There have been developments concerning the measures adopted by the United States against steel products originating from Turkey as this article was being prepared for printing. We are closely following the developments and will be providing an update in our next issue and/or in our client alerts. Safeguard measures in steel has been a hot topic recently due to a series of protectionist measures adopted by countries all around the world in response to the decision of the United States to impose additional tariffs on imports of steel and aluminum products. It is a widely discussed question worldwide whether the measures taken by the U.S. fit the requirements put into place by the General Agreement on Tariffs and Trade 1994 (“GATT”)1 regarding the permissible unilateral action for members to protect national interests. There have also been developments in Turkey as well as in the European Union in the field of iron and steel products. The tariffs in question were introduced in the U.S. on the basis of Section 232 of the Trade Expansion Act of 1962, which allows the President to impose tariffs unilaterally if national security is at stake.2 However, many countries – including the usually neutral Switzerland- have requested consultations3 with the U.S. in the Dispute Settlement Body of the World Trade Organization (“WTO”), claiming that these additional tariffs are not strictly related to national security concerns, but are rather “safeguard measures,” which are per se subject to higher standards of proof before they can be employed by member states. In this article, we will first introduce the concept of “safeguard measures” as described under the international conventions, and then briefly summarize the processes that may lead to the adoption of these measures by Turkish authorities. What are safeguard measures? Safeguard measures are exceptional emergency measures envisioned in the GATT and the Agreement on Safeguards, which is an annex of the Marrakesh Agreement Establishing the WTO that develops the concept of safeguards. According to Article XIX of the GATT and Article 2 of the Agreement on Safeguards, if, as a result of unforeseen developments, a product is imported into a country in increased quantities and under such conditions as to cause or threaten to cause serious injury to the domestic industry that produces like or directly competitive products, the country may depart from the rules set forth under the GATT aiming to promote free trade, and can, for example, raise its tariffs on certain products. However, given the fact that the overall purpose of the GATT is to minimize barriers on free trade, the before the requirements that must be checked off before a country can apply safeguard measures are quite high. As the Appellate Body of the WTO has stated in its decision concerning the Argentina - Footwear dispute, “import restrictions that are imposed on products of exporting Members when a safeguard action is taken must be seen [. . .] as extraordinary.”4 Thus, some commentators and states argue that the U.S. has unjustly invoked the national security exception to impose restrictions on imports of steel and aluminum products to bypass the standards of proof applicable to safeguard measures under the GATT. The GATT gives more discretion to the contracting states to decide when their “national security” is at stake and to apply certain trade measures based on such grounds, rather than apply the more stringent standards employed for safeguard measures. Developments in Europe and Turkey As a result, the U.S. is imposing additional tariffs on imports of steel products, the European Union started an investigation on certain steel products on 26 March 2018 and announced on 6 July 2018 that provisional safeguard measures were going to be applied due to the trade diversion of steel products into the EU as a result of the additional 25% tariff on steel imports imposed by the U.S. Following these developments in the Western world, the Turkish Ministry of Trade5 (“Ministry”) initiated a safeguard investigation concerning the imports of certain steel products on 27 April 2018.6 Safeguard Investigations in Turkey Turkey is a party to the GATT and the Agreement on Safeguards making it subject to the standards set therein to apply any safeguard measures. Consequently, and in order to ensure harmony between the GATT and local legislation, Turkey has enacted the Regulation on Import Safeguard Measures7 (the “Regulation”), which mostly aligns with the rules of both the GATT and the Agreement on Safeguards. Pursuant to the Regulation, safeguards may only be imposed in Turkey following the process detailed below, regardless of the industry concerned. Initiation of the Investigation Safeguard measures can only be applied as a result of an investigation. If the Ministry decides to initiate an investigation, the relevant investigation decisions, as well as the applicable procedural rules, must be published in the Official Gazette. If a private party claims to have an interest in connection with the investigation and would like to raise arguments either for or against the application of safeguard measures, it must apply to the Ministry and register itself as an “interested party.” This requirement applies to both local and foreign entities alike. The Process Questionnaires. The Ministry publishes a set of questionnaires for entities or real persons that would like to register as interested parties. There are usually different versions of the questionnaires for importers, exporters, producers and other interested parties. The questionnaires pose factual questions aiming to establish whether the facts, including quantitative figures, may justify the application of safeguard measures. Filling these questionnaires is a crucial step in the process and the answers provided play a key role throughout the investigation up until the decision phase. In sum, questionnaires serve a similar purpose to petitions filed in a lawsuit. Some of the questions in the questionnaires may relate to commercial secrets of the interested entity. In such case, the Regulation allows interested parties to mark the relevant information as confidential to alert the Ministry not to disclose it to third parties; however, the Ministry is still allowed to benefit from such information in its decision-making process. Hearing phase. The Ministry has the authority to decide to hear interested parties either individually or collectively. Interested parties should express their intent to attend a hearing in the questionnaire. In our experience, most safeguard investigations end up in a hearing phase. Application of Safeguard Measures and Provisional Safeguard Measures At the end of an investigation, the Ministry can elect to apply safeguard measures if it finds that a product is imported in such increased quantities and under such conditions that cause or threaten to cause serious injury to domestic producers producing like or directly competitive products. If it chooses to impose safeguard measures, the Ministry will have the burden to prove that the criteria to adopt safeguard measures set under the GATT and the Regulation are met. The Ministry must take into account glosses of these standards as expressed in decisions of the Appellate Body of the WTO, which is the body in charge of reviewing claims related to safeguard measures. Certain important criteria laid out either by the Appellate Body of the WTO or in previous decisions of the Ministry are as follows: In the very recent Argentina – Footwear dispute, the Appellate Body of the WTO stated that “the increase in imports must have been recent enough, sudden enough, sharp enough, and significant enough, both quantitatively and qualitatively, to cause or threaten to cause ‘serious injury.”8 Therefore, the Ministry must thoroughly evaluate the import conditions of the product that is under investigation. Safeguard measures can only be applied to the import of “like” or directly competitive products of the product subject to investigation, in addition to the main product itself. There is a number of criteria set by both the Appellate Body of the WTO and the Ministry that may be considered when determining if a product is “like” another. There are usually overarching trade policy decisions behind investigations. The Ministry is not obliged to apply safeguard measures even if all the conditions are met. As a result, one should appreciate that the final decision of the Ministry will also take into account the contemporary economic policy followed by the government. The Ministry is also entitled to apply provisional safeguard measures even prior to the finalization of the proceedings where it appears on preliminary review that increased imports have caused or are threatening to cause serious irreparable harm to domestic producers producing like or directly competitive products. In 2017, the Ministry imposed additional tariffs on certain tire products for a term of 200 days as a provisional measure soon after the launch of an investigation.9 Safeguard measures can take the form of customs duties, additional financial charges, restrictions on quantity/value of imports, tariff quotas, or a combination of these forms. In past investigations, the Ministry has applied quotas and additional customs duties. For example, an additional ad valorem customs duty was imposed on wallpapers,10 while the Ministry opted for a quota on glassware of Iranian origin According to the Regulation, the application term of safeguard measures should not exceed four years, including any provisional measures, unless extended.12 If a certain measure imposed by the Ministry has an application term longer than one year, the measure must be progressively liberalized in regular intervals during the period of application. Decisions of the Ministry are subject to judicial review by administrative courts. Also, the member countries of the WTO may file a complaint against safeguard measures with the Dispute Settlement Body of the WTO. A Prospect for the Future Given the increasing tendency of world governments to impose protectionist measures on imports, in the near future we may very well experience a phase where the terms of the GATT and the national security exception recognized under the agreement come under closer scrutiny. While on one side there is an argument that “every country must be the judge in the last resort on questions relating to its own security,”13 there are also opposing views noting that this exception almost gives carte blanche to contracting states to bypass the requirements concerning the application of safeguard measures. There is indeed a tough balance to keep between trade freedom, state autonomy and national security concerns; we need, and hope to see in the near future, new guiding jurisprudence from the Appellate Court of the WTO based on the contemporary trade policies. The rapidly escalating measures being widely imposed against steel imports may give it the opportunity to do so very soon.