Philippe Heeren, Brussels based regulatory partner at Reed Smith, said: “The EU is the UK’s most important steel export market. The shift from the current safeguard with 25% out-of-quota duty to a regime with roughly halved in-quota volumes and a 50% out-of-quota duty would therefore have an outsized impact on UK exporters compared to countries less reliant on EU market access.”
“Under the current EU steel safeguard, the UK benefits from a country-specific quota allocation for certain product categories. It is not certain that the UK will maintain a country-specific quota allocation under the new measures, and if so, whether that country-specific quota allocation will be available from 1 July. At the same time, it remains to be seen how these new measures can be reconciled with the existing Trade and Cooperation Agreement between the United Kingdom and the European Union, and what any non-specific treatment for the UK would mean politically.”
“The proposed ‘melt-and-pour’ requirement could pose a specific risk for UK exporters, if country-specific quota eligibility is determined on that basis. UK-manufactured steel products from imported materials that were originally melted and poured in another country may not qualify for UK-specific quota.”
“The new regime represents a significant experiment. Because the tariff-rate quota measures are no longer classified as safeguards but as tariffs, any antidumping and countervailing duties would apply on top of them. When combined with the impact of the Carbon Border Adjustment Mechanism, the cumulative cost burden on importers would be substantial and likely disruptive. The actual effect on import volumes and trade flows remains difficult to estimate.
“Absent a mechanism to carve out certain downstream products from the new tariff-rate quota system, the EU risks undermining its own industry through the very measures it has adopted. While some may regard this as acceptable collateral damage, it runs contrary to the EU’s stated objective of reshoring manufacturing and production capacity.
“The outcome on melt and pour is the single most consequential open question for importers. As it stands, the Commission has proposed melt and pour as a transparency and traceability obligation only; importers must identify the country where steel was originally melted and poured, but this data does not determine quota allocation. The Parliament, however, proposes that the country of melt and pour shall directly determine quota allocation, which would disrupt existing supply chains built around further processing in third countries. Even the Council’s middle ground – a mandatory review within two years on whether melt and pour should become the basis for allocation – signals that this shift may be a matter of “when” rather than “if”. Importers should begin mapping melt-and-pour origins across their product portfolios now, and consider embedding documentary-evidence clauses in supply contracts to ensure they can comply with whichever outcome emerges.
“The 13 April trilogue will be critical and we expect the EU institutions to reach a political agreement. Stakeholders should pay particular attention to the outcome on melt and pour (which could fundamentally change how quotas are allocated), the carry-over mechanism (which affects import flexibility), and the downstream protection provisions. If adopted close to its current shape, the regime would materially tighten access for third country steel through roughly halved in quota volumes and a 50% out of quota duty, with potential quota allocation shifts driven by melt and pour.
