We’re reaching out today as we believe the publication of the 11th package of sanctions against Russia deserves your utmost attention! Particularly as it relates to the new anti-circumvention tool and the addition of entities registered outside of Russia on the list of natural or legal persons which are military end-users, form part of Russia’s military-industrial complex or which have commercial or other links with or which otherwise support Russia’s defence and security sector (i.e. China, Uzbekistan, the United Arab Emirates, Syria and Armenia).
In our opinion, we feel that the updates made to the import ban on iron and steel goods foreseen in Article 3g of Regulation (EU) No 833/2014 do not get the attention they deserve.
Through this blog post, we want to shed some light on the amended Article 3g, and also discuss its implications on EU economic operators. More importantly, we will outline concrete actions that will need to be taken over the summer.
The tightened import ban on iron and steel
Article 3g prohibits any person subject to the EU jurisdiction (see article 13) to import or purchase iron and steel products listed in Annex XVII if such products are:
- First, exported from Russia, whatever their non-preferential origin; or
- Second, originating in Russia; or
- Third, originating in any other country than Russia provided that they incorporate Russia-originating iron and steel products listed in Annex XVII in any quantity.
In brief, economic operators are not only required to comply with this import ban but will also be asked to prove their compliance. What does this mean for you? Concretely, upon entry of any non-Russia originating iron and steel product targeted by Annex XVII, importers shall provide evidence that the goods they import do not contain any Russia-originating sanctioned iron or steel item.
Collecting such information is not only time-consuming but also very challenging. However, it will be necessary and crucial to comply in order to ensure a smooth entry into the EU’s customs territory. Any non-compliance will lead to border blocks, major delays affecting your supply chain as well as potential litigation started by the Authorities in the countries of import. This work will not be done in vain as the data collection could also reveal that the imported iron and steel products include Russia-originating iron or steel items. Taking the appropriate decision will then appear to be decisive to secure your supply-chain and could also bring you a competitive edge.
The overall objective of these tightened controls is to improve the effectiveness of the import ban on iron and steel products. This implies that the existing import ban was not effective enough in blocking Russian goods of entering into the EU’s customs territory, given the reality of the iron and steel trade.
As highlighted by the Worldsteel Association, as a result of globalisation and the specialisation of manufacturing, “indirect steel trade […] grew by more than 80% worldwide in the period 2000-2013, while direct trade increased by 30%.”[1] Indirect trade in steel covers “exports and imports of steel in the form of steel containing manufactured goods.”[2] Imposing an import ban on manufactured goods containing Russia-originating iron or steel is therefore highly relevant to ensure this restrictive measure achieves its intended objectives. Consider the below:
- First, Annex XVII to Regulation (EU) No 833/2014 also includes articles of iron and steel (i.e. Chapter 73 of the EU’s Combined Nomenclature).
- Second, in 2019, 5 Member States of the European Union (Germany, France, Belgium-Luxembourg, Spain and Italy) were ranked among the top 10 largest indirect importers of steel.[3] [4] China was by far the largest indirect exporter of steel.[5]
- Third, the impact of EU’s sanctions on the Russian steel industry is lower than expected. New trade flows have been reported. Countries like China, India or Turkey face inflows of cheap Russian steel.[6]
The implications on EU importers and recommendations
According to the Worldsteel Association, steel is used in the following sectors: building and infrastructure (52%), mechanical equipment (16%), automotive (12%), metal products (10%), other transport (5%), electrical equipment (3%) and domestic appliances (2%).[7]
In clear, operators active in any of these sectors who import iron or steel products listed in Annex XVII to Regulation (EU) No 833/2014 should act with extreme caution as there is a high risk that they may currently be importing products incorporating Russia-originating sanctioned iron or steel items. This risk should be carefully assessed and documented as importers will be required, as from 30 September 2023 (for most products) to prove that the items they import comply with Article 3g(d), which is going to be a challenging exercise if not approached properly and timely. An additional complexity resides in the lack of details brought forward by the Regulation regarding the “type of proof of origin” that would be deemed sufficient from the point of view of the Authorities. Companies will need to take this in consideration and make certain assumptions when gathering/requesting the proof of origin information/documentation relating to their iron and steel products.
We would suggest to any economic operators to perform, a.o. the following tasks:
- First, review their import data to flag imports of products classified in any of the commodity codes listed in Annex XVII to Regulation (EU) No 833/2014, whatever their non-preferential origin.
- Second, review the customs classification of the targeted items.
- Third, prioritize the review of the targeted items against Article 3g(d) of Regulation (EU) No 833/2014 based on their declared non-preferential origin and “ship-from country”, taking into account both:
- The partner countries identified in Annex VIII to Regulation (EU) No 833/2014 (i.e. The United States of America, Japan, United Kingdom, South Korea, Australia, Canada, New Zealand, Norway and Switzerland); and
- The key risk factors, such as: the local steel industry, any reported increase of imports or iron and steel from Russia, or the relevance of the sourcing country in indirect trade in steel.
- Fourth, engage with your supplier(s) to collect information about the targeted items. In that perspective, economic operators should collect Bills of Materials, and any other relevant information to be used as part of the determination of the non-preferential origin of the products to be imported into the EU’s customs territory.
- Fifth, take action! This is a boardroom strategic discussion. Depending on the outcome of the review, these actions could range from: reporting violations, reviewing contracts, requesting certifications, drafting documents to prove the absence of sanctioned Russia-originating iron or steel items in the imported products.
We hope that you will find our guidance useful. It goes without saying that we would be more than happy to assist you in developing a tailored action plan to ensure minimal impact on your supply-chain disruption and time-to-market.
[1] Worldsteel Association, Indirect Trade in Steel, March 2015, p.5.
[2] Ibidem.
[3] Data for individual EU’s Member State include intra-European trade..
[4] Worldsteel Association, 2023 World Steel in Figures, May 2023, p.28.
[5] Ibid.
[6] See, for example: https://eurometal.net/eu-extends-sanctions-on-imports-of-products-goods-containing-russian-steel/ ; https://www.bloomberg.com/news/articles/2022-07-19/asian-steel-markets-unsettled-by-inflows-of-cheap-russian-metal#xj4y7vzkg ; or https://www.reuters.com/markets/commodities/india-steel-imports-russia-rise-eight-year-high-april-jan-2023-02-21/ .
[7] Worldsteel Association, 2023 World Steel in Figures, May 2023, p.30.
