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Partner, Sayenko Kharenko
Ms Makhinova is recognized as being among the leading individuals for International Trade by The Legal 500, “Best in international trade” by the LMG Europe Women in Business Law Awards; in International Trade for Ukraine and in Franchising by Client Choice Awards; in Franchising by Who’s Who; in Trade by the Best Lawyers International; in Trade and Customs by Who’s Who: Trade & Customs. She is a country expert on franchising, distribution and agency for the International Distribution Institute and a Chair of the Working Group on International Trade of the ACC.
Trade Defense Remedies: The Most Frequently Used Protectionist Measures of 2020
2020 was, indeed, one of the most unpredictable years, providing numerous challenges to businesses and governments. Nobody was ready for the COVID-19 pandemic or for the unparalleled restrictive measures applied by governments around the globe. As a result, international trade in goods and services fell sharply in 2020. To save the economy, governments have applied unprecedented state aid and other protectionist measures, including trade defense remedies, a brief overview of which is set out in this article.
2020 has demonstrated a boost in trade remedies around the globe, as confirmed by the Overview Of Developments In The International Trading Environment Annual Report By The Director-General (Mid-October 2019 to mid-October 2020). Specifically, looking at relevant WTO statistics for the periods from 2012 to July 2019 — June 2020, it is evident that during the latest period WTO members had initiated different trade defense proceedings much more often than ever before, i.e. 32.7 initiations per month. During the latest period, 303 anti-dumping investigations (as compared with 203 and 178 investigations in July 2017 — June 2018 and in July 2018 — June 2019, respectively); 48 anti-subsidy investigations (compared with 52 and 37 investigations in July 2017 — June 2018 and in July 2018 — June 2019); and 32 safeguard investigations had been initiated (compared with 9 and 21 investigations in July 2017 — June 2018 and in July 2018 — June 2019). The vast majority of such measures are traditionally applied against imports of steel products, chemicals, textile, wood, machinery, etc.
The said trend is predictable and could be easily explained by the global crisis caused by COVID-19 and the intentions of governments to save their economies and jobs.
Statistics in Ukraine
Ukraine also actively initiated trade defense investigations and applied different remedies in 2020.
As for the new proceedings, the following ones were initiated in 2020: in January, interim review of anti-dumping measures applied to imports of ammonium nitrate with origin in Russia; in February, safeguard investigation related to imports of polymer materials and anti-dumping investigation related to imports of turning-opening mechanisms for windows with origin in Turkey; in May, safeguard investigation related to imports of freshly-cut roses; in June, anti-dumping investigation related to imports of plywood with origin in Belarus; in July, safeguard investigation related to imports of cables; in November, an anti-dumping investigation related to imports of heat-insulation materials with origin in Russia and Belarus; in December, an anti-dumping investigation related to imports of galvanized steel with origin in China.
The year 2020 was also rich for application of different remedies. Namely, over the last year the following remedies were applied: in February, anti-dumping measures to imports of gas concrete blocks with origin in Belarus and anti-dumping measures to imports of ropes with origin in Russia; in May, anti-dumping duties to imports of matches with their origin in Belarus and Russia, as well as anti-dumping duties on imports into Ukraine of seamless hot-finished pipes originating in China; in November, safeguard duties on imports of polymer materials.
Additionally, last year Ukraine extended the following anti-dumping duties for the next 5 years: in September, anti-dumping duties applied to imports of ropes with origin in China; in December, anti-dumping duties applied to imports of corrosion-resistance pipes with origin in China and anti-dumping duties applied to imports of switches with origin in Russia.
It is noteworthy that last year was unique because of application of preliminary measures, namely: in May, preliminary safeguard duties related to imports of polymer materials and preliminary anti-dumping duties related to imports of bolts from China were applied.
Benchmark Trends of Trade Defense Proceedings in Ukraine
Public Refusal to Initiate a Case
Under Ukrainian law, if the Interdepartmental Commission on International Trade (i.e. a state authority responsible for adoption of key decisions in the course of investigations, e.g. on initiation, application of measures etc.) adopts a decision to reject an application on initiation of an anti-subsidy investigation in the absence of justified grounds, it shall oblige the Ministry of Economy of Ukraine (i.e. a state authority responsible for conducting investigations) to notify the applicant on the adopted decision. Ukrainian law requires only publication of the official notice on initiation of an investigation, but not on its rejection.
Notwithstanding the above, in July 2020 the Commission’s decision to reject an application on initiation of an anti-subsidy investigation related to imports of oil products from Russia was published for the first time in the history of Ukraine. This was done in response to enormous public reaction to the news on potential initiation of the case and further application of countervailing measures.
Termination of Investigations Without any Measures
Before 2020, almost all investigations were terminated with application of measures. However, 2020 brought quite bad news for Ukrainian domestic producers. Particularly, five investigations were terminated without any measures, namely: safeguard investigations related to imports of caustic soda; related to imports of nitrogen fertilizers; related to imports of complex fertilizers; related to imports of syringes. At the very beginning of January 2021, the anti-dumping investigation related to imports of auto aluminum wheels with origin in China and Russia was also terminated without measures. The vast majority of the said investigations were terminated without measures because the latter do not comply with national interests or in the absence of a causal link or unforeseen developments. This trend is very important for foreign producers and their customers because it clearly demonstrates that the latter must actively participate in investigations and try to prove their position.
Recall of Applications on Investigation/Review Initiation
Ukrainian law directly stipulates the possibility to recall an application on investigation/review initiation only at the initial stage when official proceedings have not been commenced. However, in 2020 the sunset review and the interim review of anti-dumping duties related to imports of ammonium nitrate with origin in Russia was terminated because the domestic industry recalled the relevant application on initiation of review almost at the final stage of review. This is a widespread practice in other jurisdictions because such an option is better for domestic producers. The fact is that if the application is just recalled, the domestic industry could again initiate the case as soon as the situation improves and does not need to wait at least a year as in the case of termination of an investigation due to absence of the relevant grounds.
Ukraine has not applied preliminary measures in trade defense proceedings since 2008. However, in May 2020 Ukraine applied preliminary safeguard duties to imports into Ukraine of polymer materials and preliminary anti-dumping duties related to imports of bolts with their origin in China. Such practice is good for domestic producers as they could expect application of preliminary measures shortly after initiation of an investigation.
Anti-dumping vs Safeguards
Previously, the Ukrainian producers have followed the well-established practice of other WTO countries and in the vast majority of cases have initiated anti-dumping investigations to protect the domestic market against imports. However, 2020 has demonstrated a different trend. Particularly, Ukraine initiated 3 new safeguard investigations and only 4 anti-dumping ones, which was not typical for Ukraine during the last 8-9 years. At the same time, due to strong opposition from the side of foreign trade partners, specifically the EU, as well as termination of 3 safeguard investigations without measures, one could expect that in 2020 the era of safeguard investigations had already passed.
Publication of Final Reports in Safeguard Investigations
It is worth emphasizing that Ukrainian law does not stipulate the obligation of the Ministry and/or the Commission to publish the whole final report following the results of safeguard investigation even though such a publication is directly set out by the Agreement on Safeguards. The practice of the Ministry in respect of publication of reports differs considerably from investigation-to-investigation. In some safeguard investigations the Ministry publishes such reports in electronic case materials available only to interested parties of investigations and only upon the request of such parties. In other cases, the Ministry refuses access of the interested parties to the reports and they can gain such access only through a court.
Liberalization of Safeguard Quotas
Ukrainian law stipulates a possibility to review safeguard measures in order to either liberalize them or abolish before expiry. In practice, such possibility has not been used yet, because the law does not set out the relevant implementation procedure. However, in 2020 the relevant decision was adopted for the first time in the history of Ukraine. The decision set out that the general quota shall replace the country-specific quota applied to imports into Ukraine of sulfuric acid. This is an important example for the interested parties that now can try to apply for early expiry liberalization/termination of the safeguard measures.
Shall the Ministry/the Commission Take Into Account Position of Non-interested Parties or Not?
Before 2020 the Commission and/or the Ministry took into account only evidence and arguments submitted by duly registered interested parties (i.e. domestic producers, foreign producers, importers, end customers etc.), the list of which was defined at the very beginning of the investigation. However, in safeguard investigations related to imports of nitrogen fertilizers, and complex fertilizers the position of the Commission/the Ministry has changed. Particularly, the Ministry has made its conclusions and prepared its final report with recommendations to apply quotas based on the position of the interested parties, but while adopting the final decision, the Commission has also considered the positions of several associations of end customers that have not participated in the course of investigations and have not been duly registered as interested parties. Now the said decision is challenged before the court and the latter should drive the nail into the head in this regard.
Recent Case Law
Much of 2020 case law once again related to the special limitation period for challenging decisions on application of measures before the courts. Under the Law of Ukraine On Foreign Economic Activity, a one month limitation period shall apply in such cases. But the law itself does not explain precisely from which date such period is calculated (i.e. adoption of a decision on imposition of a measure, official publication of the notice on the above decision or entry into force of the measure, which in Ukraine usually takes from 30 to 60 days). In case 826/7768/17, the Supreme Court of Ukraine clarified that the one month limitation period shall start from adoption of a decision on imposition of a measure by the Commission. This approach was confirmed in numerous cases in 2020. The courts have rejected all cases where the said period was missed even by a few days, e.g. 7 days.
The case law of 2020 once again confirmed that the courts are reluctant to apply interim remedies (interim suspension of measures) for the period of court proceedings. The fact is that while challenging trade defense measures, claimants often submit motions on interim remedies to the courts. The court of first instance grants such motions in certain cases. In 2020, there were several examples of application of such measures at the level of appeal courts, but in any case, the Supreme Court of Ukraine did not accept such an approach and abolished the said measures.
In certain cases, the courts began to request from the Ministry all confidential case materials, even questionnaires of certain interested parties. This is quite dangerous for interested parties because under Ukrainian law all documents submitted during a court proceeding are available for all participants of disputes (usually rivals). It goes without saying that this loophole must be regulated as soon as possible.
Moreover, in 2020 courts interpreted due submission of questionnaires and additional questionnaires in several disputes. Under Ukrainian law any document shall be regarded as submitted within the deadlines set out by the Ukrainian investigative authorities provided that such a document is submitted and the most important registered by the end of the working hours of the relevant registry in the last date of the set deadline. The courts have agreed on the Ministry’s approach not to take into account questionnaires/additional questionnaires even if the latter are submitted on the last day of the deadline, but not duly registered. Therefore, companies, participating in trade defense proceedings in Ukraine, must take into account the above peculiarities and always check the working hours of the registry, that could be changed from time-to-time, especially in the COVID-19 situation.