EU Metals Rule and Certification of Aircraft Parts – Updates For Older Parts

As we wrote last month, the EU has issued new rules that are meant to help ensure compliance with Russia sanctions. These rules include a requirement for certain iron and steel articles to certify the source of the metals when these articles are imported in to the EU (to ensure the metal is not sourced from Russia). The EU has published a FAQ that provides an exception for parts produced before June 23, 2023.

As a practical matter, ASA members in the EU who are importing, and ASA members outside the EU who are exporting to the EU, need to make sure they can document source of the metal for certain articles. These iron and steel articles include, but are not limited to:

• screws, bolts, nuts, coach screws, screw hooks, rivets, cotters, cotter pins, washers, incl. spring washers, and similar articles, of iron or steel under CN Heading 7218;
• wire of alloy steel other than stainless, in coils (excl. bars and rods) under CN Heading 7229;
• containers of iron or steel, for compressed or liquefied gas under CN Heading 7311;
• air heaters and hot-air distributors under CN Heading 7322;
• lavatory fixtures under CN Heading 7324;
• articles of iron or steel regulated under CN Heading 7325 or 7326.

While the CN Headings are quite similar to the Harmonized Tariff Code Headings, it is wise to look directly at the European Union’s CN Headings to make sure you are properly characterizing your goods under EU law. Bear in mind also that this new rule applies to articles processed outside the EU.

If you have an article that is affected by the new rules, then you will need evidence of the country of origin of the iron and steel inputs used for the processing of the product. This must be available at the time of import into the EU.

The Exclusion

The EU regulation does not have any plain language exclusions for reasonableness, but the EU has published an exception among its “frequently asked questions” that limits application of the rule (look at question 6 of the FAQ document):

Does the application of Article 3g (1) (d) of Regulation (EU) No 833/2014 also extend to products that were manufactured or processed in a third country before 30 September 2023? Last update: 2 October 2023

The prohibition applies to imports of iron and steel products incorporating inputs originating from Russia that enter the Union as of 30 September 2023, provided that they were manufactured or produced after 23 June 2023. That is the date when the obligation for the importer to demonstrate the country of origin of the iron and steel inputs used for the processing of the product in a third country was introduced in EU law. Coupled with the almost one-year wind-down period of the prohibition itself, this should have allowed an orderly planning of imports into the Union of the relevant goods before 30 September 2023.
If the abovementioned goods are already in the territory of the Union and have been presented to customs before 30 September 2023, Article 12e applies and they can be purchased or transferred after that date (see Q3).

This means that articles that would be subject to the new EU import documentation rule, but were produced before June 23, 2023, are not required to bear the applicable documentation. As a practical matter, this is likely to mean that you will need documentation to show that the article was produced before June 23, 2023. This can include trace documentation showing commercial transactions before the date, an approval for return to service showing maintenance before the date, or an authorized release document that shows that the article was produced/approved before the date. Such documentation should be made available to prove that the article is exempt from the EU’s metals-sourcing-documentation requirement.

EU Metals Rule and Certification of Aircraft Parts

The EU has targeted Russian metals as a key element of their Russia-sanctions program. These sanctions have come to the attention of the aircraft parts industry because some EU importers are asking their export partners to certify that the metals in the aircraft parts did not come from Russia. In many cases, though, the request is NOT applicable to aircraft parts.

Executive Summary

The new EU import restriction is tied to certain categories of parts – namely certain parts in CN chapters 72 and 73. These chapters describes iron, steel, and things made from iron and steel. But the CN Code rules require you to use the most specific applicable CN code, and aircraft parts are typically going to be categorized under a more specific chapter (rather than chapters 72 or 73).

Most aircraft parts fall into CN chapters 84 (engines and their parts) or 88 (aircraft and their parts). So they are not affected by the new requirements to certify origin of the steel.

It is possible for a distributor to export chapter 72 (iron and steel) or chapter 73 (articles of iron or steel) materials to the EU (in which case the restrictions apply). If you are exporting affected material to the EU, then the importer will likely rely on you to provide evidence of the country of origin of the iron and/or steel.

To be clear, most aircraft parts are not affected by the requirement for proof that the metal did not come from Russia.

The Longer Analysis

The EU has issued a comprehensive body of sanctions against Russia for its actions in the Crimean Peninsula and for its subsequent invasion of Ukraine.

On June 23, 2023, the EU adapted additional sanctions against Russia. These amended the existing sanctions programs against Russia, which date-back to 2014 (when Russia annexed the Crimean Peninsula). While the EU has taken various steps to support Ukraine during the Russia-Ukraine conflict, some of the most important sanctions are those targeting Russia’s iron and steel industries. The newest amendments to the EU sanctions are specifically intended to address circumvention efforts.

The new sanctions apply to the import into the EU of iron and steel products where the iron or steel came from Russia. This includes materials like bar stock as well as certain finished articles. These new sanctions require the importer to confirm that the iron and/or steel did not come from Russia, which is why EU importers are asking for certifications that the materials did not come from Russia.

The newest sanctions are tied to the EU’s combined nomenclature (CN) codes. CN codes are based on the harmonized tariff code system. Why does the EU give it a different name? Because the EU has modified the harmonized tariff code system by adding additional subheadings to further distinguish imported products. But the CN code system still uses the same chapter numbers and heading numbers (and related descriptions) as the harmonized tariff code system. This will become important later in the analysis when we get to compliance strategies.

There is a very lengthy table of iron and steel products subject to the new regulations, but here are some excerpts that are potentially relevant to the aviation community:

The main message you should be getting from this chart is that if you are dealing in iron or steel things that are categorized under tariff chapter 72 or chapter 73 then you need to look carefully to see if they are subject to the new EU regulations that are meant to prevent circumvention. If you are exporting these sorts of articles to the EU, then they are likely covered under the sanctions provisions and if they are then you will need to support your importer with compliance documentation.

Aircraft parts fall under a wide variety of tariff codes (CN codes in the EU). In particular, the requirements likely do not apply to aircraft parts categorized under harmonized tariff codes in chapter 84 (engines and their parts) or chapter 88 (aircraft and their parts).

Note that some additional aircraft parts CN Codes under chapter 73 include air heaters and hot-air distributors made of iron or steel (7322) and certain iron or steel lavatory fixtures (7324). Both of these headings appear in Annex XVII so each would be subject to the compliance obligations of the new rule.

Compliance Strategy

For aircraft parts distributors, the first thing to do is to ascertain whether your articles are subject to these requirements. The new amendment to the EU sanctions regulations includes a revision to Annex XVII.

Note that most aircraft parts are categorized under CN chapter 84 (engines and their parts) or Chapter 88 (aircraft and their parts) [these are not exclusive – many aircraft parts can fall under other chapters so be sure you are accurately categorizing your parts]. The new non-circumvention rule applies to certain headings found in chapters 72 and 73 only. If you know that 84 or 88 is the proper chapter for your articles, then your analysis of this particular regulations may be complete!

When we export parts from the United States, it is normal to identify a schedule B number. While the specific descriptors and subheadings can vary, the chapters and headings should be the same between the United States Schedule B (for export out of the US) and the European Union CN Codes (for import into the EU). When exporting from the United States, look at the first two numbers of your Schedule B number (this is called the “chapter”); if the number is NOT 72 or 73 then your analysis for compliance to this particular requirement is done. If the chapter is 72 or 73, then you need to continue your analysis. Look at the first four numbers of your Schedule B number (this is called the “heading”) and compare it to the numbers in Annex XVII. Make sure you are using the most up-to-date version of the Annex – the links in this article were up-to-date on the date of publication but they can be superseded! If the heading number matches a CN Code in Annex XVII, then the final step is to examine where the product was processed. The rule applies to products processed outside of the EU. If your product is described by a CN Code on Annex XVII, and it was “processed” outside of the EU, then your export to the EU will likely need to be accompanied by evidence of the country of origin of the iron and steel inputs used for the processing of the product.

Compliance For Affected CN Codes

So what do these sanctions provisions really say? The pre-existing sanctions provisions had already prohibited importing iron and/or steel articles that came from Russia or that were produced in Russia. The new provisions are meant to prevent circumvention of the sanctions.

Under the recently-amended EU sanctions provisions, it becomes illegal for persons in the EU to import or purchase iron or steel articles listed in Annex XVII (which is a list of articles regulated under CN chapters 72 or 73 ) that were processed in a third country if they incorporated iron and/or steel products originating in Russia. The Annex lists a wide variety of different forms that iron and steel can take (e.g. semi-finished articles, flat-rolled product, bar or rod stock, tubes, wires, etc.). This can be interpreted to mean that if the iron or steel came from Russia, even if it came from Russia before sanctions, then it is prohibited from import into the EU.

I know I’ve said this before, but an important distinction is that Annex XVII (as recently amended) includes articles whose CN codes begin with 72 and 73. Most aircraft parts are found in Chapters 84 (engines and their parts) or 88 (aircraft and their parts), so their CN codes begin with 84 or 88.

If you’ve got affected material that you want to export to the EU, then the operative requirement comes in the sentence that reads:

For the purposes of the application of this point, at the moment of importation, importers shall provide evidence of the country of origin of the iron and steel inputs used for the processing of the product in a third country.

Regulation (EU) No. 2023/1214 Article 1, Para. 12 amending Article 3g(1)(d) of Regulation (EU) 833/2014 (as amended)

This means that the importer of this affected material needs to get evidence of compliance (such as a certification that the iron/steel did not come from Russia).

This new requirement applies starting September 30, 2023.