The EU’s agreed draft detailing upcoming intensifications to its existing steel trade protection framework will retain quota carryovers for its initial year, and apply to all trading partners, according to the draft document seen by McCloskey on 24 April.
The European Parliament and Council recently agreed via trilogue negotiations on the final compromise text to be tabled under the Commission’s original regulatory proposal, which seeks to double the bloc’s base steel tariff rate to 50%, and cut overall import quota levels by 47%. A first reading of the negotiated regulation has been tentatively scheduled for 18-21 May, and sources generally expect the measure to be adopted without issue.
Specific details on the country-specific allocations of the tightened quotas remain unavailable, and are being actively prepared in an associated implementing act. McCloskey understands that the European Commission – and industry representatives – are actively conducting article XXVIII negotiations this week in Geneva, finalising quota allocations for affected trading partners.
The tabled text does give some additional indication of how country-specific quotas will be allocated, confirming the methodology of adjusting specific 2022-2024 import market shares to 2013’s overall import balance of 13%.
Beyond that, the agreed regulation details a number of factors the Commission should be “taking into account” when designating country-specific allocations, including new considerations of:
- “the Union interest” – defined in relation to the entire steel value chain, including final consumers;
- “third country measures impacting the Union steel market”;
- whether countries are “in breach of ILO conventions or multilateral environmental agreements;”
- “information gathered in application of Article 3” – detailing the melt and pour requirements
The draft also clarifies how quotas will be administered as relates to Free Trade Agreement (FTA) partners, confirming that relevant counterparties will still be subject to the new steel trade framework via bilateral safeguard agreements. The Commission is authorised to adopt these implementing acts with immediate legal effect “on duly justified grounds of urgency,” if required to ensure implementation before 1 July.
Where a country receives a quota allocation via bilateral FTA safeguard, they will not receive duplicated quota allocations under the country-specific quota implementing act. If bilateral safeguards cannot be applied to an FTA, said counterparty will remain subject to the quotas set by the primary regulation.
‘Melted and poured’ evidence requirements are included in the agreed draft, but remain a traceability mechanism for now, non-determinative of quota allocations. Mill test certificates are cited as potentially sufficient as “verifiable appropriate evidence” of the country of melt and pour, with further details to come via implementing act before 31 August. By July 2028, the Commission will assess whether the country of melt and pour should become the basis of allocation to country-specific quotas, on the basis of “information collected” in the preceding years.
Most provisions under the new measure, including the overall quota volumes and country-specific allocations implementing act, will take effect from 1 July, just in time to replace the existing steel safeguard system which reaches its maximum 8-year term in June as per WTO rules.
Overall, the agreed text reflects the Commission’s original proposal, with relatively minor changes to CN codes across product categories, but no changes to the overall quota volume of 18.3 million tones, or the specific allocation to product categories.
The most prominent change relates to the administration of the quotas, specifically the quota carry-over, which the Commission originally proposed to remove from the new framework.
Quarterly quota carry-over is now back in the final negotiated text, but only for the initial July 2026-27 year, after which the carry-over will be reviewed specific to each product category, taking into account factors including import pressure and its concentration across the trading year; downstream supply availability; and average quota use over the period, taking quarterly usage above 80% as strong evidence to support maintaining the carry-over.
As regards pressure to extend the measure to steel-containing goods – to avoid simply deflecting non-competitive substitutive import pressures downstream – the Commission has expedited the review processes under the regulation:
For certain product categories, scope extension review has been brought forward to 31 December, with stakeholder consultations to begin before 1 July:
- “Tubes, pipes and hollow profiles, of cast iron” – CN codes 73 030010, 73 030090;
- “Non alloy and other alloy wire” – CN codes 72 29 2000, 72 29 9020, 72 29 9050, 72 29 9090; “Stainless Wire” – CN codes 72 23 0011, 72 23 0019, 72 23 0091, 72 23 0099;
- “Non-Alloy and Other Alloy Forged Bars” – CN codes 7214 1000, 7228 1050, 7228 4010, 7228 4090).
Further downstream scope extensions to products containing “a significant amount of steel” will be assessed by 30 June 2027, but the Commission has not been granted authority to expand the product scope without a new legislative proposal. This is likely to be deemed far too slow a pace by industry associations like EUROMETAL, which recently spearheaded a campaign – with broad support across the European steel value chain – to extend the incoming steel trade measure to all steel-containing products across CN headings 73-95 before implementation 1 July.
The Commission has been granted extensive power to vary quota volumes by product category, in so far as total allocations are not adjusted beyond 14,400,000- 22,200,00 t (from the initial allocation of 18,345,922 t). “Union interest” returns as a central factor for consideration in adjusting quota levels, as well as new provisions relating to the EU steel sector’s “decarbonisation path,” domestic supply diversity and associated cost inflation, security and defense, and demand evolution.
Finally, the agreed text annex contains a joint statement from the EU’s lawmaking institutions on the continuance of steel imports from Russia – a supply route criticised by many in the EU steel market given the existing sanctions regime – suggesting that the new regulation will not modify the existing quota-based sanctions exemption for Russian-origin steel, and citing the existing “transitional agreement” phase-out deadline of September 2028.
The agreed text does explicitly provide that countries under restrictive measures would not be allocated country-specific quotas, confirming that Russia’s historic trade flows with the EU will not be accommodated in the allocation of quota volumes, for as long as sanctions remain.
Author: Benjamin Steven
