Are all tariffs equal? Not when it comes to trade remedies and that matters for businesses who are navigating the UK’s new independent trade policy. Getting caught out with a large duty payment at the border when trying to import bicycles from China or biodiesel from Argentina is not something that any business wants.
To avoid this, it’s important for businesses to understand the practical implications of the new UK trade remedies regime on their operations and on the wider competitive environment in which they trade.
Background to trade remedies
Trade remedies are measures, typically significant additional tariffs on specific products, that a national government can take to protect its domestic industry from ‘unfair’ global trade practices.
In brief, these are divided into anti-dumping measures (where an exporter deliberately sells its products into a market at an under-value), anti-subsidy or countervailing measures (where an exporter is unfairly subsidised by its home government), and safeguard measures (to protect the domestic industry from a surge in imports).
Moving from the EU to UK regime
While it was part of the EU, the UK followed the EU’s trade remedies position. But as of 1 January 2021, the UK has introduced its own trade remedies regime. Importantly, trade remedies measures can now also be applied on trade between the UK and EU.
At present, the UK’s trade remedies regime is being operated by the Trade Remedies Investigations Directorate (TRID) within the Department for International Trade, pending the establishment of the Trade Remedies Authority (TRA) by the Trade Bill. Businesses in the UK now need to engage with TRID (and TRA when operational) instead of the European Commission if they feel that they are facing unfair practices from foreign competitors.
Key features of the UK trade remedies regime
The UK trade remedies regime follows the overall framework set out by the World Trade Organization (WTO), and there are some key points of divergence from the EU’s regime – both in terms of rules and practical application. Businesses need to understand these differences and how the UK regime will operate.
UK domestic producers can now request a trade remedies investigation as long as the industry they operate in represents at least 1% of the UK’s domestic market and the application is supported by at least 25% of all UK production of the affected goods. The application must not be opposed by producers accounting for a greater share of production. Unlike the EU, which has to consider production across all EU Member States, the UK regime only concerns itself with UK producers. This could lead to very different outcomes when assessing whether to continue with measures that had applied under the EU regime.
The TRID is currently undertaking transition reviews for certain products to determine whether existing EU trade remedy measures should be maintained, adjusted or terminated for the UK. They are reviewing the measures in the UK context, with UK-specific data, to decide whether there would be injury to the relevant UK industry if the measures were removed. Current EU safeguard measures will be maintained if it is in the UK interest. The outcome of these reviews could result in significant consequences for both UK domestic producers and importers, and so it is important for affected businesses to engage with the review process.
Implications for businesses
The new UK trade regime has already introduced significant changes for businesses operating in or trading with the UK. Key actions that businesses can take now include identifying the current EU trade remedy measures under review to assess which are relevant to their operations, either directly or indirectly upstream or downstream in their supply chain, and engaging with TRID to support their assessments on whether to continue, amend or terminate measures. Businesses should look to estimate the impact of changes in trade remedy measures on their operations and cost base and secure their supply chains. Going forward, businesses impacted by dumped or subsidised imports, or sudden increases in imports, should review and prepare evidence to apply to the TRID for initiation of new investigations.
Businesses need to act now to understand what this will mean for their operations and cost base, identify mitigating actions, and plan how to effectively engage with UK and overseas governments.