Unprecedented EU Steel Regulation targets global overcapacity

Background

Since the 19 March 2025 adoption of the Steel and Metals Action Plan, the EU began developing a new instrument to replace the safeguard measures applicable to certain steel products in place since 2019. The existing measure could not remain in force beyond 30 June 2026 under the applicable legal framework due to temporal limitations under WTO law. Having identified negative trade-related effects arising from global steel overcapacity, the EU sought a new means of protecting its local industry.

The European Commission presented its legislative proposal on 7 October 2025. Following trilogue negotiations among the European Parliament, the Council and the Commission, the co-legislators reached a political agreement in April 2026, resulting in Regulation (EU) 2026/1384 that went into force on 25 June 2026 and principally applies from 1 July 2026.

Although the EU continues to pursue international cooperation on steel overcapacity, including through the Global Forum on Steel Excess Capacity, the Regulation constitutes an autonomous EU trade measure, which is unprecedented given that it was adopted as an instrument of the EU’s common commercial policy under Article 207(2) TFEU and outside of the multilateral WTO Agreement on Safeguards.

Tariff quotas

The Steel Regulation opens annual tariff quotas on imports of 30 categories of steel products listed in Annex I. The quotas apply in yearly periods running from 1 July to 30 June and have an initial combined annual volume of 18,345,922 tonnes. The individual quota volumes differ by product category and are specified in Annex II.

The country-by-country distribution of the quotas is defined in Commission Implementing Regulation (EU) 2026/1457, more specifically in its Annex I. The quota allocation gives preferential access to the EU's FTA-partners by awarding them 50% of the annual import volume in majority, in proportion to their historic trading volumes with a smaller portion awarded on a first-come, first-served basis. The remaining 50% is open for all WTO members. Country-specific quotas have been set for countries with historic import shares of at least 5%.

The quotas apply to imports from all third countries, including countries that have a free-trade agreement with the EU or otherwise benefit from preferential tariff treatment. Products originating in Iceland, Liechtenstein and Norway are excluded from the tariff-quota system and the out-of-quota duty. Imports from an FTA partner may also be dealt with through a bilateral safeguard measure adopted in accordance with the relevant agreement. Where such a bilateral safeguard applies, the corresponding products are excluded from the general quota system.

The tariff quotas are administered quarterly. During the first year of application (from 1 July 2026 to 30 June 2027) unused quota volumes from one quarter are carried over to the following quarter, although only within the same annual quota period. From 1 July 2027, the Commission will decide separately for each product category whether quarterly carry-over should continue. That decision must take into account increased import pressure, the average use of tariff quotas (particularly where average use during the first three quarters exceeds 80%) and insufficient availability of supplies for downstream steel users.

For importers, the new tariff system requires close monitoring not only of the relevant product classification and country allocation, but also of the remaining quota balance during each quarter. The commercial consequences of quota exhaustion may need to be addressed in supply contracts, including through price adjustments, customs liabilities and the allocation of the risk that the relevant quota is no longer available when the goods are released into free circulation.

Out-of-quota duty

Where the applicable tariff quota has been exhausted or where an import does not benefit from an available quota, the covered products are subject to an out-of-quota duty of 50% ad valorem. This is twice the 25% tariff previously imposed under the EU steel safeguard measure and is intended to reduce the risk of trade diversion into the EU market.

The 50% duty is an additional duty imposed under the Steel Regulation, which applies in addition to any other duties or charges that may be applicable to the goods, including ordinary customs duties and anti-dumping or countervailing duties. Conversely, imports admitted within the available quota are exempt only from the additional out-of-quota duty introduced by the Steel Regulation. They are not necessarily exempt from all other import measures.

Preferential origin under an EU free-trade agreement or subject to autonomous tariff preferences, such as the Generalised Scheme of Preferences (GSP), GSP+ and EBA, does not exempt a product from the 50% duty. Unless the relevant imports are covered by an available tariff quota, excluded because of their EEA origin, or governed by a separate bilateral safeguard arrangement, the duty applies even where the ordinary customs duty would otherwise be reduced or eliminated.

Given the level of the duty, quota availability may determine whether an import transaction remains commercially viable. Importers should therefore review delivery terms, customs-valuation arrangements and contractual responsibility for additional duties, particularly for consignments scheduled to arrive close to the end of a quarter.

The new melt and pour principle

The Steel Regulation also introduces a new “melt and pour” traceability requirement. From 1 October 2026, importers of covered product categories must, at the moment of import, provide verifiable and appropriate evidence identifying the country in which the raw steel or iron was first produced in liquid form in a steel- or iron-making furnace and subsequently cast into its first solid state. The first solid state may be a semi-finished product (e.g. a slab, billet or ingot, or a finished steel-mill product).

The Regulation mentions a mill test certificate as one possible form of evidence. The precise documentation that customs authorities will accept is to be specified in a Commission implementing act. The Commission is required to adopt the first such implementing act by 31 August 2026, taking account of the position of small and medium-sized enterprises and the need to avoid disproportionate administrative burdens. A stakeholder consultation on the documentary requirements runs until 2 July 2026, with the implementing rules expected to apply from 1 October 2026.

At the initial stage, tracing the country of melt and pour functions principally as an additional supply-chain transparency requirement. The country’s regulations do not replace the existing rules used to determine the customs origin of a product. From 1 October 2027, however, the Commission may take the information collected from importers into account when distributing tariff quotas among third countries. By 30 June 2028, the Commission must assess whether the country of melt and pour should become the basis for determining whether an import may benefit from a tariff quota and should submit a further legislative proposal to that effect.

Importers should review whether their supply agreements should include documentary obligations, audit and cooperation clauses to ensure they have the required evidence available at the moment of import so that they will be able to comply with new evidentiary requirements.

Outlook

Unlike the outgoing safeguard measure, the Steel Regulation is not subject to a fixed expiry date. It establishes a longer term for the framework that can be adjusted according to market conditions, changes in global overcapacity and the needs of the EU steel industry and downstream users. The Commission may amend the quota volumes by delegated act, although the combined annual volume must remain between 14.4 million and 22.2 million tonnes. Considerations include demand, import-market shares, developments in global overcapacity, steel-sector decarbonisation, third-country measures, availability of supply and substantial price increases affecting downstream industries, security and defence policy and undue crowding-out effects in certain tariff quotas.

The product scope may also expand quickly. By 31 December 2026, the Commission must assess whether certain iron and steel products identified by CN Codes should be included – 7303 00 10, 7303 00 90, 7229 20 00, 7229 90 20, 7229 90 50, 7229 90 90, 7223 00 11, 7223 00 19, 7223 00 91, 7223 00 99, 7214 10 00, 7228 10 50, 7228 40 10 and 7228 40 90. By 30 June 2027, the Commission must conduct a broader assessment covering additional products made of or containing a significant amount of steel, including downstream iron and steel products not covered by the regulation so far. Further reviews of scope are required by 30 June 2029 and then every two years after, or earlier where significant market disruptions or sudden changes in trade patterns occur.

The Commission must also assess the future role of the country of “melt and pour” by 30 June 2028 and publish an implementation report by that date and every two years after. A broader evaluation of the Regulation’s effectiveness is due by 30 June 2029 and then every three years. 

In the immediate term, businesses importing or using covered steel products should verify the relevant CN or TARIC classification, identify the applicable country-specific quota, establish procedures for monitoring quota utilisation and prepare for the melt-and-pour documentation requirement. Businesses purchasing steel-containing downstream products should also follow the forthcoming scope reviews since the current coverage may represent only the first stage of a broader EU response to global steel overcapacity.

Although the Regulation expressly states that it is to be designed and implemented consistently with the EU’s WTO obligations, its autonomous character, substantially reduced quota volumes and 50% out-of-quota duty are likely to attract close attention from trading partners, particularly those with an FTA already in place. Its practical and legal durability will depend both on its implementation by the Commission and customs authorities and on how successfully the EU combines the measure with international efforts to address the underlying causes of global excess steel capacity, including its negotiations under Article XXVIII of the GATT.

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