UK: What Happens When Trade Goes Wrong? Understanding Trade Remedies And What They Mean For You

International trade generally takes place without significant dispute. However, in the event of unfair or adverse trading practices (such as dumping, injurious subsidies or an unforeseen surge in goods imported into a certain jurisdiction), affected businesses look to government to impose balancing or corrective measures. Those measures take the form of trade remedies. These remedies are one of the tangible mechanisms by which states may choose to manage international trade disputes.

Trade remedies have previously been assessed and implemented by the EU on behalf of the UK under the multilateral WTO framework. From 1 January 2021, the UK has implemented an independent trade remedies framework; the aim being to defend UK business interests from potentially injurious market distortion.

This article explains the new framework, why it is an important aspect of the UK's future economic policy, and what role business can take in shaping this new horizon.

What exactly are trade remedies?

Trade remedies are governed by the WTO and are approved exceptions to the fundamental general principles of WTO law i.e. no goods quotas, no diverging customs duties, no discrimination between WTO members etc. (more on that here). Broadly, trade remedies take three forms:

• Anti-dumping measures/duties – Goods are considered 'dumped' if they are exported at a lower-than-normal domestic price. This practice can lower demand for similar goods in the importing market and unfairly increase market share. Anti-dumping measures seek to provide protection, and minimise any "material injury" threatened or caused, by applying an additional tariff on the goods in question;
• Anti-subsidy or countervailing measures/duties – Countries often grant subsidies to certain sectors or industries in an effort to promote domestic production or trade. When these subsidised goods are exported, the price advantage can adversely impact the importing market. Countervailing measures protect against any "material injury" threatened or caused, by applying an additional tariff on the goods in question; and
• Safeguards – Another risk to a market comes from a significant and unexpected increase in the import of certain goods. Whilst this is not considered an unfair practice, the increased supply (without a mirrored increase in demand) has a clear detrimental effect on the price of goods already available in that market. Safeguards are temporary measures than can be introduced to mitigate likely or actual "serious injury". They commonly form quantitative restrictions (such as bans or tariff rate quotas) or customs duties on the goods in question.

Businesses can also challenge trade practices (such as foreign subsidies) or trade remedy decisions via judicial review in the UK or the WTO's dispute resolution framework.

On 31 March 2020, the EU had in place 95 anti-dumping measures, 16 countervailing measures and 3 safe-guard measures. There were also 54 active investigations. Via a 2017/8 Call for Evidence consultation, the Department for International Trade has undertaken an assessment of those EU measures which should be retained in the UK from the end of the transition period, i.e. which measures remediate material injury caused to the UK market in particular. The full list can be found here – it covers a number of product categories including 19 affected by the existing EU steel safeguard quotas. Where a measure has not been transitioned, the associated tariffs or tariff rate quotas ceased to apply at the UK border from 1 January 2021.

Why are trade remedies something to think about?

• Trade remedy measures and accompanying investigations are complex. Nonetheless, in order to protect your trading interests it is useful to have a basic grasp of the options available in order to assess what action to take when commercial interests may be threatened by injurious imports.
• As the UK re-assesses its trade frameworks with WTO member states, and businesses acclimatise to the new challenges and opportunities for supply chains, there is a high potential for unforeseen challenges, market shares to be affected and trade remedies to be brought into play.
• A state investigation into an adverse trade practice, such as dumping, is typically conducted on an interested party or a sampling basis. If your product sector is subject to an investigation, you will likely want to ensure you are part of the conversation and your interests are taken into account.
• As introduced above, the UK has reviewed existing EU measures and decided which to retain, i.e. which tariffs will continue to be levied against imports into the UK, and which to terminate. The affected products are varied, including solar panels, steel, bicycles, glass fibre, citrus fruits, biodiesel, hand pallet trucks and others.

Then and now – the impact of Brexit

Prior to the end of the Brexit transition period, the UK's trade remedy regime was implemented by the European Commission. Now the UK, via a new institutional framework, has responsibility. This resulting framework is broadly similar to the previous 'EU' regime, but with some divergences.

Legislation

The Government has introduced two new key pieces of legislation: the Taxation (Cross-border Trade) Act 2018 (TCBTA 2018) and the Trade Bill. These serve different purposes:

• The TCTBA 2018 establishes the overarching framework for the UK's trade remedies regime, but mandates consistency with existing WTO obligations. It is supported by secondary legislation that expands and provides detail on the rules and procedures¹;
• The Trade Bill, amongst other things, creates the Trade Remedies Authority (TRA), the UK body that will be responsible for operating the regime. The Bill is currently in the House of Lords and not yet in force.

The combined effect is, broadly, to import existing WTO measures into UK domestic law. Consequently, whilst the TRA is an autonomous regulatory body that will formulate, execute and administer the new regime, we are unlikely to see significant difference in the framework for assessment. The difference will come in how this is applied to the UK market, with new priority given to UK business interests.

Trade Remedies Authority and the Trade Remedies Investigations Directorate

Until the Trade Bill is passed, and the TRA formally established, the functions are being performed by the temporary Trade Remedies Investigations Directorate (TRID). When the time comes, it is assumed this nascent-form TRID will simply be renamed.

The TRA will conduct investigations into trade practices, consult interested parties and provide fully-formed recommendations to the Secretary of State (SoS) on appropriate courses of action.

Dumping or subsidy investigations are expected to last 11 to 13 months (safeguarding investigations slightly quicker), during the course of which the TRA will:

• consider the application for initiation of an investigation; made by the SoS or industry;
• consult contributors and interested parties, such as affected producers (domestic and exporting) and any relevant trade bodies, potentially on a sample basis;
• consider the necessity of a formal hearing or a provisional remedy i.e. a temporary measure to prevent additional harm as the investigation continues;
• satisfy itself that imposing a remedy would be in the UK's economic interest e.g. what would be the impact on a given region of imposing the considered remedy, and the impact on affected consumers?; then
  • this step is not currently required under WTO law. Under the TRA framework, this assessment will be compulsory in each and every case.
• consider the appropriate amount any additional duty or the size of any necessary quota.

If the TRA is satisfied that a remedy should be imposed, and has decided on an appropriate level of the resulting duty or quota, the measure will be recommended to the SoS. The SoS can reject a recommendation only on public interest grounds.

As introduced above, businesses can challenge a TRA decision (including the decision not to proceed with an investigation) by way of:

• an application for reconsideration (made within one month of the public notice); then
• judicial review of the reconsidered decision.

The TRA may also review, revise or suspend a given measure when presented with new and significant market developments.

What are the take-aways?

There are four elements for businesses to consider:

• The UK's trade priority is to negotiate and secure favourable trade agreements with global trading partners. These may well impose additional trade remedy restrictions or requirements. Business should make sure they understand such provisions as they relate to a specific trade route - starting with the most recent and prominent examples: the UK-Japan Comprehensive Economic Partnership Agreement and the EU-UK Trade and Cooperation Agreement.
• The TRA will be reliant on industry data and other global frameworks for guidance. There is a role for UK business and, for traders on both sides of the border, an opportunity to guide the direction and focus of the TRA.
• The obvious but most tangible difference is that remedies will now be assessed solely on the basis of impact on the UK market (rather than a wider EU assessment). This will change the economic analysis and may allow more targeted remedies that would have fallen below the previous EU-wide thresholds.
• Should you, as an 'interested party', have evidence that a specific remedy has been applied, varied or set aside incorrectly, you will need to act quickly; applications must be received by the Trade Remedies Service within a month and one day of the publication or coming into force of a decision (whichever is later).

Our Global Trade team is well-placed to support your business with these issues, including initiating, contributing to or challenging an investigation, and any accompanying queries you may have.

Coming up next in the DLA Piper Trade Truths series

Our next edition of Trade Truths will take stock of progress towards a UK-US trade agreement ahead of an important April deadline, and will consider the impact of the Presidential election and the deal agreed between London and Brussels on these negotiations.

Footnote

¹ Including the Trade Remedies (Dumping and Subsidisation) (EU Exit) Regulations 2019 (SI 2019/450) (D&S Regulations), the Trade Remedies (Increase in Imports Causing Serious Injury to UK Producers) (EU Exit) Regulations 2019 (SI 2019/449) (Safeguard Regulations), the Trade Remedies (Reconsideration and Appeals) (EU Exit) Regulations 2019 (SI 2019/910) (R&A Regulations) and certain amending instruments.