law. The anti-dumping and anti-subsidy rules are in the final phases of the legislative process leading to their upgrading. The new rules are expected for the early summer.

Of interest to the shipping community is the fact that a notice period of two weeks will have to be given to the general public before any measures are imposed. This will allow traders to complete customs clearance under normal conditions and not subject to the measures to be introduced. Concerns have been raised that this will lead to stockpiling and the law introduces an obligation to review the implantation of the rules to see if this actually happens.

Making parcel delivery more affordable in the EU

The EU is close to finalising new rules on making the cross-border parcel delivery market more transparent and subject to increased regulatory controls. The new rules are expected to come into effect at the beginning of 2019. The main elements of the new Regulation on cross-border parcel delivery are:

Price transparency: While the Regulation does not impose a cap on prices, it will foster competitive pressure by allowing users to easily compare domestic and cross-border tariffs. Parcel delivery providers will have to disclose prices for the services individual consumers and small businesses often use, which the Commission will publish on a website.

Regulatory oversight: Where parcel delivery is subject to the universal service obligation, National Regulatory Authorities will assess whether tariffs for cross-border services are unreasonably high compared to the underlying cost – as they already do for postal services.

National regulators will be given new powers to identify better parcel service providers and the services they offer. This will allow them to get a better overview also of the many innovative new players in the fast-growing EU cross-border e-commerce market.

Traders also have to provide consumers with clear information on prices charged for cross-border parcel delivery and returns, and customer complaints procedures, in line with the Consumers Rights Directive.

A 2013 Commission survey found that consumers and small businesses struggle with parcel delivery, in particular with the high prices, which prevent them from buying or selling more from other Member States. Research shows that the public cross-border prices charged by universal service providers are up to five times higher than the domestic equivalent and that these differences cannot be explained by labour or other costs in the destination country. Prices from broadly similar originating Member States over comparable distances sometimes vary significantly without obvious explanatory cost factors.

Controlling Investment into the EU

China is making significant investments in shipping capacity and in port facilities outside China. This is all part of the One Belt, One Road programme as well as the idea of developing national champions in each economic sector of strategic importance to China. The transport sector is clearly one in which China has placed a lot of emphasis.

In response to the fact that Chinese enterprises and in particular enterprises with a strong link, whether formal or informal or through direct ownership or not, to the state or to the Communist Party of China are purchasing strategic assets, the EU Commission has come up with a draft Regulation to monitor and control such investments. The Commission made its move having been requested by the governments of Italy, France and Germany.

The draft Regulation is now being examined by the two houses of the EU legislator, the Council and the European Parliament. The underlying debate between Brussels and the Member States is how much control powers should be given to the EU or should remain at the Member State level. Smaller Member States, keen to encourage Chinese inward investment, are concerned that these investments may be blocked.

It is unlikely that the new rules will be agreed this year and if at all would only come into effect in 2019.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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