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COMMISSION DECISION No 3485/85/ECSC

of 27 November 1985

on the extension of the system of monitoring and production quotas for certain products of undertakings in the steel industry

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Coal and Steel Community, and in particular Articles 47 and 58 thereof,

Whereas:

1. Progress towards overcoming the crisis

Since the start of 1984 the situation on the Community steel market has improved appreciably. This applies not only to production but also to the financial position of the steel undertakings.

By the end of this year the overcapacity will have been cut by approximately 32 million tonnes of hot-rolled products compared with the 1 January 1980 level. This cutback is on course for the 1985 target set by the Council on a proposal from the Commission, in Elsinore at the end of 1982. At he same time the steel industry has pressed ahead with plant modernization to boost its competitiveness. Together, the capacity-shedding and modernization have brought about further job losses in the steel industry. As a result, the workforce in the European steel industry contracted further in 1984 and 1985. In all, more than 200 000 jobs have been shed since 1980.

Crude steel production is expected to reach 122 million tonnes in 1985, as against 109 million tonnes in 1983. Combined with the capacity-shedding this increased output has pushed up the capacity utilization rate from less than 60 % at the start of the 1980s to almost 70 % in 1985. At the same time, steel prices have been rising steadily since 1984.

On the other hand, the world market is still suffering from the same persistent imbalance between supply and demand. This is further aggravated by the import restrictions imposed by the United States of America; in addition, the sharply fluctuating dollar exchange rate has created uncertainty about world trade.

The surveys on which the Commission based its General Objectives Steel 1990 indicate that the expected economic trends and the lasting uncertainty on the world market will call for Community steel undertakings to shed a further 20 million tonnes or so of hot-rolling capacity. At the same time, the modernization schemes must be doggedly pursued to make Community steelmakers internationally competitive across their entire product range. In this context, the move towards increased production of quality steels should be noted.

2. Position of the individual product categories in the quota system

The European steel industry has come a long way down the difficult road of restructuring but still not enough has been done to be sure of success yet. Although the storm has clearly been weathered, that does not mean that the crisis is over yet. Nonetheless the situation has improved so much that coated flat products (category Id) and reinforcing bars (category V) can now be taken out of the quota system. These are the products which show most clearly how far the situation has improved.

There has been a steady increase in demand for coated flat products, generated by technical developments of all sorts. At the same time many steel undertakings have been expanding their capacity in this product category while the quota system has been in force.

Over 80 % of the output of reinforcing bars has now been switched to low-cost mini-mills. Since the vast majority of these mills have been unaffected by the crisis, there are no longer any grounds for keeping this product in the quota system.

The situation remains difficult for all the other products, albeit to varying degrees. The imminent improvement in the situation of various products will cause the Commission to review the position once again in the course of 1986 and to take whatever further liberalization measures are called for, so that the quota system can be dismantled completely over a two-year, or at most three-year, transition period.

At its meeting on 25 July 1985 the Council said that an orderly return to a market allowing free competition between Community steelmakers was needed as soon as possible. On 29 October 1985 the Council duly gave its assent to the liberalization of the market in the two above-mentioned products and the general principles guiding the quota system for the next two years. Apart from the changes outlined below, by and large the new quota system simply extends the existing rules. 3. Adjustment of reference figures (Article 15 (1))

Five years after the quota system was introduced, the reference figures (i.e. the reference production or reference quantities) based on past performance, mainly in the 1970s, are no longer in keeping with the pattern of production demanded by today's technical and economic conditions.

Although some steelmakers have taken up the option to exchange reference figures opened up by Article 15 of Commission Decision No 234/84/ECSC (1), experience has shown that such exchanges can do only a limited amount to correct outmoded product structures. For this reason, at the start of the new quota system the undertakings are to be given a once-only opportunity to transfer their reference figures from one product category to another. To ensure that they make the widest possible use of this opportunity, the previously imposed condition that the undertakings must close a production plant or sell one to a third country has been deleted from Article 15. So too has the 15 % reduction levied on such transfers. On the other hand, these transfers must not cause an excessive redistribution of the reference figures. For this reason, transfers are to be limited to 10 % of the total reference figures and the increase in any individual product category to not more than 25 % of the existing reference figure. Changes must also be made to avoid any deterioration in the relative position of 'mono producers' who are able to take only limited advantage of this transfer option, if at all.

4. Adjustments for category Ic and IV products (Article 10 (3) and (4))

The newly liberalized category Id (coated flat products) includes products competing with category Ic (hot-dipped galvanised sheet). The decision to keep category Ic in the quota system must not distort competition between producers of category Ic and Id products. It must be left to the market, i.e. the consumer, to decide which of the two types of products to use. The quotas for undertakings whose basic quotas are insufficient to cover their customer's requirements should therefore be adjusted.

Category V products (reinforcing bars) compete with some category IV products (wire rod). Reinforcing bars in coils (whih belong to category IV) and wire rods used to produce welded wire mesh are the products involved. They all compete for customers in the building industry.

In this case too steps must be taken to avoid putting Category IV producers at a competitive disadvantage vis-à-vis Category V producers. Category IV producers should therefore also be allowed to make adjustments provided they can produce evidence that their basic quotas are insufficient to cover their customers' requirements.

However, some wire rod does not compete with reinforcing bars but is destined for other customers (and in particular for wire-drawers). Producers allowed to make the adjustments outlined above must therefore produce evidence that their deliveries are genuinely bound for builders, reinforcement fabricators and/or welded wire mesh producers.

5. Adjustment for quotas acquired in previous quarters (Article 14 A)

In 1984 and 1985 a number of undertakings bought or exchanged quotas to increase their allocation so that they could produce and sell more. Undertakings which have continuously been acquiring large extra quotas should be granted adjustments at least partially obviating the need for them to acquire such extra quotas in future. This is another way in which the quota system should be more closely tailored to the undertakings' requirement. It will give the system a flexibility which should avoid the serious disadvantages which could arise if the quota system were once again simply extended.

Nevertheless these adjustments must be restricted enough to avoid upsetting the balance between supply and demand. It therefore seems best to make these adjustments by drawing on the reserve set up under Article 9. Since priority will still be given to adjustments made under Article 14, that leaves the unused reserve for these adjustments. Should the unused reserve prove too small to cater for all the newly acquired quotas, it would have to be divided between the individual undertakings on a pro rata basis decided by the size of the extra quotas acquired.

6. Compensation for reductions of over 1 %

(Article 7)

In future the new adjustments for previously acquired extra quotas, as outlined in paragraph 5, will more or less completely use up the reserve. To prevent this from putting undertakings not benefiting from either Article 14 or Article 14A at an unreasonable disadvantage, undertakings which see the ratio between their quotas and the quotas for the Community as a whole fall by over 1 % compared with the quotas granted under Article 6 should be given some compensation for any disadvantage beyond the 1 % mark.

In a departure from Article 8 of Decision No 234/84/ECSC and the implementing Decisions No 3650/84/ECSC (1) and No 1243/85/ECSC (2), adjustments made for exceptional exports or for deliveries of materials for further processing to rerollers and coaters will not be counted when calculating this reduction. There is no reason to grant compensation for such adjustments which, like the adjustments under Article 10, are open to all undertakings conducting such transactions. In future the market alone is to decide the position of the undertakings in the quota system.

7. Elasticity rules (Article 11)

With the end of the quota system in sight, the quota utilization rules can now be relaxed to a certain degree. Accordingly, the 3 % tolerance margin in Article 11 is to be increased to 5 % and the carryover of unused production quotas or parts of quotas from 5 % to 10 %. On the same grounds, the advance on the quotas for the next quarter is to be increased from 10 % to 20 %.

8. Special cases (Article 4 (4), 5 (2) and 13)

In view of the generally improved situation on the steel market, smaller producers can now be taken out of the quota system. To this end, the minimum size of undertaking covered by the quota system has been raised from an annual reference production of 24 000 tonnes to one of 36 000 tonnes. Correspondingly, the lower limit for the quotas has been raised to 9 000 tonnes.

Decision No 234/84/ECSC empowers the Commission to make the necessary adjustments if groups of undertakings separate or jointly-formed independant undertakings are established. This option should also be extended to mergers, and in particular to mergers resulting in closures of hot-rolling mills which account for an exceptionally large share of the capacity shedding without receiving any compensation in the form of capacity increases or constituting a counterpart for State aid.

9. Exception for Spain and Portugal

Under the Act of Accession the possibility exists for Spanish and Portuguese undertakings not to be fully subject to the quota system. Beyond that, the Act of Accession includes special arrangements for deliveries of steel products from Spain and Portugal to the other Community countries. Under the circumstances, it seems best to apply the monitoring system to Spanish and Portuguese undertakings, but not the production quota system.

After consulting the Consultative Committee and with the assent of the Council to the continuation of the production quota system, and on the basis of studies made jointly with the undertakings and associations of undertakings in connection with the determination of the quotas,

HAS ADOPTED THIS DECISION:

I. Monitoring system

Article 1

A system for monitoring production and deliveries of certain products of categories I, II, III, IV, V, VI and certain sub-categories of category I is hereby established. These categories, which include all qualities and choices of steel, are:

1.2 // - category I: // hot-rolled wide and narrow strip rolled on specialized mills; // - category II: // reversing mill plate and wide flats; // - category III: // heavy sections; // - category IV: // wire rod; // - category V: // reinforcing bars; // - category VI: // merchant bars.

The sub-categories of category I include the following products:

Category Ia

- hot-rolled wide strip for direct use and export,

- hot-rolled wide strip for re-rolling or other types of processing in other Community undertakings,

- medium and heavy plate with a thickness of 3 mm or more, obtained by cutting hot-rolled wide strip,

- hot-rolled strip less than 600 mm wide, including tube strip.

Catebory Ib

- cold-rolled sheet cut or coiled, with a thickness of less than 3 mm,

- cold-rolled plate of 3 mm and over (cut or coiled),

- hot-rolled sheet in cut lengths, with a thickness of less than 3 mm,

- cold- or hot-rolled sheet for the production of derived products of categories Ic and Id in other Community undertakings.

Category Ic

- hot-dipped galvanized sheet, cut or coiled,

- galvanized sheet for the production of category Id products in other Community undertakings,

Category Id

other coated flat products.

A detailed list of the products is given in Annex I.

Article 2

1. As from January 1986 undertakings shall be required to report each month to the Commission their production and deliveries of the products referred to in Article 1. These reports must reach the Commission not later than 10 working days after the end of the month. They must be made in conformity with the forms set out in Annex II.

2. Undertakings which make deliveries of one or more categories of product subject to the quota system under Article 58 of the Treaty to other steel undertakings which are not subject to the steel quota system for the same categories shall be obliged, notwithstanding the explanatory notes in Annex II, to declare such deliveries themselves and the tonnages concerned will be debited against their quotas.

At the request of undertakings which have made deliveries of the type described in the preceding subparagraph during the course of the reference period used for the calculation of the reference quantities as defined in Article 6, the Commission shall make an appropriate amendment to their reference quantity.

3. For the purposes of supervision as provided for in Article 3, undertakings shall provide authorized representatives of the Commission with a copy of their monthly report and indicate the tonnage for each works.

4. Undertakings shall establish for each works a numbered register recording production as well as daily and monthly deliveries, in accordance with the forms set out in Annex II.

Such a register shall be kept at each works site and be accessible to the authorized representatives of the Commission.

5. For the purposes of this Decision, any group of concentrated undertakings within the meaning of Article 66 of the Treaty shall be regarded as a single undertaking even if such undertakings are located in different Member States.

Article 3

1. The Commission shall manage the monitoring system. It shall examine on the spot the conformity and exactitude of reports and information as referred to in Article 2 of this Decision. The Commission may obtain assistance from independent agencies or experts. The business secrecy of the undertakings shall be guaranteed.

2. The instructions given to verifying officials shall refer to this Decision and indicate the reports supplied by the undertakings they are responsible for inspecting. Undertakings shall be under an obligation to permit such inspections, for which no individual decision shall be necessary.

3. Any undertakings evading their obligations under Articles 2 and 3 (2) or supplying false information shall be liable to the fines and penalties provided for in Article 47 of the Treaty.

II. System of production quotas

Article 4

1. A system of production quotas is hereby established in respect of categories Ia, Ib, Ic, II, III, IV and VI, irrespective of quality or choice.

2. In the case of categories Ia, Ib, Ic, II and III, the following products shall be excluded:

- special alloy steels, except for special fine-grained weldable structural alloy steels with a high yield point (Sonderbaustahl),

- permanent way material,

- sheet piling,

- colliery arches, and

- subject to proof being furnished that this material has in fact been processed in the Community, material intended for the production, in the Community, of:

- welded tubes more than 406,4 mm in diameter,

- tinplate (including blackplate and TFS),

- electrical sheet with a minimum silicon content of 1 %.

- derived products, falling within category Id.

3. As regards categories IV and VI:

(a) alloy steels with an alloy content of not less than 5 % (except for steels containing less than 1 % of carbon and more than 12 % of chromium) whose actual invoiced price is not less than 30 % higher than the list price of the corresponding ordinary steel product, may be produced in excess of the compulsory quota for the relevant category of products for a given undertaking;

(b) the Commission shall continuously monitor market trends in consultation with the producers and users and shall publish adequate information and guidelines;

(c) if an undertaking exercising the opinion granted under point (a) exceeds the guidelines published by the Commission, the latter shall limit the excess to the extent required by market conditions;

(d) in the light of market trends, on the one hand, and of the information which it receives, on the other, the Commission may terminate the derogation for the product in question.

4. Without prejudice to the obligations with regard to information and checks provided for in this Decision, undertakings shall not be subject to the quota system if their annual reference production referred to in Articles 6 does not exceed 36 000 tonnes for all categories subject to the system of quotas. 5. However, if during a three-month period an undertaking's production levels exceed a quarter of the annual reference production figures indicated in paragraph 4, the undertakings shall be subject to the system with effect from the following three-month period.

In such a case, the Commission shall allocate reference production to that undertaking on the basis of production in the best 12 calendar months in the period between July 1982 and the last month preceding the quarter for which the quotas are allocated.

If during this period an undertaking's production does not cover at least 12 representative months, the annual production shall be calculated on the basis of the average for the representative months available.

The production shall be used to establish the corresponding reference production on the basis of the abatement rates for the quarters concerned.

These provisions shall also apply to undertakings which bring plants back into service following a total stoppage of their steel activities resulting in the suspension of quotas.

Where the limits provided for in paragraph 4 are exceeded as a result of undeclared investment or investment on which an unfavourable opinion has been given, the undertaking shall be subject to the system and shall receive quotas corresponding to the limits indicated in Article 5 (2).

Article 5

1. The Commission shall fix each quarter, for each undertaking, the production quotas and the part of such quotas which may be delivered in the common market:

- on the basis of the reference production and quantities referred to in Articles 4 (5) and 6,

- by applying the abatement rates referred to in Article 8 to such reference production and quantities.

2. Within the limit laid down in in Article 4 (4) the Commission may, if necessary, adjust the quotas fixed pursuant to paragraph 1.

Such adjustment may not lead to quotas in excess of 9 000 tonnes per quarter for all categories for any one undertaking.

It shall be made proportionately to the reference figures and provided the undertaking has itself produced or delivered in the common market the corresponding tonnage.

The undertaking in question must submit an application in the course of the quarter and provide proof that this tonnage has actually been produced or delivered by not later than one month following the end of the quarter.

Article 6

The reference production and quantities shall be those resulting from the application of Articles 6 and 7 of Decision No 234/84, including those resulting from the application of Article 4 (5) and exchanges and/or transfers and adjustments granted by the Commission pursuant to Articles 2 (1), 13 and 15 (1) and (2) of that Decision, calculated on an annual basis.

Article 7

Where, in a category of products, the quotas, including all adjustments pursuant to Articles 14 and 14A, allocated to an undertaking during a quarter are such that the ratio of these quotas to all quotas, including the adjustments referred to above, granted in the Community as a whole for the same category is more than 1 % lower compared with the quotas calculated for the same quarter under Article 6, respectively for that undertaking and for the Community as a whole, during two consecutive quarters, the Commission shall take the necessary measures to limit such a loss to a maximum of 1 % to the extent that, for all the categories of products which it produces, that undertaking has also suffered a loss of relativity of at least 1 %.

The Commission shall lay down the conditions and criteria for applying this provision by means of a general decision.

Article 8

1. The Commission shall fix each quarter, approximately six weeks before the quarter begins, the abatement rates for establishing the production quotas and the part of these quotas which may be delivered in the common market. The Commission may, not later than the first week of the second month of the quarter in question, modify these abatement rates in the light of the development of the market situation.

2. The Commission shall notify to each undertaking its reference production and reference quantities as well as its production quotas and the part of those quotas which may be delivered in the common market.

3. Where an undertaking ceases its production activitiy during a quarter, the Commission shall suspend the allocation of quotas as from the following quarter. Quotas or parts of quotas which have not given rise to production or deliveries may not be exchanged or transferred. In the case of temporary cessation of activity, the suspension shall be lifted once the activity in question resumes and the quotas shall be allocated in proportion to the part of the quarter still to run. 4. Where a plant - a works or an undertaking - undergoes a change of ownership, the new owner shall receive the plant's reference production and quantities and the relevant quotas. It is forbidden to circumvent such a transfer of references by selling, exchanging or transferring them.

In the case of a plant producing category Ia, Ib, or Ic products, the Commission shall take the necessary measures to ensure that the total production of each of categories Ia, Ib or Ic placed on the market remains unchanged.

Article 9

The Commission, when setting the abatement rates, shall set up each quarter a reserve not exceeding 3 % of overall steel demand.

This reserve shall serve in the first place to allocate the additional quotas pursuant to Article 14. The remainder may be used in order to apply Article 14A. Should the reserve prove to be insufficient to satisfy all requests, the Commission will reduce these increases in proportion to the reference production of the undertakings concerned.

Article 10

1. With regard to category Ia products which are used in the form of hot-rolled products for the production of welded rubes in the Community, with a diameter not larger than 406,4 mm, undertakings shall be authorized to increase their quotas and parts of quotas which may be delivered in the common market by an amount up to 5 000 tonnes per quarter or up to 30 % of the quantity of these products contained in the parts of quotas which may be delivered in the common market, whichever is the greater. The latter quantity shall correspond to the proportion accounted for by its deliveries for the production of such tubes in the common market in its total Community deliveres for category Ia in the best 12 months referred to in Article 8 (1) of Commission Decision No 2177/83/ECSC (1). The undertaking may make this increase only on condition that, no later than the month following the quarter in question, it provides proof that the relevant deliveries have been used for the intended purposes.

On a duly substantiated request by an undertaking, the Commission may adjust the quotas and parts of quotas which may be delivered in the common market by a larger amount. The Commission may make the granting of such an adjustment conditional on the production by the undertaking concerned, at the latter's expense, of a report drawn up by a firm of auditors certifying receipt of the undertakings' semi-finished products by the tube-manufacturing client or clients and their actual use for the production in question.

2. On a duly substantiated request by an undertaking, and if special prooducts represent at least 50 % by weight of its production in the category or categories in question, the Commission may adjust the quotas and parts of quotas which may be delivered in the common market if

- the rolls are the property of the user, and the product is reserved for the owner of the rolls,

- the product is reserved for the user by patent,

- the user cannot reasonably be expected to use other undertakings' products.

3. With regard to category Ic products, in view of the competition from category Id products, the Commission may allocate additional quotas to undertakings which apply for them, provided that they can prove that the initial quotas do not enable them to meet the specific needs of their customers.

The undertaking shall be eligible for such an increase only on condition that, no later than the month following the quarter in question, it provides proof that the relevant deliveries, have been used for the intended purposes.

4. With regard to category IV products which are intended for use for the same purposes as category V products in the form of reinforcing bars in coils and/or wire rod for the manufacture of welded wire mesh, the Commission may, on condition that proof of their ultimate use is provided, allocate quotas to undertakings which apply for them, provided that they can prove that the initial quotas do not enable them to satisfy the specific needs of their customers.

These additional quotas will be granted only for tonnages in excess of the quantities of the same products contained in the parts of quotas which may be delivered in the common market.

The latter quantities correspond to the share of the undertaking's Community deliveries of products in category IV, in the form of reinforcing bars in coils and/or wire rod intended for the manufacture in the Community of welded wire mesh, in its total Community deliveries of category IV in 1984.

The undertaking shall be eligible for such an increase only on condition that, no later than the month following the quarter in question, it provides proof that the relevant deliveries have been used for the intended purposes.

Article 11

1. A tolerance of 5 % in excess shall be allowed on each production quota and on that part of this quota which may be delivered in the common market. However, the production and that part of the production which may be delivered in the common market for all the categories of products may not exceed the sum of the quotas and the sum of that part of those quotas which may be delivered in the common market allocated for each of these categories.

2. In the case of undertakings which produce only one category or whose reference production of one category represents not less than 80 % of its total reference production of the products referred to in Article 4, a tolerance of 5 % in excess of that part of their production quota which may be delivered in the common market shall be allowed within the limit of the production quota for the category concerned. This tolerance may not be combined with that of paragraph 1.

3. (a) Any undertaking which has not used up its production quotas or the part of its quotas which may be delivered in the common market may carry forward into the following quarter up to 10 % of the amount in question for the same category of product. The Commission may authorize a larger carryover, on receipt of a duly justified request from the undertaking, for the products which may be subject to the minimum price rules.

(b) Carryovers are authorized within the same limit from the fourth quarter of 1985 to the first quarter of 1986.

(c) A complete carryover is allowed for the unused part of the additional quotas and parts of quotas allocated in the last month of the fourth quarter of 1985.

(d) Where an undertaking has not attained its production quotas during the quarter in question and can prove that this is the result of circumstances of force majeure or shutdown for repairs lasting at least four consecutive weeks, the Commission may authorize the undertaking concerned to carry over the unused quotas in their entirety.

(e) Where an undertaking does not expect to attain its quotas during the quarter in question, the Commission may, under the conditions set out in (d), allow the undertaking an advance on the quotas for the following quarter not exceeding 20 % of the quotas for the current quarter.

4. Undertakings may, each of the undertakings concerned having made a prior declaration to the Commission, enter into arrangements with other undertakings during the current quarter for the exchange or sale of quotas or parts of quotas which may be delivered in the common market pertaining to that quarter.

5. Where an undertaking which manufactures a product in respect of part or the whole of which it has no reference production and consequently no quota because all or part of this product has been intended for further processing within the same undertaking into other products (in respect of which it has reference quantities and quotas), the 'transferor undertaking' shall reach an agreement with another undertaking that the latter undertaking (the 'transferee undertaking') will process these semi-finished products in its place and provided that:

- further processing operations will be carried out by the transferor undertaking on the semi-finished products manufactured by the transferee undertaking, and

- the additional quotas allocated will be immediately transferred to or exchanged with the transferee undertaking, and

- the transferor undertaking accepts an obligation for the quarter during which the additional quotas are allocated to refrain from production of a tonnage of these pre-products equal to the additional quotas allocated,

the Commission may allocate an additional quota to the transferor undertaking should the undertaking so request in the course of the quarter in question.

6. Deliveries in respect of which an undertaking does not show proof of export outside the territory of the Community shall be deemed to have been made within the common market.

Documents acceptable as evidence of export shall include the following:

(a) a copy, stamped by the customs office of export, of the Community export declaration form 'EX' provided for in Council Regulation (EEC) No 2102/77 (1);

(b) commercial documents relating to the dispatch instructions for the relevant products and to the carriage thereof, including copies of the shipping orders, maritime bills of lading, inland waterway affreightment contracts and consignment notes for transport by rail or by road.

7. An undertaking's production of hot-rolled wide strip which, in a given quarter, does not fall within the scope of the first and second indents of category Ia shall, for the purposes of this Decision, be regarded as production of coils intended for re-rolling or other processing operations within the undertaking itself.

Any production of hot-rolled wide strip as referred to above which is assigned during ensuing quarters to direct use, export or to re-rolling or other processing operation in Community undertakings other than the producer shall be charged against the production quota for category Ia (first and second indent) of that producer pertaining to the ensuing quarters in question.

Article 12

A fine, generally of 100 ECU for each tonne in excess, shall be imposed on any undertaking exceeding its production quotas or that part of such quotas which may be delivered in the common market.

If an undertaking's production exceeds its quota by 10 % or more, or if the undertaking has already exceeded its quota or quotas during one of the previous quarters, the fine may be up to double that amount per tonne. The same rules shall apply to any excess over the quantities which may be delivered in the common market.

This amount shall be increased by 1 % for each month or part of a month by which payment is delayed, with effect from the date fixed in the decision imposing the fine.

Article 13

Where undertakings or groups of undertakings subject to the system of production quotas have merged, separated or formed new joint undertakings after 1 January 1984, or do so while this Decision applies, the Commission, with regard to the reference production and quantities, excluding the references production and quantities, excluding the references resulting from the application of Article 16, shall take the following measures, as appropriate:

1. In the event of concentration within the meaning of Article 66 of the Treaty and authorized in accordance therewith, the reference production and the reference quantities shall consist of the sum of the reference amounts previously calculated for each of the merged undertakings. The reference production and the reference quantities of the merged undertakings shall be reduced by that part corresponding to deliveries of products subject to quotas to be processed into other products subject to quotas effected between those undertakings during the reference period. Should one of the merged undertakings not have any reference figures because of the limits set in Article 4 (4), of the general decision applying at the time of the merger, the rules set out in Article 4 (5) shall apply.

2. In the event of the separation of merged undertakings, the undertakings shall notify the Commission of the subdivision between them of the reference quantities and production previously allocated to the group of which they were part.

In the case of the undertakings' not agreeing to the division mentioned above, the Commission shall determine the division of the reference production and quantities of the group between the undertakings.

The Commission may act in a similar manner where undertakings are in course of separation and where their conduct is liable to jeopardize the proper functioning of the production quota system.

3. In the event of the formation of new independent undertakings by one or more undertakings which assign to these new undertakings plant which was previously part of the production facilities of the founding undertakings, the undertakings shall notify the Commission of the subdivision between them of the reference production and quantities previously allocated to the separate founding undertakings.

4. The Commission shall carry out any adjustments needed, on the basis, where appropriate, of the opinion of a panel of experts.

Article 14

If, by virtue of the scale of the abatement rate for a certain category of products set for a quarter, the quota system creates exceptional difficulties for an undertaking which, during the 12 months preceding the quarter in question:

- did not receive aids authorized by the Commission with a view to covering operating losses,

- was not the subject of penalties in respect of the price rules or paid fines due,

the Commission shall, in respect of the quarter in question, make a suitable adjustment to the quotas and/or parts of quotas which may be delivered in the common market for the category or categories of products in question, provided that the undertaking makes an application to this effect in the first six weeks of the relevant quarter, providing all the requisite supporting documents in the following instances:

1. The reference production for the products or product for which the abatement rate exceeds 30 % represents at least 50 % of the total reference production for all categories of products manufactured by the undertaking.

2. The annual reference production is less than 130 000 tonnes and the abatement rate for one or more categories representing at least 50 % of the total reference production of all the categories of products manufactured by the undertaking exceeds 20 %.

In the first instance, the additional quotas and/or parts of quotas which may be delivered in the common market may not exceed an amount corresponding to a 25 % reduction in the abatement rate for each category of products in question and may not results in a rate of less than 30 %. The total adjustment for all categories of products in question may not exceed 25 000 tonnes per quarter. In the second instance, the additional quotas and/or parts of quotas which may be delivered in the common market may not exceed an amount corresponding to a 50 % reduction in the abatement rate for each category of products in question and may not result in an abatement rate of less than 20 %.

The Commission may make the granting of the adjustment conditional on the production by the undertaking concerned, at the latter's expense, of a report drawn up by a firm of auditors certifying that the quota system is causing it exceptional difficulties.

Article 14A

The Commission may, at the request of an undertaking to be made before the end of the first month of the quarter in question, grant additional quotas if the undertaking is experiencing serious difficulties as a result of the maintenance of the quota system and as a result has acquired a large amount of quotas during at least four quarters within a period of six consecutive quarters after 1 January 1984.

In this respect quotas acquired which have been replaced by the corresponding references shall not be taken into account.

This Article shall not apply to undertakings which receive additional quotas under Article 14.

Article 14B

1. The Commission may allocate additional quotas to undertakings:

- which have received orders from third countries exceeding by over 10 % the part of the quota which the undertaking is not authorized to deliver in the common market,

- which make an application to this effect, accompanied by supporting documents, within the first six weeks of the quarter in which the export is to take place and,

- which have not been the subject of penalties or have paid fines due imposed in respect of the price rules.

2. If the Commission establishes that these orders are in the interest of the Community, the Commission shall allocate additional quotas to these undertakings corresponding to the quantity in excess of the threshold mentioned in the first indent of paragraph 1. The sum total of these adjustments may not exceed, in any quarter, the quarterly average of the sum total of the parts of quotas which may not be delivered in the common market for all undertakings which were not used in the four preceding quarters. If the average of these unused parts of quotas proves inadequate to satisfy all these increases, the Commission shall reduce these increases proportionally.

3. Undertakings shall communicate to the Commission, within three months of the export, in addition to the evidence of export indicated in Article 11 (6), copies of the import forms of the third country of destination. Deliveries in respect of which an undertaking does not provide such proof of export shall be regarded as having been made within the common market, and the Commission shall modify its decision accordingly.

Article 14C

The Commission may allocate an additional quota increase of up to 25 000 tonnes per quarter to an undertaking:

- which is the sole steel undertaking in the country in which it is located;

- which is still facing exceptional problems even after obtaining a quota increase under Article 14.

Article 15

1. The Commission may, at the request of an undertaking made in the first quarter of 1986, authorize transfers of references within the two groups of categories of products listed below, with effect from the second quarter of 1986:

- Ia, Ib, Ic, II and III (group 1),

- III, IV and VI (group 2).

subject to the following conditions:

- the transfer must be limited to 10 % of the reference figures for all the categories mentioned above;

- the transfer may not result in an increase of more than 25 % of the reference figures for any one category;

- the Commission shall determine the coefficients for exchanges between categories;

- category III may not be used to move from one group of categories to another.

As regards the undertakings referred to in Article 11 (2), the Commission shall grant the necessary adjustments if, as a result of these transfers, it finds that there is a substantial reduction in the ratio between their reference figures and those for all other Community undertakings.

2. Where the undertakings concerned so request in advance, the Commission may authorize exchanges, sales or transfers of all or part of reference production or quantities if the plants corresponding to the reference figures to be transferred were permanently closed or sold and transferred to a third country after 1 January 1980. Where the undertakings concerned so request in advance, the Commission may also authorize exchanges, sales or transfers of all or part of reference production and quantities within the framework of restructuring plans which it has approved.

Where an undertaking wishes to exchange or transfer production of products covered by the quota system which were previously intended for internal processing in conjunction with another undertaking, the Commission may allocate to it the necessary reference figures to permit such exchanges or transfers, provided that production does not increase as a result.

3. In the case of permanent closure or of sale and transfer of a plant to a third country after 1 January 1980, the Commission may authorize the undertaking to transfer the reference figures corresponding to this plant within the two groups of categories of products set out in paragraph 1.

This transfer of references shall be subject to the following conditions:

- the reference for the plant in question shall be reduced by 15 %;

- the references resulting from this calculation shall be distributed within the groups of categories of products mentioned above in proportion to the undertaking's production references;

- the Commission shall determine the coefficients for exchanges between categories;

- category III may not be used to move from one group of categories to another.

4. The rules laid down in paragraphs 2 and 3 concerning production and quantity references shall apply only if the undertaking in question is not receiving aids not in conformity with Commission Decision No 3484/85/ECSC (1).

They shall also apply in the case of conversion of a plant so that the production potential of a category is permanently altered by over 20 %.

Article 15A

1. The Commission may make a reduction in an undertaking's quotas if it establishes that the undertaking in question has received aids not authorized by the Commission in accordance with Decision No 3484/85/ECSC or that the conditions attached to the authorization of aids have not been complied with.

In such cases the undertaking in question shall not be entitled to an adjustment under Articles 7, 14, 14A, 14C and 16.

2. Similarly, no undertaking shall be entitled, in any given quarter, to an adjustment under Articles 7, 14, 14A, 14C and 16 if, in the 12 months preceding the quarter in question, it was the subject of penalties under the quota system, unless it has paid all fines due.

Article 15B

1. A Member State may submit a complaint to the Commission if it establishes, with regard to categories Ia, Ib, II and III, that deliveries of products in one of these categories have been altered during a quarter to a significant extent compared with traditional deliveries.

2. A complaint as referred to in paragraph 1 must be submitted not later than eight weeks following the end of the quarter in question.

3. The Commission shall examine whether such a complaint is justified, on the basis of the monthly statistics sent by the Member States pursuant to Commission Decision No 3717/83/ECSC (2). When making its assessment it shall take account of all the circumstances pertaining to the case in question.

4. It shall consult the Member States concerned if it considers that the complaint is justified. In this event, it shall request the undertakings in question to give a commitment in writing that, during the following quarter, they will correct the imbalance in their traditional deliveries.

5. The Commission shall inform the Member States concerned of the action taken on the complaints.

Article 16

Where the Commission finds, following receipt of a request from an undertaking whose plants are located in Greece or Ireland, that the quota system is causing the undertaking concerned exceptional difficulties likely to prevent it from adapting to the structural developments in that country's economy, it shall make an appropriate adjustment to the quotas or parts of quotas which may be delivered in the common market for the undertaking and products in question, providing that the undertaking in question has not been the subject of penalties in respect of the price rules or has paid fines due.

Article 17

Where the Commission finds, in particular on the basis of complaints, that undertakings have modified their traditional deliveries of semi-finished products intended for the manufacture of products subject to the quota system to the point where they no longer permit a proper supply to the undertakings which depended on them, it shall take the appropriate steps to remedy the situation.

Article 18

1. If radical changes occur on the iron and steel market or if the application of this Decision encounters any unforeseen difficulties, the Commission shall carry out the necessary adjustments by general decision.

2. Without prejudice to the application of Article 58 (3) of the Treaty, this Decision shall apply for the period 1 January 1986 to 31 December 1987.

3. The provisions concerning the production quota system shall not apply to Spanish and Portuguese undertakings.

Article 19

Before the end of 1986 the Commission intends to ask the Council, after consulting the Consultative Committee, for its assent to the exclusion of other categories from the quota system as from 1 January 1987.

Article 20

This Decision shall enter into force on the day of its publication in the Official Journal of the European Communities.

This Decision shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 27 November 1985.

For the Commission

Karl-Heinz NARJES

Vice-President

(1) OJ No C 29, 1. 2. 1984, p. 1.

(1) OJ No L 335, 22. 12. 1984, p. 64.

(2) OJ No L 129, 15. 5. 1985, p. 11.

(1) OJ No L 208, 31. 7. 1983, p. 1.

(1) OJ No L 246, 27. 9. 1977, p. 1.

(1) See page 1 of this Official Journal.

(2) OJ No L 373, 31. 12. 1983, p. 9.

ARTICLE 19

BEFORE THE END OF 1986 THE COMMISSION INTENDS TO ASK THE COUNCIL, AFTER CONSULTING THE CONSULTATIVE COMMITTEE, FOR ITS ASSENT TO THE EXCLUSION OF OTHER CATEGORIES FROM THE QUOTA SYSTEM AS FROM 1 JANUARY 1987 .

ARTICLE 20

THIS DECISION SHALL ENTER INTO FORCE ON THE DAY OF ITS PUBLICATION IN THE OFFICIAL JOURNAL OF THE EUROPEAN COMMUNITIES .

THIS DECISION SHALL BE BINDING IN ITS ENTIRETY AND DIRECTLY APPLICABLE IN ALL MEMBER STATES .

DONE AT BRUSSELS, 27 NOVEMBER 1985 .

FOR THE COMMISSION

KARL-HEINZ NARJES

VICE-PRESIDENT

( 1 ) OJ NO C 29, 1 . 2 . 1984, P . 1 .

( 1 ) OJ NO L 335, 22 . 12 . 1984, P . 64 .

( 2 ) OJ NO L 129, 15 . 5 . 1985, P . 11 .

( 1 ) OJ NO L 208, 31 . 7 . 1983, P . 1 .

( 1 ) OJ NO L 246, 27 . 9 . 1977, P . 1 .

( 1 ) SEE PAGE 1 OF THIS OFFICIAL JOURNAL .

( 2 ) OJ NO L 373, 31 . 12 . 1983, P . 9 .