Worldwide: New EU/UK Restrictions On Russian-Origin Iron And Steel Products

From September 30, 2023, new EU and UK sanctions will come into effect targeting the imports of specified iron and steel products which are processed in third countries and incorporate Russian-origin iron and steel inputs. Importers will need to declare upon import whether the imported goods are compliant (and be prepared to provide evidence demonstrating compliance if checked by customs).

The new measures tighten existing primary Russian iron and steel import restrictions (which were introduced in 2022) and aim to target circumvention by limiting the ability for Russian-origin iron and steel to be concealed through third country processing into downstream steel products.

Establishing the non-Russian origin of inputs in a range of iron and steel products, especially those that have undergone numerous processing stages in multiple countries, is likely to be a complex and time-consuming task. With the implementation deadline fast approaching, importers and their suppliers will need to work at pace to ensure they can collect the requisite information and demonstrate compliance.

UK prohibition

From September 30, 2023, UK persons will be prohibited from importing an iron and steel product into the UK, where it:

• is listed in Schedule 3B of the UK's Russia (Sanctions)(EU Exit) Regulations 2019 (the UK Regulations);
• has been "altered, transformed in any way; or subjected to any type of operation or process" in a third country; and
• incorporates one or more Schedule 3B iron and steel products of Russian origin.

Schedule 3B contains a list of products with HTS / CN codes falling within Chapter 72 (predominantly primary metals) and Chapter 73 (predominantly basic tubes / shapes).

Associated prohibitions will also apply with respect to the provision of technical assistance, financial services and funds, and brokering services in relation the prohibited goods.

The UK Government has stated in guidance that, since the measure was first published in April 2023, there will be no exceptions or transitional period. There is the ability for traders to apply for a license, with the UK Government indicating that the import of iron and steel that left Russia before 21 April 2023 may be eligible.

The UK Government has further stated that traders should be prepared to have documentation available to demonstrate their compliance with the new prohibitions, which may include, but is not limited to, a Mill Test Certificate (MTC) or Mill Test Certificates (MTCs) where the relevant information cannot be summarized in a single document.

EU prohibition

The EU is similarly introducing a prohibition on the direct or indirect import or purchase, from September 30, 2023, of iron and steel products listed in Annex XVII to Regulation (EC) 833/2014 (Regulation 833) when processed in a third country incorporating iron and steel products originating in Russia as listed in Annex XVII. Annex XVII similarly contains products with HTS / CN codes falling within Chapters 72 and 73.

Associated prohibitions on the provision of technical assistance, brokering services, financing or financial assistance, and insurance and re-insurance will also apply with respect to the prohibited goods.

Unlike the UK, the EU has implemented a staggered implementation period, with longer implementation windows for products with certain Russian-origin inputs (as per the table below).

Further, the EU has prescribed in Regulation 833 that, at the moment of importation, importers shall provide evidence of the country of origin of the iron and steel inputs used for the processing of the product in a third country. In guidance, the European Commission has stated that MTCs may be considered as sufficient evidence of the inputs' origin. However, customs authorities may require any additional evidence for the different transformation steps which the product has gone under.

Although EU Member States have the ability to grant trade licenses to authorize otherwise prohibited imports, these are on more targeted grounds, namely for civil nuclear and medical applications.

Implications for businesses

The new prohibitions, and associated evidentiary requirements to demonstrate compliance, are likely to be time-consuming and challenging not only for importers who face the direct compliance obligation but also their suppliers from whom they would need to obtain the relevant evidence of origin. This will be a particular challenge for finished products which have undergone multiple stages of processing in one or more third countries.

Although neither the EU or the UK have legally prescribed the type of evidence required to demonstrate origin, both the European Commission and UK Government have made clear that MTCs are the preferred source of evidence. This could cause challenges for importers if this information is not readily available from their suppliers, and cause supply chain backlogs if importers do not have the requisite evidence.

It still remains to be seen whether customs authorities will be more flexible in their requirements, and accept other types of evidence. For example, the German customs authority has stated that invoices, delivery bills, quality certificates, long-term supplier declarations, calculation and production documents, customs documents of the exporting country, business correspondence, production descriptions, declarations of the manufacturer or exclusion clauses in purchase contracts, which show the non-Russian origin of the primary products, can also be recognized as suitable proof documents. French customs have also indicated that they may accept other admissible evidence. Accordingly, we suggest that importers are attune to the specific requirements of individual member states.

In the meantime, we recommend that businesses work at pace to assess whether any of their goods are likely to be caught by the new prohibitions, and to work closely with their suppliers to source sound evidence of origin to ensure minimal impact on supply chains.

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.