Fourth Report of Session 2019-21 Contents

11EU retaliatory duties on imports from the US (Byrd amendment WTO dispute)55

This EU document is legally and politically important because:

  • it concerns a retaliatory trade measure which will apply UK-wide from 1 May 2020 until the end of the transition;
  • the measure may continue to apply in Northern Ireland after transition under the Protocol on Ireland/Northern Ireland; and
  • there may be wider implications for the UK in negotiating trade agreements with third (non-EU) countries.

Action

  • Ask the Minister to clarify the Government’s understanding of the relevant provisions of the Protocol on Ireland/Northern Ireland and how the possible application of different trade defence measures in Northern Ireland and Great Britain after transition might affect the UK’s trade negotiations with third countries.
  • Draw to the attention of the International Trade Committee and the Northern Ireland Affairs Committee.

Overview

11.1The Commission Delegated Regulation adjusts the retaliatory measures—in this case additional customs duties—which will be payable on the import of certain products originating in the United States of America from 1 May 2020. The EU’s right to apply these additional duties stems from a World Trade Organisation (“WTO”) ruling in 2003 which found that the United States’ Continued Dumping and Subsidy Offset Act 2000 (usually referred to as the “Byrd amendment”) was incompatible with its WTO obligations. The Byrd Amendment requires the US Government each year to distribute anti-dumping and countervailing duties to the domestic companies that requested or supported their imposition, creating an incentive for US industries to press for duties on imported goods to secure cash payments and improve their competitive position.56

11.2The retaliatory measures taken by the EU must be adjusted each year to reflect the wide variations in the amount of payments made to US industry under the Byrd amendment. from one year to the next. The Commission Delegated Regulation establishes the new level of retaliation to apply to the export of the following goods from the US: sweetcorn, spectacle frames and mountings, crane lorries, and women’s denim trousers. It would increase duties on these products from 0.001% in 2019 to 0.012% in 2020 (effective from 1 May), bringing the new level of EU retaliation to around $25.5 thousand in cash terms.

11.3In his Explanatory Memorandum of 10 March 2020, the Minister for Trade Policy (Rt Hon. Conor Burns MP) explains that the Continued Dumping and Subsidy Offset Act 2000 was repealed in December 2005 but still has “transitional effects”. The Government, as “a strong defender of the rules-based system of trade under the WTO”, supports the Commission Delegated Regulation which will apply directly in the UK during the post-exit transition period and “may continue to apply subject to the interpretation of the Northern Ireland Protocol (Article 5(1), 5(2), 5(3), 5(4) and Annex 2)”.

11.4The Minister notes that the level of retaliation proposed for 2020 “constitutes a negligible sum”, expected to amount to “around £997” in additional duty collected on the affected goods on import into the UK from the US, and will have “a negligible effect on UK-US FTA [free trade agreement] negotiations”. He makes clear that the Government “will not transition the Commission Delegated Regulation” at the end of the post-exit transition period, meaning that the UK will no longer collect the additional duties, though this is “subject to the interpretation” of the Protocol on Ireland/Northern Ireland.

Action

11.5Ask the Minister to clarify the Government’s understanding of the relevant provisions of the Protocol on Ireland/Northern Ireland, how it might affect the application of the Commission Delegated Regulation (and other EU trade defence measures) in Northern Ireland once the post-exit transition period has ended, and whether there may be wider implications for the UK in negotiating trade agreements with (non-EU) third countries.

Letter to the Minister for Trade Policy (Rt Hon. Conor Burns MP) at the Department for International Trade

Thank you for your Explanatory Memorandum on the Commission Delegated Regulation which adjusts the level of retaliatory measures — in this case, additional duties — to be applied from 1 May 2020 on a range of products imported from the United States, in line with a World Trade Organisation ruling dating back to 2003.

You make clear that the Commission Delegated Regulation “will be binding on the UK as well as all EU Member States” during the post-exit transition provided for in the EU/UK Withdrawal Agreement, but add that you will “not transition” the Regulation at the end of the transition period. We take this to mean that the UK will not continue to collect the additional duties beyond 31 December 2020 (the date on which the transition period is expected to end). You nonetheless indicate that the additional duties “may continue to apply subject to the interpretation of the Northern Ireland Protocol” (our emphasis) and refer us to Articles 5(1)-(4) of the Protocol.

Article 5(3) of the Protocol on Ireland/Northern Ireland specifies the customs legislation that will apply to Northern Ireland. It includes the EU Customs Code and “the provisions supplementing or implementing it adopted at Union or national level”. Articles 5(1) and (2) provide that EU customs duties will apply to goods considered to be “at risk” of subsequent onward movement to the EU after entering Northern Ireland from Great Britain or another (non-EU) third country. Article 5(4) and Annex 2 list the additional provisions of EU law that will continue to apply to Northern Ireland (but not the rest of the UK) after the post-exit transition period has ended, including various EU trade defence instruments.57

Your Explanatory Memorandum suggests that there is room for doubt about the continued application of the Commission Delegated Regulation in Northern Ireland after the end of the post-exit transition period. We would welcome a more detailed analysis of the provisions you cite in Article 5 of the Protocol on Ireland/Northern Ireland, including your reasons for considering that the application of the Commission Delegated Regulation in Northern Ireland after transition turns on the interpretation of the Protocol, and where the ambiguity lies. We also ask you to explain what systems would need to be put in place to distinguish between products entering the UK after transition which would attract the additional duties and those which would not, how long this is likely to take to set up, and your assessment of the costs involved.

One of the tasks of the Joint Committee established by the EU/UK Withdrawal Agreement is to consider “any issue relating to the implementation, application and interpretation” of the Agreement (including the Protocols) referred to it by the EU or the UK.58 The first meeting of the Joint Committee took place on 30 March. We would like to know whether issues relating to the implementation, application and interpretation of the Protocol on Ireland/Northern Ireland were discussed at the meeting or whether the intention is to address any issues, in the first instance, in the Specialised Committee on the Protocol on Ireland/Northern Ireland or in the Joint Consultative Working Group. We also ask you to explain how the Government intends to update Parliament on the issues discussed at these meetings, particularly where they concern differences in the EU and UK positions on the implementation, application and interpretation of the Protocol.

Finally, we recognise that the sums involved in applying the specific retaliatory measures set out in the Commission Delegated Regulation are negligible and, as such, are unlikely in themselves to undermine the Government’s goal of negotiating “an ambitious and comprehensive” Free Trade Agreement with the United States. We wonder, nonetheless, whether a broader issue might be at stake if it is indeed the case that Northern Ireland and Great Britain might (after transition) apply different trade defence measures in their trading relationships with third (non-EU) countries. What assessment has the Government made of the magnitude of the risk, how disruptive it may be when negotiating trade agreements with third countries, and how it could be mitigated.

We expect to receive your response by 15 May 2020.


55 Commission Delegated Regulation of 21.02.2020 amending Regulation (EU) 2018/196 on additional customs duties on imports of certain products originating in the USA; Council number 6308/20 + ADD 1, C(20) 973; Legal base — Article 3(3) of Regulation (EU) 2018/196; Department for International Trade; Devolved Administrations not consulted; ESC number 41093.

56 Anti-dumping duties may be applied to protect domestic industry from the harmful effects of products which are “dumped” on the market by an exporter at less than their normal value. Countervailing measures may be applied to offset the trade distorting effects of unfair subsidies.

57 Regulation (EU) No 2018/196 on additional customs duties on imports of certain products originating in the United States of America.

58 See Article 164 of the EU/UK Withdrawal Agreement.




Published: 29 April 2020