On June 7, 2018, the European Union (EU) published a Regulation introducing tougher rules to tackle dumped and subsidized imports. This reform comes only six months after the entry into force, in December 2017, of Regulation 2017/2321, which substantially changed the methodology for calculating anti-dumping duties.

The new Regulation aims to (i) modernize EU anti-dumping and anti-subsidy rules to reflect current global economic challenges and (ii) create an expedited, simple framework for anti-dumping and anti-subsidy investigations, including by simplifying cooperation by interested parties.

The following are the eight most notable amendments to existing EU rules that will be introduced.

1. Exception to the lesser duty rule: The EU investigating authority (Commission) applies the lesser duty rule. It limits the level of anti-dumping and anti-subsidy duties to the level of the injury margin (even if the dumping margin is higher). The Regulation allows the Commission to disregard the lesser duty rule in case of distortions to the prices of a raw material for the investigated product (including energy), if this is in the EU interest. This is the case only when a single raw material accounts for at least 17 percent of the production cost of the product concerned. Examples of measures distorting raw material prices include export taxes, export prohibitions, dual pricing schemes and licensing requirements.

2. EU industry target profits: To apply the lesser duty rule, the Commission calculates an injury margin. Injury margins are determined on the basis of a target selling price for the EU industry. That price is based on costs of production, selling, general and administrative expenses and a target profit margin. The Regulation prescribes that the target profit shall not be lower than six percent. It also clarifies that the target profit should take into account certain factors, such as research and development, and innovation costs.

3. Social and environmental considerations: The Regulation requires that when calculating the target selling price for the EU industry (in the context of the injury margin), the Commission take into account social and environmental considerations. Specifically, the cost of production will reflect the costs of complying with multilateral environmental agreements and the International Labor Organization Conventions. Separately, the Commission will also consider principles and obligations arising from labor and environmental rules when it assesses the acceptability of a price undertaking offer from the investigated exporters.

4. Enhanced transparency and predictability: The Regulation introduces an early warning mechanism to inform interested parties about provisional anti-dumping or anti-subsidy duties three weeks before they are imposed (the so-called “shipping clause”). Further, small and medium-size enterprises will receive assistance from a specific help desk to enable them to participate in anti-dumping or anti-subsidy investigations.

5. Expiry reviews: During expiry (also known as sunset) reviews, the anti-dumping or anti-subsidy duties under review remain in place. The Regulation provides that importers will be eligible for reimbursement of duties collected during an expiry review if, following the review, the duties are not extended. Further, the Regulation sets out a possibility for the EU industry to request the initiation of an expiry review of anti-dumping measures on the basis of evidence of (continued) distortions of raw material prices.

6. Involvement of trade unions: Under the Regulation, EU trade unions will be able to lodge complaints jointly with, or support complaints by, the EU industry. Trade unions also receive explicit procedural rights.

7. Shorter timelines in investigations: Anti-dumping investigations will, under the new rules, have to be concluded within 14 months of their initiation (instead of 15 months currently). Anti-subsidy investigations will still have to be concluded within 13 months of initiation. Provisional anti-dumping duties will not be imposed later than seven (and not more than eight) months from the initiation.

8. Extended scope of application: The Regulation seeks to introduce an “enabling clause,” allowing the extension of anti-dumping and anti-subsidy measures to the continental shelf and the exclusive economic zones of EU Member States. The Commission will adopt implementing acts laying down the conditions for this extension.