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Vol. 1983/0 114 
  
 
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In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983 
concerning the opening to the public of the historical archives of the European Econom ic 
Communit y and the European Atom ic Energy Communit y (OJ L 43, 15.2.1983, p. 1), as 
amended by Regulation (EC, Euratom) No 1700/2003 of 22 September 2003 (OJ L 243, 
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file have been declassified in conformity with Article 5 of the aforementioned regulation.  
In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom  1. 
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COMMISSION 
OF THE 
EUROPEAN  COMMUNITIES COM(83)  282 final. 
Brussels,  6 June 1983. 
FOR OFFICIAL  USE  ONLY 
General  Secretariat 
INTRODUCTION  OF A NEW  SYSTEM  OF PRODUCTION QUOTAS PURSUANT 
TO ARTICLE  58 AFTER 30 JUNE 1983 
(Communication  from  the  Commission  to the  Council) 
COM(83)  282  final. 

INTRODUCTION  OF A NEW  QUOTA  SYSTEM 
AFTER  30  JUNE  1983 
1. The present system of monitoring production and deliveries of a number of 
steel products, and the system of production quotas for certain steel pro­
ducts entered  into  force on 1 July 1982 and  will  come to an end on 30 June 
1983 (*). 
The measures in question were introduced in 1980 and have been maintained since 
then because of the manifest crisis in the steel industry. They have resulted 
in greater market stability and an increase in the level of prices. 
2. However, there has been no fundamental change in the crucial problems facing 
the steel industry : 
a/ There is still considerable overcapacity in the apparatus of production in the 
steel industry : in its General Objectives the Commission put this overca­
pacity at more than 40 million tonnes, and at their informal meeting at 
Elsinore  the  Industry  Ministers acknowledged  that  it was essential to 
endeavour to reduce capacity by some 30 to 35 million tonnes. 
b/ Demand  within  the Community is now at an even lower level than in 1982. 
Consumption of steel has steadily declined since 1979, anch Community pro­
duction figures  will  in all likelihood fall in 1983. 
c/ The world steel market is still in a state of imbalance, and similar 
phenomena (surplus capacity-and falling demand)- are continuing to affect 
our exports. 
The Commission is therefore obliged to conclude  that  the state of 
manifest crisis is persisting (*). 
(*) Decision N° 1696//82  ECSC  of 30  June  1982. 

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3. The Commission therefore considers  that  it must propose to the Council 
the extension of a number of measures adopted pursuant to Article 58 of the 
ECSC  Treaty. As indicated in its Communication on the extension beyond 
1 July 1983 of the measures adopted under Article 58 (*), which the 
Council  discussed on 25 April 1983, the Commission considers  that  these 
measures  are essential not only in order to prevent a deterioration of the 
market but also in order to enable firms to undertake the requisite res­
tructuring  measures. 
In view of the second objective, the monitoring system should be extended 
until  the end of 1985, which coincides  with  the end of the period of 
validity of the Aids  Code.  (**) 
The system in force during this periocrof two and a half years should be based 
largely on the present system, which has operated satisfactorily. However, 
severa\  -adjustments are called for in view of the proposed duration of 
the r\€r  s system and in order to emphasize the close links  with  the 
restructuring policy. 
The first  innovation is to bring Categories II and III  into  the system 
of compulsory quotas. These categories of products, which have so far 
been  the subject of voluntary restriction agreements, are also affected 
by the state of manifest crisis, as the high abatement rates set by 
the Commission in the Forward Programmes adopted in recent quarters indicate. 
Extending  the system of compulsory quotas to include new categories is 
also  justified  by the fact  that  the system should encourage-firms to 
adapt their reference figures to their restructured apparatus of 
production. 
It is becoming increasingly necessary to adjust -firms' reference figures as 
the periods taken  into  consideration in order to establish them are becoming 
increasingly  distant. It  will  not be question of reducing the overall 
reference figures of a  firm  which has reduced its surplus capacity in order 
to use its apparatus of production more efficiently. 
However,  within  this overall framework, encouragement should be given for 
transfers of reference figures between firms and,  within  individual firms, 
transfers relating to the  different  products -  flat  products on the 
one hand, and long products on the other hand - provided  that  the changes 
in question are in line  with  the market trend. 
(*) COM (83) 236 
(**) Commission Decision n°  2320/81/ECSC  of 7 August 1981. 

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5. It is also necessary to continue to protect unaided small and medium-sized 
firms against exceptional difficulties which they may encounter when the 
market situation justifies very high abatement rates, the reason being  that 
these  firms are not as flexible as the integrated producers. 
6. In view of the lengthy proposed duration of the system, it  will  be necessary 
for the Commission to draw up a  report  each year for the interested parties 
concerning  the results of its management activities, the state of the 
market and of the crisis, and it  will  propose any adjustments needed in order 
to ensure the system operates properly. A large degree of transparency is 
requi red. 
7. In proposing these measures, the Commission intends to continue to assume 
fully  the responsabi lities conferred upon it by the  ECSC  Treaty : mandatory 
production quotas constitute one of the main components of the anti-crisis 
measures,  the other main on es being : 
- the imposition of price rules on steel wholesalers and distributors 
and the publication of guidance prices ; 
- the monitoring of statistics relating to deliveries by producers 
and dealers ; 
- the Arrangements concluded  with  the 14 non-member countries which are 
the main exporters to the Community and 
- the Arrangement  with  the USA concerning exports  from  the Community to  that 
country. 
8. These measures provide a framework which should enable the steel industry to 
undertake the requisite restructuring measures in comparatively orderly 
conditions. In addition, the Commission has proposed to the Council the 
requisite social support measures to mitigate the employment consequences 
of the capacity reductions which this restructuring entails. However, in 
order to ensure  that  the restructuring measures do not get off to 
a bad  start,  it is essential  - as the Council meeting of  25  April 
recognized  - that  the measures adopted under Article  58  (which in the present 
situation constitute the only means of bringing supply  into  line  with  demand) 
should  be extended as described above. 
That is why the Commission, after consulting the Consultative Committe, wishes 
the Council to give its assent in respect of this Communication. 

Extension  of  the  production quota  system  from 1st July 1983 
1. Continuation - duration - transparency 
1.1. In the paper concerning "the extension of the measures to be taken 
under Article 58 from 1st July 1983" (*) which was studied at the 
Steel  Council of 25th April 1983, the Commission explained  that  the 
continuation of the measures of market regulation will be necessary 
to avoid deterioration of the market, and thus allow companies 
to restructure  within  a stable context. 
T.2.  On this  basis,  it was proposed  that  the system of control be extended 
for a  further  2 1/2 years to  that  end of 1985, which is also the 
target date fixed in the Aids  Code. 
This  proposal has met  with  a generally positive response and this 
justifies  that  this position should be maintained. 
1.3. The operation of the quota system over such a period will, of course, 
requjre the close co-operation of the Member States and the producers. 
For 1:nis reason, the Commission intends to indicate clearly the principal 
elements of the system to be introduced, and also to keep the interested 
parties informed, on a regular  basis,  of the way in which the system 
is managed and how the situation is developing. 
• As often as is necessary, and at least once a year, the Commission 
will report to the Council on the evolution of the crisis, the results 
achieved  by the system, and the modifications which mey be required. 
In particular, the Commission willgive its opinion on the continued 
existence  of a state of manifest crisis, and the compatibility of the-
system  with  the progress made in restructuring. 
./. 
(*) COM  (83) 236 

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1.4. It might welt be  that  restructuring, which will vary in the different 
member states, will create  difficult  situations for some undertakings. 
It is clearly too soon to consider solutions for such problems, as 
yet hypothetical. However, it is reasonable to suppose  that,  if such 
cases  should arise, the Commission would wish, after the  first  year of 
operation of the system, to introduce the modifications necessary to 
correct such imbalances in the system. 
1.5. For the moment the existing system, which has been shown to be effective, 
should  not be fundamentally modified ; however, its long duration and 
the closer link  with  restructuring which the Commission intends to establish 
calls  for some modifications. 
2. Product Coverage of the system 
2.1.  The products in Categories II (reversing mill plate and wide flats) 
and III (heavy sections), as defined in Decision No  2794/80/ECSC,  should 
be included in the system of mandatory quotas for two reasons : 
- the restructuring efforts must also relate to these products, and they 
should  therefore be covered by the rules, which will take restructuring 
into  account in the  future  system ; and 
- the voluntary agreements are no long working satisfactorily, in particular 
in the  case  of Category III where certain outsiders have significantly 
increased  their market shares, to the detriment of producers who 
participate in the voluntary programme. 
2.2.  The inclusion of these two product categories raises the question of 
determining the reference periods. 
Category  II products come under the heading of  flat  products and are 
comparable  with  the plates which fall in Category la. It is therefore 
proposed  that  a formula similar to  that  for products derived from 
hot-rolled wide strip should be  used.  Reference production would be 
calculated  on the basis of the average for the periods 1974, 1979 and 
the best 12 months, on the one hand, and the quotas of the  first  system, 
on the other, including the adaptations given during  that  period. 

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This  formula cannot be used for Category III, since some of the works 
producing heavy sections were not in production in  1974  and produced 
very  little  in  1979,  in the "best  12  months" period. For these products, 
which are  fairly  similar to merchant bars, the formula which is already 
applied  to Categories V and VI (i.e. the reference figures corresponding 
to the quotas of the  first  Article  58  system) should be applied. 
These  reference figures should be adjusted in accordance  with  Article  13 
of Decision No  1831/81/ECSC  (inclusion of new mills or of capacity 
increases  in  excess  of  100 %),  if the capacity increases in question 
have  not been taken  into  consideration in the voluntary system. 
2.3.  The categories of products covered by the voluntary quota system may 
be modified if the situation changes.. In particular, the Commission 
may wish to examine, in conjunction  with  the producers concerned, 
the possible inclusion of certain types of special steels in the quota 
system.  Also,  it is possible  that  the Commission, between now and  1985, 
may propose in the  light  of improved economic conditions to terminate 
the quota Arrangements for some products now included. The Commission 
will  keep the Council informed of its views on this  important  point 
in its periodic reports. 
3. Relationship  with  Restructuring 
3.1.  As the Commission has stated, it is desirable to allow the references 
of an undertaking to be altered in order to adapt them to its restructured 
production facilities. 
This  can take place  : 
- by the exchange of references between undertakings (synergy)  ; 
- by the modification of the references of the undertaking by means 
of transfer of references between categories but  within  the  total 
of its references  (flat  products and long products being considered  „ 
separately) . 

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The first  operation will-take place in accord  with  the state of the 
market and the Commission would not wish to intervene in exchanges 
of this type, which have no impact on other companies. 
If this type of exchange is impossible, which  will  probably be the  case 
for products for which there is  excess  capacity where the undertaking 
seeking  exchanges cannot  find  a partner, it seems reasonable to reduce 
the references to be transferred, a reduction which could be based for 
example  on the reduction rates for product groups given in the 
General  Objectives, or another solution based on exchanges at rates 
dictated by the market. The following paragraphs outline a possible 
solution : 
3.2.  Article 15 of Decision  1696/82/ECSC  would be modified to  afford  to 
undertakings greater possibilities of adaptation. However, the general 
conditions which constitute its introduction  will  be maintained, as 
well as the  first  paragraph which provides the possibility of exchange 
or ceding of production and reference quantities between undertakings 
which have definitively closed the corresponding production facilities. 
3.3.  Is is proposed, however, to modify the rules of paragraph 2. 
Given  that  the rules of the  first  paragraph do not guarantee  that 
the undertakings can in all  cases  obtain adaptation of their 
references  to the new production structures, exchanges of reference 
within  individual companies must be provided fox.. 
3.4. To this end, the following'rules should apply : 
" 3.4.1. Firms would be allowed to make exchanges, tonne for tonne, 
within  their own reference figures, which for this purpose 
would be subdivided  into  two groups of products categories: 
(i) la, lb, Ic, Id, II, III . . 
(ii) III, IV, V, VI. 

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This  subdivision  into  two groups is necessary because of the 
existence  within  the Community of two different types of firms 
- integrated works and mini-works  -,  the structure of which is 
quite different. However, using Category III in order to move 
from one group to another would be prohibited. 
3.4.2.  Exchanges would be made on a tonne for tonne  basis,  and the 
following conditions would apply  : the  firm  must close down 
a plant once and for all  ; the reference figures would be 
reduced  by a rate of reduction as defined in para.  3.1. 
The remainder would be distributed, in proportion to production 
potential, between the other categories of the same group. 
3.4.3.  In the  case  of mini-works  with  only a very small number of modern 
mills,  exchanges of reference figures, as provided for above, 
would not be subject to a reduction in the reference figures 
at the same rate of reduction as defined in  para  3.1., in order 
to prevent these very competitive undertakings from falling 
below the level of viability. 
3.4.4. In the  case  of Category Id, firms would be able, in the event of a 
very largeincrease in demand, to increase their reference 
production in  return  for an equivalent reduction in Category lb 
and/or Ic,  without  closure of a production plant used for the 
manufacture of Category lb or Ic products. 
This  increase of Category Id, resulting from internal  · exchanges, 
must remain  within  a global figure for this category which will 
be kept under review by the Commission. The references accorded 
to production facilities should not exceed  85 %  of their PMP, 
and the overall increase in Community references should.not exceed 
40 %  of the existing references. 

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3.4.5.  Firms which do not arrange for exchanges of their reference 
figures  with  other firms and which do not make an internal 
exchange  or a permanent transfer would lose the reference 
figures one year after the closure or conversion of the plant 
in question, where this entails discontinuing production of 
the product in question. 
3.5.  It must be clearly understood  that  during the life of this decision, 
the bringing  into  service of new capacities or the increase of 
existing capacity will not result in the allocation of supplementary 
references. 

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4. Special  Arrangements for small and medium  sized  unsubsidized undertakings 
4.1.  Small and medium  sized  undertakings, not subsidized, which are unable 
to close certain production facilities cannot thus benefit from 
internal restructuring to improve their situation. It is appropriate 
to adapt Article 14 of Decision  1696/82/ECSC  to take account of the 
exceptional  difficulties such undertakings can experience resulting 
from exceptionally high abatement rates. 
4.2.  In the  case  of producers of  flat  products, the thresholdd 000 000 tonnes) 
defining those undertakings whichcan experience exceptional difficulties 
need  not be changed, nor the 20 % minimum abatement rate which brings 
the special provisions  into  play. 
It should be understood  that  producers of reversing mill plate 
(Category  II) will benefit from these provisions, as well as the 
producers  of Categories la to Id. 
4.3.  In the  case  of the producers of long products, distinction must be 
drawn between two categories of producers : 
4.3.1.  The very small producers, for whom, as a result of the introduction 
of Category III, it is proposed to raise the threshold of 
100 000 tonnes to 130 000 tonnes (the sum of references for 
categories  III, IV, V and VI). For these producers, as in the 
JNpast,  the minimum abatement rate permitting the use of the special 
'"provisions  will be fixed at 20 '/.. 
4.3.2.  In addition to these very small producers of long products there 
are a large number of medium-sized producers which often have 
modern plant. It is necessary to avoid a situation where such 
producers  encounter exceptional difficulties because of the quotas. 
The following rules are therefore proposed : 
- total  production as referred to in Article 1 of Decision 
No 1696/82/ECSC,  did not exceed 700 000 tonnes in 1981; 
- production of Category III, IV, V and VI products represents 
at least 90 % of the  total  production referred to in the 
first  indent, and 

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- the proportion of the production of the categories of products 
for which the abatement rate exceeds  40%  is not  Less  than  50% 
of the  total  reference production for the four categories of 
product in question. 
4.4.  It is evident  that  the existing criterion of firms encountering 
exceptional  difficulties because of the  scale  of the abatement 
rates should be maintained. In addition, it should be specified 
that  the firms in question must not receive operaing subsidies. 
Above  all, firms which receive subsidies incompatible  with  the Aids 
Code  should be excluded in all  Cases. 
4.5. fne advantage which the Commission could  grant  to the firms indicated 
in paragraphs 4.2.  (flat  products) and 4.3.2. (medium  sized  mills, 
long products) would normally consist of a reduction in the abatement 
rate of up to % of the reference figure, but not exceeding tonnes 
a quarter for the categories taken all together.  Such  firms would be 
required to submit to the Commission their balance sheets for the last 
three years and the production costs and average prices for the 
various product categories for the previous quarter. 
If firms apply for a bigger reduction in the abatement rate, the 
Commission  would carry but a more detailed" examination and would 
request a  firm  of auditors (chosen by the Commission) to give its 
opinion,  and the expenses involved would have to be paid by the 
applicant. Where it is confirmed  that  the above conditions are 
satisfied,  the Commission would  grant  a reduction in the abatement 
rate of up to % of the reference figure, but not exceeding 
tonnes a quarter for the categories taken together. 

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4.6.  In the  case  of the very small producers of Long products referred 
to in paragraph  4.3.1.,,  the Commission  will  also carry out an in 
depth examination of their position on the basis of the information 
it considers necessary and which the undertakings are obliged to 
provide, and if necessary employing a  firm  of auditors. On the basis 
of this examination, the Commission can reduce the abatement rate by 
up to % if the categories produced by these companies are not all 
subject to an abatement rate greater than 20%, or up to '/. if all the 
product categories are subject to a rate greater than 20%. 
4.7.  In no  case  can the abatement rate accorded to an undertaking after 
modification by the Commission be  less  than 20%. 
4.8.  For the adaptations mentioned above, the Commission  will  use in the 
first  place the production references of undertakings which have 
ceased  production, the references lost by undertakings when exchanging 
internal references, and unused references (see 3.4.5.).