Date of publication: 27 January 2015
Olena Omelchenko, Partner, Attorney at Law, Head of International Trade Practice
Since 2008, 864 anti-dumping measures have been applied in the world, of which only 21 – in Ukraine
The WTO rules do not permit to unilaterally set quotas or impose duties above the tariff bindings, which are fixed in the obligations of Ukraine. The overall weighted average rate of duty for the obligations of Ukraine is 2.7%. In comparison, e.g. in Russia the figure is 9.1% (according to the WTO data for 2012 World Tariff Profiles 2014).
However, there are exceptions to the general rule. Imposition of duties is permitted due to the deteriorating balance of payments; introduction of protective, anti-dumping or countervailing duty is allowed in case of certain conditions with a sharp unexpected increase in imports, in case of dumped imports or providing subsidies that do not comply with the obligations in the WTO.
Taking advantage of the exception, on December 28, 2014, the Verkhovna Rada adopted the Law “On Measures to Stabilize the Balance of Payments of Ukraine in Accordance with Article XII of the General Agreement on Tariffs and Trade 1994”. The document introduces additional import duty on all goods except for essential ones, due to the deteriorating balance of payments. Following the procedure, the issue will be brought up for discussion to the Committee on Balance of Payments Restrictions of the WTO.
In contrast to the duty imposed by this law, protective, anti-dumping or countervailing duty is introduced to protect national production according to the results of the relevant investigations. The investigation may be initiated by business or the state. Internationally, investigation is rarely initiated by the state. This is due to the laborious process of gathering confidential business information, evidence, and imperfect legislation.
Protecting its interests, business is beginning to realize gradually that if you are drowning, you are on your own. It implies active use of trade defense instruments.
In Ukraine, the investigative body conducting investigations is the Ministry of Economic Development, where these functions are assigned to the Department for WTO Cooperation and Trade Remedies.
Decision on imposition of duties (measures) is approved not by the Parliament, but by the Interdepartmental Commission on International Trade, which simplifies the decision-making greatly. The Commission is chaired by the Minister of Economic Development, and its composition is approved by the CMU. The Commission is usually composed by government officials of the State Security Service of Ukraine, the Presidential Administration, the Ministry of Justice, the Ministry of Foreign Affairs, the Ministry of Economic Development, the Ministry of Agrarian Policy, and the Antimonopoly Committee. The composition is renewed as needed.
As compared to other countries, Ukraine uses the instrument of imposition of a duty for protection of its interests insufficiently. As officially reported by the WTO, since 2008, 864 anti-dumping measures have been applied in the world, of which only 21 – in Ukraine; 74 compensatory measures, of which 0 – in Ukraine; 53 protective measures, of which 3 – in Ukraine.
At the same time the advantage of this instrument could be taken by agricultural producers, producers of organic and inorganic chemical products, plastics and polymeric products, machinery, tire manufacturers, producers of graphite electrodes, bearings, cast iron valves, concrete products, construction cradles, cosmetic products, soap, foam, matches, plaster bandages, syringes, window profiles, glass bottles and many others.
Where to start to demand the introduction of a special (protective) anti-dumping or countervailing duties?
First and foremost, you must determine the product, the domestic producer, analyze the market in Ukraine and abroad, determine whether there is dumping, increased imports or subsidy, the provision of which does not comply with the WTO rules, whether there is damage to domestic producer and cause-and-effect relationship. After gathering evidence, you can begin to prepare an application to the Ministry of Economic Development.
The investigation may last for about a year, but duration of the procedure shall not scare the producers. Introduction of measures based on the result will have the economic effect for more than four years, with an option to renew the measure and the ability to upgrade the production.
Trade remedies are tools invented to ensure fair competition. Therefore, introduction of measures is directed at the adjustment of the competitive environment and creation of conditions for business development rather than being protectionist in nature.
During anti-dumping investigation assuming price commitments is permitted to avoid payment of duties. In 2014, e.g. Interpipe assumed obligations within the framework of investigation by the United States with respect to steel pipes, and the Chinese Zhejiang Longda Stainless Steel Co. assumed price undertakings with respect to seamless stainless steel casing tubing pipes within the framework of investigation by the Ministry of Economic Development of Ukraine.
In case of safeguard investigation not only imposition of protective duties, but also introduction of quotas is permitted. Setting a quota by Ukraine in respect of seamless steel casing tubing pipes may serve as an example.
In 2014, the number of security investigations and the use of protective duties had increased significantly worldwide, which was discussed at the last meeting of the WTO’s Committee on Safeguards. In total in 2014, 25 safeguard investigations were initiated, of which : 7 – in India, 4 – in Indonesia, 4 – in Turkey, 2 – in Egypt, 2 – in Tunisia, and one 0 – in Jordan, Thailand, Morocco, Malaysia, Ecuador; Ukraine has begun review of cases on pipes.
It shall be noted that the developed countries such as the EU and the USA do not apply protective measures. It can be explained simply – their markets are sufficiently protected by high duties and other barriers permitted as part of accession to the WTO. These countries prefer to be protected from unfair competition by dumping or subsidy provision.
However, for Ukraine protective measures are sufficiently important element of protection of the market considering economic fluctuations and regular market disruption.
Protective duty applies regardless of the country of origin, i.e. the measure applies to all countries except the developing countries, which may fall under the exception.
Therefore, a political question always arises when applying protective duty: how would major trading partners react to this? The question is especially relevant in view of the unilateral preferential terms of trade on the part of the EU, and even more so if with the introduction of protective measures the EU may become the biggest or the main supplier.
The answer to this question forms the basis of the same WTO rules. If there is an unexpected sharp increase in imports, damage to the domestic production and cause-and-effect relationship, the investigative authority and the Commission will have to consider it when making a decision. Otherwise, the production of domestic goods and in some cases even the industry can be lost.
The WTO rules permit the introduction of protective duties also on the basis of the relative increase in imports as compared to production, which is extremely important in view of recent decrease in imports in absolute indices in 2014 due to the situation with the ATO.
Imposition of duties based on the results of investigations is also envisaged by the Association Agreement between Ukraine and the EU. It is worth mentioning that this year a part of the agreement on free trade zone will come into effect, which will certainly result in the growth of imports to Ukraine from the EU. Therefore, businesses need to study the possibilities of protecting their interests even now.
At present, the Ministry of Economic Development is conducting investigations (reviews of effective measures) regarding imports of float glass, motor cars, filament lamps, seamless stainless steel casing tubing pipes for approximately $ 248 mln. In 2014, the Ministry of Economic Development of Ukraine applied measures on imports into Ukraine of fiberboard, ammonium nitrate, products made of ferrous metals, porcelain tableware for about $ 75 mln.