I OVERVIEW OF TRADE REMEDIES

As outlined in the fourth edition of The International Trade Law Review, The Eurasian Economic Union (EAEU) remains an active user of trade defence instruments.

Between July 2018 and July 2019, the following developments took place with regard to the application of trade remedy instruments by the EAEU:

  1. An anti-dumping investigation (AD-24) initiated on 2 March 2018 against imports of cast aluminium wheels originating from China into the EAEU territory. The investigation was finished in March 2019 by the imposition of anti-dumping duty of 33.69 per cent for a five-year period.
  2. An anti-dumping investigation (AD-25) initiated on 26 March 2018 against imports of optical fibre for optical communication cables originating from the United States and Japan into the EAEU territory. The interested parties emphasised that the introduction of such a duty could lead to isolation of the market from innovative products, a shortage of goods on the market and an increase in the cost of secondary products. Therefore, on 8 July 2019, the Department published a draft report containing the conclusion that there is no substantial injury for the relevant industry of the EAEU and suggesting to finish the investigation without the imposition of anti-dumping measures.
  3. An anti-dumping investigation (AD-26) initiated on 29 June 2018 against imports of galvanised steel originating from China and Ukraine into the EAEU territory. The investigation was prolonged till 28 October 2019. No interim results were available as at July 2019.
  4. A safeguard investigation (SG-10) initiated on 7 August 2018 against imports of certain types of metal into the EAEU territory. On 10 June 2019, a draft report on the results of the investigation was published. It proposed to apply a safeguard measure in the form of a special quota for one year, for the purpose of preventing serious injury to the industry of the EAEU.
  5. An anti-dumping investigation (AD-27) initiated on 4 September 2018 against imports of hot-rolled seamless pipes made of corrosion-resistant steel originating from China into the EAEU territory. Pending as at July 2019.
  6. An interim anti-dumping investigation (AD-7-R1) initiated on 26 February 2019 against imports of mill rolls originating from Ukraine. On 24 May 2019, a decision was made to extend the anti-dumping measure by the amount of 26 per cent until 25 February 2020.
  7. A safeguard investigation (SG-11) initiated on 1 March 2019 against imports of microwave ovens into the EAEU territory. On 18 April 2019, the decision was made to suspend the investigation because of the withdrawal of the application by the company that initiated the investigation.
  8. A safeguard investigation (SG-12) initiated on 4 March 2019 against imports of welded pipes made of stainless steel into the EAEU territory. Pending as at July 2019.
  9. An anti-dumping investigation (AD-28) initiated on 7 May 2019 against imports of aluminium tape originating from Azerbaijan and China into the EAEU territory. Pending as at July 2019.
  10. An interim anti-dumping investigation (AD-19-R2) initiated on 13 June 2019 against imports of steel railway wheels originating from Ukraine. On 17 June 2019, a draft report of the investigating authority was published. It proposed to suspend application of the anti-dumping duties until the end of the interim anti-dumping investigation. This happened upon the request of the EAEU consumers of the wheel products, which indicated the industry's inability to supply the market with the required quantity of relevant products and unusually drastic price increases.2

EAEU countries were also extensively targeted by trade remedy measures on foreign markets.

On 27 April 2018, Turkey launched a safeguard measure investigation concerning the import of certain iron and steel products. In October 2018, Turkey implemented the provisional safeguard measure on five imported steel products and placed a 25 per cent tariff on imports exceeding the average imported volume between 2015 and 2017. However, on 8 May 2019, the Ministry of Trade, Industry and Energy of Turkey lifted its provisional safeguard measure without imposing further restrictions.3

On 13 August 2018, the European Union announced an anti-dumping investigation relating to imports of mixtures of urea and ammonium nitrate in aqueous or ammonia solution, originating in Russia, the United States, and Trinidad and Tobago. As mentioned in the Notice of initiation of an anti-dumping proceeding concerning imports of mixtures of urea and ammonium nitrate originating in Russia, Trinidad and Tobago and the United States of America, dated 13.8.2018:

The allegation of dumping from Russia is based on both a comparison of the domestic price with the export price (at ex-works level) of the product under investigation when sold for export to the Union and a comparison of a constructed normal value (manufacturing costs, selling, SG&A and profit, for which the costs for gas, SG&A and profit were adjusted) with the export price (at ex-works level) of the product under investigation when sold for export to the Union. Both comparisons show dumping.4

On 2 October 2018, the European Union approved and adjusted anti-dumping duties on steel pipes originating in Russia and Ukraine. The duties have been set in the range of 24.1 per cent to 35.8 per cent for various producers in Russia, and from 12.3 per cent to 25.7 per cent for Ukraine. The decision came into force on 3 October 2018.5 Anti-dumping duties on pipes produced in Russia and Ukraine have been in effect since 1997. Depending on market environment and court judgements, they are regularly adjusted or temporarily cancelled.

On 15 April 2019, Egypt imposed provisional safeguards of up to 15 per cent on semi-finished steel and 25 per cent on rebar imports. The country launched a safeguard probe at the end of March 2019. The tariffs on billet and slab imports are up to 15 per cent, with their rate being determined by the cost, insurance and freight (CIF) value of the material. Semi-finished steel imports priced above $550 per metric ton CIF are not subject to a duty, while any material below $450 per metric ton. CIF is taxed at the maximum rate of 15 per cent, according to market participants. The rebar duties are 25 per cent of the import's CIF value. The measure will apply for 180 days and is designed to remedy the increase in imports arising from trade measures elsewhere – most notably in the US and EU.6

On 3 June 2019, the US International Trade Commission (the Commission) announced the start of the third review to determine whether revocation of the anti-dumping duty order on silicon metal from Russia would be likely to lead to continuation or recurrence of material injury to the domestic industry within a reasonably foreseeable time. Initially, on 26 March 2003, the US Department of Commerce (Commerce) issued an anti-dumping duty order on imports of silicon metal from Russia. Following the first five-year reviews by Commerce and the Commission, effective 16 July 2008, Commerce issued a continuation of the anti-dumping duty order on imports of this product from Russia. And following the second five-year reviews by Commerce and the Commission, effective 2 July 2014, Commerce issued a continuation of the anti-dumping duty order on imports of silicon metal from Russia.7

In addition, Ukraine introduced a number of restrictive measures against goods from EAEU countries:

  1. in July 2018, safeguard measures in the form of quantitative quotas were imposed on imports of acid sulphur and oleum for a period of three years;
  2. in October 2018, anti-dumping measures against imports of asbestos-cement slate from Belarus were suspended without extension owing to the exhaustion of the terms of application;
  3. as a result of the anti-dumping investigation initiated in July 2018 against imports of cement products from Belarus, Moldova and Russia, in May 2019 imports from Russia received an extremely high duty of 114.95 per cent, and products from Belarus were taxed at 57.03 per cent;
  4. in March 2019, an anti-dumping investigation against imports of electric bulbs from Belarus finished with adoption of 17.73 per cent anti-dumping duty without accepting price undertakings from Belarusian exporters;
  5. in March 2019, an anti-dumping investigation against imports of salt from Belarus finished with the imposition of 11.85 per cent anti-dumping duty for all exporters and individual duty of 10.28 per cent for the main Belarusian exporter and accepting price undertakings from him;
  6. at the end of June 2019, an anti-dumping investigation against imports of hire with a corrosion-resistant coating originated in Russia and China finished with the imposition of 47.57 per cent anti-dumping duty for product from Russia, which is two times higher than the duty imposed for China;
  7. in December 2018, an anti-dumping investigation against imports of roller bearings originated from Kazakhstan was launched;
  8. in April 2019, an anti-dumping investigation against imports of aerated concrete blocks from Belarus was launched. According to the complainant it was initiated because of the sharp increase in imports from 2017 and 2018 from 41 per cent to 98 per cent respectively;
  9. in April 2019, an anti-dumping investigation against imports of cables and ropes from Russian Federation was launched;
  10. in April 2019, a review of anti-dumping duties on ammonium nitrate from the Russian Federation was initiated because of the expiration of the measure in force. The action of the duty was extended for the period of the review. At the same time, ammonium nitrate was included into the sanctions list of banned goods from the Russian Federation published by the Cabinet of Ministers of Ukraine at the end of June 2019;
  11. in April 2019, the anti-dumping measures against imports of glass containers originating from the Russian Federation were extended for another five years; and
  12. in April 2019, the application of safeguard measures on imports into Ukraine of flexible porous plates, blocks and sheets of polyurethane foams was extended for another three years in the form of safeguard duties.8

II LEGAL FRAMEWORK

As indicated in the fourth edition of The International Trade Law Review, changes to the current EAEU trade defence regime have been actively discussed over recent years, including during the period since July 2018. However, no significant amendments and alterations to the Protocol have happened in the past year.

III RECENT CHANGES TO THE REGIME

The EAEU member states and governing bodies are very actively negotiating free trade regimes with third parties. Currently, the EAEU is in negotiations on the conditions and future terms of FTAs with countries including Egypt, Israel, Serbia, India, Thailand, Indonesia and Mongolia. The negotiations with Egypt and Serbia are nearly complete, while the EAEU plans to sign the FTA with India in 2020. Moreover, the EAEU concluded a declaration on cooperation with the Pacific Alliance. On 20 June 2019, Russia launched negotiations with South Korea on investment and trade in services agreement. The EAEU signed the memoranda on cooperation with Bangladesh, where the intention to sign the FTA was expressed.

The FTA signed on 29 May 2015 with Vietnam has come to fruition. The EAEU and Vietnam bilateral trade has increased considerably by 18.9 per cent in comparison with the previous year. The economic and trade cooperation between the EAEU and China is gaining momentum and experienced growth by a margin of 8 per cent. Furthermore, the EAEU moved forward with China's One Belt, One Road initiative and joined the project during the G20 summit.

IV SIGNIFICANT LEGAL AND PRACTICAL DEVELOPMENTS

As indicated in the fourth edition of The International Trade Law Review, some changes in the enforcement practice of the EAEC Department have taken place in recent years, and it should be noted that the standard of proving injury to the domestic industry has generally increased. However, during the past year, two controversial enforcement decisions have been taken by the EAEU Commission.

The first, rather unusual, approach was employed by the EAEU according to the results of an interim anti-dumping investigation in relation to certain types of steel pipes originating from Ukraine to revise the individual sizes of anti-dumping duties as a result of changed circumstances.

Initially, duties on the Ukrainian Interpipe pipes were introduced in June 2011. Later, their action was extended until 2021. In October 2016, the Ukrainian manufacturer initiated a revision of anti-dumping duties because the company put into operation its own electric steel-smelting complex. This, in turn, provided the company's enterprises with their own pipe billet, which resulted in a change in the structure and level of production costs.

According to the results of the revision, on 4 October 2017, the Department for the Protection of the Domestic Market of the EAEC suggested reducing the anti-dumping duties on certain types of steel pipes, produced in Ukraine. In particular, the duty for casing pipes should be reduced from 18.9 per cent to 9.98 per cent, for tubing from 19.9 per cent to 12.23 per cent, and for general purpose pipes from 19.4 per cent to 12.11 per cent. For more than a year, the report was left without consideration by the EAEC Board.

On 30 October 2018, at the meeting of the Board of the Eurasian Economic Commission, the proposals and the draft decision of the Department to reduce anti-dumping duties were not supported. There was no explanation of any reasons or justifications for such a decision.9

The second interesting enforcement decision was taken in June 2019. It relates to the anti-dumping duty against the import of Ukrainian steel railway wheels produced again by Ukrainian company Interpipe on the EAEC market. For the first time, the measure in force was revised because of requests from consumers from Belarus and Kazakhstan. On 22 December 2015, the EAEC applied an anti-dumping duty against the Ukrainian railway wheels, which was the only alternative to the same product produced in the EAEC at the rate of 34.22 per cent. However, following a statement by the consumers of the wheel products of the EAEU, which indicated the inability of its industry to provide the market with the required quantity of relevant products and unusually drastic price increases, the investigating authority was forced, on 13 June 2019, to open the review of the existing measures and suspend them until the end of the interim anti-dumping investigation.10

V EAEU–UKRAINE TRADE SANCTIONS ESCALATION

During the past year, the EAEU and Ukraine exchanged restrictive measures within the framework of sanctions lists for a quite considerable group of goods.

On 15 May 2019, the Cabinet of Ministers of Ukraine adopted two resolutions that continued the economic sanctions war between Ukraine and Russia. One of these resolutions substantially supplemented the list of products prohibited from import from Russia. The second introduces safeguard duties from 1 August 2019 on almost all products of Russian origin except for products of sensitive import such as coal, gasoline and pharmaceuticals. As at mid July, this resolution has not yet been published.

The second resolution – No. 535 'On Amendments to the list of goods prohibited from being imported into the customs territory of Ukraine originating from the Russian Federation' – appeared on the website of the Cabinet of Ministers at the end of June 2019. It substantially complements the list of Russian goods prohibited from import, approved by the Resolution of the Cabinet of Ministers of Ukraine No. 1147 of 30 December 2015.

This was done in response to the April 2019 decision of the Russian government on sanctions against Ukraine, which, in turn, was made after a similar decision by the Ukrainian Cabinet of Ministers.

Based on the data of the State Fiscal Service of Ukraine, in terms of value, according to the results of 2018, the import of prohibited goods from Russia to Ukraine amounted to US$511.9 million.

This amount mainly includes deliveries of:

  1. fertilisers – US$323 million, or 63.1 per cent;
  2. tractors and cars – US$52.8 million, or 10.3 per cent;
  3. hardware (wires, pipes, cables, screws, bolts, etc.) – US$48.9 million, or 9.6 per cent;
  4. used freight wagons and trams – US$42.9 million, or 8.4 per cent;
  5. plywood – US$19.7 million, or 3.8 per cent; and
  6. cement – US$16.8 million, or 3.3 per cent.

The share of imports of other sanctioned goods from Russia to Ukraine amounted to 1.5 per cent at US$7.8 million.

The total amount of goods that fell under the sanctions turned out to be three times more than that for which Russia banned the import of goods.

This decision of the Ukrainian government will not remain without a response from Russia. Most likely, the response will affect the Ukrainian engineering products that are not yet banned from importing into Russia, which is the most painful option for Ukraine. The only question is the scale of the answer.11

At the same time, in June 2019, Russia allowed the automobile and railway transit of sanctioned Ukrainian goods through its territory if there were special seals on vehicles and goods using the GLONASS technology (similar to GPS). The relevant amendments have been made to the presidential decree on the use of special economic measures, signed in October 2018.

There was a noticeable trend in the past year for the growth of restrictive and sanction measures from both parties. Only five years ago they had a much more substantial amount of mutual trade flows than today.

VI TRADE DISPUTES

i WTO dispute settlement

Among the five current member countries of the Eurasian Economic Union, Russia remains the most active user of the WTO dispute settlement system. It acts as a complainant to three active cases – two against the United States and one against Ukraine.

On 20 July 2018, the final panel report was circulated to members on the case Russia–Ukraine – Anti-dumping measures on the import of ammonium nitrate (DS493). According to this report, Ukraine made mistakes in the procedure for establishing a dumping margin for Russian producers of ammonium nitrate, and subsequently, the current protective duties should be abolished. At the same time, the Ukrainian side noted that it could use gas adjustments in the future when conducting investigations against gas-intensive industries. For example, Russian producers have access to gas at a price three to five times (depending on the period) lower than the same gas sold for export and used by competing manufacturers in third countries. In addition, at different periods the price of gas for Russian producers was even lower than the cost of Gazprom and, accordingly, was unprofitable for it. It is clear that with such pricing in the industry, where gas is the main raw material they immediately become uncompetitive with Russian producers in both the domestic and export markets.

With regard to gas adjustments, the panel confirmed that during the conduct of anti-dumping investigations, the investigating authority has the right to apply adjustments to the cost of the main raw materials and materials of a foreign manufacturer if there is evidence to prove that their price is unjustified. In this dispute, the panel more clearly placed emphasis on this issue than in the Argentina–Biodiesel dispute (DS473), the results of which made the application of cost adjustments look quite controversial. Ukraine has actually restored a certain balance in the application of adjustments.

Despite this, on 23 August 2018, Ukraine notified the DSB of its decision to appeal to the Appellate Body certain issues of law and legal interpretations in the panel report.

On 22 October 2018, the Appellate Body indicated that Division members could currently spend only very little time preparing for this appeal and that it would not be possible for the Division to focus on the consideration of this appeal and be fully staffed for some time. The Appellate Body informed the DSB that it would communicate appropriately with participants and DSB members as soon as it knew more precisely when the Division could schedule the hearing in this appeal.12 The situation remains unchanged as at mid July 2019.

The case United States – Certain Measures on Steel and Aluminium Products (DS554) initiated by Russia on 29 June 2018 is moving very slowly. On 18 October 2018, the Russian Federation requested the establishment of a panel. At its meeting on 29 October 2018, the DSB deferred the establishment of a panel. At its meeting on 21 November 2018, the DSB established a panel. Bahrain, Brazil, Canada, China, Colombia, Egypt, the European Union, Guatemala, Hong Kong, Iceland, India, Indonesia, Japan, Kazakhstan, Malaysia, Mexico, New Zealand, Norway, Qatar, Saudi Arabia, Singapore, South Africa, Switzerland, Taiwan, Thailand, Turkey, Ukraine and Venezuela reserved their third-party rights.

On 7 January 2019, the Russian Federation requested the Director General to compose the panel. On 25 January 2019, the Director General composed the panel.13 As at mid July 2019, the case is ongoing.

On 5 July 2019, Russia requested consultations with the United States regarding anti-dumping measures imposed by the United States on hot-rolled flat-rolled carbon-quality steel products from Russia (DS586).

The key claims are:

  1. the United States imposed anti-dumping duties at the level of the 'all others' rate, which exceeds the margin of dumping that should have been established under Article 2 of the Anti-Dumping Agreement;
  2. the United States failed to determine an individual dumping margin for each known exporter or producer concerned of the product under investigation and instead relied on an 'all others' rate; and
  3. the United States failed to establish normal values based on the method enshrined in Article 2.1 of the Anti-Dumping Agreement or on any of the alternatives enshrined in Article 2.2 of the Anti-Dumping Agreement.14

EAEU countries more often act as respondents. There are eight active WTO cases: six of them brought by Ukraine, including three cases for Russia and one each for Kazakhstan, Armenia and Kyrgyz Republic, one case against the European Union and one against the USA.

In Russian Federation – Measures on the Importation of Live Pigs, Pork and Other Pig Products from the European Union (DS475), following lengthy compliance proceedings, which took up a large part of 2017–2018, on 18 October 2018, the European Union requested the establishment of a compliance panel. At its meeting on 29 October 2018, the DSB deferred the establishment of a compliance panel. At its meeting on 21 November 2018, the DSB agreed to refer to the original panel, if possible, the matter raised by the European Union. Australia, Brazil, Canada, China, India, Japan, Kazakhstan, Taiwan, Ukraine and the United States reserved their third-party rights.

The compliance panel was composed of the original panellists. On 25 March 2019, the chair of the compliance panel informed the DSB that the panel expected to issue its final report, based on the timetable adopted after consultation with the parties, in the first quarter of 2020.15

In Russia – Measures affecting the importation of railway equipment and parts thereof (DS499), initiated by Ukraine in October 2015, the panel report was circulated to members on 30 July 2018.

On 27 August 2018, Ukraine notified the DSB of its decision to appeal to the Appellate Body certain issues of law and legal interpretations in the panel report. On 3 September 2018, the Russian Federation notified the DSB of its decision to cross-appeal.

On 24 October 2018, the Appellate Body indicated that Division members could only spend very little time preparing for this appeal and that it would not be possible for the Division to focus on the consideration of the appeal and be fully staffed for some time. The Appellate Body informed the DSB that it would communicate appropriately with participants and DSB Members as soon as it knows more precisely when the Division can schedule the hearing in this appeal.16 As at mid July 2019, there is no further move on the case.

Ukraine lost the dispute Russia – Transit Transportation Measures (DS512). The decision was made public on the WTO website on 5 April 2019 and adopted by the DSB on 26 April 2019. The arbitrators did not reveal violations by Russia of its obligations both under the GATT agreement of 1994 and under the agreement on accession to the WTO. In 2016, the Russian Federation banned railway and automobile transit for Ukrainian products that are sent to Kazakhstan and Kyrgyzstan. Later the ban was extended to other central Asian countries and Mongolia. In the same year, Ukraine appealed against Russia's actions to the WTO. Ukraine claimed a violation by Russia of Article V of the GATT that prohibited discrimination in transit of goods from other member states of the organisation. In turn, the Russian Federation motivated its actions by another norm (Article XXI of the GATT), which allows for the introduction of protective measures in the event of a threat to national security. This decision may indirectly influence the DS532 case, where Ukraine is trying to challenge the ban on imports of Ukrainian juices, confectionery and wallpaper.17

Kazakhstan – Anti-dumping measures on steel pipes (DS530) has made almost no significant progress since July 2018. The only move was made on 7 September 2018 when Ukraine supplemented its consultations request of 19 September 2017. Ukraine referred to Kazakhstan's failure to implement the findings of the investigating authority in the interim review of the anti-dumping duties on steel pipes, initiated in October 2017, concluding that such duties should be decreased.18

DS530 was supported by similar cases initiated by Ukraine. Namely, Armenia – Anti-Dumping Measures on Steel Pipes (DS569) and Kyrgyz Republic – Anti-Dumping Measures on Steel Pipes (DS570). Both cases were initiated on 17 October 2018. Ukraine requested consultations with both countries concerning anti-dumping measures applied in Armenia and Kyrgyz Republic on the importation of certain types of steel pipes. The challenged measures were allegedly adopted as a result of the sunset review of the anti-dumping measures on imports of certain types of steel pipes originating in Ukraine and imported into the customs territory of the EAEU. Ukraine claimed that these measures appear to be inconsistent with Articles 9.1, 9.3, 11.1, 11.2, 11.4 and 12.2.2 of the Anti-Dumping Agreement; and Article  VI of the GATT 1994. As at the time of writing, both cases are at the consultations stage.19,20

The third case Russia is respondent in is Russian Federation – Additional Duties on Certain Products from the United States (DS 566). On 27 August 2018, the United States requested consultations with the Russian Federation concerning the imposition by the Russian Federation of additional duties with respect to certain products originating in the United States.

The United States claimed that the measures appear to be inconsistent with Articles I:1, II:1(a) and II:1(b) of the GATT 1994.

At its meeting on 18 December 2018, the DSB established a panel. Brazil, Canada, China, the European Union, Egypt, India, Indonesia, Japan, Kazakhstan, Malaysia, Mexico, New Zealand, Norway, Qatar, Saudi Arabia, Singapore, Switzerland, Taiwan, Thailand, Turkey, Ukraine and Venezuela reserved their third-party rights.

On 8 January 2019, the United States requested the Director General to compose the panel. On 25 January 2019, the Director General composed the panel.21 The case is ongoing.


Footnotes

1 Sergey Lakhno is a counsel and head of the international trade practice at International Law Firm Integrites.