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COM (85) 535 
 
 
 
Vol. 1985/0197 
  
 
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Conformém ent au règlement (CEE, Euratom) n° 354/83 du Conseil du 1er février 1983 
concernant l'ouverture au public des archives historiques de la Communauté économique 
européenne et de la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983, 
p. 1), tel que modifié par le règlement (CE, Euratom) n° 1700/2003 du 22 septembre 2003 
(JO L 243 du 27.9.2003, p. 1), ce dossier est ouvert au public. Le cas échéant, les documents 
classifiés présents dans ce dossier ont été déclassifiés conformément à l'article 5 dudit 
règlem ent. 
In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983 
concerning the open ing 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, 
27.9.2003, p. 1), this file is open to the public. Where necessary, classified documents in this 
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. 
Februar 1983 über die Freigabe der historischen Archive der Europäischen  
Wirtschaftsgemeinschaft und der Europäischen Atomgem einschaft (ABI. L 43 vom  15.2.1983,  
S. 1), geändert durch die Verordnung (EG, Euratom) Nr. 1700/2003 vom 22. Septem ber 2003  
(ABI. L 243 vom  27.9.2003, S. 1), ist diese Datei der Öffentlichkeit zugänglich. Soweit  
erforderlich, wurden die Verschlusssachen in dieser Datei in Übereinstimmung mit Artikel 5  
der genannten Verordnung freigegeben.  
COMMISSION OF THE EUROPEAN COMMUNITIES
C0M(85> 535 final.
Brussels, ^October 1985
COMMUNICATION FROM THE COMMISSION TO THE COUNCIL
concerning the negotiation of arrangements on Community steel imports
for 1986
C0MC85) 535 final

CONTENTS
Part I :  background
Part II: draft guidelines for the negotiation of
arrangements on Community steel imports  
for 1986

I. BACKGROUND
1. Since 1978 the Community has come each year to arrangements with  
some fifteen non-member countries concerning its imports of iron and  
steel products. The arrangements were necessary to cope with the  
worldwide crisis caused in the industry as massive overproduction set  
off unbridled competition, leading in turn to falling prices and  
various distortions.
2. The Commission proposes that a fresh round of steel arrangements  
be negotiated in the light of the following factors:
- its international commitments, and in particular the concern of all  
steel-trading countries to prevent the disruption of traditional  
trade flows established under normal conditions of competition;
- the firmness of exports, and the fact that the Community as a whole  
is a net exporter;
- the fact that consumption in 1984 was almost 6% up on 1983 levels, the  
market appears to have remained steady in 1985, and the forecasts for  
1986 suggest continuation of the recovery;
- the progress achieved in the restructuring of the Community steel  
industry;
- the conclusions adopted by the Council on 25 July regarding the  
organization of the steel market, stressing the need to "return as  
swiftly as possible, in an orderly manner, to a market in which  
Community undertakings freely compete", while "being aware ... that the  
process of restructuring is still in progress and that a transitional  
period limited to ... three years is necessary".

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3. To date the arrangements have been rather complex and diverse. For  
1986, therefore, the Commission is proposing negotiating directives  
designed to simplify the terms of the arrangements as much as possible  
and match the quantitative provisions to market trends.
(i) Presentation: until now, each arrangement has been agreed annually
by reference to the one before, and has had a string of declarations  
annexed to it. The Commission feels it would be preferable (a) to  
negotiate new texts which, while incorporating most of the existing  
clauses, would not refer back to old arrangements, and (b) to do  
away with the annexed declarations or provisions, which have made  
the arrangements unwieldy to implement and insufficiently  
transparent. The annexed provisions will henceforward be included  
in the body of the text.
(ii) Geographical cover: the Commission would suggest that arrangements
be negotiated with countries having already accepted an arrangement  
for 1985. Should countries without an existing arrangement wish  
to negotiate one, the Commission will notify the Council in the  
usual way.
(iii) Differentiation: in the Commission's view the arrangements would
be both more effective and easier to administer if their provisions  
had greater uniformity. It proposes that there should be just  
two types of arrangement, one for EFTA countries and one for the  
rest. The provisions of both types would be similar, though  
distinctions would be made between market and non-market economies.

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EFTA countries: the arrangements wi LL substantially rely of the free-trade
agreements with those countries, and will affirm the need or duty  
to observe Community prices and traditional patterns of trade in  
steel between the Community and EFTA countries. The presentation  
will be recast and controversial wording avoided, but the  
arrangements will have substantively the same objectives as earlier  
ones.
Other non-member countries: the provisions being proposed by the
Commission are essentially the same as the existing ones; some  
of the wording will be simplified , and some sub-quantities the  
establishment of which presented obstacles to implementation of  
the arrangements will be abolished or adjusted.
(iv) Product coverage of arrangements with non-EFTA countries: the
Commission proposes keeping to the range of ECSC products  
covered in the 1985 arrangements, minus CCT heading nos 73.06 and  
73.07 (puddled bars and pilings; ingots, blocks, lumps and  
similar forms, of iron or steel; blooms, billets, slabs and  
sheet bars (including tinplate bars) of iron or steel). Setting  
aside the EFTA countries and Spain and Portugal on the one hand  
and countries without arrangements, subject to basic prices, on  
the other, imports of these products have traditionally been small  
and are in steep decline. The Commission also feels semi-finished  
products should be excluded in as much as it maintains that these  
products must remain outside the arrangement it is negotiating with  
the United States, because the main buyers are steel manufacturing  
firms that benefit from them in their restructuring process.  
However, it believes it is appropriate to reconsider this question  
should it find that US policy is altering world market conditions.

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(v) Quantities :  the Commission suggests that the quantities to  
agreed in the Arrangements be increased by 4,5%. The  
quantities thus fixed will be re-assessed after the first six  
months in order to take into account the then updated consumption  
forecasts.
(vi) The Commission is proposing regional distribution and product  
breakdown clauses based on traditional trade flows, which are  
changing. Should any problems arise in this respect the  
Commission will open consultations with the party concerned  
immediately.
The price clauses and sanctions for breach of price rules will  
be no different from last year's. There will no longer be a  
reference to minimum prices, which are being suspended within  
the Community itself.
4. The conclusion of arrangements with non-member countries will not  
affect the continued existence or tightening up of autonomous measures.
- The Commission will renew and if necessary strengthen the Community  
surveillance procedure for iron and steel imports, which expires at  
the end of the year. The licensing system, which is compatible with  
the requirements of international law, will give the Commission more  
up-to-date information, enabling it to react promptly to quantitative  
movements or undercutting.

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- The system of basic prices at Community frontiers will remain. The  
Commission will monitor the production costs of iron and steel products  
in the most competitive market economies and adjust basic prices as neces  
sary or adapt the list of products covered by basic prices should semis  
be excluded from the arrangements.
- Commission Decision No 2177/84/ECSC on protection against dumped or  
subsidized imports from countries not members of the European Coal and  
Steel Community will provide effective protection for the Community  
steel industry against damage from abnormally low-priced imports.
- The autonomous quotas currently applicable to steel imports will be  
allowed to remain in force, but have to be administered in such a way  
that their utilization is not hindered.
- Where a Member State does not have autonomous quotas and it looks as  
though imports from a state-trading country will exceed the quantities  
agreed in the arrangement with that country, the Commission, after  
consultations with the exporting country, may authorize the
Member State to take safeguard measures.
5. Spain and Portugal will be members of the Community from  
1  January 1986, the date when the external provisions are due to enter  
into force. Existing Community provisions will apply to
the new members as from that date; these member states will be involved  
in the decisions relating to acts renewable annually.
As far as arrangements are concerned, the Commission is of the opinion  
that they must be applicable to the enlarged Community as from the  
1  January 1986.

II. GUIDELINES
for the negotiation of arrangements on  
Community steel imports for 1986

ANNEX
I. Arrangements covering Community steel imports for 1986 will be  
negotiated with the following countries:
Austria, Finland, Norway, Sweden, South Africa; Australia, Brazil,
South Korea; Bulgaria, Czechoslovakia, Hungary, Poland, Romania;
Japan (special understanding).
The two existing arrangements with Brazil (one for pig iron and cast  
iron and one for other iron and steel products) will be consolidated.
Arrangements may also be reached, on the basis of a Commission proposal  
and with the approval of the Permanent Representatives Committee, with  
other countries wishing to do so.
II. In these negotiations the Commission will aim at the conclusion of  
arrangements on the lines set out below.

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A. COUNTRIES OTHER THAN EFTA MEMBERS
(a) SC0PE
1. The ECSC product coverage  
arrangements, minus CCT tariffwill be the same as in the 1985  
headings Nos 73.06 and 73.07.
2. Community imports of iron and steel products covered by the  
arrangements will not be subject to the quantitative limits set therein  
provided they are declared to be for re-export from the Community in  
the same state or after Commission processing, in accordance with the  
system of control in force in the Community.
(b) QUANTITIES
1. The quantities to be agreed with third countries having concluded an  
Arrangement in 1985 will be 4,5% up for 1986 on those agreed for 1985.  
Inclusion of Spain and Portugal will result in an adjustment of these  
quantities. The amounts thus fixed will be subject to a re-assessment after  
the first six months in order to take into account the then updated  
consumption forecasts.
2. Quantities not utilized in 1985 will not be carried over and added  
to the 1986 quantities.
3. A number of Member States apply autonomous quotas to imports from  
certain non-member countries having an arrangement with the Community.
Those quotas will be adjusted in line with the overall quantitative  
level set in the arrangement concerned, on the basis of the traditional  
quota level. Member States maintaining autonomous quotas must not  
use a more detailed product breakdown in the arrangement than they do  
for the national quotas. Where the arrangements include sub-quantities  
for other Member States, their number should be limited and adapted to  
the real market situation. All quantities established, including  
those covered by autonomous quotas, will be administered in such a way  
that no obstacle is placed in the way of their utilization.
4. Indirect imports originating in a country which has concluded an arrangement  
but having been consigned from another third country will be set against the  
quantity mentioned in the Arrangement.

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5. Where quantities are not expressly agreed in the arrangements for  
seconds or substandard products, iron and steel products imported into  
the Community must be of standard quality, unless the Commission  
exceptionally authorizes the importation of seconds or substandard  
products.
<ci PRICE RULES
1. The delivered prices actually charged on direct deliveries by  
producers or merchants in a country which has entered into an  
arrangement, or by their agents in the Community or elsewhere, must  
not be more than 6% in the case of ordinary steel or 4% in the case  
of special steel below the delivered prices resulting from the list  
prices and conditions of sale of Community producers.
2. An exporter in a country which has entered into an arrangement may  
match the prices quoted in the Community by third countries which  
do not have an arrangement with the Community provided the selling  
price of the goods exported by the arrangement country, delivered  
at the Community frontier, is not lower than the basic import  
reference price.
3. Discounts given on seconds or substandard products must not differ  
by more than 25% from the list prices of prime-quality products,  
including the penetration margin.
4. Imports from arrangement countries which comply with the price rules  
of the arrangement will not be subject to Commission Decision
No 2177/84/ECSC·
5. The right of Community iron and steel firms to align their prices on  
the delivered prices of iron and steel products covered by an  
arrangement and originating in the country having entered into that  
arrangement with the Commission will be suspended by a decision  
prohibiting alignment.
6. (i) The parties will agree that in the light of the Community's
efforts to maintain the level of prices on the internal market,  
special attention must be paid to observance of the price  
rules in the arrangement.

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(ii) The parties will agree that the Commission may reduce or
eliminate the margin allowed under paragraph 1 for products  
in respect of which persistent and unjustified undercutting  
of prices has been observed.
(iii) They will also agree that in especially serious cases the
Commission may suspend application of the arrangement price  
rules for one or more products where it finds, following the  
normal consultation procedure and not earlier than eight  
working days after a special preliminary consultation, that  
the arrangement is no longer functioning normally owing to  
persistent and unjustified undercutting of the arrangement  
prices for the product or products concerned. The product  
or products concerned will be subject instead to basic prices,  
but will continue to be covered by the quantitative provisions  
of the arrangement. The import of such products may be if needed  
subject to the provisions of Comission Decision No 2177/84/ECSC  of 27 July 1984.
7. Imports originating in a country having entered into an  
arrangement with the Commission but coming from a third country (indirect  
imports) will be subject not to arrangement prices but to basic prices.
8. Imports of steel for the construction or repair of ships or offshore  
structures are not subject to either Community or arrangement price  
rules.
(d) Other provisions
1. Regional distribution clause (applicable to non-eastern bloc  
countries). A country entering into an arrangement with the  
Commission will recognize that an abnormal rise in exports in  
comparison with traditional trade flows may cause problems in  
certain regions of the Community, and therefore that it is  
necessary to avoid concentrating deliveries on a single region  
of the Community. It will declare its willingness to enter into  
consultations with the Commission as soon as the Commission  
informs it of regional problems, and to take appropriate steps  
to put an end to these problems.

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2. Product breakdown
i.  Non-eastern bloc countries
A country entering into an arrangement with the  
Community will ensure that its exports do not  
exacerbate the problems being experienced by  
Community producers of certain categories of product  
in the continuing difficult economic circumstances  
and will see that the traditional proportions  
of its exports to the Community of different categories  
of product are maintained.
ii.  Eastern bloc countries
Countries whose arrangements include specific  
quantitative limits for some products while not  
differentiating or defining others in sufficient detail  
will avoid concentrating deliveries on an individual  
product.
3. Consultations
Consultations will be entered into at the  
request of either party on any problems arising from the  
implementation of the arrangement.
B- EFTA COUNTRIES
(a) Preliminary provisions
1. The parties will confirm that subject to the provisions of  
the arrangement the conduct of their trade in iron and  
steel products will be governed by the Agreement between  
the Member States of the European Coal and Steel Community  
and the European Coal and Steel Community on the one hand  
and the EFTA countries on the other (free-trade Agreement).

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2. In accordance with the free-trade Agreement, the arrangement  
will apply to iron and steel products covered by the Treaty  
establishing the European Coal and Steel Community.
3. Imports into the Community of iron and steel products  
covered by the arrangement will not be subject to the  
provisions of the arrangement where they are declared to  
be for re-export from the Community in the same state or  
after Commission processing.
4. An EFTA country will agree with the Commission on the need  
to see that imports originating in a third country but  
coming from that EFTA country do not cause problems.
(b) Maintenance of traditional trade flows
1. While affirming their attachment to the principles of  
Article 10 of the free-trade Agreement, the parties will  
agree that trade must not hinder the policy of  
restructuring under way in the Community, and should  
remain within traditional limits. They will therefore  
agree that the export/import growth ratio should be kept  
to the traditional proportions.
2. Where information available to one of the parties shows
that imports are not keeping in line with exports or  
threaten to cause difficulties for certain regions or  
categories of product, both parties, at the request of  
either of them, shall immediately enter into
consultations with a view to finding appropriate means of  
resolving the problem.

(c) Price rules
1. The Commission will recall that in accordance with Article 19(1)/20C1)  
of the free-trade Agreement, Article 60 of the Treaty establishing the  
European Coal and Steel Community and decisions taken in pursuance to  
that article apply to transactions carried out by the steel undertakings  
referred to in Article 80 of the ECSC Treaty in an EFTA country.
2. The EFTA countries will confirm that in accordance with
1Article 19(2)/20(2) of the free-trade Agreement, they will ensure  
that firms under their jurisdiction comply with the provisions of  
the article, and in particular that they will continue to take the  
measures required to achieve continually the same effects as those  
produced by Community decisions on prices.
3. Having regard to the measures taken by the Community to ensure  
price observance by its firms, and in order to ensure effective  
application by EFTA firms of the price rules in Article 60 of the  
Treaty and decisions implementing that article, the authorities of the  
EFTA countries will undertake to take effective measures to monitor  
compliance with such rules by means of appropriate legal, regulatory  
and administrative rules.
4. Imports of steel for the construction or repair of ships or offshore  
structures are not subject to the price rules.
5. Should either of the parties find that the price rules are not  
being applied it will request the holding of a special consultation  
meeting.
Article 19 for Finland and Norway, Article 20 for Austria and Sweden.

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(d) Other provisions
1. Regional distribution
Each EFTA country will recognize that an abnormal development of exports
may cause problems in certain regions of the Community. In order to
1avoid recourse to Article 22/23 of the free-trade Agreement, it is  
prepared to enter into consultations with the Commission upon notification  
by the Commission of regional problems, with a view to finding an  
appropriate solution.
2. Product breakdown
The EFTA country will recognize that a significant change in the structure  
of trade could hinder the smooth development of trade. In consideration  
of the problems being experienced by Community producers of certain  
categories of product in particularly difficult economic circumstances,  
the EFTA country will ensure that its exports of certain categories of  
product do not exacerbate those problems. It is prepared to enter into  
consultations with the Commission upon notification by the Commission of  
the existence of problems, with a view to finding an appropriate solution.
3. Seconds
The EFTA country will ensure that its exports of seconds or substandard  
products do not exceed the percentage of seconds in deliveries by  
Community firms. It declares its willingness to enter into consultations  
with the Commission whenever the Commission finds that there has been an  
abnormal development in imports of seconds.
4. Consultation
Consultations will be held at the request of either party  
on any problem arising from the implementation of the arrangement.
Article 22 for Finland and Norway and Article 23 for Austria and Sweden.