After five years of inter-institutional discussions, the European Parliament ("Parliament") and the Council of the European Union ("Council") have adopted Regulation (EU) 2018/825 ("Modernization Regulation"),1 which substantially updates the trade defense instruments ("TDIs") legislation of the European Union ("EU"). The Modernization Regulation entered into force on June 8, 2018, and the new trade defense rules it provides for will start to apply to all new investigations initiated on or after this date.
The adopted text reflects the inter-institutional agreement that was reached between the European Commission ("Commission"), the Parliament and the Council on December 5, 2017, and provides for amendments to the EU's basic anti-dumping and anti-subsidy legislation, as set forth respectively in Regulation (EU) 2016/1036 and Regulation (EU) 2016/1037.2
In Commission President Juncker's own words, the Modernization Regulation is, together with the EU's new dumping methodology addressing cost and price distortions,3 part of the EU's plan to improve its trade defense rules to "face today's challenges in global trade [and] defend European producers and workers when others distort the market or don't play by the rules."4
The main features of the Modernization Regulation can be summarized as follows:
- Investigation periods will be shortened, notably with anti-dumping investigations having shorter deadlines for imposing provisional measures and to conclude investigations;
- The Commission will be able to impose higher duties, as the so-called "lesser duty rule" will no longer apply—in all cases, in anti-subsidy investigations and, in case of raw material distortions,5 in anti-dumping investigations—provided that the non-application of the lesser duty rule is in the EU's interest;
- The target price of the EU industry used to determine injury margins will a minima reflect a target profit of 6 percent, and potentially higher;
- Social and environmental considerations, as resulting from core International Labour Organization standards and environmental agreements, will be taken into account when constructing the target price of the EU industry and when deciding whether to accept price undertakings. Changes in relation thereto may result in interim reviews being initiated;
- Predictability and transparency will be increased for exporters and importers through the implementation of a three-week pre-disclosure window whereby interested parties will be notified in advance of the imposition or non-imposition of provisional measures and be given an opportunity to comment. However, a safeguard mechanism is foreseen to prevent risks of stockpiling during this pre-disclosure window;
- Anti-dumping or countervailing duties paid while an expiry review investigation is ongoing will be refunded if an investigation concludes that the relevant measures should be terminated;
- The Commission theoretically will be entitled to impose anti-dumping or countervailing duties on products shipped offshore, although, in practice, additional implementing measures need to be adopted before this becomes a reality; and
- The Commission’s reporting obligations have been extended, notably to cover amendments brought by the Modernization Regulation.
In addition, the Modernization Regulation provides for rules enhancing the participation in investigations, or clarifying existing rules, as follows:
- Provisions are made to facilitate the participation of small and medium-size enterprises and to allow for the participation of trade unions in TDI proceedings;
- Fear of retaliation is now officially recognized as a "special circumstance" warranting ex officio initiation of investigation by the Commission, although this appears to have limited practical resonance;
- Registration of imports, which permits the imposition of definitive anti-dumping or countervailing duties up to 90 days before the imposition of provisional measures, will be promoted;
- Conditions under which undertakings can be accepted have been clarified;
- Amendments have been made to the rules relating to anti-circumvention proceedings to reflect existing practice and experience; and
- Existing practices, including those resulting from the World Trade Organization's rules, have been codified. In particular, the Modernized Regulation acknowledges the possibility for the Commission to adopt non-binding interpretative guidance, subject to certain consultations requirements.
The text of the adopted Modernized Regulation is the same as the December 2017 inter-institutional agreement; it has simply been formally endorsed by the Council and the Parliament.
Correspondingly, detailed information on the changes brought about by the Modernization Regulation can be found in Mayer Brown's January 30, 2018, legal update, Trade Defense Instruments: Analysis of the Negotiated Proposal on Modernization.6