Decision

Proposed approach to steel safeguard reconsideration (HTML version)

Updated 23 June 2022

Disclaimer

The HTML version departs in certain respects from the formatting of the original text.

See ‘Proposed approach to steel safeguard reconsideration (ODT version)’ for the exact text.

SECTION A: Introduction

This document sets out the Secretary of State for International Trade’s conclusions and proposed approach based on the Trade Remedies Authority’s (TRA’s) findings under the steel safeguard reconsideration. It should be read in conjunction with the TRA’s Report of Findings and other public documents available for this case on the public file.

The review of the transitioned steel safeguard measure was initiated on 1 October 2020. Until June 2021 the UK’s trade remedies investigation functions were carried out by the Trade Remedies Investigations Directorate (TRID) as part of the United Kingdom (UK) Department for International Trade (DIT). On 1 June 2021 the TRA was formally and legally established as an independent arm’s-length body of DIT. Therefore, although the transition review was initiated by TRID, rather than TRA, for the sake of simplicity and clarity, the report will refer to ‘the TRA’ to cover all the activities associated to this reconsideration of the transition review, both before and after their establishment as the TRA.

For further guidance and information regarding transition reviews and reconsiderations please see the TRA’s public guidance.

A1. Case history

On 22 March 2022, under regulation 3(b) of the Trade Remedies (Review and Reconsideration of Transitioned Trade Remedies) Regulations 2022 (S.I. 2022/113) (“the Call-in Regulations”) the Secretary of State for International Trade notified the TRA in writing that, in relation to the Steel Safeguard under reconsideration, she intended to take the decision on whether to vary, maintain or revoke the tariff rate quotas applicable to goods. The Secretary of State for International Trade directed the TRA, pursuant to this, to assist her by:

• investigating and analysing the impact of the transitioned trade remedy under reconsideration;
• gathering and assessing evidence in connection with the impact of the transitioned trade remedy;
• providing a report to the Secretary of State (in these Regulations referred to as a “Report of Findings”) before a date specified by the Secretary of State.

In accordance with regulation 4(2)(a)(ii) of the Call In Regulations, the Secretary of State instructed the TRA, on 22 March 2022 to include the following analyses and assessment:

• The analysis carried out and the conclusions reached on the reconsideration prior to the date of the letter;
• An assessment as set out in points a-e below of the evidence of the 19 products transitioned from the EU measure (“the transitioned trade remedy”) in the 3 steel product category groups set out in annex A (“the family groups”);
• A separate assessment as set out in points a-e below of the 10 product categories recommended for extension by the TRA in 2021 in the same family groups;
• An assessment of the Economic Interest Test (as required under regulation 7(1)(c)(iii) of the Call-in Regulations) for each individual product category; and
• Proposed tariff rate quotas (TRQ) for each individual product category subject to the reconsideration and to which the measure currently applied.

The points of assessment referenced above for the three product families (to be conducted on the basis of both 19 total categories split across the 3 groups, and 10 categories split across the three groups, respectively) were whether:

a. The goods were imported into the UK in increased quantities and whether this increase was significant.

b. The importation of those goods in increased quantities would be likely to recur if they were no longer subject to a tariff rate quota.

c. There was serious injury or a threat of serious injury to UK producers.

d. Any continuation of a tariff rate quota was necessary at an individual product category level to prevent or remedy serious injury or threat of serious injury to UK producers.

e. There was evidence that that the UK producers were adjusting.

A2. Aggregation of steel products

The TRA’s original transition review of the steel safeguard measure was conducted based on the consideration of each of the 19 steel product categories on an individual basis.

In applications for a reconsideration, steel producers made the case that the production of steel within the individual categories was not distinct and the product categories, were instead, inherently interconnected. Producers argued that steel products should therefore be considered on an aggregate basis.

Given the grounds for the reconsideration, DIT asked the TRA to consider the data in aggregate at industry level and at by product group, so that it could be considered alongside the evidence on individual product categories to be able to determine whether the safeguard should be maintained to prevent or remedy serious injury.

There are a range of possible ways in which individual products categories may be linked to one another. These include:

• demand substitutability – how easily the products can be substituted for one another from a user perspective
• supply substitutability – the ease with which producers can swich production between the products
• common customers – the extent to which changes in demand from a given customer affect more than one product
• shared facilities – the extent to which products share production facilities so that injury experienced in one product can affect another product
• shared company ownership – where different products are produced by the same company so that injury on one product can impact on multiple products
• vertical integration – the extent to which products are used as inputs in the production of other products
• common materials – the extent to which products are produced from the same unprocessed or semi-processed materials

The European Commission (EC), in its original definitive determination of January 2019, stated that it based its analysis of whether safeguards were warranted on a single aggregate group of products. It has since reaffirmed that position.

However, responding to arguments put forward by interested parties, and with the aim of confirming the robustness of its aggregate analysis, the Commission also examined this single group of products under three different groupings, or “families”: flat products, long products and tubular products.

The EC argued that these groupings are commonly used by the steel industry, and that, within each of these families, there is a degree of commonality between product characteristics, that products within each family sometimes share production processes, that products within a family are often an input for other downstream products within the same family or have common users or customers in the supply chain. This, it argued, generates a greater degree of competition within the family group than is present at the aggregate level.

DIT considered these arguments and the appropriateness of grouping steel products in this way.

Although there is no single grouping of products that satisfies each and every one of the above criteria, the submissions by steel producers are generally supportive of these grouping as a logical basis for assessing injury or the threat thereof.  The arguments and evidence put forward mainly emphasise linkages between products resulting from the use of common production inputs, common ownership, vertically linked production chains and supply-side interchangeability.  Demand side substitutability features less prominently, though there are also linkages via common customers. Collectively these suggest that injury caused to one product will have repercussions on other products within the same group.

Although it is possible to conceive of alternative groupings of products, because of the reasoning above, DIT concluded that the grouping of steel products into flats, longs and tubes had sufficient merit to form the basis of assessment of whether the retention of the safeguard would be necessary to prevent or remedy serious injury. In addition, the EU grouped them this way.

SECTION B: Department for International Trade and the Secretary of State for International Trade’s Conclusions

B1. Consideration of the grounds raised by interested parties

The TRA accepted eight applications for reconsideration, the grounds of which set the scope for ongoing analysis. In addition to these, the TRA received 22 non application submissions and two further responses from interested parties which were all taken into consideration.

Over 250 grounds (arguments that were put forward) for analysis were identified in the 8 applications received as part of the reconsideration process. The TRA analysed all grounds individually and identified 10 common themes, as below, into which most grounds could be categorised. An additional category of ‘other’ was used to capture a small group of grounds that could not be readily assigned to a common theme. The common themes are:

• COVID-19 and the UK’s exit from the EU
• Economic Interest Test (EIT)
• the publication of the EU safeguards determination*
• HMRC vs ISSB data, and the use of Below Threshold Trade Allocations (BTTA)
• increase in imports and significance assessment
• serious injury assessment
• interconnectedness
• timeframe
• UK production
• other*

The Secretary of State has taken into account the findings of the TRA against these grounds, as set out in paragraphs 1.4.1 – 1.4.10 of its Report of Findings and concluded that none of these grounds should be upheld.

B2. Consideration of aggregated steel categories

As set out above, in addition to consideration of the grounds raised by interested parties, the Secretary of State directed the TRA to examine whether:

a. The goods were imported into the UK in increased quantities and whether this increase was significant;

b. The importation of those goods in increased quantities would be likely to recur if they were no longer subject to a tariff rate quota;

c. There was serious injury or a threat of serious injury to UK producers;

d. Any continuation of a tariff rate quota was necessary at an individual product category level to prevent or remedy serious injury or threat of serious injury to UK producers.

e. There was evidence that that the UK producers were adjusting.

B3. Necessity of a TRQ to prevent or remedy serious injury

The Secretary of State has taken into account the TRA’s findings in sections 2.1 to 2.4 of the TRA’s Report of Findings and concluded that the maintenance of TRQs is necessary to remedy serious injury. The Secretary of State also recognised that adjustments were required to certain TRQ’s to better reflect trade flows.

As detailed below, several factors have been taken into account in making this overall approach, including the evidence of an increase in imports, the likelihood of a recurrence of imports and the existence of serious injury to UK producers.

B3.1 Increase in imports

Having taken into account the evidence provided by TRA in its Report of Findings, the Secretary of State has concluded that there is evidence of an increase in imports over the period of investigation for both groups 1 (flat products) and 3 (pipes/tubes) but that there is no evidence of a significant increase in imports for group 2 (long products).

The Secretary of State has taken this information into account as part of the overall assessment. However, the Secretary of State does not consider that prior increased imports during the period considered must be established to establish that a safeguard measure is necessary to prevent or remedy serious injury.

B3.2 Likelihood of recurrence of imports

In its Report of Findings, the TRA identified indications of serious injury. The Secretary of State has taken into account the Report of Findings and concluded that removal of the steel safeguard measure would likely result in an increase in imports and therefore would result in serious injury or the threat of serious injury to UK steel producers.

There is evidence in the TRA’s Report of Findings that removal of the measure would likely result in an increase in imports of steel products due to:

• global steel overcapacity – there will be an oversupply in the international market for steel products under review for the foreseeable future (section 2.2).
• import trends – The TRA found an ongoing high rate of import volume during the most recent period, including during the introduction of the EU safeguard measure in 2018 and the COVID-19 crisis in 2020. The TRA also found an increase in import volume during the period of investigation and most recent period, relative to domestic production of multiple product categories in each group (section 2.2).
• actions of other authorities – US steel tariffs imposed in 2018 caused a knock-on effect resulting in numerous other countries introducing trade remedy measures to protect against the diversion of steel products. Were the UK to remove its safeguard, it would be based on the evidence that the UK would face an increase in diverted steel product imports (section 2.2).
• attractive UK market – actions taken by other authorities reduced their attractiveness and consequently increased the attractiveness of the UK as an export destination for steel products. Not only this but equivalent countries such as Japan and South Korea experienced lower penetration levels than the UK despite the implementation of the EU’s safeguard measure, indicating the UK is a comparatively attractive market (section 2.2).

B3.3 Serious injury or threat of serious injury and necessity of a TRQ to prevent or remedy serious injury

When investigated at an aggregate level (both at the industry level and at the group level) the Secretary of State concluded that UK steel producers were suffering threat of serious injury and that this would be likely to increase should the safeguard measure be removed. The Secretary of State has taken into account the assessments made throughout section 2.3 of the TRA Report of Findings that, at industry and group level, there were indications of serious injury to UK producers for all three steel product category groups.

B4. Evidence of UK producers adjusting

Having taken into account section 2.5 of the TRA’s Report of Findings, the Secretary of State has concluded that there is sufficient evidence to demonstrate that UK producers have sensible and practical adjustment plans in place and are adjusting to the surge in steel imports, as required under the WTO Safeguards Agreement.

SECTION C: Proposal

The Government’s proposals are set out below and are made on the basis of the Secretary of State for International Trade’s conclusions, as set out in Section B, above.

C1. Grounds Raised by Interested Parties

1. The steel safeguard measure will continue to apply on the following 10 steel categories until 30 June 2024:

• 1 – Non-alloy and other alloy hot-rolled sheet and strip
• 2 – Non-alloy and other alloy cold-rolled sheet
• 4 – Metallic coated sheet
• 5 – Organic coated sheet
• 13 – Rebar
• 19 – Railway material
• 20 – Gas pipe
• 21 – Hollow section
• 25 – Large welded tube
• 26 – Other welded tube

C2. Application of the safeguard to other steel categories

As set out above, the Government extended the measure with effect to a further 5 categories of steel for the period of 1 year. These categories were as follows:

• 6 – Tin mill products
• 7 – Non-alloy and other alloy quarto plates
• 12 – Merchant bars and light sections1
• 16 – Non-alloy and other alloy wire rod
• 17 – Angles, shapes, and sections of iron or non-alloy steel

The Secretary of State has concluded that, on the basis of the of the indications identified by the TRA in its Report of Findings there is clear evidence that:

a. if the measure were discontinued, there would be serious injury or the threat of serious injury to UK producers; and

b. UK producers are adjusting

The Secretary of State has also concluded that the retention of the measure for these categories of steel is in the economic interest of the UK.

The Secretary of State therefore proposes to extend the measure for a further 2 years (from 1 July 2022 until 30 June 2024) with effect to categories 6, 7, 12, 16 and 17.

However, throughout the reconsideration, evidence has been received from importers and downstream users of Category 12 steel products highlighting severe problems with supply of these products and associated increased costs to those businesses. The Secretary of State therefore proposes increasing the tariff rate quota on Category 12a to 126,136 tonnes to ensure it better reflects trade flows.

The Secretary of State does not propose to reapply the measure to the 4 categories for which the measure was discontinued in 2021 (categories 14, 15, 27 and 28).

The full list of proposed TRQs are set out in the next section.

SECTION D: Proposed tariff rate quotas

Table 1: Quarterly volumes of country and residual tariff-rate quotas (in tonnes) year 1

Product category	Country	1 July 2022 to 30 September 2022	1 October 2022 to 31 December 2022	1 January 2023 to 31 March 2023	1 April 2023 to 30 June 2023
1	EU	176,722	176,722	172,880	174,801
1	Turkey	23,203	23,203	22,699	22,951
1	Taiwan	12,918	12,918	12,637	12,777
1	Residual	22,233	22,233	21,750	21,991
2	EU	76,412	76,412	74,751	75,581
2	South Korea	11,240	11,240	10,996	11,118
2	India	9,396	9,396	9,192	9,294
2	Residual	23,844	23,844	23,325	23,584
4	EU	305,241	305,241	298,605	301,923
4	Taiwan	31,558	31,558	30,872	31,215
4	India	23,307	23,307	22,801	23,054
4	Turkey	23,242	23,242	22,736	22,989
4	Residual	80,601	80,601	78,849	79,725
5	EU	34,543	34,543	33,792	34,167
5	South Korea	14,037	14,037	13,732	13,884
5	Residual	2,098	2,098	2,053	2,075
6	EU	30,120	30,120	29,465	29,792
6	PRC	7,647	7,647	7,481	7,564
6	Taiwan	2,497	2,497	2,443	2,470
6	South Korea	2,370	2,370	2,319	2,344
6	Residual	1,022	1,022	1,000	1,011
7	EU	67,025	67,025	65,568	66,297
7	Ukraine	10,461	10,461	10,234	10,347
7	Residual	13,458	13,458	13,165	13,312
12A	EU	27,795	27,795	27,191	27,494
12A	Residual	3,998	3,998	3,911	3,954
12B	EU	33,389	33,389	32,664	33,026
12B	Turkey	12,567	12,567	12,294	12,431
12B	Residual	7,142	7,142	6,986	7,064
13	EU	70,174	70,174	68,648	69,411
13	Turkey	33,245	33,245	32,522	32,883
13	Residual	22,635	22,635	22,143	22,389
16	EU	70,644	70,644	69,108	69,876
16	Residual	3,084	3,084	3,017	3,051
17	EU	142,481	142,481	139,384	140,933
17	Residual	35,084	35,084	34,322	34,703
19	EU	4,517	4,517	4,419	4,468
19	Residual	133	133	130	131
20	Turkey	14,810	14,810	14,489	14,649
20	EU	6,666	6,666	6,521	6,593
20	India	3,427	3,427	3,352	3,390
20	UAE	2,272	2,272	2,223	2,247
20	Residual	696	696	681	689
21	Turkey	35,157	35,157	34,393	34,775
21	EU	10,671	10,671	10,439	10,555
21	Residual	3,244	3,244	3,174	3,209
25A	Japan	7,794	7,794	7,624	7,709
25A	EU	5,963	5,963	5,834	5,899
25A	South Korea	1,191	1,191	1,165	1,178
25A	Residual	2,102	2,102	2,057	2,079
25B	EU	15,339	15,339	15,006	15,173
25B	South Korea	4,409	4,409	4,313	4,361
25B	Japan	1,932	1,932	1,890	1,911
25B	Residual	4,650	4,650	4,549	4,600
26	EU	21,488	21,488	21,021	21,255
26	UAE	14,441	14,441	14,127	14,284
26	Turkey	10,490	10,490	10,262	10,376
26	PRC	5,518	5,518	5,398	5,458
26	Residual	9,528	9,528	9,320	9,424

Table 2: Quarterly volumes of country and residual tariff-rate quotas (in tonnes) year 2

Product category	Country	1 July 2023 to 30 September 2023	1 October 2023 to 31 December 2023	1 January 2024 to 31 March 2024	1 April 2024 to 30 June 2024
1	EU	181,526	181,526	179,553	179,553
1	Turkey	23,834	23,834	23,575	23,575
1	Taiwan	13,269	13,269	13,125	13,125
1	Residual	22,837	22,837	22,589	22,589
2	EU	78,489	78,489	77,636	77,636
2	South Korea	11,546	11,546	11,421	11,421
2	India	9,652	9,652	9,547	9,547
2	Residual	24,492	24,492	24,226	24,226
4	EU	313,539	313,539	310,131	310,131
4	Taiwan	32,416	32,416	32,063	32,063
4	India	23,941	23,941	23,681	23,681
4	Turkey	23,873	23,873	23,614	23,614
4	Residual	82,792	82,792	81,892	81,892
5	EU	35,482	35,482	35,096	35,096
5	South Korea	14,419	14,419	14,262	14,262
5	Residual	2,155	2,155	2,132	2,132
6	EU	30,938	30,938	30,602	30,602
6	PRC	7,855	7,855	7,769	7,769
6	Taiwan	2,565	2,565	2,537	2,537
6	South Korea	2,435	2,435	2,408	2,408
6	Residual	1,050	1,050	1,038	1,038
7	EU	68,848	68,848	68,099	68,099
7	Ukraine	10,746	10,746	10,629	10,629
7	Residual	13,824	13,824	13,673	13,673
12A	EU	28,551	28,551	28,241	28,241
12A	Residual	4,107	4,107	4,062	4,062
12B	EU	34,297	34,297	33,924	33,924
12B	Turkey	12,909	12,909	12,769	12,769
12B	Residual	7,336	7,336	7,256	7,256
13	EU	72,081	72,081	71,298	71,298
13	Turkey	34,148	34,148	33,777	33,777
13	Residual	23,250	23,250	22,997	22,997
16	EU	72,564	72,564	71,775	71,775
16	Residual	3,168	3,168	3,134	3,134
17	EU	146,355	146,355	144,764	144,764
17	Residual	36,038	36,038	35,646	35,646
19	EU	4,640	4,640	4,590	4,590
19	Residual	137	137	135	135
20	Turkey	15,213	15,213	15,048	15,048
20	EU	6,847	6,847	6,773	6,773
20	India	3,520	3,520	3,482	3,482
20	UAE	2,334	2,334	2,308	2,308
20	Residual	715	715	708	708
21	Turkey	36,113	36,113	35,721	35,721
21	EU	10,962	10,962	10,842	10,842
21	Residual	3,332	3,332	3,296	3,296
25A	Japan	8,006	8,006	7,918	7,918
25A	EU	6,126	6,126	6,059	6,059
25A	South Korea	1,224	1,224	1,210	1,210
25A	Residual	2,159	2,159	2,136	2,136
25B	EU	15,756	15,756	15,585	15,585
25B	South Korea	4,529	4,529	4,479	4,479
25B	Japan	1,984	1,984	1,963	1,963
25B	Residual	4,777	4,777	4,725	4,725
26	EU	22,073	22,073	21,833	21,833
26	UAE	14,833	14,833	14,672	14,672
26	Turkey	10,775	10,775	10,658	10,658
26	PRC	5,668	5,668	5,607	5,607
26	Residual	9,787	9,787	9,680	9,680

Table 3: Developing Country non-Exemptions by Product Category

Product Category	Developing country non-exemptions (July to December 2021 import share)
1	India (24.9%), Turkey (9.2%)
2	India (12%), Ukraine (11.7%), Vietnam (8.5%), Tunisia (3.6%)
4	Vietnam (26.7%), India (10.9%), Turkey (7.6%)
5	India (10.8%), Vietnam (5%)
6	PRC (44.8%)
7	Ukraine (16.6%)
12A	n/a
12B	Turkey (29.9%)
13	Turkey (20%), India (8.5%)
16	Ukraine (12.7%), Turkey (3.2%)
17	Turkey (10.9%), India (3.2%)
19	n/a
20	Turkey (65.5%), India (15.4%), UAE (4.1%)
21	Turkey (79.4%), UAE (5.7%)
25A	n/a
25B	n/a
26	Turkey (25%), UAE (13.3%), PRC (11.1%), India (5.8%)

Developing countries

Developing countries include:

• Afghanistan

• Albania

• Angola

• Antigua and Barbuda

• Argentina

• Armenia

• Bahrain

• Bangladesh

• Barbados

• Belize

• Benin

• Bolivia

• Botswana

• Brazil

• Brunei Darussalam

• Burkina Faso

• Burundi

• Cabo Verde

• Cambodia

• Cameroon

• Central African Republic

• Chad

• Chile

• Colombia

• Congo

• Costa Rica

• Côte d’Ivoire

• Cuba

• Democratic Republic of the Congo

• Djibouti

• Dominica

• Dominican Republic

• Ecuador

• Egypt

• El Salvador

• Eswatini

• Fiji

• Former Yugoslav Republic of Macedonia

• Gabon

• Gambia

• Georgia

• Ghana

• Grenada

• Guatemala

• Guinea

• Guinea-Bissau

• Guyana

• Haiti

• Honduras

• Hong Kong

• India

• Indonesia

• Jamaica

• Jordan

• Kazakhstan

• Kenya

• Kuwait

• Kyrgyz Republic

• Lao People’s Democratic Republic

• Lesotho

• Liberia

• Macao

• Madagascar

• Malawi

• Malaysia

• Maldives

• Mali

• Mauritania

• Mauritius

• Mexico

• Moldova

• Mongolia

• Montenegro

• Morocco

• Mozambique

• Myanmar

• Namibia

• Nepal

• Nicaragua

• Niger

• Nigeria

• Oman

• Pakistan

• Panama

• Papua New Guinea

• Paraguay

• Peru

• Philippines

• PRC

• Qatar

• Rwanda

• Saint Kitts and Nevis

• Saint Lucia

• Saint Vincent and the Grenadines

• Samoa

• Saudi Arabia

• Senegal

• Seychelles

• Sierra Leone

• Solomon Islands

• South Africa

• Sri Lanka

• Suriname

• Tajikistan

• Tanzania

• Thailand

• Togo

• Tonga

• Trinidad and Tobago

• Tunisia

• Turkey

• Uganda

• Ukraine

• United Arab Emirates

• Uruguay

• Vanuatu

• Venezuela

• Vietnam

• Yemen

• Zambia

• Zimbabwe