European Union: EU Member States Back Retaliation Measures Against US Products

Last Updated: 25 June 2018
Article by Laurent Ruessmann and Jochen Beck

Last Thursday, 14 June 2018, the EU Member States backed a proposal from the Commission to impose additional customs tariffs on a wide range of US products. The decision by the EU was taken in response to the US' adoption of unilateral safeguard measures in the form of tariff duties of 25% on imports of certain steel products and 10% on imports of certain aluminium products which became effective against EU exports to the US as of 1 June 2018.

The EU duties are expected to enter into force in late June or early July. (In addition, the EU also brought a WTO challenge against the US safeguard measures and launched its own safeguards investigation of imports of certain steel products (from all countries).)

Economic operators are raising questions as to what this means for EU and US companies:

Which products are affected by the EU measures?

The final list is not yet published. In early June, the EU notified a list of likely targeted products to the WTO.

The range of products is very wide and includes: agricultural products, such as grains, fruits, tobacco and whiskey; consumer products, such as tableware and household articles, cosmetic products, clothing, footwear, doors, and playing cards; means of transport, such as motorcycles, boats and yachts; electronic products and white goods, such as batteries, telecom equipment, and washing machines; and chemicals and metals, such as aluminium, iron, steel products, glass and manganese.

How high will the additional EU duties be?

Depending on the product, the duties will be 10%, 25%, 35% or 50%. Check the list of likely targeted products for the duty rates per product. The total duties will amount to approximately €2.8 billion.

As of when will the duties apply?

The exact date is not fully clear but the duties will come soon. It is anticipated that the additional EU duties take effect either still in June or in early July.

I am an EU importer. What do these additional duties mean for me?

The import of these products will not become illegal. Imports of targeted products can continue, albeit with the additional duties due on imports from the date the measures enter into force.

Importers should therefore check purchase conditions and the applicable incoterms. If a purchase is DDP (delivered duty paid), the supplier is responsible for customs clearance and duty payment. Suppliers under those incoterms might seek to get out of existing contracts.

For incoterms other than DDP, the importer will be responsible for the payment of the duties. The goods will become more expensive and the importer must make a commercial decision as to whether to continue sourcing from the US or change supply sources to the EU or third countries.

It is in particular important to be aware of and review contractual obligations with US suppliers and of goods in transit that might only arrive after the additional duties become effective.

I am a US company exporting products on the list to the EU. What should I do?

US products on the EU list will be hit by the additional duties to the extent they will clear EU customs after the measures take effect. Depending on the product, that might mean that margins become too low to continue selling profitably to the EU. Companies with multiple production locations could consider supplying the EU market from non-US manufacturing locations.

US exporters need to be aware of contractual obligations, especially if they sell at DDP terms (see above).

If the products produced in the US contain parts from several countries, or are semi-assembled outside the US, it would be worth verifying whether under EU origin rules, the products could be considered to have an origin other than the US, which would allow them to avoid the additional duties.

I am an EU producer of products on the list. What do the measures mean for me?

You will have less competition from US producers. This will be an opportunity to gain additional market share. However, EU producers might also face increased imports from other non-EU countries. If this is the case and those imports are unfairly traded, e.g. sold at dumped and undercutting prices, it could be possible to ask the Commission to investigate with a view to the imposition of anti-dumping or anti-subsidy measures on the unfairly traded imports. Even if the increased imports are fairly traded, there may be the possibility of a safeguard request if there is a surge of imports. EU producers should therefore carefully monitor the trade flows for the products in question.

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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