The EU may adopt trade defence remedies against dumped or subsidised imports from third countries leading to an increase in tariff duties. In addition, the EU may decide to protect its industry against a sudden increase in imports of a particular product by means of safeguard measures in the form of import quotas. Special safeguard mechanisms are also available against textile and clothing products as well as other specific products originating in the Chinese mainland. Traders may also request the EU to tackle certain trade barriers on third markets affecting their commercial interests through the so-called "Trade Barriers Regulation".

2.10.1 Anti-dumping and Anti-subsidy Measures

In order to combat unfair trade practices which cause or threaten to cause material injury to the EU industry, following certain procedures the EU may increase the import duties on imports of specific products from certain countries for which dumping or subsidisation is found.

a) Anti-dumping

Council Regulation 384/96, as amended, provides the main legal basis for the EU's anti-dumping measures. According to this Regulation, anti dumping duties are to be imposed if three conditions are met: (i) a finding of dumping;¹ (ii) a determination of material injury (or threat thereof) to EU industry;² and (iii) the adoption of measures is in the interest of the EU as a whole.³

The European Commission is responsible for investigating complaints and assessing whether they are justified. It can also impose provisional measures. However, definitive measures can only be imposed by the Council.

i. Initiation of the Investigation

Proceedings for an investigation can be initiated by written request from the EU industry or from an EU Member State. Any natural or legal person, or any association not having legal personality, acting on behalf of the EU industry (i.e. representing at least 25% of EU total production of the product concerned), may submit a written complaint to the European Commission (or to any EU Member State). If the complaint contains sufficient "prima facie" evidence of dumping and material injury, the European Commission will initiate an anti-dumping proceeding. Once it has received the complaint, the European Commission has 45 days to decide whether to initiate an investigation or reject the complaint.

ii. Main Steps of the Investigation

The investigation is carried out by the European Commission (Directorate-General for Trade). In cases involving the Chinese mainland, the European Commission will identify an analogue country with similar conditions which will be taken into account in order to determine the normal value of the products concerned. Regardless of this, exporters have the opportunity to claim market economy status (MES) if they can demonstrate that they operate under market economy conditions and are free from significant State interference. If a claim for market economy status is accepted, the normal value will be calculated on the basis of the cost information provided by the exporter. If the claim for market economy status is rejected, the exporters may still claim that they are free from State interference with respect to export prices, and request individual treatment (IT) in the calculation of anti-dumping duties.

From the date of publication of the notice of initiation in the Official Journal, Chinese exporters have 10 days to comment on the analogue country selected; 15-21 days to send in the market economy status claim (where individual treatment may also be requested); 37 days to submit the questionnaire response containing detailed information about the company's export activities in the EU; and 37 days to submit their views on injury to the EU industry. These time-limits may be extended.

In cases where an investigation involves a significant number of exporters, the European Commission may resort to sampling (i.e. the selection of representative companies on which to base the calculations of dumping). Exporters wishing to participate in the sample must submit information on their domestic and export sales as well as their production volume within 10-15 days after initiation.

A final determination on a claim for market economy status should be issued no later than three months after initiation. However, in practice, this time limit is seldom respected. Such claim may also be subject to an on-the-spot verification by the European Commission. Three or four months after initiation, Commission officials may carry out further verification visits at the exporters' premises in the Chinese mainland, in order to ensure that any of the information submitted is accurate.

Selected Time Limits of EU's Anti-dumping Proceedings against Mainland-origin Products

From the date of publication of the notice of initiation in the Official Journal	Actions
Within 10 days	Exporters to comment on the analogue country selected by the Commission, whose information (e.g. market and cost data) will be used for calculation of dumping margin of the concerned products.
Within 15 days	Exporters to indicate their interest to be selected for sampling to the Commission and provide the information requested in the Notice of Initiation.
Not later than 15 days	Interested parties not named in the anti-dumping complaint to make themselves known to the Commission and request questionnaires from the Commission.
Within 15-21 days	Exporters to send the 'market economy status' claim, and request for 'individual treatment'.
Within 37 days from the date of notification of being included in the sample	Sampled exporters to submit duly completed questionnaire about their companies' export activities in the EU to the Commission.
Not later than 9 months	The Commission may impose provisional anti-dumping duties.
Within 15 months	The Commission must conclude the investigation. The Commission may terminate the proceeding without the imposition of anti-dumping duties; or impose definitive anti-dumping duties (through a Council Regulation); or conclude the investigation by accepting ‘price undertakings' from exporters agreeing to revise their prices.

Note: The time limits are for reference only. Different anti-dumping investigations may have different time limits, which are specified in the relevant Notice of Initiation published in the Official Journal of the EU.
Source: Council Regulation 384/96 (OJ 1996 L56, as amended)

iii. Outcome of the Investigation

Nine months after initiation, the European Commission may impose provisional duties, if the existence of dumping and injury to the EU industry has been preliminarily established, as well as EU interest. The investigation must be concluded within 15 months from initiation. The European Commission may terminate the proceeding without the imposition of anti-dumping duties; or impose definitive anti-dumping duties (through a Council Regulation); or conclude the investigation by accepting undertakings from exporters agreeing to revise their prices. If duties are imposed, they will expire five years after their date of imposition or after the conclusion of the review of the measures concerned. The duties imposed are calculated according to the dumping or injury margin, whichever is lower.

iv. Undertakings

Hong Kong traders would be interested to know that, once it becomes clear that the investigation will lead to the imposition of duties, the companies concerned might want to consider price undertakings in order to avoid the imposition of such duties against their exports. Undertakings are a form of anti-dumping measure where an exporting producer undertakes to increase its export prices of the product concerned to the Community to non-dumped or non-injurious levels. Undertakings are negotiated with the Commission late in the anti-dumping investigation, when the duty rates have been calculated on the basis of the cooperating exporting producers' dumping or injury margins. They can be negotiated with respect to both provisional and definitive duties.

The acceptance by the Commission of an undertaking leads to the non-application of provisional or definitive anti-dumping duties to the imports of the product concerned manufactured by the company benefiting from the undertaking. The Commission enjoys wide discretion in accepting or rejecting undertakings offered by exporting producers. As a general rule, the Commission will not accept undertakings from exporters which did not cooperate or did not sufficiently cooperate in the investigation, or which did not produce or export the product concerned during the period of investigation.

In light of the above, price undertakings would only be an option for companies which cooperated in the anti-dumping investigation and for which the Commission has found dumping. Each company will have to assess whether a price undertaking is a better solution than paying the duties.

v. Appeal

Individual cooperating exporters may challenge the definitive anti-dumping duties before the Court of First Instance (CFI) and subsequently appeal to the European Court of Justice (ECJ) on points of law only. A WTO Member (including, of course, the Chinese mainland) may have recourse to the WTO dispute settlement system to discuss the conformity of the adopted measures with the WTO Anti-dumping Agreement.

EU's Anti-dumping Measures against Mainland-origin Products
(Measures in Force as at 29 February 2008)

Definitive Duties (44 cases)

Imposition Date		Product	Rate of Duty *	Remarks
1.	4.4.1996	Certain iron or steel tube or pipe fittings	58.6%	Original duty maintained for another five years starting from 7.6.2003 consequent to an expiry review. Consequent to two separate circumvention investigations, AD duty has been extended, with effect from 2.12.2004, to imports of the same products consigned from Indonesia or Sri Lanka, whether declared as originating in Indonesia or Sri Lanka or not. Consequent to a circumvention investigation, AD duty has been extended, with effect from 30.4.2006, to imports of the same products consigned from the Philippines, whether declared as originating in the Philippines or not.
2.	19.1.1997	Certain bicycle parts	48.5%	-
3.	17.12.1997	Silicon metal	49%	Original duty maintained for another five years starting from 5.3.2004 consequent to an expiry review. Consequent to a circumvention investigation, AD duty has been extended, with effect from 20.1.2007, to imports of the same products consigned from Korea, whether declared as originating in Korea or not.
4.	10.4.1998	Tungsten carbide and fused tungsten carbide	33%	Duty maintained for another five years starting from 1.1.2005 consequent to an expiry review. On 3.8.2005, a partial interim review extended the measures to tungsten carbide simply mixed with metallic powder.
5.	26.6.1999	Magnesium oxide	i. the difference between the minimum import price of EUR 112 per tonne and the net, free-at- Community-frontier price before duty in all cases where the latter is less than the minimum import price, and established on the basis of an invoice issued by an exporter located in the mainland of China directly to an unrelated party in the Community; ii. zero, if the net, free-at-Community-frontier price before duty is established on the basis of an invoice issued by an exporter located in the mainland of China directly to an unrelated party in the Community and equal to or higher than the minimum import price of EUR 112 per tonne; and iii. equal to an ad valorem duty of 27.1% in all other cases not falling under (i) and (ii) above.	Duty maintained for another five years starting from 26.5.2005 consequent to an expiry review.
6.	18.8.1999	Steel ropes & cables	60.4%	Consequent to an anti- circumvention investigation, AD duty has been extended, with effect from 31.10.2004, to imports of the same products consigned from Morocco, whether declared as originating in Morocco or not.
7.	19.2.2000	Dead burned (sintered) magnesium	i. the difference between the minimum import price of EUR 120 per tonne and the net, free-at- Community-frontier price before duty in all cases where the latter is less than the minimum import price, and established on the basis of an invoice issued by an exporter located in the mainland of China directly to an unrelated party in the Community; ii. zero, if the net, free-at-Community-frontier price before duty is established on the basis of an invoice issued by an exporter located in the mainland of China directly to an unrelated party in the Community and equal to or higher than the minimum import price of EUR 120 per tonne; and iii. equal to an ad valorem duty of 63.3% in all other cases not falling under (i) and (ii) above.	Original duty maintained for another five years starting from 13.5.2006 consequent to an expiry review.
8.	26.5.2000	Glyphosate	29.9%	Consequent to an anti- circumvention investigation, AD duty has been extended, with effect from 1.2.2002, to imports of the same products consigned from Malaysia and from Taiwan, whether declared as originating in Malaysia or Taiwan or not. Duty (as extended to Malaysia and Taiwan) maintained for another five years starting from 1.10.2004 consequent to an expiry review.
9.	27.5.2000	Silicon carbide	52.6%	Duty maintained for another five years starting from 26.8.2006 consequent to an expiry review
10.	15.7.2000	Bicycles	48.5%	Duty maintained for another five years starting from 15.7.2005 consequent to an expiry review.
11.	6.10.2000	Certain ring binder mechanisms	17 and 23 rings: Amount by which the price falls below EUR 325 per 1,000 pieces Others: 78.8% (except for one company: 51.2%)	Original duty maintained for another four years starting from 5.12.2004 consequent to an expiry review. Consequent to a circumvention investigation, AD duty has been extended, with effect from 2.7.2004, to imports of the same products consigned from Vietnam, whether declared as originating in Vietnam or not. Consequent to a circumvention investigation, AD duty has been extended, with effect from 13.1.2006, to imports of the same products consigned from Laos, whether declared as originating in Laos or not. New anti-circumvention investigation is ongoing (with the product concerned being allegedly circumvented via Thailand and allegedly slightly modified)..
12.	20.7.2001	Integrated electronic compact fluorescent lamps	66.1% (except for eight companies ranging from 0% to 59.5%)	Consequent to a circumvention investigation, AD duty has been extended, with effect from 10.6.2005, to imports of the same products consigned from Vietnam, from Pakistan and from the Philippines whether declared as originating in Vietnam, Pakistan or the Philippines or not. On 7.9.2006, a partial interim review excluded lamps working only on direct current voltage from the scope of the measure with retroactive effect. Duty maintained for another five years starting from 18.10.2007 consequent to an expiry review.
13.	19.9.2001	Gas fuelled, non-refillable and certain refillable pocket flint lighters	EUR 0.065 per lighter	Duty extended and maintained for another five years starting from 13.12.2007 consequent to an expiry review. Pursuant to the extension, the duty currently applies to: -- gas-fuelled, non-refillable pocket flint lighters -- gas-fuelled, refillable pocket flint lighters, incorporating a plastic tank body The duty does not apply to gas-fuelled, refillable pocket flint lighters, incorporating a plastic tank body, with a value per piece equal to or greater than EUR 0.15,.
14,	10.5.2002	Coumarin	EUR 3,479 per tonne	Consequent to a circumvention investigation, AD duty extended, with effect from 31.12.2004, to imports of the same product consigned from India or Thailand, whether declared as originating in India or Thailand, or not. Consequent to a circumvention investigation, AD duty has been extended, with effect from 11.11.2006, to imports of the same products consigned from Indonesia or Malaysia, whether declared as originating in Indonesia or Malaysia or not. Expiry review initiated on 8.5.2007.
15.	15.6.2002	Powdered activated carbon	EUR 323 per tonne	Expiry review initiated on 13.6.2007.
16.	26.7.2002	Sulphanilic acid	33.7%	Original duty amended from 21.0% to 33.7% with effect from 13.2.2004 as a result of a reinvestigation. Expiry review initiated on 24.7.2007.
17,	21.9.2003	Para-cresol	40.7% (except for one company whose duty rate is 10.8%)	-
18.	1.11.2003	Furfuryl alcohol	EUR 250 per tonne (except for four companies ranging from EUR 84 to EUR 160 per tonne)	-
19.	12.3.2004	Sodium cyclamate	EUR 0.26 per kilo (except for three companies ranging from EUR 0 to EUR 0.11 per kilo)	An anti-absorption investigation, to examine whether the anti-dumping measures have had an effect on export prices, resale prices or subsequent selling prices in the EU, was initiated on 27 April 2005 and terminated on 24.12.2005. It concluded that no absorption of the anti-dumping duties had occurred.
20.	20.8.2004	Polyethylene terephthalate	EUR 184 per tonne (except for nine companies ranging from EUR 0 to EUR 184 per tonne)	On 28.12.2005 a new exporter investigation resulted in a duty of 45 EUR/ton for one company.
21.	13.11.2004	Okoumé plywood	66.7% (except for four companies ranging from 6.5% to 23.5%)	-
22.	18.3.2005	Synthetic staple fibres of polyesters, not carded, combed or otherwise processed for spinning	49.7% (except for six companies ranging from 4.9% to 26.3%)	Partial interim review initiated on 30.8.2007 to establish whether the measures, imposed especially on imports of PSF originating in Malaysia and Taiwan, are still in the Community interest.
23.	22.1.1995	Furfuraldehyde	EUR 352 per tonne	Duty maintained for another five years starting from 29.4.2005 consequent to an expiry review.
24.	22.7.2005	Hand pallet trucks and their essential parts	46.7% (except for four companies, ranging from 7.6% and 39.9%)	An anti-absorption investigation, to examine whether the anti-dumping measures have had an effect on resale prices or subsequent selling prices in the EU, was initiated on 31.3.2006 and terminated on 7.12.2006. It concluded that no absorption of the anti-dumping duties had occurred. Partial interim review initiated on 7.8.2007 to establish whether highlifters, stackers, scissorlifts and weighing trucks (which could fall under the product scope) are distinct from the product concerned. Partial interim review initiated on request from one producer on 19.12.2007 to establish whether the measure at its current level is still necessary to offset dumping and whether the applicant meets the criteria for market economy treatment.
25.	22.7.2005	Barium carbonate	EUR 56.4 per tonne (except for EUR 6.3 and 8.1 for two companies)	-
26.	30.7.2005	Certain castings	47.8% (except for 5 companies (who obtained 0%) and other companies ranging from 28.6% and 37.9%) The 0% duty also applies to companies that provide an undertaking.	Imports by companies from which undertakings are accepted by the Commission and whose names are listed in Commission Decision 2006/109/EC are exempt from the anti-dumping duties, on the condition that they are manufactured, shipped and invoiced directly by the said companies to the first independent customer in the Community, that they are accompanied by a valid undertaking invoice and that the goods declared and presented to customs correspond precisely to the description on the undertaking invoice.
27.	17. 9.2005	Finished polyester filament fabrics	74.8% (except for several named companies, ranging between 14.1% and 55.7%)	An anti-absorption investigation, to examine whether the anti-dumping measures have had an effect on resale prices or subsequent selling prices in the EU, was initiated on 28.12.2006 and resulted in an amendment of the duties, effective from 22.9.2007.
28.	8.10.2005	Trichloroisocyanuric acid (TCCA)	42.6% (except for four companies ranging from 7.3% to 40.5%).	-
29.	13.10.2005	Magnesia bricks	39.9% (except for six companies ranging from 2.7% and 27.7%)	Commission Decision 2005/704/EC accepting undertakings from certain companies and exempting such companies from the anti-dumping duties was repealed by Decision 2007/440/EC, effective from 27.6.2007, due to breach of the undertakings.
30.	20.11.2005	Stainless steel fasteners and parts thereof	27.4% (except for 11.4% and 12.2% for two companies)	-
31.	9.12.2005	Granular polytetrafluoroethylene (PTFE) resin	55.5%	-
32.	15.9.2006	Chamois leather	58.9%	-
33.	16.11.2007	Dicyandiamide	49.1%	-
34.	7.10.2006	Footwear with uppers of leather	16.5% (except for 9.7% for one company)	The measure is in force for a period of two years. New anti-circumvention investigation is ongoing (with the product concerned being allegedly circumvented via Macao).
35.	27.4.2007	Ironing boards	38.1% (except for 34.9%, 36.5% 26.5%, 18.1% and 0% respectively, for five companies)	-
36.	28.7.2006	Lever arch mechanisms	47.4% (except for 27.1% for one company)	-
37.	12.10.2007	Peroxosulphates	71.8% (except for 24.5% and 0% for two companies)	-
38.	30.9.2006	Plastic sacks and bags	28.8% (except for duties ranging from 4.8% to 12.8% for eight companies)	Pursuant to a new exporting producers' request, one Thai company (out of six Chinese and three Thai companies) was granted new exporting producer treatment on 22.11.2007. Partial interim review initiated on 9.3.2007 concerning the market economy status of one company.
39.	18.4.2007	Frozen strawberries	0% for one company. For all other companies, the duty is the difference between the minimum import price and the net free at Community frontier price, before duty, provided the latter is lower than the former. The minimum import price is determined as follows: -- In case of strawberries containing added sugar or other sweetening matter with a sugar content exceeding 13% by weight: EUR 496.8 per tonne. -- In case of strawberries containing added sugar or other sweetening matter with a sugar content not exceeding 13% by weight: EUR 566.3 per tonne. -- In case of strawberries not containing added sugar or other sweetening matter: EUR 598 per tonne. In cases where the customs declaration indicates a price different from the price actually paid (post-importation price), a fixed anti-dumping duty shall apply (unless the sum of such fixed duty and of the post-importation price is below the minimum import price). In these cases, the fixed anti-dumping duty is determined as follows: -- In case of strawberries containing added sugar or other sweetening matter with a sugar content exceeding 13% by weight: EUR 62.6 per tonne for one company and EUR 169.9 per tonne for all other companies. -- In case of strawberries containing added sugar or other sweetening matter with a sugar content not exceeding 13 % by weight: EUR 71.3 per tonne for one company and EUR 193.7 per tonne for all other companies. -- In case of strawberries not containing added sugar or other sweetening matter: EUR 75.3 per tonne for one company and EUR 204.5 per tonne for all other companies.	-
40.	28.1.2006	Tartaric acid	34.9% (except for 0%, 4.7% and 10.1% for three companies)	On 22.2.2008, a partial interim review excluded 'D' grade of the product concerned from the measure with retroactive effect.
41.	14.3.2007	Tungsten electrodes	63.5% (except for 41%, 38.8% and 17% for three companies)	-
42.	22.6.2007	Saddles	29.6% (except for six companies ranging from 0% to 5.8%)	-
43.	6.12.2007	Silico-manganese	8.2%	The measure, imposed for a period of five years, was immediately suspended for a period of nine months, starting on 6.12.2007, due to a temporary change of market conditions.
44.	29.2.2008	Ferro-silicon	31.2% (except for 15.6% and 29% for two companies)	-

Provisional Duties (2 cases)

Imposition Date		Product	Rate of Duty *	Remarks
1.	20.9.2007	Coke (over 80mm)	The duty is equal to the difference between the minimum import price of EUR 227 per tonne and the net, free-at-Community-frontier price, before duty, in all cases where the price is less than the minimum import price.	-
2.	19.9.2007	Polyvinyl alcohol (PVA)	10%	According to the exact technical specification, the measure concerns certain polyvinyl alcohols in the form of homopolymer resins with a viscosity (measured in 4 % solution) of 3 mPas or more but not exceeding 61 mPas and a degree of hydrolysis of 84,0 mol % or more but not exceeding 99,9 mol % falling within CN code ex 3905 30 00 (TARIC code 3905 30 00 20).

Anti-dumping Investigations Underway (14 cases) as at 29 February 2008

Date of Initiation of Anti-dumping Proceedings		Product
1.	4.9.2007	Citric acid
2.	20.10.2007	Prepared or preserved citrus fruits (namely mandarins, etc.)
3.	21.12.2006	Certain compressors
4.	9.11.2007	Iron or steel fasteners (other than of stainless steel)
5.	14.12.2007	Hot-dipped metallic-coated iron or steel flat-rolled products
6.	5.9.2007	Monosodium glutamate
7.	26.9.2007	Certain welded tubes and pipes
8.	6.12.2007	Slightly modified ring binder mechanisms
9.	20.4.2006	Silicon metal (anti-circumvention investigation)
10.	6.12.2007	Certain ring binder mechanisms (anti-circumvention investigation)
11.	6.9.2007	Footwear (with uppers of leather) (anti-circumvention investigation)
12.	16.2.2008	Candles, tapers and the like
13.	16.2.2008	PSC wires and strands
14.	1.2.2008	Stainless steel cold-rolled flat products

Remark: Anti-dumping duty is levied on the basis of CIF price before duty.
Source: Official Journal of the European Union; Trade and Industry Department, Hong Kong SAR Government

b) Anti-subsidy

Council Regulation 2026/97 on protection against subsidised imports, as amended, provides the main legal framework governing the EU's countervailing measures. Apart from the provisions on the definitions and calculation of subsidies,⁴ this Regulation is similar to that on anti-dumping, particularly with regard to the determination of injury, the definition of EU industry, initiation procedures, imposition of provisional and definitive measures, and termination of proceedings.

The three conditions to be satisfied before the imposition of a countervailing measure are that: (i) the subsidy must be specific (i.e. an export subsidy, or a subsidy limited to a company, an industry or a group of companies or industries); (ii) a material injury to EU industry must exist; and (iii) the interest of the EU must be taken into account.

The amount of the countervailing duties is established in accordance with the subsidisation or injury margin, whichever is lower. The margin of subsidisation is calculated in terms of the benefit conferred on the subsidised products, whereas the injury margin is set at a level necessary to remove the injury.

New Anti-dumping and Anti-subsidy Investigations by the EU⁵

	2000	2001	2002	2003	2004	2005	2006	2007
New anti-dumping and anti-subsidy investigations, of which :	31	33	23	8	29	26	36	9
against Chinese mainland-origin products	6	1	4	3	9	8	12	6
against India-origin products	3	8	3	2	0	1	2	0
against Russia-origin products	2	2	3	0	3	1	2	1
against Hong Kong-origin products	0	0	0	0	0	2	0	0

New Anti-dumping and Anti-subsidy Investigations by the EU
by Product Sectors

Product	2000	2001	2002	2003	2004	2005	2006	2007
Iron and Steel	7	16	5	0	13	4	0	6
Chemical and allied products	17	5	5	3	8	3	13	2
Textiles and allied products	0	5	2	2	4	1	2	0
Other mechanical engineering items	1	4	4	0	2	2	2	0
Wood and paper	0	0	0	1	0	0	0	0
Electronics	2	3	3	2	0	7	5	0
Others	4	0	4	0	2	9	14	1
Total new investigations	31	33	23	8	29	26	36	9
(anti-dumping investigations)	(31)	(27)	(20)	(7)	(29)	(24)	35	9
(anti-subsidy investigations)	(0)	(6)	(3)	(1)	(0)	(2)	1	0

2.10.2 Safeguards: Textile and Non-textile Products

In general terms, safeguard measures can be adopted in those cases where there is a sudden increase in imports of a particular product into the EU causing or threatening to cause serious injury to the EU industry. Council Regulation 3285/94 on common rules for imports sets out the provisions for the adoption of safeguard measures by the EU. Measures adopted through this Regulation normally adopt the form of an import quota imposing limits on the importation of the product concerned regardless of its origin (erga omnes). However, as described below, the EU may have recourse to specific safeguard mechanisms against imports from the Chinese mainland.

a) Initiation of a Safeguard Investigation

For any safeguard action, including the specific instruments with respect to the Chinese mainland, the EU industry (one or more EU-based companies) cannot send the petition to the European Commission directly. Instead, a Member State must make a request to the European Commission for action to be taken, or the European Commission can initiate an action on its own initiative. An industry may of course channel a complaint for action through the Member State or States in which it is located. Once a request is made by the Member State, the European Commission will handle the complaint.

Under Regulation 3285/94, before a safeguard measure is applied to particular products, the European Commission must find "serious injury". The investigation must examine the trend of imports and serious injury or threat thereof, in relation to factors including the volume of imports, the price of imports, and the consequent impact on EU producers as indicated by trends in certain economic factors such as production, capacity utilisation, stocks, sales, market share, profits and employment.

b) Outcome of the Investigation

Under Regulation 3285/94, provisional safeguard measures may be adopted by the European Commission alone, in critical circumstances, for up to 200 days. These measures should be in the form of increased customs duties. Definitive safeguard measures can be adopted (increased customs duties and/or quotas) either by the European Commission or by a qualified majority of the Council. If the measure is adopted by the European Commission, the Council has the power to confirm, amend or revoke the safeguard measure. Any measures, if adopted, would have to apply to imports from all third countries, except developing countries whose imports are below a certain threshold. The duration of any of the measures should not exceed four years, but may be extended for four more years.

If the safeguard measure leads to the establishment of a quota, account is taken of the need to maintain traditional trade flows and the volume of goods exported under contracts concluded on normal terms and conditions before the entry into force of the safeguard measure. In general, the quota is not to be lower than the average level of imports over the last three representative years for which statistics are available.

c) Safeguard against Specific Products from the Chinese Mainland

As regards the specific case of products originating in the Chinese mainland, Hong Kong traders should be aware that the EU can impose safeguard measures against textile and non-textile products from the Chinese mainland by using the general safeguard instrument describe above or any of two specific safeguard instruments. These instruments were adopted in 2003 pursuant to the Chinese mainland's Protocol of Accession to the WTO and therefore only apply to the Chinese mainland-origin imports. The two additional instruments are as follows: (i) Regulation 138/2003 on textile products, introduced as Article 10a of Regulation 3030/93 on common rules for imports of certain textile products from third countries (the "Article 10a procedure"); and (ii) Regulation 427/2003 on a transitional product-specific safeguard mechanism (the "TPSSM").

i. Textiles: the Article 10a Procedure

The Article 10a procedure can be triggered if textile imports of Chinese mainland origin, and covered by the WTO Agreement on Textiles and Clothing, threaten to impede, owing to market disruption, the orderly development of trade in those products within the EU.

Under the Article 10a procedure, the European Commission must hold consultations with the Chinese mainland. It must present the latter with a detailed statement of reasons and justifications for consultations, with current data showing market disruption or the threat thereof. During consultations, a quota system will already begin. In order to find a threat or existence of market disruption, the European Commission will examine factors including the volume of the imports concerned, their effect on EU prices for the like or directly competitive products, and the effect on the EU industry concerned.

Formula to Determine the Consultation Levels

Products whose imports from China represent as % of total EU imports in 2004 in volume	2005 Increase over 2004 in % of 2004 imports	2006 Increase over 2005 level in % of 2004 imports	2007 Increase over 2006 level in % of 2004 imports	2008 Increase over 2007 level in % of 2004 imports
7.5% or less	100%	50%	50%	50%
>7.5% to 20%	50%	50%	50%	50%
>20% to 35%	30%	30%	30%	30%
Over 35%	10%	10%	10%	10%

Under the Article 10a procedure, during the EU-China consultations process, the Chinese mainland must hold its shipments of the textiles in question at a level up to 7.5% (or 6% for woollens) above the amount entered during the first 12 months of the most recent 14 month period before the Commission requested consultations. If consultations cannot resolve the threatened or existing market disruption, then the European Commission can establish a quota for the textiles in question, on the basis of the level of the Chinese shipments held during the consultations.⁶ The quota can remain in force for up to one year, and can be reapplied.

Levels below which, in Principle, a Textile-specific Safeguard should not be Invoked

 

All products for which quotas will be liberalised in 2005	2005 Increase over 2004 in % of 2004 imports	2006 Increase over 2005 level in % of 2004 imports	2007 Increase over 2006 level in % of 2004 imports	2008 Increase over 2007 level in % of 2004 imports
7.5% or less	25%	25%	25%	25%
>7.5% to 20%	20%	20%	20%	20%
>20% to 35%	15%	15%	15%	15%
Over 35%	10%	10%	10%	10%

The Article 10a procedure (and any safeguard measure under it) will expire on 31 December 2008. Until that time, however, the European Commission can request consultations with the Chinese mainland for any textile products' trade disruption in the EU.⁷

Selected Procedures for Initiating Textile-Specific Safeguards

Safeguard investigations	They last up to 60 days from publication of the notice (but can be extended by a further 10 working days)
	Within 21 days, the Commission will solicit views from interested parties
	Within 60 days, the Commission will request informal consultations with China
Findings to the Textiles Committee	If the Commission makes a positive determination, and the Textiles Committee delivers a positive opinion, the Commission will request formal consultations with China
Emergency measures	In case of extreme urgency, the Commission may request formal consultations with China without an investigation or informal consultations, or before the investigation or informal consultations are completed, after consultation with the Textiles Committee
Formal consultations	They last for 90 days from the receipt by China of the request for consultations
	China will have to introduce self-restrictions on its exports within 15 days from the receipt of the request, by holding exports to the level of the first 12 of the 14 months prior to the launch of the investigation, plus 7.5% (6% for wool products)
	If not, the Commission, after consultation with the Textile Committee, may establish import limits on concerned products
Adoption of safeguard measures	If no mutually satisfactory solution is reached with the 90 day period, after consultations with the Textiles Committee, the Commission may impose quantitative limits for imports of the concerned products
	The limits will apply to the concerned products exported after publication of the notice announcing formal consultations and shipped in excess of the quantities to which China should have limited itself
	Such limit will be effective for a period ending on 31 December of the year in which consultations were requested, or, where three months or less remained in the year at the time of the request for consultations, for a period ending 12 months after the request for consultations.

Note: Different safeguard investigations may have different time limits, which are specified in the relevant Notice of Initiation published in the Official Journal of the EU.
Source: Official Journal of the European Union (2005/C 101/02, 27 April 2005)

ii. Non-textiles

The TPSSM can be triggered if there is market disruption by any product originating in the Chinese mainland (including textiles) and also if any safeguard/remedial action is taken by another WTO Member (including the Chinese mainland) to prevent market disruption on its territory which in turn causes significant trade diversions of a product from the Chinese mainland to the EU.

Under the TPSSM, the European Commission will initiate a proceeding and may invite consultations with the Chinese mainland beforehand. After initiation it will seek all information it deems necessary from both the Member States and all interested parties that make themselves known. Meetings will be held and documents can be inspected by interested parties. The European Commission may carry out verification visits (including to Chinese exporters' premises if agreed to) to examine records of exporters, importers, EU producers and trade bodies.

In investigating the threat or existence of market disruption, the European Commission will examine factors including the volume of the imports concerned, their effect on EU prices for the like or directly competitive products, and the effect on the EU industry concerned. In investigating a significant trade diversion, the Commission's examination will include any increasing trends in market share of the Chinese mainland-origin imports, the action taken or proposed by the other WTO Member(s), increasing EU trends in volume of the Chinese mainland-origin imports and conditions of demand and supply in the EU.

Under the TPSSM, the European Commission can, on its own, impose provisional safeguard measures in "critical circumstances". The measures cannot exceed 200 days and can take the form of customs duties or quotas. Where the European Commission definitively finds the existence of market disruption or significant trade diversion, definitive safeguard measures can be adopted either by the European Commission or by a qualified majority of the Council. Safeguard measures can remain in force for up to four years, but can be extended on review. A trade diversion measure must be terminated within 30 days of the expiration of the WTO Member's action which caused the trade diversion.

The TPSSM (and any measure adopted under it) will expire on 11 December 2013. Once a proceeding is initiated under the TPSSM, the investigation itself should wherever possible be concluded within 9 months, but can be extended for up to two months.

2.10.3 Others - the Trade Barriers Regulation (TBR)

Economic operators in the EU and the governments of the EU Member States may request the European Commission to respond to any trade barriers put in place by third countries, with a view to eliminating the resulting injury or adverse trade effects in accordance with international trade rules.⁸ The substantial and procedural rules regulating these requests are contained in Council Regulation 3286/94, laying down Community procedures in the field of the common commercial policy in order to ensure the exercise of the Community's rights under international trade rules (the "TBR"). The TBR applies not only to goods but also to certain services, particularly cross-border services.

Trade barriers which fall under the scope of the TBR are any trade practice adopted by a third country but prohibited by international trade rules which give a party affected by the practice a right to seek elimination of the effect of the practice in question. These international trade rules are essentially those of the WTO and those set out in bilateral agreements with third countries to which the EU is a party.

a) Initiation of the Investigation

Complaints under the TBR may be lodged in three ways: (i) by the EU industry⁹ that has suffered material injury as a result of trade barriers that have an effect on the EU market; (ii) by one or more EU enterprises¹⁰ that have suffered adverse trade effects as a result of trade barriers that have an effect on the market of a third country; or (iii) by a Member State denouncing an obstacle to trade. Complaints must be submitted to the European Commission in writing. The complaint must contain sufficient evidence of the existence of the trade barriers and of the injury or adverse trade effects resulting therefrom.

In examining injury or adverse trade effects, the European Commission will take account of certain factors such as the volume of EU imports or exports concerned, the prices of the EU industry's competitors, the rate of increase of exports to the market where the competition with EU products is taking place, the export capacity in the country of origin or export, and so on. The European Commission will decide on the admissibility of a complaint within 45 days.

If a complaint is deemed admissible, an examination is initiated and announced through publication of an announcement in the Official Journal of the EU. This announcement will indicate the product or service and countries concerned. The European Commission will then gather all the relevant information from the parties involved.

b) Outcome of the Investigation

When it is found as a result of the examination procedure that the interests of the EU do not require any action to be taken, the procedure will be terminated. When, after an examination procedure, the third country or countries concerned take measures to eliminate the adverse trade effects or injury referred to by the complainant, the procedure may be suspended. It may also be suspended in order to try to find an amicable solution that may result in the conclusion of an agreement between the third country or countries concerned and the EU.

Where it is found, as a result of the examination procedure, that an action is necessary to protect the interests of the EU, the EU may adopt appropriate measures including the following:

• suspension or withdrawal of any concession resulting from commercial policy negotiations;
• the raising of existing customs duties or the introduction of any other charge on imports;
• the introduction of quantitative restrictions or any other measures modifying import or export conditions or otherwise affecting trade with the third country concerned.
• Where the EU's international obligations require it to follow prior international consultation or dispute settlement procedures (such us through the WTO Dispute Settlement procedures), the above-mentioned measures may only be implemented at the end of these procedures and in accordance with their conclusions.

2.10.4 Trade Defence Reform

Throughout 2006 and 2007, speculation mounted that the Commission was preparing to issue a far-reaching proposal to reform the Community's trade defence instruments (TDI), particularly with regard to anti-subsidy and anti-dumping measures. Indeed, Trade Commissioner Peter Mandelson set multiple dates on which a reform proposal would be published for review by the Council and Parliament. However, after repeatedly extending these deadlines, Commissioner Mandelson announced on 14 January 2008 that TDI reform would be postponed indefinitely.

In announcing the postponement, the Commissioner cited widespread disagreement between Member States, most likely referring to the issue of reforming the definition of "Community interest" within the TDI legislation. When determining whether to impose anti-subsidy or anti-dumping tariffs, the EU determines whether such tariffs would be in the Community interest, measuring, for instance, the injury done to EU industry by the foreign imports against the harm that might be done to consumers within the EU by imposing tariffs.

It had long been speculated that the Commission's draft proposal would have changed the test used to determine Community interest, in order to take stock of the trend amongst European manufacturers to move their production outside the EU. By some accounts, the changes to the Community interest test would have exempted such manufacturers from potential anti-dumping and countervailing duties.

By other accounts, the changes would merely have meant that, in determining whether an import duty was in the Community interest, the EU would take into account the effect of the duties on European companies who have transferred their manufacturing activities outside Europe. Still others report that, in various drafts of the proposal, changes to the Community interest test were limited to increasing the weight given to considerations of European consumer interests.

Mandelson had suggested that changes were simply necessary to have a fair and efficient trade defence policy on which all Member States could agree. In support of this argument, Mandelson frequently cited the debate over duties on leather shoes imposed in 2006, which pitted Member States with an interest in protecting domestic industry against Member States that sought to prevent rising consumer costs.

Many critics, however, have suggested that changes to the Community interest test would have amounted to a weakening of European industries' ability to protect themselves against competition from emerging economies, a charge that the Commission consistently denied.

It is widely believed that the decision to shelve the proposal was the result of pressure from several large Member States such as France, Germany and Italy, which all favour stronger defences against the importation of below-cost goods from emerging economies and many of which were in favour of the footwear duties.

On the other side of the debate, Member States such as the UK and Sweden, which were opposed to the footwear duties, have argued that reform is necessary, both because anti-dumping duties harm European consumers and because they see protectionist policies as harming European industries which source an increasing share of their supply chain from emerging economies.

It should also be noted that many close observers of the reform debate had suggested that the proposal might extend the scope of anti-subsidy remedies to cover non-market economies. Prior to 2007, nei