FTA regrets Member States’ agreement to waive the lesser duty rule

19-12-2016

On 13 December Member States finally agreed on a compromise proposal that broke the deadlock on the proposal to modernise the EU’s trade defence instruments (MTDI). FTA has been closely involved in this exercise since its inception in November 2011 and was in frequent contact with first Christofer Fjellner, the MEP responsible at the European Parliament, and subsequently several Member States. More recently we protested the Slovak Presidency’s proposal. 

Positive outcome: Since then we have maintained contact with Member States attempting a more reasonable proposal and have met with some, albeit limited, success:

  • The agreed proposal extends the notice period that provisional duties will be imposed from two to four weeks. 
  • It also allows importers to reclaim duties paid during a 15 months expiry review when that review concludes duties should be abolished – an issue on which the FTA has campaigned for many years. 
  • Finally, there is a reversal to the burden of proof when the Commission conducts the “Union interest test” in that it has to prove that removing the lesser duty rule would be in the interest of producers, importers and users – with particular mention of the effect on supply chains.

Downside: However, at the heart of the proposal is still the fact that the Commission, should it find that there are State induced distortions to the cost of the raw material (including energy) of the product concerned, is no longer bound to set the anti-dumping duty at the level of the injury margin (when it is lower than the dumping margin).  This may turn out to be more costly for EU importers, including producers who rely on low cost input materials to manufacture a final product, than the limited advantage gained by the four week pre-notification and reimbursement of duties.

Overall assessment: Whilst the FTA recognises that there is over production of “raw materials” in China, notably steel, and sympathises that this poses a real threat to the EU industry, we also believe that the potential to remove the lesser duty rule, a concept that has existed in the EU system for almost five decades, poses a threat to the competitiveness of EU importers.  We will now be closely following the proposal’s passage through the European Parliament where we suspect it will meet with some resistance and calls for a less liberal approach.

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