On 8 June 2018, the Trade Defence Instruments Modernisation Package (the "Modernisation Package") became applicable in the European Union (EU). A key component of the package was the possibility for the European Commission (the "Commission") not to apply the so-called "lesser duty rule" ("LDR") under certain conditions. On 10 April 2019, the Commission for the first time made use of this possibility when imposing provisional duties.
The EU generally imposes trade defence measures at the least economic cost by ensuring that the extra import duties are kept to a minimum under the LDR. This means that additional duties are capped at a level that is sufficient to remove injury to EU industry, even if higher duties would be required to remove dumping altogether.
Under the new rules, the Commission can disapply the LDR in cases where there are significant market distortions in a product's raw material base in comparison to other international prices, thus enabling the Commission to impose higher duties on dumped imports.
On 10 April 2019, the Commission has for the first time made use of this possibility. In a case involving Russian liquid fertilizer makers and distributors Acron and EuroChem, the Commission has imposed provisional measures at a level that is higher than the level required to remove injury to Union producers of liquid fertilizer.
In this case, the complainant Fertilizers Europe had alleged the Russian fertilizer producers had benefitted from distorted gas prices as a result of high subsidies in their home market, where gas is the biggest expense in the production of these liquid fertilizers – urea and ammonium nitrate ("UAN") – at issue. The Commission has agreed with this analysis, which will expose these Russian producers – and only the Russian producers – to particularly high tariffs in Europe.
The full text of the regulation is available here. The Commission is expected to put in place five-year definitive duties by no later than October 2019.