I LEGAL FRAMEWORK

The European Union's (EU's) legislation on anti-dumping and anti-subsidy instruments consists of Regulation (EU) 2016/10362 (the basic Anti-Dumping Regulation) and Regulation (EU) 2016/1037 (the basic Anti-Subsidy Regulation).3 Both Regulations were adopted in 2016 to codify a number of amendments that were made to the previous basic regulations and did not contain any new substantive elements. The codified amendments were primarily aimed at adapting the Union's trade defence legislation to the entry-into-force of the Treaty of Lisbon and its new rules on delegated and implementing acts under Articles 290 and 291 TFEU (the Comitology rules).4 A significant substantive overhaul of the basic Regulations has taken place with the adoption of Regulations (EU) 2017/23215 and 2018/825,6 both the result of inter-institutional negotiations on the future of trade defence instruments in the field of anti-dumping and anti-subsidy. The changes resulting therefrom are manifold and concern both the anti-dumping and anti-subsidy instruments, and while already in part addressed in last year's edition, are discussed in detail in Section III below.

The legal framework surrounding safeguard measures is split into two regulations: Regulation (EU) 2015/4787 covers the rules for imports from non-WTO member countries, whereas Regulation (EC) 260/20098 covers the rules for imports from WTO members. The two safeguard regulations are equally unaffected by the changes brought about by Regulations (EU) 2017/2321 and 2018/825.

II OVERVIEW OF TRADE DEFENCE INSTRUMENTS

Since the previous edition of this book, the EU has slightly intensified its trade defence activity. While last year's edition reported 94 provisional and definitive anti-dumping and 12 provisional and definitive countervailing measures in force, this year's statistics report 97 provisional and definitive anti-dumping measures and 13 provisional and definitive anti-subsidy measures in force (excluding measures extended as a result of circumvention reviews).9 This slight increase of new measures falls against the backdrop of a 75 per cent increase of review measures initiated.10

The main country affected remained China, which accounts for approximately 60 per cent of the total of measures imposed as of 31 May 2018.11 In numbers, it is subject to 60 definitive measures, with seven anti-dumping and two countervailing duty investigations currently pending conclusion. Following suit are Russia (currently subject to nine measures) and India (currently subject to five measures) in second and third place.12

A couple of noteworthy investigations initiated between 1 August 2017 and 31 May 2018 deserve mention. First, the initiations into dumping and subsidy practices of electric bicycles and retreated tyres from China.13 These technically complex cases affect a wide array of economic interests, and so perfectly showcase the variety of products and interests that trade defence measures can target. Second, biodiesel makes a return, as an anti-subsidy measure on imports of biodiesel from Argentina was initiated on 31 January 2018.14 Third are the various measures that the EU continues to seek to address the overcapacity in the global steel market, and the resulting redirection of this excess steel production, by Chinese exporting producers in particular, to the EU market. Thus, the past year saw the conclusion of the anti-dumping investigation into hot-rolled flat products of iron, non-alloy or other alloy steel from Ukraine, Iran, Brazil and Serbia,15 an anti-subsidy investigation into the same product from China16 and the initiation (and termination) of an anti-dumping investigation into ferro-silicon from Egypt and Ukraine.17 Of particular note is also the initiation of an anti-dumping investigation into imports of hot-rolled sheet steel piles from China, which is the first 'Article 5 investigation'18 since the entry-into-force of the revised rules for normal value calculations in face of significant, state-induced, market distortions in third countries on 20 December 2017.19 The EU also concluded an anti-dumping investigation into cast iron articles and corrosion resistant steels from China through the imposition of definitive anti-dumping duties.20 On the review side, the EU initiated four expiry reviews into steel and aluminium products from China, Russia and Ukraine,21 and concluded the expiry reviews of the anti-dumping duties on steel robes and cables from China and the countervailing duties on stainless steel bars and rods from India by extending the measures.22

Noteworthy points are to be reported from in particular the anti-dumping and anti-subsidy investigations into hot-rolled flat steel products. In the former, at the provisional stage, the Commission had noted that 'it is not in a position to make an affirmative conclusion that it would be in the Union interest to impose provisional measures.'23 After final disclosure, it was then proposed that ad valorem duties ranging from 5.3 to 33 per cent, capped by a minimum import price (MIP) of €472.27 per tonne net product weight, would best serve the Union interest in light of the various (and competing) interests at stake.24 The EU Member States, however, rejected this proposal during the vote in the Trade Defence Instruments Committee by way of a negative opinion.25 This was the first negative opinion ever received by Member States since the entry-into-force of the Comitology rules after the Treaty of Lisbon. Pursuant to the procedural rules in force for trade defence instruments, a second proposal would have to be delivered to the Appeal Committee, either in the form of the same draft, or in the form of an amended version.26 At Appeal Committee stage, the Chair of Committee concluded that an amendment regarding the form of the measure, changing it from ad valorem duties capped by a MIP to duties to be expressed as a fixed amount per tonne, commanded the broadest possible support among EU Member States.27 Still, the Appeal Committee delivered a 'no opinion' vote.28 On that basis, and in line with the rules applicable to the Appeal Committee voting procedure, the Commission decided, on balance and having weighed up the various interests at stake, that the Union interest would still demand the putting into place of definitive duties on the product concerned.

However, in the case of the parallel anti-subsidy investigation into the same product, but originating in China, the EU treated loans as grants for the purposes of Article 3(1)(a)(i) of the basic anti-subsidy Regulation.29 The Commission deemed this necessary since access to capital for corporate actors in China was deemed to be subject to various distortions, including a bias for lending to SOEs, large well-connected private firms and firms active in key industrial sectors.30 Indeed, during its investigation, it referenced a study by the International Monetary Fund, which showed significant divergence between local Chinese rating grades and international rating grades (giving the example that over 90 per cent of Chinese bonds were rated AA to AAA by local rating agencies, whereas less than 2 per cent of US company bonds would command such ratings).31 On that basis, the Commission deemed creditworthiness the Commission did not consider the creditworthiness assessments of the exporting producers concerned to be correctly assessed, and, instead, assigned those exporting producers a BB rating, the highest 'non-investment grade' rating.32 The premium expected on bonds issued by exporting producers with this rating was then applied to the standard lending rate of the People's Bank of China in order to determine the market rate. For this, the Commission calculated the relative spread between the indexes of US 'A-rated' corporate bonds to US 'BB-rated' corporate bonds, adding the resulting relative spread to the benchmark interest rates published by the People's Bank of China for that day.33 This was done individually for each loan provided to the exporting producer concerned. Inter alia, on the basis of those findings, countervailing duties ranging between 4.6 per cent to 35.9 per cent were then imposed on imports of the product concerned.34 This is the first time that a 'relative spread methodology' features in an EU anti-subsidy investigation. In fact, the authors were not able to retrieve an example of a non-EU anti-subsidy investigation employing the same type of methodology. Given its innovative and country-neutral nature, this methodology could, accordingly, serve as an example for future anti-subsidy investigations where local company bond ratings are deemed inflated.

In another significant development, also related to the global oversupply of steel, on 26 March 2018, the EU initiated ex officio a safeguard investigation into certain steel products.35 The Commission considered that the information available, including the surveillance measures on steel products in place,36 had revealed that imports from certain steel products had recently increased sharply, showing that there was sufficient evidence to initiate an investigation into possible safeguard measures.37 On 18 July 2018, the Commission then imposed provisional safeguard measures, which it noted could remain in force for a maximum period of 200 days. These measures concern 23 steel product categories and will take the form of a Tariff Rate Quota (TRQ). For each of the 23 categories, tariffs of 25 per cent will only be imposed once imports exceed the average of imports over the past three years, but remains unallocated by individual exporting country (thus, a 'global' TRQ). The measures were imposed against all countries, with the exception of some developing countries with limited exports to the EU, and the European Economic Area (EEA) countries (Norway, Iceland and Liechtenstein), which, according to the Commission, share close economic links between with EU.38 The Commission aims to conclude the full investigation within nine months of the date of initiation. 39

A further development in the trade defence area that captured the headlines in Europe in the past year was the EU's response to the US's imposition of Section 232 tariffs on all imports of aluminium and steel into the US at rates of 25 per cent and 10 per cent respectively.40 In response thereto, the Commission outlined a three-pronged response earlier this year: first, the launch on 1 June 2018 of legal proceedings against the United States in the WTO.41 Second, on 18 May 2018, the EU notified the WTO with regard to the suspension of concessions under the GATT 1994 so as to allow for an application of additional customs duties on the importation of certain products originating in the US.42 Products that may be subject to additional duties from 20 June 2018 include sweetcorn, cranberries, tobacco and a list of steel products such as bars and rods of stainless steel, angles, shapes and sections of stainless steel, flat-rolled products of alloy steel other than stainless.43 The steel safeguard investigation mentioned above constitute the third part of the EU's response and aim to serve to protect the EU market from the disruptions caused by the diversion of steel from the US market.

III SIGNIFICANT LEGAL AND PRACTICAL DEVELOPMENTS

i Legislative changes to the regime

In the past year, the legal framework for the EU's use of trade defence instruments underwent a significant overhaul as a result of the adoption of Regulation (EU) 2017/2321 and Regulation (EU) 2018/825, which introduced a number of important amendments to both the Basic Anti-Dumping Regulation and the Basic Anti-Subsidy Regulation. We highlight below the key features of both Regulations, which largely reflect the original Commission's proposals that were discussed in detail in the previous edition of this book, but which also include a number of new provisions that were added during the EU's legislative adoption process.

Regulation 2017/2321

First, the EU formally adopted Regulation (EU) 2017/2321 containing certain targeted amendments to the basic Anti-Dumping Regulation and the basic Anti-Subsidy Regulation, which was published in the Official Journal of the European Union on 19 December 2017, and which entered into force on the day following publication.

As a general matter, the key change to the EU's legal framework for trade defence instruments that resulted from this Regulation was the introduction of new rules for calculating the dumping margin for imports from WTO members in cases where domestic prices and costs are significantly distorted as a result of state intervention. In particular, the Regulation abolished the previous distinction between market economies (MEs) and non-market economies (NMEs) for those countries, and provides instead that where 'significant distortions' are deemed to exist, the Commission must construct the normal value 'exclusively on the basis of costs of production and sale reflecting undistorted prices or benchmarks.' The Regulation hereby further specifies that the Commission may in those cases use (i) corresponding costs of production and sale in an appropriate representative country with a similar level of economic development; and (ii) undistorted international prices, costs, or benchmarks. It must, however, use domestic costs 'to the extent that they are positively established not to be distorted'.

In this regard, another notable feature of Regulation (EU) 2017/2321 is that it requires an assessment of the existence of 'significant distortions,' which are defined as 'distortions which occur when reported prices or costs, including the costs of raw materials and energy, are not the result of free market forces because they are affected by substantial government intervention' and for which a non-exhaustive list of criteria that must be considered is provided. The Regulation hereby adds that the Commission will publish reports that describe the market circumstances in countries or sectors for which it has well-founded indications of significant distortions, which the EU industry may rely on when filing a complaint or a request for a review and which will also be placed on the file of any investigation into those countries or sectors. The Commission has also emphasised, in response to concerns that Members of the European Parliament (MEPs) raised during the legislative adoption process, that it will do the work of establishing that significant distortions exist and that this requirement will not impose any additional burden on the EU industry.44

In addition, a further change to the basic Anti-Dumping Regulation was a new provision that stipulates that, where the Commission decides to apply the new rules and can choose between a number of appropriate representative third countries, preference will be given to countries with an adequate level of social and environmental protection. This provision was inserted during the EU's legislative adoption process and is noteworthy because it allowed, for the first time, for social and environmental standards to play a role in the context of EU trade defence law.45

Finally, Regulation (EU) 2017/2321 fully incorporated both the transitional arrangements and the amendment to the Basic Anti-Subsidy Regulation that the Commission had proposed. As discussed in the previous edition of this book, the former entail that the new rules will only apply to investigations initiated on or after the entry into force of the Regulation, and that the methodology used in the previous determination will continue to apply for existing measures until an expiry review is initiated. As for the latter, the new rules provide that – in situations where subsidies are only identified in the course of an investigation – the Commission will offer consultations to the country of origin or export concerned, forward that country a summary of the main elements of those subsidies, adjust the notice of initiation of the investigation and invite interested parties to comment.

Regulation 2018/825

On 5 December 2017, the Council and the European Parliament reached an agreement on the Commission's proposal. Following the formal approval in the Council and the European Parliament's plenary vote, the modernisation legislation entered into force on the 8 June 2018. The overhaul covers a broad range of aspects relating to the way the Commission carries out trade defence investigations. The changes deliver solutions to problems raised by EU businesses. Although already elaborately set out in the previous edition of this book, it is worth reiterating the most important changes to the EU's modernised anti-dumping and anti-subsidy legislation.

First, the Regulation provides a new injury margin calculation method, which allows the injury margin to be calculated on the basis of a target price. The target price must reflect the profitability needed to recover full costs and investments, research as well as development and innovation. Moreover, the injury margin includes future expenses related to social and environmental standards, for example under the EU's Emissions Trading System,46 if the Union industry presents sufficient evidence to this effect. Additionally, the target price has to include a minimum profit of 6 per cent.

Second, the investigation period is shortened by requiring the Commission to impose provisional measures within seven to eight months of the initiation of the investigation, instead of the former term of nine months.

Third, the Commission will now be issuing an 'early warning' on the imposition of provisional anti-dumping and anti-subsidy measures. This will include a grace period of three weeks during which provisional duties will not be applied, which should allow all operators to adapt to the new situation. After two years, the Commission will review the three weeks early warning system with the option to go up to four weeks or down to two weeks of such pre-disclosure. The non-imposition of provisional measures will also be signalled ahead.

Fourth, the Regulation introduces a help desk for small and medium-sized enterprises, which should facilitate access to trade defence instruments. The help desk is intended to raise awareness and provide information and explanations on trade defence instruments.

Fifth, the Commission is allowed to modulate the application of the lesser duty rule in anti-dumping investigations to take into account the existence of serious distortions regarding raw materials with the imposition of duties reflecting the full amount of dumping in such cases.

Finally, social and environmental standards will be taken into account in the investigations. The EU will normally not accept price undertakings from third countries with an insufficient implementation record of key International Labour Organisation (ILO) conventions and multilateral environmental agreements. The Commission also intends to review the measures in place in case of changed circumstances concerning social and environmental standards.

IV TRADE DISPUTES BEFORE THE EUROPEAN COURTS

As has been the case in previous years, the EU continued to face regular court challenges concerning its trade policies and trade defence practice. We therefore discuss some of the most significant court developments below.

i Rights of defence arising from non-disclosure of information

Under EU law, in all proceedings initiated against a person, that are likely to result in a measure adversely affecting that person, the rights of the defence must be respected. This fundamental principle must be guaranteed even in the absence of any rules governing the proceedings in question.47

The forceful enforcement of that fundamental principle is also reflected in the general trend viewed in last year's trade defence case law. All too often, the decisive factor for annulment of a regulation imposing anti-dumping duties was not substantive deficiencies in the Commission's assessments. That should be no surprise given the well-established, vast discretion that the Commission holds in the sphere of the Common Commercial Policy.48 Rather, the European judiciary faulted the Commission for procedural deficiencies that occurred during the course of the investigative procedure. The General Court's judgments in Cases T-460/14 AETMD v. Council and T-442/12 Changmao Biochemical Engineering v. Council are perfect examples of this trend. In the latter, the applicant, a Chinese exporting producer of tartaric acid, challenged the increase of its definitive anti-dumping duties after an interim review. It argued that the construction of the normal value for its exports was affected by a violation of its rights of defence as the Commission did not provide any information on the origin of the prices used to calculate the normal value. The Commission, in turn, submitted that it was not able to disclose that information as it concerned the pricing of a competitor, and was hence, by its nature, confidential. The General Court disagreed with the Commission. It annulled the contested regulation insofar as it concerned Changmao on the basis that it could not totally be ruled out that the outcome would have been different had the applicant been disclosed the origin of the normal value information during the investigation, and not only at the hearing. As such, it held, the obligation to respect confidential information cannot deprive an interested party's rights of defence of their substance.49 A similar non-disclosure issue was at hand in the former case, AETMD v. Council. That case concerned an interim review limited to dumping requested by a Thai exporter of sweetcorn. The interim review led to a reduction of the anti-dumping duty. The Union industry challenged the interim review on the basis that the lasting change of circumstances was not genuine, and that the relevant information on the file to that effect was confidential. The General Court accepted the Union industry's argument and annulled the contested regulation, holding, in essence, that there was an infringement of the procedural rights of the applicant arising from the non-disclosure of the confidential information at hand. In establishing this, it had particular reference to the hearing officer's report and additional correspondence by the hearing officer with the applicant. To the General Court, the incomplete nature of the final disclosure would render a contested regulation unlawful if, owing to that, the interested parties were unable to properly defend their interests in the administrative procedure.50 The case has, in the meantime, been appealed to the Court of Justice. It has been registered as Case C-144/18 P River Kwai International Food Industry v. AETMD.

ii Non-severability of undertakings from anti-dumping duties

A second interesting development arose from appeals to the General Court's orders of inadmissibility in Cases T-141/14 and T-142/14 SolarWorld and Others v. Council. In those cases, the Council, the Commission, and a Chinese chamber of commerce had argued that the definitive regulations would be based on the economic effect of the combination of the measures adopted, that is ad valorem duties plus the acceptance of an undertaking. If the anti-dumping duties were extended to all imports as a result of the annulment of Article 3 of the respective regulations, they had argued, the measure would be appreciably different from the measure adopted, although would be by no means certain that ad valorem duties in respect of all imports it would have been adopted. The General Court had agreed with those arguments and had held that annulment of Article 3 of Regulations 1238/201351 and 1239/201352 alone, which exempted those exporting producers subject to an undertaking from the ad valorem duties imposed by those regulations, would affect the substance of the regulations as wholes. Consequently, according to the General Court, those provisions would not be severable from the remainder of those regulations, notably the respective Article 1 thereof, which imposed a definitive anti-dumping or countervailing duty on imports of solar panels from China.53 The General Court's reasoning relied, in this regard, on other case-law establishing that the partial annulment of a Union act is possible only if the elements whose annulment is sought may be severed from the remainder of the act.54

On appeal in both C-204/16 P and C-205/16 P SolarWorld v. Council, the Court of Justice upheld the General Court's reasoning. It noted that, by imposing an anti-dumping duty alongside an undertaking, the Union legislature had put in place trade defence measures constituting a set or a 'package'. That resulted in the existence of two separate and complementary measures that sought to achieve a common goal. As such, since the Union legislature intended the regulations at issue to be based on the possibility of applying two separate measures alternatively. And, since the annulment of Article 3 would remove such a possibility and eliminate the alternative that the legislature wished to offer when adopting the regulations at issue, the severability requested by the applicants could not be permitted without changing the measures completely.55

These decisions will likely influence the result of the pending appeals in Cases C-236/17 P and C-237/17 P Canadian Solar Emea and Others v. Council SolarWorld, which last year's chapter highlighted, and which remain pending before the Court of Justice.

iii Circumvention

This third section will consider the two recent judgments in T-462/15 Asia Leader International (Cambodia) v. Commission and T-435/15 Kolachi Raj Industrial v. Commission, and their impact on the interpretation of Article 13 of the basic Regulation.

Readers of last year's chapter will recall that the judgment in Joined Cases C-247/15 P, C-253/15 P and C-259/15 P Maxcom v. Chin Haur Indonesia,56 released on 26 January 2017, for the first time characterised the Union's anti-circumvention system in trade defence cases. According to the Court of Justice in those cases, under an Article 13 anti-circumvention investigation, the task of the EU institutions is only to carry out an assessment of circumvention on the basis of prima facie evidence for the third country as a whole, and subsequently extend the duties concerned. The task for the exporting producers, newly affected by those extended duties, would then be to show that, for their particular situation and on the basis of the evidence provided by them, an exemption from those duties pursuant to Article 13(4) of the basic Regulation is justified.57 Needless to say, those exemptions from the country-wide duty, which take the form of individual decisions, only hold true so long as the factual circumstances on which they are built remain valid.

The judgment in T-462/15 Asia Leader International (Cambodia) v. Commission for the first time applies those principles. Thus, in that case, the General Court builds on the Maxcom v. Chin Haur case law to hold that one sort of circumvention practice established for any of the exporting producers in the country concerned is sufficient to establish circumvention for the country as a whole, even where other exporting producers are either not involved in that type of circumvention practice or in a different type of circumvention practice.58 So, it would again fall to the exporting producer concerned to establish that it is not involved in any type of circumvention practice, be it the type of circumvention practice on the basis of which the duties were extended to the country concerned or not. However, as the applicant concerned was not able to prove that its particular situation justified the grant of an exemption, the General Court held that the Commission was entitled to refuse that exemption request.59

The judgment in T-435/15 Kolachi Raj Industrial v. Commission60 concerned a different part of Article 13 of the basic Regulation. In there, the applicant challenged the evidence available to the Commission that it was assembling bicycles from parts originating in China but coming from third countries (such as Sri Lanka), because the Commission had not been able to establish the Chinese origin of the parts concerned. Instead, the Commission had assessed whether the parts concerned originated in Sri Lanka, which, on the basis of the evidence provided, it found not to be true. It then, 'by analogy', applied Article 13(2)(b) of the basic Regulation to establish that circumvention of the duties on bicycles and their parts from China was taking place. The General Court, however, found that this 'by analogy' application of Article 13(2)(b) to determine the origin of a certain product was not possible, because the investigation at hand was not targeted at assembly operations in Sri Lanka, but, instead, at assembly operations in Pakistan.61 In addition, that provision of the basic Regulation, in itself, could not be used as a rule of origin, as the Commission had not, at the time of investigation, made use of its powers under Article 14(3) of the basic Regulation to establish special provisions for the determination of origin, and thus had to make use of those contained in the Union's customs legislation.62 On that basis, it annulled the regulation concerned.

iv WTO developments

The previous years' chapters discussed in detail the findings of the Panel and the Appellate Body in EU – Biodiesel (Argentina) (DS473). Early 2018 saw a continuation of this saga with the circulation of the Panel report in EU – Biodiesel (Indonesia) (DS480), the parallel dispute that arose from the imposition of anti-dumping duties on imports of biodiesel from Argentina and Indonesia.63 Indonesia had challenged the EU's cost adjustment methodology under Article 2(5) of the basic Regulation on an 'as applied' basis when the Commission substituted the recorded input costs of the exporting producers with cost data derived from 'international markets'. In fact, the dispute brought by Indonesia was suspended pending appeal of the Argentina dispute to the Appellate Body, and resumed thereafter. It comes therefore as no surprise that the Panel found along similar lines in DS480 as the Appellate Body did in DS473: most importantly, it found that the EU acted inconsistently with the WTO Anti-Dumping Agreement, and in particular with Article 2.2.1.1 thereof, by failing to calculate the cost of production on the basis of the producers' records, and with Article 2.2 of the WTO Ant-Dumping Agreement and Article VI:1(b)(ii) of the GATT by using a cost for the main input that was not the cost prevailing in the country of origin.64 A distinctly novel feature of DS480 compared with DS473, however, was the inconsistency of the profit determination; notably, the Panel held that the EU acted inconsistently with Articles 2.2.2(iii) and 2.2 of the WTO Anti-Dumping Agreement by failing to determine the profit normally realised by exporters or producers on sales of products of the same general category in the domestic market of the country of origin (cap for profits). Other noteworthy aspects of DS480 were the violations of Articles 2.3, 3.1 and 3.2. Remarkably, the EU did not appeal the DS480 Panel report, which led to its adoption on 28 February 2018, with the end of the reasonable period of time to implement the recommendations and rulings concerned set for 28 October 2018.65

A second major development concerned the release of the long-awaited Appellate Body Report in EU – Large Civil Aircraft (21.5) (DS316), finally bringing to an end a story leading back to the year 2004. This dispute concerns the issue of whether certain EU Member States (France, Germany, Spain and the United Kingdom) granted prohibited subsidies to its aircraft manufacturer, Airbus, for the development and production of its series of large civil aircraft programmes. The original Appellate Body finding, in fact, dates back to 2011, but the United States considered that the EU, France, Germany, Spain and the United Kingdom had failed to take sufficient steps to withdraw the subsidies to Airbus, or remove the economic impact of those subsidies on Boeing. That is, where, pursuant to Article 21.5 of the WTO's Dispute Settlement Understanding, the United States brought compliance proceedings against the EU that challenged the efforts made by the latter. In its Article 21.5 Report, the Appellate Body found, most notably, that the majority of support measures by the EU Member States to Airbus challenged by the United States in the 2004 dispute had expired in 2011. As such, under WTO rules, the EU would no longer be required to take any further action regarding state support that no longer existed, such as the alleged support for the A300, A310, A320 and A330/A340 aircraft models.66 On prohibited import substitution subsidies, the Appellate Body agreed with the Panel that a subsidy results in the use of domestic over imported goods cannot by itself demonstrate that that subsidy is contingent on the use of domestic over imported goods, whether in law or in fact.67 Finally, on adverse effects, the Appellate Body rejected almost all of the United States claims on economic damage to Boeing, although upholding, for different reasons, the Panel's conclusion that, for two types of aircraft markets, the EU had failed to comply with the Dispute Settlement Body recommendations and rulings.68 It should also be recalled that the parallel dispute against US government measures in support of Boeing, now also at the stage of compliance proceedings, is still outstanding but should be released soon.

The final development derives from the Appellate Body report in EU – PET (Pakistan) (DS486). At issue here were certain countervailing measures by the EU against imports of PET from Pakistan. The Panel had previously found that the EU acted inconsistently with several provisions of the Agreement on Subsidies and Countervailing Measures (SCM Agreement), inter alia that the EU acted inconsistent with Article 1.1(a)(1)(ii) and footnote 1 of the SCM Agreement by failing to provide a reasoned and adequate explanation for why it found that the entire amount of remitted duties under the Pakistani Manufacturing Bond Scheme, which it found to be the financial contribution, was in excess of those that have accrued. On appeal, the Appellate Body agreed: it ruled that the EU had not demonstrated that the Panel erred in its interpretation of law.69 As to the EU's causation analysis, which had previously been blessed by the Panel, the Appellate Body observed that, while the Panel had correctly found that a 'causal link' existed between the subsidised imports and the injury before it turned to its non-attribution analysis, it would be 'inappropriate for an investigating authority to examine whether other known factors 'break' the causal link in the sense that the injurious effects of each non-attribution factor are so significant that they eliminate the link between the subsidised imports and the injury'.70 This would be because 'the correct causation standard requires instead an examination of whether, in light of the significance of the injurious effects of other known factors, the subsidised imports can be considered a 'genuine and substantial' cause of the injury'.71 With regard to the duty at issue, however, the Appellate Body did not find any fault in the Commission's assessment of the 'genuine and substantial' cause of the injury and the other known factors that it found to have contributed to the injury.72

V OUTLOOK

Investigation work will continue intensively into the second half of 2018, and likely continue at the same level thereafter. Of particular interest to observers will be the developments arising from the safeguard investigation, as well as the anti-dumping and anti-subsidy investigations into tyres and electric bikes. With the first 'Article 5 investigation' having been initiated, the coming year also promises to bring novelties on the side of the Commission's work as well as that of interested parties arising from both the modernisation exercise and the new rules on distortions.

On the legislative front, not much activity should be expected: the past year stood out for its unusual amount of legislative activity, which, in the field of trade defence, is usually quiet at EU level. The coming year will, therefore, likely feature a mere application of those new rules into practice.

With regard to the disputes, however, the wheel will keep on turning as usual: the first half of 2018 has been unusually quiet on the number of judgments released by the General Court and the Court of Justice. That could imply that a wave of judgments may be released during the second half of the year. It is also expected that more applications for annulment and preliminary references reach the European Courts during the second half of the year as a number of investigations reaches their legislative deadline to conclude on definitive measures or termination. The WTO disputes on the US safeguard measures and EU – Price Comparison Methodologies (DS516)73 should also bring about some activity in the trade disputes arena. All in all, the coming year promises to be one of the most active in recent EU trade defence history.


Footnotes

1 Nicolaj Kuplewatzky is a member of the Legal Service of the European Commission and Kiliane Huyghebaert is an associate at VVGB Advocaten. The authors are grateful for the valuable assistance of Maarten Vanderhaeghe.

2 Regulation (EU) 2016/1036 of the European Parliament and of the Council of 8 June 2016 on protection against dumped imports from countries not members of the European Union, OJ L 176, 30.6.2016, p. 21.

3 Regulation (EU) 2016/1037 of the European Parliament and of the Council of 8 June 2016 on protection against subsidised imports from countries not members of the European Union, OJ L 176, 30.6.2016, p. 55.

4 See Regulation (EU) No. 37/2014 of the European Parliament and of the Council of 15 January 2014 of 15 January 2014 amending certain regulations relating to the common commercial policy as regards the procedures for the adoption of certain measures, OJ L 18, 21.1.2014, p. 1. See also Regulation (EU) No. 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission's exercise of implementing powers, OJ L 55, 28.2.2011, p. 13.

5 Regulation (EU) 2017/2321 of the European Parliament and of the Council of 12 December 2017 amending Regulation (EU) 2016/1036 on protection against dumped imports from countries not members of the European Union and Regulation (EU) 2016/1037 on protection against subsidised imports from countries not members of the European Union, as published in OJ L 338/1 (2017).

6 Regulation (EU) 2018/825 of the European Parliament and of the Council of 30 May 2018 amending Regulation (EU) 2016/1036 on protection against dumped imports from countries not members of the European Union and Regulation (EU) 2016/1037 on protection against subsidised imports from countries not members of the European Union, as published in OJ L 143/1 (2018).

7 Regulation (EU) 2015/478 of the European Parliament and of the Council of 11 March 2015 on common rules for imports, OJ L 83, 27.3.2015, p. 16.

8 Regulation (EU) 2015/755 of the European Parliament and of the Council of 29 April 2015 on common rules for imports from certain third countries, OJ L 123, 19.5.2015, p. 33.

9 36th Annual Report from the Commission to the Council and the European Parliament on the EU's Anti-Dumping, Anti-Subsidy and Safeguard activities (2017), p. 2.

10 Ibid., p. 9.

11 See the WTO's Integrated Trade Intelligence Portal (I-TIP Goods) and limit the direct query search accordingly: http://i-tip.wto.org/goods/Forms/TableView.aspx (last accessed 22 July 2018).

12 Commission Staff Working Document accompanying the 36th Annual Report from the Commission to the Council and the European Parliament on the EU's Anti-Dumping, Anti-Subsidy and Safeguard activities (2017), p. 14.

13 Notice of initiation of an anti-subsidy proceeding concerning imports of electric bicycles originating in the People's Republic of China, OJ C 440, 21 December 2017, p. 22 and Notice of initiation of an anti-dumping proceeding concerning imports of electric bicycles originating in the People's Republic of China, OJ C 353, 20 October 2017, p. 19, respectively.

14 Notice of initiation of an anti-subsidy proceeding concerning imports of biodiesel originating in Argentina, OJ C 34, 31 January 2018, p. 47.

15 Commission Implementing Regulation (EU) 2017/1795 of 5 October 2017 imposing a definitive anti-dumping duty on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in Brazil, Iran, Russia and Ukraine and terminating the investigation on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in Serbia, OJ L 258, 6 October 2017, p. 24.

16 Commission Implementing Regulation (EU) 2017/969 of 8 June 2017 imposing definitive countervailing duties on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in the People's Republic of China and amending Commission Implementing Regulation (EU) 2017/649 imposing a definitive anti-dumping duty on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in the People's Republic of China, OJ L 146, 9 June 2017, p. 17.

17 Notice of initiation of an anti-dumping proceeding concerning imports of ferro-silicon originating in Egypt and Ukraine, OJ C 251, 2 August 2017, p. 5, and Commission Implementing Decision (EU) 2018/824 of 4 June 2018 terminating the anti-dumping proceeding concerning imports of ferro-silicon originating in Egypt and Ukraine, OJ L 139, 5 June 2018, p. 25.

18 After Article 5 of the basic anti-dumping Regulation, currently Regulation (EU) 2016/1036 (OJ L 176, 30 June 2016, p. 21), which concerns itself with 'new' investigations, as opposed to reviews, re-openings, or circumvention investigations.

19 Regulation (EU) 2017/2321 of the European Parliament and of the Council of 12 December 2017 amending Regulation (EU) 2016/1036 on protection against dumped imports from countries not members of the European Union and Regulation (EU) 2016/1037 on protection against subsidised imports from countries not members of the European Union, OJ L 338, 19 December 2017, p. 1.

20 Commission Implementing Regulation (EU) 2018/140 of 29 January 2018 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of certain cast iron articles originating in the People's Republic of China and terminating the investigation on imports of certain cast iron articles originating in India, OJ L 25, 30 January 2018, p. 6.

21 Commission Staff Working Document accompanying the 36th Annual Report from the Commission to the Council and the European Parliament on the EU's Anti-Dumping, Anti-Subsidy and Safeguard activities (2017), pp. 27–28.

22 Ibid., p. 29.

23 Information document of 4 April 2017, AD635, Anti-dumping proceeding concerning the imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in Brazil, Iran, Russia Serbia and Ukraine, recital 280.

24 Commission Implementing Regulation (EU) 2017/1795 of 5 October 2017 imposing a definitive anti-dumping duty on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in Brazil, Iran, Russia and Ukraine and terminating the investigation on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in Serbia, OJ L 258, 6 October 2017, p. 24 at recital 553.

25 Ibid., p. 24 at recital 626.

26 Regulation (EU) No. 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission's exercise of implementing powers, OJ L 55, 28 February 2011, p. 13, Article 5(3).

27 Commission Implementing Regulation (EU) 2017/1795 of 5 October 2017 imposing a definitive anti-dumping duty on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in Brazil, Iran, Russia and Ukraine and terminating the investigation on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in Serbia, OJ L 258, 6 October 2017, p. 24 at recital 628.

28 Ibid., recital 671.

29 Regulation (EU) 2016/1037 of the European parliament and of the Council of 8 June 2016 on protection against subsidised imports from countries not members of the European Union, OJ L 176, 30 June 2016, p. 55.

30 Commission Staff Working Document accompanying the 36th Annual Report from the Commission to the Council and the European Parliament on the EU's Anti-Dumping, Anti-Subsidy and Safeguard activities (2017), p. 53.

31 Commission Implementing Regulation (EU) 2017/969 of 8 June 2017 imposing definitive countervailing duties on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in the People's Republic of China and amending Commission Implementing Regulation (EU) 2017/649 imposing a definitive anti-dumping duty on imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in the People's Republic of China, recital 159 et seq.

32 Ibid., recital 166.

33 Ibid., recitals 169 et seq.

34 Ibid., recital 641.

35 Notice of initiation of a safeguard investigation concerning imports of steel products, OJ C 111, 26 March 2018, p. 29.

36 See Commission Implementing Regulation (EU) 2016/670 of 28 April 2016 introducing prior Union surveillance of imports of certain iron and steel products originating in certain third countries, OJ L 115, 29 April 2016, p. 37.

37 Ibid., p. 29.

38 See Press Release of 18 July 2018, 'Trade: Comission imposes provisional safeguard measures on imports of steel products', available at http://europa.eu/rapid/press-release_IP-18-4563_en.htm (last accessed 22 July 2018). See also Commission Implementing Regulation (EU) 2018/1013 of 17 July 2018 imposing provisional safeguard measures with regard to imports of certain steel products, OJ L 181, 18 July 2018, p. 39.

39 Ibid., p. 32.

40 See the accompanying U.S. chapter in this edition for more information on the Section 232 tariffs.

41 See WTO, Request for Consultations by the European Union of 6 June 2018, 'United States – Certain Measures on Steel and Aluminium Products', WT/DS/548/1.

42 WTO Council for Trade in Goods, Committee on Safeguards, 'Immediate Notification under Article 12.5 of the Agreement on Safeguards to the Council for Trade in Goods of Proposed Suspension of Concessions and other Obligations referred to in Paragraph 2 of Article 8 of the Agreement on Safeguards', G/L1237, 18 May 2018, available at: http://trade.ec.europa.eu/doclib/docs/2018/may/tradoc_156909.pdf (last accessed 22 July 2019).

43 Ibid.

44 See Press Release of 4 October 2017: 'The EU is changing its anti-dumping and anti-subsidy legislation to address state induced market distortions', available at http://europa.eu/rapid/press-release_MEMO-17-3703_en.htm (last accessed 22 July 2018).

45 Ibid.

46 See generally https://ec.europa.eu/clima/policies/ets_en for more information thereon (last accessed 22 July 2018).

47 See, for instance, judgment of 16 February 2012, Council and Commission v. Interpipe Niko Tube and Interpipe NTRP, C-191/09 P and C-200/09 P, EU:C:2012:78, paragraph 77 and the case law cited.

48 Ibid., paragraph 63 and the case law cited.

49 Judgment of 1 June 2017, Changmao Biochemical Engineering v. Council, T-442/12, EU:T:2017:372, paragraph 142 and the case law cited.

50 Judgment of 14 December 2017, AETMD v. Council, C-460/14, EU:T:2017:916, paragraph 81 and the case-law cited. Note that the judgment is currently under appeal by the Thai exporting producer, and is registered as Case C-14/18 P River Kwai International Food Industry v. AETMD.

51 Council Implementing Regulation (EU) No. 1238/2013 of 2 December 2013 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of crystalline silicon photovoltaic modules and key components (i.e., cells) originating in or consigned from the People's Republic of China, OJ L 325, 5 December 2013.

52 Council Implementing Regulation (EU) No. 1239/2013 of 2 December 2013 imposing a definitive countervailing duty on imports of crystalline silicon photovoltaic modules and key components (i.e., cells) originating in or consigned from the People's Republic of China, OJ L 325, 5 December 2013, p. 66.

53 Judgments of 1 February 2016, SolarWorld and Others v. Council, T-141/14, EU:T:2016:67, at paragraph 61 and T-142/16, EU:T:2016:68, also at paragraph 61.

54 Ibid., at paragraph 48.

55 Judgments of 9 November 2017, SolarWorld and Others v. Council, Case C-204/16, EU:C:2017:838, at paragraph 55, and C-205/16 P, EU:C:2017:840 at paragraph 57.

56 ECLI:EU:C:2017:61.

57 Judgment of 26 January 2017, Maxcom v. Chin Haur Indonesia, Joined Cases C-247/15 P, C-253/15 P and C-259/15 P, EU:C:2017:61 at paragraph 59.

58 Judgment of 19 April 2018, Asia Leader International (Cambodia) v. Commission, T-462/15, EU:T:2018:196 at paragraph 62.

59 Ibid. at paragraph 88.

60 The case is currently under appeal, which is registered as Case C-۷۰۹/۱۷ P Commission v. Kolachi Raj Industrial.

61 Judgment of 10 October 2017, Kolachi Raj Industrial v. Commission, T-435/15, at paragraph 110 et seq.

62 Ibid. at paragraph 113.

63 Council Implementing Regulation (EU) No. 1194/2013 of 19 November 2013 imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of biodiesel originating in Argentina and Indonesia, OJ L 315, 26 November 2013, p. 2.

64 However, we recall the AB's finding in DS473 that an '[investigating] authority is not prohibited from relying on information other than that contained in the records kept by the exporter or producer, including in-country and out-of-country evidence' (see AB Report, EU- Biodiesel (Argentina), para. 6.73).

65 The chapter on the WTO deals with this dispute in more detail. Reference is therefore had to the discussion therein.

66 Press Release of 15 May 2018: 'WTO rejects vast majority of US claims in Airbus dispute', available at: http://trade.ec.europa.eu/doclib/press/index.cfm?id=1841 (last accessed 22 July 2018).

67 Appellate Body Report, EU – Large Civil Aircraft (21.5), WT/DS316/AB/RW, at point 5.70 et seq. and point 6.3.

68 Ibid. point ۶.۴۳.

69 Appellate Body Report, EU – PET (Pakistan), WT/DS486/AB/R, point 5.140.

70 Ibid. point 5.229.

71 Ibid.

72 Ibid.

73 The chapter on the WTO deals with this dispute in more detail.