EC adjusts steel quotas post-ban on Russia, Belarus imports; India to gain?

The European Commission (EC) has decided to adjust the safeguard measure to ensure the import bans imposed on Russia and Belarus do not create a shortage of steel supply in the European Union (EU) in the categories affected, and that Union steel users can continue sourcing those volumes from other sources.

It may be recalled that the EU banned the imports of steel products originating in Belarus and imports of certain steel products originating in Russia after the latter invaded Ukraine on 24 Feb’22. As a result of these measures, imports from Belarus and Russia, subject to the safeguard measure, will no longer be able to enter the Union.

However, the EU needs to ensure that this ban does not lead to shortage of materials in the categories affected for steel users and ensure they can source from alternate sources.

How will the volumes be distributed?

Consequently, in each product category where Belarus and Russia had country-specific tariff rate quotas (CSTRQs), the EC has proportionally redistributed those volumes among other exporting countries based on the latter’s share of imports in 2021.

For instance, as per the EC website, say if Belarus had a yearly quota of 1 million tonnes in category X, this must now be redistributed among the other exporting countries. Now, if, in 2021, Turkey was supplying 35% of category X entering the EU under the steel quotas, and India, 20%, then from this 1 mnt formerly allocated as a quota to Belarus will now be split according to the other countries’ share of imports in 2021. Turkey will get an additional 350,000 tonnes on top of its existing quotas, while India will get an additional 200,000 t.

It is relevant to ensure sufficient supplies of steel products into the Union market, since Belarus and Russia mostly exhausted their CSTRQs in 2021.

To maintain the overall level of imports, the EC has not taken into account the volumes from Belarus and Russia, nor the import volumes from countries currently excluded from the measure, since including them will reduce the proportion of all the other countries, rendering the exercise ineffective.

In addition, for each product category affected the Commission has established a share of imports for countries having a CSTRQ and a share of imports for countries falling under the residual quota respectively.

Implications of the adjustment

• This approach ensures a fair treatment of the different origins, allowing EU steel users to make effective use of the volumes that originally were subject to the CSTRQs attributed to Belarus and Russia, thereby avoiding any risk of shortage.
• The import ban on Russian and Belarus steel provides a three-month transition period to wind down existing contracts. During the transition period, any goods bought in these countries under contracts established prior to the cut-off date (2 Mar’22 for Belarus, and 16 Ma’22 for Russia) – including ancillary contracts necessary for the execution of these contracts – will still be allowed to enter the EU.
• Steel exports from Belarus and Russia will drop significantly during the three-month transition period following the export bans and will cease fully thereafter.
• However, as there will no longer be an import quota specifically assigned to Russia and Belarus, these products will need to be imported under the (proportionally increased) residual quotas in the respective product categories, which also allow for duty free imports.
• India stands to benefit since it has substantial share across product categories in which Russia and Belarus supplied to the EU. These include non-alloy and other alloy hot rolled and cold rolled sheets and strips, plates, stainless steel HR and CR sheets and strips among other items.