How the EU Investigates Circumvention of Anti-dumping Measures

Source: EFDA

What is circumvention?

Circumvention is the practice of evading anti-dumping or anti-subsidy measures on imports from a particular country or countries.

Circumvention may take a number of forms but for fasteners the most prevalent is trans-shipment via a third country so that the products imported to the EU appear as though originating from that third country.

In terms of carbon steel fasteners from P. R. China two practices are common:

● Fasteners are shipped to a third country, sometimes consigned and coded as other product. On arrival in that country they are transferred to an export container with fraudulent documentation indicating that they originated from that country, and re-exported to the EU.

● A factory legitimately manufacturing the product in the third country imports fasteners. These fasteners are then re-exported as having been manufactured by that factory.

Both of these practices contravene EU anti-dumping and anti-subsidy regulations.

How is a circumvention investigation initiated?

There are a number of ways:

● EU manufacturers can lodge a complaint with the European Commission.

● Any EU member state can request that the European Commission carries out an investigation.

● The European Commission can initiate an investigation on its own initiative, based on changes in the pattern of trade for the product or as a result of OLAF investigations of specific exporters in a third country.

What happens in a circumvention investigation?

The European Commission publishes a regulation in the EU Official Journal announcing the investigation and explaining the basis for its decision to initiate it.

The investigation applies to ALL exports of the product (as defined in the original anti-dumping regulation) from the country or countries under investigation.

EU national customs authorities are required to register (record) details of the imports of the products from the country under investigation from the date the investigation is initiated.

If the investigation determines that circumvention has occurred this information is used to apply retrospective anti-dumping duties on all imports from that country from the date the investigation started, except for those from exporters that succeed in obtaining an EU exemption from the measures.

Exporters from the country are invited to apply for an exemption. They normally only have 37 days to make this application. In doing so, they agree to open their businesses to a very detailed and thorough investigation by EU officials.

The investigation has nine months to decide whether circumvention has occurred and to determine whether individual exporters are entitled to be exempted from the measures.

If circumvention is confirmed by the investigation, a new regulation is issued applying the maximum anti-dumping duty defined by the original anti-dumping measure (for carbon steel fasteners from PRC this is 74.1%) to ALL imports from the country investigated except from exporters that are granted an exemption.

Retrospective anti-dumping duties are collected on all imports from the date the investigation was initiated except those from exporters that successfully obtained an exemption.

Important things to recognise

Each exporter has to prove its innocence to obtain an exemption.

Exemption investigations are individual to each company. There is no sampling or grouping.

The exporter has to submit to a detailed, rigorous and intrusive investigation by EU officials.

Failure to provide all information required by EU investigators, which includes detailed accounting and transaction information, will be deemed as non-cooperation and an exemption will NOT be issued.

It is not enough to be innocent of circumvention but the exporter has to prove beyond all doubt it is innocent.

In previous fastener-related circumvention investigations (e.g. on Malaysia) only a small number of exporters succeed in obtaining an exemption.

The authorities in the country under investigation have no influence over the EU decision.

What it means to importers

The launch of a circumvention investigation creates massive uncertainty for EU importers.

The Malaysian experience demonstrated that once a circumvention investigation is initiated there is a significant probability that anti-dumping duties will be applied to the country under investigation.

It also became clear the EU would use its powers to apply and require collection of retrospective duties at the maximum rate applied to P. R. China (e.g. 74.1%). Payment of these duties is required on demand by the national customs authorities.

Even if an exporter applies for exemption, there is no guarantee it will be granted. If there is any doubt or slightest indication of non-cooperation, the European Commission will not grant an exemption.

Importers, therefore, have no choice but to weigh up very carefully whether they can take the risk of continuing to import from a country subject to a circumvention investigation or whether to ‘play safe’ and move their purchases to other countries.

Background Notes

This briefing has been prepared to clarify the issues related to EU circumvention investigations. The information is to the best of EFDA’s knowledge accurate and reflects the current situation in relation to EU circumvention investigatory practises in general and the specific situation for fasteners. However, those requiring definitive information must refer to European Commission, Directorate-General Trade. Full contact information can be found at:
http://ec.europa.eu/trade/trade-policy-and-you/contacts/#_trade-defence

The briefing is primarily based on the experience of the EU circumvention investigation initiated by EU Regulation 966/2010, which in 2011 resulted in anti-dumping duties being applied to carbon steel fasteners imported from Malaysia with the exception of those originating from eight exporters which obtained a EU exemption (see EU Council Implementing Regulation 723/2011 for the detailed findings and determination.)

Definitions of circumvention and the legal grounds and processes for EU circumvention investigations are based on the EU Basic Anti-dumping Regulation 1225/2009 variously amended.

Anti-dumping duties are currently applied to imports of certain carbon steel fasteners originating from P. R. China to a maximum level of 74.1%. These duties were originally imposed by EU Regulation 91/2009 and are currently subject to EU Expiry Review R591. The Review is expected to publish its findings in April 2015 and will determine whether the anti-dumping measures are extended for a further five years from that date.

Contact:

European Fastener Distributor Association

Am Weidendamm 1 A, D-10117 Berlin

Phone: + 49 30 590099581 Fax: + 49 30 590099481

E-Mail: secretary@efda-fastenerdistributors.org

Internet: www.efda-fastenerdistributors.org