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Turkey Initiated a Safeguard Investigation to Steel Imports

Turkey Initiated a Safeguard Investigation to Steel Imports

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In recent years, the USA has been pursuing a very protectionist approach against imports and accordingly, it has initiated safeguard investigations and imposed very high measures (e.g. steel product).

Such approach has led other countries to implement a protectionist approach as well. In other words, the increasing number of trade defence measures taken by third countries has triggered new investigations of the EU to protect its domestic industries from the potential serious injury on the basis of the most recent developments, such as any trade diversion resulting from the US measures or potential tendencies after such developments.

Such an approach has particularly become crucial for the exporting firms active in a market which is characterized by extensive trade flows and where the customers as well as the suppliers operate on a global level. Thus, any restriction concerning exports/imports of the products which are largely commoditized (no significant differences) and whose price levels are relatively comparable across jurisdictions and dependent on the conditions of competition at a global level would definitely raise concerns and trigger, at least, counter-investigations to protect the interest of the country’s main producers.

In this regard, the aforesaid ongoing world-wide protectionist approach in the international trade regime has finally found its response from Turkey as well. Right after the EU’s newly initiated safeguard investigation concerning iron & steel products (on 26 March 2018), the Turkish Ministry of Economy (“Ministry”) has launched a safeguard measure investigation concerning the imports of certain iron & steel products and announced this in the Official Gazette dated 27 April 2018 and numbered 30404. The result of the investigation which covers a wide range of product and all countries will absolutely have an effect on export, import and domestic markets for the subject products.

In the light of above, we will provide a brief of recent events in this regard from the USA and the EU. Then, Turkish Ministry of Economy’s recent investigation will be discussed.

Background

As widely discussed, US President Donald Trump last year issued a controversial executive order calling the Department of Commerce to open an investigation whether the steel imports harmed the US national security. The executive order aimed to protect the national security by imports in accordance with a decades-old, rarely used law, namely Section 232 of the Trade Expansion Act. Following this executive order, the Department of Commerce has opened an investigation and analyzed the effects of the imported steel to the US. As a result of the investigation, “The Effect of Imports of Steel on the National Security” was issued on 11 January 2018. The report indicates that the imports of the steel have “weakened US internal economy and threatened to impair the national security as defined in Section 232”.

Protectionist approaches by the President Trump are not limited with this case. Within his administration, the USA has withdrawn from Trans-Pacific Partnership and is considering to withdraw from NAFTA. Further, new measures on steel and aluminum, solar panels are also in the agenda. In the news, this whole process is called “trade wars”.

The EU officials have previously stated that if the USA is to impose measures, then the EU would take these three steps to protect itself:

  • taking the case to the WTO,
  • imposing further safeguard measures and
  • impose tariffs on a series of American-made goods.

Within this scope, the EU Commission has launched a safeguard investigation concerning steel products to prevent trade diversion into the EU. According to the EU, the surveillance system for steel imports, which has been in place since March 2016, has granted evidence that imports of certain steel product have increased. The investigation is on-going.

Turkish Investigation

An action from the Turkish government against the actions taken by US and EU had been expected to prevent trade diversion into Turkey. As expected, the Ministry on 27 April 2018 ex officio initiated a safeguard investigation concerning the imports of steel products by the Communiqué on the Safeguard Measures in Imports No: 2018/3 (“Communiqué”) to find out whether the steel imports were caused serious injury the domestic industry and/or threatens to cause serious injury. The investigation covers 21 different steel products and scope can be widened pursuant to the information collected throughout the investigation. Currently, the following product categories are being investigated by the Ministry to find whether the imports were caused serious injury the domestic industry and/or threatens to cause serious injury: (i) flat rolled products, (ii) bars, rods and angles, (iii) railway or tramway truck construction materials, (iv) tubes, pipes, hollow profiles and (v) stainless steel.

As an important note, the Board of Evaluation of Safeguard Measures decided to consider the issue whether the products originating from EU may be exempted from the measures, if imposed.

Within this scope, exporters may cooperate with the Ministry in this investigation to enjoy no measure or lesser measures than those who do not cooperate. As such, exporters wishing to cooperate with the Turkish government are required to fill-in a questionnaire published in the Turkish Ministry of Economy’s website and submit it to the Directorate General of Imports within 30 days. By doing so, exporters are considered as interested parties and are given the chance to defend themselves in the process. Additionally, any interested party may attend the public and private hearing where they have the opportunity to orally present their position. Any oral or written communication regarding the investigation is carried out in Turkish.

Within the said questionnaire, the exporters should present the following matters to the Turkish Ministry’s attention: (i) information on the concerned products (types, production technology, usage, competitiveness, substitutability etc.), (ii) market structure of the concerned product and (iii) economic indicators (profitability, domestic sales, export sales, employment etc.) of the exporting company.

Importing companies may also fill-in a questionnaire to be considered as an interested party. In this questionnaire, the following information should be provided by the importers: (i) status of the importer (industrial user, exporter, only importer, distributor or etc.) and (ii) purposes for the imports (raw material, exporting by processing, reselling to the domestic market or etc.).

On the other hand, the domestic industry may also participate in the investigation and defend their interest by filling-in a questionnaire, which includes the following information: (i) the distribution channels, (ii) raw materials of the concerned product, (iii) technology of the concerned product, (iv) worldwide demand amount and (v) the domestic capacity.

As the above information suggests, the Ministry aims to collect information regarding the concerned product in terms of export, import and production. The information provided to the Ministry is crucial for the findings as to whether the iron-steel imports cause serious injury to the domestic industry.

Conclusion

Following the international trade measures imposed by the USA, mainly the import tariffs on the steel and aluminum, the EU has also started a safeguard investigation regarding to steel imports, as a response to the actions taken by the USA. Shortly after, Turkey announced that it initiated a safeguard investigation concerning the steel imports. It is not yet clear that the imports originating in European Union will be exempted from the possible safeguards measures. While the reflections of the Turkish investigation are yet to be seen, many exporters around the world are expected to participate in this investigation to protect their interest and to enjoy a potential no measure or lesser measures than their competitors. Therefore, it is undoubted that this investigation will shape the relevant markets in Turkey.

By Ertugrul Can Canbolat, Senior Associate, Baran Can Yıldırım, Associate, Sinan Lahur, Associate, ACTECON