The UK’s trade remedies regime
16 November 2021
Non-UK industries and companies that may find themselves subject to these trade remedies, and potentially a UK investigation, will need to ensure they understand the UK’s new trade remedies-related powers and processes fully.
The UK’s Trade Act 2021 (the Act) became law in April 2021 and the UK’s Trade Remedies Authority (the TRA) was officially established on 1 June 2021.
This article explores the UK’s new trade remedies regime, including the impact for the companies and industries it affects. In particular, we explore:
- the different forms of trade remedies currently available to the UK through its membership of the World Trade Organisation (WTO)
- the legal and practical steps that the UK Government has taken in this important area of economic policy
- what the UK’s trade remedies landscape now looks like
What are trade remedies?
Trade remedies are a key part of the toolkit of measures used by states to protect their domestic industries against disruptive trade flows. The WTO rules provide that trade remedies are an exception to the most-favoured-nation principle, which means that states generally cannot discriminate between their trading partners.
Ordinarily, trade remedies (which are also referred to as “trade defence” measures) constitute additional tariffs levied on the import of particular products from specified countries. Although, in the case of safeguarding measures, they can take the form of quantitative restrictions such as a ban or quota.
Trade remedy types
Three types of trade remedy are provided for in WTO law.
Anti-dumping measures address instances where the products of one WTO member are introduced into the domestic market of another WTO member at less than the normal value of the product, thereby causing, or threatening to cause, negative effects on a domestic industry.
Anti-subsidy measures (which are also referred to as “countervailing duties”) may be imposed on imports into a state’s domestic market in an amount up to the value of the subsidy determined to have been granted, directly or indirectly, on the manufacture, production or export of such product in its country of origin or exportation. As with anti-dumping measures, no countervailing duties may be imposed unless there is a determination that the subsidisation has caused, or threatens to cause, negative effects on a domestic industry.
Safeguarding measures may be imposed to protect a specific domestic industry from an unforeseen increase in imports of any product which is causing, or which is likely to cause, serious negative effects to the domestic industry.
The UK has ratified all of the WTO agreements that provide for these types of trade remedy.
The new UK trade remedies regime
The institutional framework for the UK’s new regime comprises a new non-departmental public body, the TRA, which is established by the Act. The TRA will conduct trade remedies investigations and reviews. It will also provide the Secretary of State for International Trade (the SoS) with advice, support and assistance.
The framework for the UK’s trade remedies regime is set out in the Taxation (Cross-border Trade) Act 2018 (the Taxation Act).
In outline, the Taxation Act provides the following:
- the SoS has the power to impose, suspend, vary or revoke trade remedy measures and to make associated regulations
- the UK has access to the suite of trade remedies provided for in the WTO agreements (anti-dumping, anti-subsidy and safeguards)
- in terms of the process for the imposition of trade remedies, the TRA applies as follows
- UK businesses or the SoS may request that the TRA initiate a trade remedies investigation
- if the relevant criteria to initiate an investigation are met, the TRA will conduct its investigation, determine whether the legal conditions for the application of remedies are met, and calculate the duty that may be imposed
- if the legal conditions are met, and unless it finds that the remedy would not be in the economic interest of the UK, the TRA must then make a recommendation to the SoS on the application of remedies and the applicable level of duties
- the SoS can then decide whether to impose remedies, but, if the SoS is satisfied that it would be against the UK’s public interest, they can reject the TRA’s recommendation
Further detailed rules and the applicable procedures are set out in secondary legislation. The Trade Remedies (Dumping and Subsidisation) (EU Exit) Regulations 2019 (SI 2019/450) details the anti-dumping duties and countervailing duties and safeguards are dealt with by the Trade Remedies (Increase in Imports Causing Serious Injury to UK Producers) (EU Exit) Regulations 2019 (SI 2019/449).
Both sets of regulations address the transitioning of EU measures and provide detail on, to name a few, the procedures for investigations and reviews, as well as the substantive requirements to apply measures.
It is anticipated that the overall investigative process will be a lengthy one. Anti-dumping and anti-subsidy-related investigations are expected to take up to 11 months (but in no case more than 13 months) after initiation of an investigation. Safeguards investigations are expected to take slightly less time.
The Trade Remedies (Reconsideration and Appeals) (EU Exit) Regulations 2019 (SI 2019/910) (the R&A Regulations) set out detailed rules concerning the reconsideration or appeal of trade remedy decisions. Depending on the role of the party concerned and the nature of the decision under challenge, as a matter of domestic law, trade remedy decisions can be challenged through:
- requesting a reconsideration by the TRA
- appealing to the Upper Tribunal (Tax and Chancery Chamber)
- applying for judicial review
Ultimately, as a matter of public international law, it may also be possible to challenge the UK’s trade remedy decisions through international bodies, for example, the WTO’s dispute settlement system. In that regard, the new UK regime is intended to operate in line with the UK’s relevant WTO obligations. As such, section 28 of the Taxation Act requires that when the TRA and the SoS exercise their functions in relation to trade remedies, they must take into consideration the relevant international arrangements to which the UK is a party. Therefore, relevant WTO agreements and related WTO jurisprudence may assist in the interpretation of the UK’s trade remedies regime.
In respect of challenges under domestic law, exacting timeframes are set. For example, the R&A Regulation stipulates that, where an application is made for the reconsideration of an original decision that was published in a notice, the TRA must reject the application unless it receives the application within one month beginning on the day after the notice is published, or (if later), within one month beginning on the day after the notice comes into effect. A late application however, may be accepted in limited situations.
Establishing the TRA
Initially, the UK Government’s intention was that the TRA would be established under the 2017-2019 Trade Bill. However, that Bill’s Parliamentary passage ended when Parliament was prorogued on 8 October 2019. Meanwhile, provision was made for the SoS to carry out the TRA’s functions until the TRA was established. On 6 March 2019, the SoS formed the Trade Remedies Investigations Directorate (TRID) within the Department for International Trade to carry out the relevant functions. The TRA officially commenced operations on 1 June 2021. Anything done by the TRID is regarded as having been done by the TRA, so in this article, for simplicity, we refer only to the TRA.
Continuity with the EU regime
There is considerable continuity between the new UK trade remedies regime and the EU regime. However, there are a number of distinguishing features to the UK regime, some of which we describe below.
Economic interest case
First, the UK regime includes an economic interest test. This test is designed to ensure that only remedies that are in the UK’s economic interests will be adopted.
When applying the test, the TRA and SoS are required to take the following factors into account:
- the injury caused to the relevant UK industry (or, in the case of safeguarding remedies, the serious injury caused to UK producers)
- the economic significance of the affected industries and of consumers in the UK
- the likely impact of the remedies on those parties
- the likely impact on particular geographical areas, or particular groups, in the UK
- the likely consequences for the competitive environment, and for the structure of markets for goods, in the UK
There is also a “catch-all” requirement to take into account such “other matters” as the authorities consider “relevant”.
With regard to anti-dumping and anti-subsidy cases, there is a presumption that the economic interest test is met, whereas no such presumption arises in safeguard cases. Information will be sought at different stages of the investigation and questionnaires can be sent to relevant parties. The SoS is required to review the TRA’s decision to ensure it is “reasonable”, however, the UK Government has not published guidance on how the SoS will conduct this review. So, while the UK’s test appears to be similar to the “public interest test” or “union test” used by the European Commission, the UK test is, for obvious reasons, UK-focused and appears to place a greater emphasis on gathering evidence than its EU equivalent. It may be able to play a more prominent role in shaping trade remedies related policy.
Lesser duties rule
In addition, the UK regime includes a blanket “lesser duties rule” which requires duties to be set at the minimum level necessary to prevent injury to domestic producers. This rule is encouraged but not required by the WTO. The EU also includes a version of the lesser duty rule in its regime, but has introduced exceptions to the rule in order to allow it to impose higher duties in certain situations.
Finally, with regard to challenges, in the first instance, rather than bringing a challenge in the courts against the TRA, it will be necessary in many cases to request a reconsideration of the relevant decision by the TRA itself. Only after the TRA’s reconsideration is completed can an appeal to the Upper Tribunal be made. This differs from the EU regime whereby appeals must be made directly to the General Court as there is no option or requirement to request an internal reconsideration.
In summary, there is a strong likelihood that the EU and UK’s trade remedies regimes will look quite different in the future.
The impact of the TCA and the withdrawal agreement
The EU-UK Trade and Cooperation Agreement (TCA) provides that trade remedies must be applied in a fair and transparent manner. The parties can (but are not required to) resort to the lesser duty rule and must consider information provided relating to whether imposing an anti-dumping or a countervailing duty would not be in the public interest. This last point leaves open the possibility that political or non-technical economic arguments can be utilised in investigations.
Importantly, trade remedies are not subject to the TCA’s overall dispute settlement mechanism. Instead, the parties will have recourse to the dispute resolution mechanisms at the WTO level. As an exception to this, the TCA does provide for specific remedies in the case of a violation of the TCA’s rules on subsidy control.
Under the Protocol on Ireland/Northern Ireland in the UK-EU Withdrawal Agreement, EU trade remedies continue to apply in Northern Ireland on an ongoing basis.
The impact on UK industry
The UK decided to transition a number of EU trade remedy measures across into UK law. Full details of the UK’s decisions can be found in the Trade remedies transition policy.
The trade remedies that have been transitioned are now subject to so-called “transition reviews” by the TRA. However, that process could last years because the requirement is that the review must be initiated prior to the expiry date of the relevant EU measure. To date, thirteen transition reviews have been initiated by the TRA. The most recent transition review, initiated by the TRA on 7 October 2021, concerns anti-dumping measures on aluminium road wheels.
In the meantime, the impact of the transitioned trade remedies is considerable for the affected industries. For example, 21 steel safeguard measures have transitioned into UK law along with 42 anti-dumping and anti-subsidy trade remedy measures. The measures include an anti-dumping duty of 58.9% on chamois leather originating in the People’s Republic of China and a countervailing duty on certain rainbow trout originating in Turkey ranging from 1.5% to 9.5%. In addition, a countervailing duty on biodiesel originating in Argentina has also been transitioned, with duty rates varying between 25% and 33.4%.
The political sensitivity of the TRA’s decisions was demonstrated when, on 7 September 2021, it initiated a reconsideration of its recommendation to the SoS regarding the retention or revocation of certain steel safeguards concerning 19 categories of steel products. That reconsideration followed the SoS’s decision to reject some of the TRA’s recommendations at the end of its transitional review; a decision considered to be of questionable legality under WTO law and domestic law. This incident triggered a review by the UK Government of the UK’s trade remedies regime. It is unclear when that review will conclude, but changes to the regime have already been announced to allow the SoS to “call in” transition reviews and reconsiderations of transition reviews conducted by the TRA. After calling a particular case in, the intention is that the SoS will be responsible for determining the outcome of the review or reconsideration.
UK trade remedies going forward
The UK’s new trade remedies framework is complex and its impact on industries in the UK and beyond will be significant, particularly as the UK further develops the regime. Indeed, despite the volume of guidance published by the TRA, until the UK Government has made more substantive decisions and been subject to challenge, uncertainties will prevail.
Countries and industries that are, or may be, affected by the UK’s new regime will need to ensure that they are proactive and decisive when required. It will be particularly important to ensure that relevant data is available to support any submissions made to the TRA, that investigations are properly managed, and interactions with the TRA are handled sensitively and strategically.
In terms of immediate steps, businesses should identify which of the trade remedies subject to a transition review by the TRA are of relevance to them and their supply chain and engage with the TRA accordingly. Going forward, businesses should prepare to use or defend themselves against the UK’s new trade remedies given the potential impact these measures may have.
Should you have any questions on the matters discussed in this paper please contact Matthew Townsend, Jonathan Benson, Danae Wheeler or your usual contact at Allen & Overy LLP.