EU Proposes Ending Import Duty on Unalloyed Aluminum in 2009

Jan. 9 -- European Union regulators recommended ending a tariff on imports of unalloyed aluminum within two years to increase shipments from Russia, a step that would scale back protection for producers in the EU including Alcoa Inc.

The European Commission proposed cutting the 6 percent duty on unalloyed primary aluminum to 3 percent retroactively from Jan. 1 and to zero in January 2009 after Poland demanded import relief. A month ago, the commission said it aimed to halve the levy in January and might seek a second-step reduction to zero.

``This is a balanced proposal that would be good for the competitiveness of European industry,'' the commission, the 27- nation EU's regulatory arm, said in an e-mailed statement today in Brussels. The proposal needs the backing of EU governments, which may vote on the plan in the coming weeks or months.

The relief would be a compromise that leaves untouched the EU import tax on the alloyed version of the product. The aluminum duty, set at 6 percent for the past decade, also protects such producers in the EU as Alcan Inc., Norsk Hydro ASA, Glencore International AG and Rio Tinto Plc.

The entry to the EU of 10 mainly eastern European nations in May 2004 strengthened the case for scrapping the tax because new member states have aluminum-transforming industries that traditionally relied on Russian supplies. Unalloyed aluminum is used after reprocessing for products ranging from cars and planes to packaging and electric cables.

Russia Gains Most

Russia stands to benefit most from the proposed relief from the duty on unalloyed aluminum because domestic exporters such as OAO Russian Aluminium account for most of the EU imports that are subject to the levy.

In 2005, the EU imported about 2.3 million metric tons of unalloyed aluminum, of which 1 million tons were subject to the 6 percent duty. Of that amount, most came from Russia.

Some non-EU aluminum exporting nations are already exempted from the levy on both forms of the product because of trade agreements with the bloc. For example, Norway can export aluminum duty free because it's a member of the European Economic Area and Mozambique gets the same benefit as a result of preferential EU arrangements for poor countries.

In addition, the EU is negotiating a full aluminum-duty exemption for the Gulf Cooperation Council grouping of countries including Saudi Arabia and the United Arab Emirates as part of a planned trade accord with the region.