COMMUNICATION FROM THE COMMISSION Request for Council assent and consultation of the ECSC Committee, pursuant to Article 95 of the ECSC Treaty, concerning a Draft COMMISSION DECISION amending Commission Decision No 2136/97/ECSC of 12 September 1997 on administering certain restrictions on imports of certain steel products from the Russian Federation

EXPLANATORY MEMORANDUM

In October 1997, under the Agreement on partnership and cooperation (PCA) establishing a partnership between the European Communities and their Member States, of the one part, and the Russian Federation, of the other part, the European Coal and Steel Community and the Russian Federation concluded a sectoral agreement on trade in certain steel products. This Agreement prepared the way for the gradual and conditional liberalisation of bilateral trade in steel.

Several declarations are attached as integral parts to the agreement. In particular, Declaration No 3 states that the Parties agree that they shall not apply quantitative restrictions, customs duties, charges or any similar measures on each other's exports of ferrous waste and scrap.

On 16 April 1999, despite this undertaking, the Russian Government adopted a decree imposing a 15% customs duty (with a minimum charge of EUR 15/tonne) on exports of iron and steel scrap for a period of six months. According to the decree, this measure was intended to prevent diversion of the raw materials needed for steel production and to maintain minimum levels of production from Russian steel plants.

On several occasions, the Community formally drew the attention of the Russian authorities to the incompatibility of the decree with the provisions of the Steel Agreement and demanded that the export tax on iron scrap be dropped forthwith.

On 28 October 1999 the Russian Government nevertheless extended the original decree imposing a customs duty on exports of iron and steel scrap by an additional six months.

In accordance with Article 107(2) of the PCA, which sets out the procedure for either Party to take appropriate measures if it considers that the other Party has failed to fulfil its obligations, the Community responded to the Russian Federation's persistent breach of the Steel Agreement by reducing the quantitative limits for 2000 by 12% of the amounts originally provided for in the Agreement.

On 15 April 2000, the Russian Government extended the measure contested by the Community indefinitely.

In view of the lack of progress towards settlement of the dispute, the Community should renew its counter-measure by also reducing the quantitative limits for 2001 by 12% of the amounts originally provided for in the Steel Agreement.

Draft COMMISSION DECISION amending Commission Decision No 2136/97/ECSC of 12 September 1997 on administering certain restrictions on imports of certain steel products from the Russian Federation

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Coal and Steel Community, and in particular the first paragraph of Article 95 thereof,

After consulting the ECSC Consultative Committee and obtaining the unanimous agreement of the Council,

Whereas:

(1) Commission Decision No 2136/97/ECSC of 12 September 1997 on administering certain restrictions on imports of certain steel products from the Russian Federation, [1] as amended by Decisions Nos 2124/98/ECSC [2] and 659/2000/ECSC, [3] implements in Community law the provisions of the Agreement between the European Coal and Steel Community and the Russian Federation on trade in certain steel products [4] (hereinafter the "Steel Agreement"). The Steel Agreement was concluded in the wider framework of the Agreement on partnership and cooperation (PCA) establishing a partnership between the European Communities and their Member States, of the one part, and the Russian Federation, of the other part, as specified in Article 21 thereto. [5]

[1] OJ L 300, 4.11.1997, p. 15.

[2] OJ L 268, 3.10.1998, p. 31.

[3] OJ L 80, 31.3.2000, p. 13.

[4] Commission Decision of 12.9.1997 (OJ L 300, 4.11.1997, p. 51).

[5] OJ L 327, 28.11.1997, p. 3.

(2) Several declarations are attached to the Steel Agreement as integral parts thereof. Declaration No 3, in particular, states that "in the context of the Agreement [...], the Parties agree that they shall not apply with respect to the other Party quantitative restrictions, customs duties, charges or any similar measures on the export of ferrous waste and scrap under the Combined Nomenclature heading 7204 [...]".

(3) For the purposes of dispute settlement and trade sanctions, the relevant procedures in the PCA apply to areas covered by the Steel Agreement. In particular, Article 107(2) of the PCA states that, "if either Party considers that the other Party has failed to fulfil an obligation under the Agreement, it may take appropriate measures. Before so doing, except in cases of special urgency, it shall supply the Cooperation Council with all relevant information required for a thorough examination of the situation with a view to seeking a solution acceptable to the Parties."

(4) On 16 April 1999, the Russian Government adopted a decree [6] imposing a 15% customs duty (with a minimum charge of EUR 15/tonne) on exports of iron and steel scrap for a period of six months. According to the decree, this measure was intended to prevent diversion of the raw materials needed for steel production and to maintain minimum levels of production from Russian steel plants. On 28 October 1999 [7] the Russian Government extended the initial decree imposing a customs duty on exports of iron and steel scrap by an additional six months.

[6] Decree No 441 of 16.4.1999 of the Government of the Russian Federation.

[7] Decree No 1198 of 28.11.1999 of the Government of the Russian Federation.

(5) The aim and effect of the above decrees is to restrict exports of the products concerned from the Russian Federation, and they are therefore indirectly prejudicial to the Community's steel industry.

(6) On several occasions, within the appropriate forums set up by the Steel Agreement and the PCA, the Community formally drew the attention of the Russian authorities to the incompatibility of the decree with the provisions of the Steel Agreement and demanded that the export tax on iron scrap be dropped forthwith.

(7) As these consultations failed to find a solution acceptable to either Party, the Community decided that appropriate trade counter-measures should be taken for as long as the Russian Federation maintained its persistent breach of the provisions of the Steel Agreement. In accordance with Article 107(2) of the PCA, the Community reduced for 2000 the quantitative limits applying to its imports of certain steel products from the Russian Federation [8] by 12% of the quantities provided for in Annex IV to Decision No 2196/97/ECSC. This reduction constituted a proportionate response to the abovementioned infringement.

[8] Commission Decision No 659/2000/ECSC of 30.3.2000 (OJ L 80, 31.3.2000, p. 13).

(8) On 15 April 2000, the Russian Government extended the measure contested by the Community indefinitely [9].

[9] Decision No 351 of 15.4.2000 of the Government of the Russian Federation.

(9) In view of the lack of progress towards settlement of the dispute, the Community should renew its counter-measure and therefore reduce the quantitative limits applying to its imports of certain steel imports from the Russian Federation for 2001 by 12% of the amounts originally provided for in the Steel Agreement.

HAS DECIDED AS FOLLOWS:

Article 1

The quantitative limits for 2001 in Annex IV to Commission Decision No 2136/97/ECSC on administering certain restrictions on imports of certain steel products from the Russian Federation are replaced by those set out in the annex to this Decision.

Article 2

The Commission shall take appropriate measures to repeal this Decision once the Russian Federation has taken the necessary measures to meet its obligations under Declaration No 3, attached to the Agreement between the European Coal and Steel Community and the Russian Federation on trade in certain steel products.

Article 3

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

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

Done at Brussels,

For the Commission

Member of the Commission

ANNEX

(tonnes)

Product // 2001

SA. Flat products //

SA1. Coils // 206 459

SA1a. Hot-rolled coils for re-rolling. // 407 495

SA2. Heavy plate // 30 961

SA3. Other flat products // 28 125

SB Long products //

SB1. Beams // 11 941

SB2. Wire rod // 27 862

SB3. Other long products // 103 840

FINANCIAL STATEMENT

1. BUDGET HEADING INVOLVED

Chapter 12

2. LEGAL BASIS

Article 95 ECSC, Article 133 EC

3. TITLE OF OPERATION

Commission Decision amending Commission Decision No 2136/97/ECSC of 12 September 1997 on administering certain restrictions on imports of certain steel products from the Russian Federation.

4. OBJECTIVE

To extend for 2001 the Community measure in response to the Russian Federation's persistent breach of the bilateral agreement on trade in certain steel products.

5. METHOD OF CALCULATION

Reducing the quantitative limits applying to the Community's imports of the products concerned by 12% of the amount originally set out in the Steel Agreement corresponds in real terms to a reduction of about 131 000 tonnes of steel products (the prices for which range between EUR 190 and EUR 450/tonne).

The duties on the products in question for 2001 are generally between 1.2 % and 1.7%. Using the average of these rates, the theoretical loss for Community resources in terms of duties not collected is around EUR 440 000.