Proposal for a Council Regulation amending Council Regulation (EC) No 151/2003 imposing a definitive anti-dumping duty on imports of certain grain oriented electrical sheets originating in Russia
Date: 2004-04-19
Institutions: European Commission
Subjects: Russia, anti-dumping duty, import, originating product, sheet

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 19.4.2004 
COM(2004) 284 final 

Proposal for a 

COUNCIL REGULATION 

amending Council Regulation (EC) No 151/2003 imposing a definitive anti-dumping 
duty on imports of certain grain oriented electrical sheets originating in Russia  

. 

(presented by the Commission) 

EN 

   EN 

 
 
 
  
EXPLANATORY MEMORANDUM 

In  February  1996,  the  Commission  imposed  a  single  country-wide  definitive  anti-dumping 
duty  on  imports  of  certain  grain-oriented  electrical  sheets  originating  in  Russia.  An 
undertaking offered in connection with these imports was also accepted. The measures were 
confirmed further to an expiry review in January 2003. 

The Commission initiated on 20 February 2001 ex-officio an interim review limited in scope 
to the appropriateness of the form of the measures. 

Furthermore, the only two known exporting producers in Russia requested the initiation of an 
interim  review  limited  in  scope  to  the  aspects  of  dumping  on  the  grounds  that  they  fulfil 
meanwhile the conditions for market economy treatment. The interim reviews were initiated 
in August 2002 and October 2002, respectively.  

The  investigation  showed  that  the  criteria  for  market  economy  treatment  were  met  by  both 
exporting  producers.  The  investigation  also  revealed  that  significant  dumping  still  existed 
during the investigation period. 

One  applicant  could  not  show  that  circumstances  have  changed  significantly  since  the 
imposition  of  the  definitive  measures.  The  interim  review  with  regard  to  this  exporting 
producer  should  therefore  be  terminated  and  the  original  level  of  the  anti-dumping  duty 
(40.1%) should be maintained. As far as the second applicant is concerned the investigation 
revealed that significant dumping still existed during the investigation period, albeit at a lower 
level  than  originally  imposed  (14.7%).  Furthermore,  it  was  found  that  the  changed 
circumstances with regard to the second applicant are of a lasting nature. 

It  is  therefore  proposed  to  terminate  the  interim  review  with  regard  to  one  applicant  and  to 
amend the level of the definitive anti-dumping duty with regard to the other applicant. 

As  far  as  the  existing  undertaking  is  concerned,  it  was  found  that  the  circumstances  which 
prevailed at the time of accepting it have changed and that, consequently, the undertaking in 
the current form was not appropriate anymore. 

Following  disclosure  of  the  findings,  all  interested  parties  were  given  the  opportunity  to 
submit their comments in writing and to request a hearing. 

Subsequent  to  the  disclosure,  one  applicant  offered  an  undertaking  in  accordance  with 
Article 8(1) of the basic Regulation, which had however to be rejected due to the low level of 
co-operation of this company throughout the investigation.  

It is hereby proposed that the Council adopts the attached proposal for Regulation. 

2 

 
 
  
 
Proposal for a 

COUNCIL REGULATION 

amending Council Regulation (EC) No 151/2003 imposing a definitive anti-dumping 
duty on imports of certain grain oriented electrical sheets originating in Russia  

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community,  

Having  regard  to  Council  Regulation  (EC)  No  384/96  of  22  December  1995  on  protection 
against dumped imports from countries not members of the European Community1 (the ‘basic 
Regulation’) , and in particular Article 11(3) thereof, 

Having  regard  to  the  proposal  submitted  by  the  Commission  after  consulting  the  Advisory 
Committee, 

Whereas: 

A. PROCEDURE 

1. Previous investigations and measures in force 

(1) 

(2) 

The  Commission,  by  Decision  No  303/96/ECSC2  imposed  a  definitive  anti-dumping 
duty  on  imports  of  certain  grain-oriented  electrical  sheets  originating  in  Russia  (‘the 
original  investigation’).  The  rate  of  the  anti-dumping  duty  imposed  was  40.1%.  An 
undertaking  offered  in  connection  with  such  imports  was  accepted  by  the  same 
Commission Decision.  

Further to a request lodged by the European Confederation of Iron and Steel Industries 
(Eurofer) on behalf of the Community industry of grain oriented electrical sheets, the 
Commission  initiated  an  expiry  review  in  accordance  with  Article  11(2)  of 
Commission  Decision  No  2277/96/ECSC3  (the  “basic  Decision”).  At  the  same  time, 
the Commission also initiated on its own initiative an investigation in accordance with 
Article 11(3) of the basic Decision in order to examine the appropriateness of the form 
of the measures4. 

1 

2 
3 

4 

OJ L 56, 6.3.1996, p. 1, Regulation as last amended by Council Regulation (EC) N° 461/2004 (OJ L 77, 
13.3.2004, p. 12). 
OJ L 42, 20.2.1996, p. 7. 
OJ  L  308,  29.11.1996,  p. 11.  Decision  as  last  amended  by  Decision  No  1000/99/ECSC  (OJ  L  122, 
12.5.1999, p. 35. 
OJ C 53, 20.2.2001, p. 13. 

3 

 
 
  
 
                                                 
(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

In  view  of  the  expiry  of  the  Treaty  establishing  the  European  Coal  and  Steel 
Community on 23 July 2002, the Council, by Regulation (EC) No 963/20025, decided 
that anti-dumping proceedings initiated pursuant to the basic Decision and still in force 
shall  be  continued  and  be  governed  by  the  provisions  of  the  basic  Regulation  with 
effect  from  24  July  2002.  Likewise,  any  anti-dumping  measures  resulting  from 
pending anti-dumping investigations shall be governed by the provisions of the basic 
Regulation from 24 July 2002. 

As a result of the expiry review mentioned in recital (2), the Council, in January 2003, 
by  Regulation  (EC)  No  151/20036,  confirmed  the  definitive  anti-dumping  duty 
imposed  by  Commission  Decision  No  303/96/ECSC.  However,  the  interim  review 
limited  to  the  form  of  the  measures  remained  open  at  the  conclusion  of  the  expiry 
review. 

2. Grounds for the reviews 

2.1 Interim reviews limited to dumping  

The  Commission  received  two  requests  for  a  partial  interim  review  pursuant  to 
Article 11(3)  of  the  basic  Decision  which,  pursuant  to  Article  1(3)  of  Council 
Regulation  (EC)  No  963/2002  were  treated  according  to  Article  11(3)  of  the  basic 
Regulation. 

The requests were lodged by OAO VIZ – STAL (VIZ STAL), and Novolipetsk Iron 
and Steel Corporation (‘NLMK’) (VIZ STAL and NLMK are hereinafter referred to as 
’the applicants’), both exporting producers from Russia. Both requests were based on 
the  grounds  that  the  applicants  fulfilled  the  requirements  to  be  granted  market 
economy  status  and  that  their  dumping  margins  had  decreased  substantially. 
Accordingly,  they alleged that the continued imposition of the measure at its current 
level was no longer necessary to offset dumping.  

Having determined, after consulting the Advisory Committee, that sufficient evidence 
existed for the initiation of an interim review, the Commission, by notice, initiated, in 
August 2002, an investigation pursuant to Article 11(3) of the basic Regulation, with 
respect to VIZ STAL7 and subsequently, in October 2002, an investigation pursuant to 
Article  11(3)  of  the  basic  Regulation  with  respect  to  NLMK8.  Both  reviews  were 
limited to the examination of dumping. 

The Commission officially advised the applicants as well as the representatives of the 
exporting  country  of  the  initiation  of  the  interim  reviews,  and  gave  all  interested 
parties the opportunity to make their views known in writing and to request hearings 
within the time limits set out in the notices of initiation.  

(9) 

The applicants made their views known in writing. All parties who so requested were 
granted the opportunity to be heard.  

5 

6 
7 
8 

OJ  L  149,  7.6.2002,  p. 3.  Regulation  as  last  amended  by  Regulation  (EC)  No  1310/2002  (OJ  L  192, 
20.7.2002, p. 9). 
OJ L 25, 30.1.2003, p. 7. 
OJ C 186, 6.8.2002, p. 15. 
OJ C 242, 8.10.2002, p. 16. 

4 

 
 
  
 
                                                 
(10)  The Commission sent a questionnaire to the applicants and to one related importer in 
the  Community,  to  which  they  replied  within  the  time  limits  set  in  the  notices  of 
initiation.  

(11)  Furthermore, the Commission sent a claim form for market economy status pursuant 

to Article 2(7) of the basic Regulation to both applicants. 

(12)  The Commission sought and verified all the information it deemed necessary for the 
determination of dumping. Verification visits were carried out at the premises of the 
following companies: 

Exporting producers in Russia: 
- VIZ STAL, Yekaterinburg  
- Novolipetsk Iron and Steel Corporation (NLMK), Lipetsk 

Related importer (of VIZ STAL) 
- Duferco Commerciale S.p.A., Genoa 

The  investigation  of  dumping  covered  the  period  of  1  July  2001  to  30  June  2002 
(‘investigation period’ or ‘IP’). 

2.2 Interim review limited to the form of the measures 

(13)  As  mentioned  above  in  recital  (2),  the  Commission  decided  on  its  own  initiative  to 
initiate  an  interim review  in  order to  examine the appropriateness of the form of  the 
measures  in  force  (the  ‘ex-officio  review’).  In  this  respect,  it  was  considered  that 
enforcement  problems  have  been  encountered  in  the  monitoring  of  the  undertaking, 
with  consequences  on  the  remedial  effect  of  the  measures.  The  initiation  of  this 
proceeding  and  part  of  the  investigation  concerning  this  review  was  carried  out 
simultaneously  to  the  expiry  review  which  concluded  with  the  imposition  of  the 
existing  measures  by  Council  Regulation  (EC)  No  151/2003.  The  Commission 
officially advised the Community industry, the importers, the suppliers and the users 
known to be concerned, as well as the representatives of the exporting country, of the 
initiation  of  both  investigations  and  gave  interested  parties  the  opportunity  to  make 
their views known in writing and to request a hearing within the time limits set out in 
the notice of initiation. 

(14)  As mentioned in recital (6) of Regulation No 151/2003, during the course of the above 
mentioned  investigations,  the  Commission  received  two  requests  from  the  exporting 
producers concerned, namely VIZ STAL and NLMK, for the initiation of the interim 
reviews  limited  to  the  aspects  of  dumping,  as  explained  in  recital  (6)  of  the  present 
Regulation.  Since  in  both  reviews,  the  aspects  of  dumping  had  to  be  investigated, 
which  could  eventually  affect  the  level  of  the  measures  subject  to  the  ex-officio 
review, it was considered appropriate to conclude this review together with the interim 
reviews  limited  to  dumping  in  order  to  be  able  to  take  into  account  the  eventually 
changed economic circumstances of the exporting producers concerned. 

2.3 

Joint conclusions 

(15)  Due  to  the  fact  that  the  three  reviews  concerned  the  same  anti-dumping  measure,  it 
was  considered  appropriate,  for  reasons  of  sound  administration,  to  conclude  them 
simultaneously. 

5 

 
 
  
 
 
 
B. PRODUCT CONCERNED AND LIKE PRODUCT 

1. Product concerned 

(16)  The product concerned is the same as in the original investigation, i.e. grain oriented 
cold-rolled sheets and strips of silicon-electrical steel with a width of more than 500 
mm  originating  in  Russia  (‘GOES’  or  ’the  product  concerned’),  falling  within  CN 
codes 7225 11 00 and ex 7226 11 00 (new CN-code since 1.1.2004). This product is 
used for electromagnetic appliances and in installations such as power and distribution 
transformers. 

(17) 

In  the  rather  complex  manufacturing  process  of  GOES,  grain  structures  are  oriented 
uniformly in the direction of the rolling of the sheet or of the strip in order to allow it 
to conduct a magnetic field with a high degree of efficiency. The product in question 
has to comply with specifications concerning the magnetic induction, the pile factor, 
as  well  as  the  highest  admissible  level  of  re-magnetisation  losses.  In  general,  both 
sides of the product are covered with a thin isolating coating. 

2. Like product 

(18) 

It was established that GOES produced and sold in Russia had the same basic physical 
and  technical  characteristics  as  GOES  produced  in  Russia  and  exported  to  the 
Community. Therefore, they were considered to be like products within the meaning 
of Article 1(4) of the basic Regulation. 

C. INTERIM REVIEWS LIMITED TO DUMPING 

1. Preliminary remarks 

(19)  The  Council,  by  Regulation  (EC)  No  1972/20029  recognised  that  it  is  appropriate  to 
allow  normal  value  for  Russian  exporters  and  producers  to  be  established  in 
accordance  with  the  provisions  of  Article  2(1)  to  (6)  of  the  basic  Regulation  and 
amended the basic Regulation accordingly. However, in accordance with Article 2 of 
Regulation  (EC)  1972/2002,  this  amendment  should  only  apply  to  investigations 
initiated  after  its  entry  into  force,  i.e.  from  8  November  2002.  Consequently,  since 
both interim reviews requested by the applicants were initiated prior to this date, said 
amendment  is  not  applicable  to  the  present  investigations.  In  this  regard,  all  further 
references to the basic Regulation are to the one in force prior to the above mentioned 
amendment. 

(20)  Pursuant to Article 2(7)(b) of the basic Regulation, normal value can be determined in 
accordance with paragraphs 1 to 6 of the said Article only if the applicants show that 
they  meet  the  criteria  laid  down  in  Article  2(7)(c)  of  the  basic  Regulation,  i.e.  that 
market economy conditions prevail for them in respect of the manufacture and sale of 
the like product concerned. 

2. Market economy status (‘MES’) 

(21)  Claim forms for market economy status were submitted within the deadline set out in 

the notices of initiation by both applicants. 

9 

OJ L 305, 7.11.2002, p. 1. 

6 

 
 
  
 
                                                 
(22) 

It was  found  that for both applicants the decisions regarding prices, costs and inputs 
were made in response to market signals without significant state interference and the 
costs  of  major  inputs  reflected  market  values.  The  companies  had  one  clear  set  of 
basic accounting records which were independently audited in line with international 
accounting  standards  and  applied  for  all  purposes.  The  production  costs  and  the 
financial situation of the applicants were not subject to significant distortions carried 
over  from  the  former  non-market-economy  system.  Both  companies  were  subject  to 
bankruptcy  and  property  laws  which  guaranteed  legal  certainty  and  stability  for  the 
operation  of  the  firms.  Finally,  exchange-rate  conversions  were  carried  out  at  the 
market rate. On the basis of the foregoing, it was concluded that the criteria set forth in 
Article 2(7)(c) of the basic Regulation were met. 

(23)  The  Commission  informed  the  applicants  and  the  Community  industry  of  the  above 
determinations  and  granted  them  a  possibility  to  comment.  No  comments  were 
received from the interested parties. In view of the above, it was concluded that market 
economy status should be granted to both applicants. 

3. NLMK  

(24)  Although  this  applicant  requested  the  initiation  of  the  current  interim  review,  it  did 
subsequently  not  provide  the  Commission  with  the  information  essential  for  the 
calculation of the dumping margin. In particular, during the on-spot investigation costs 
of  production  could  not  be  verified.  Moreover,  the  information  provided  in  the 
questionnaire  reply  was  not  supported  by  sufficient  evidence  and  access  to  essential 
information was denied. In some instances, misleading information was provided. For 
example, as admitted by NLMK, the costs of production had been understated by ca. 
50 % in the questionnaire reply for the financial year 2001 which overlapped with the 
investigation  period  by  six  months.  The  company  actually  failed  to  substantiate  and 
demonstrate  the  veracity  of  its  cost  of  production,  as  reported  in  the  questionnaire 
reply.  Under  these  circumstances,  a  proper  verification  of  the  questionnaire  reply 
could not be carried out and the figures reported were considered unreliable. 

(25)  NLMK  was  informed  that  the  information  submitted  was  not  verifiable  and  could 
therefore  not  be  used.  The  applicant  was  granted  the  opportunity  to  provide  further 
explanations.  Furthermore,  it  was  given  the  possibility  to  be  heard  in  this  matter. 
NLMK did, however, not come forward with any satisfactory explanation within the 
specified time limit.  

(26)  NLMK  thus  admitted  the  problems  regarding,  in  particular,  the  verification  of  costs, 
but  claimed  that  in  order  to  determine  its  cost  of  production,  data  collected  during 
another investigation concerning a similar product should be used. NLMK referred to 
the anti-dumping investigation initiated in May 200210 against imports of certain grain 
oriented  electrical  sheets  and  strips  (flat-rolled  products)  of  a  width  not  exceeding 
500 mm originating in, inter alia, Russia (“small GOES”). NLMK was subject to this 
investigation  and  had  submitted  a  questionnaire  reply.  Therefore,  it  argued  that  the 
information on the cost of production submitted in the framework of that proceeding 
should  be  used  to  determine  costs  in  the  present  review.  NLMK  claimed  that  due  to 
the  similarity  of  both  products,  i.e.  small  GOES  and  the  product  concerned,  costs 
would be practically identical.  

10  

OJ C 111, 8.5.2002, p. 5. 

7 

 
 
  
 
                                                 
(27)  However,  the  investigation  concerning  small  GOES  and  the  present  interim  review 
covered different products and were subject to different IPs. Nevertheless, even if the 
costs  of  production  of  these  two  products  would  be  practically  identical  in  both 
investigations – which has not been established - it should be underlined that costs and 
prices  related  to  different  periods  are  not  necessarily  comparable.  Moreover,  the 
investigation  concerning  small  GOES  was  terminated  in  February  2003  due  to  the 
withdrawal  of  the  complaint  by  the  Community  industry11.  Therefore,  no  final 
conclusions  or  findings  have  been  made  which  could  have  been  used  in  the  present 
review.  Therefore,  it  was  concluded  that  the  information  collected  during  the 
investigation  related  to  small  GOES  would  not  be  an  appropriate  basis  to  determine 
normal value in the present proceeding. NLMK’s claim had therefore to be rejected. 

(28)  Subsequent to the disclosure, NLMK claimed that it had been discriminated vis-à-vis 
VIZ STAL and that its costs should have been established on the basis of alternative 
sources rather than rejecting its request for a review as a whole. NLMK suggested that 
costs of VIZ STAL or the Community industry should have been used. 

(29)  This  argument  was  unfounded.  Unlike  to  NLMK’s  case,  VIZ  STAL’s  questionnaire 
reply  could  be  fully verified and corrections were done on the basis of VIZ STAL’s 
own  verified  figures  (see  recitals  (40)  and  (56)  below).  Where  VIZ  STAL’s  figures 
were  replaced  by  other  sources  of  information,  this  was  not  a  consequence  of 
unverified figures, but of the reasons set out in recitals (41) to (49) and recitals (57) to 
(60) below. 

(30) 

It should also be noted that the purpose of the present interim review was to determine 
whether  the  individual  circumstances  of  the  exporting  producer  concerned  had 
significantly changed. The interim review was initiated upon NLMK’s request. In this 
context,  it  must  be  noted  that  it  is  contradictory  to  first  claim  that  individual 
circumstances  have  changed  and  subsequently,  when  this  cannot  be  shown,  to  claim 
that such determination should be made on the basis of data of other companies. The 
determination  of  costs  and  normal  value  is  an  essential  element  in  determining  a 
company’s individual situation with regard to dumping and fully replacing these data 
would lead to meaningless results under these circumstances. 

(31)  As  a  result  of  the  above,  the  company  could  not  evidence  that  circumstances  with 
regard to the dumping margin established in the original investigation have changed in 
the way it was alleged. Therefore, the interim review with regard to NLMK had to be 
terminated  and  the  anti-dumping  margin  found  during  the  original  investigation,  i.e. 
40.1% should be maintained. 

(32)  On this basis, the dumping margin, expressed as a percentage of the CIF import price 

at the Community border, is:  

Novolipetsk Iron and Steel Corporation (NLMK), Lipetsk:  40.1% 

4. VIZ STAL 

4.1  Dumping 

a) 

Normal value 

11  

OJ L 33, 8.2.2003, p. 41. 

8 

 
 
  
 
                                                 
(33)  With regard to VIZ STAL, it was first established whether its total domestic sales of 
the  like  product  were  representative  in  comparison  with  its  total  export  sales  of  the 
product  concerned  to  the  Community.  In  accordance  with  Article  2(2)  of  the  basic 
Regulation, and since the total domestic sales volume of VIZ STAL exceeded 5% of 
its total export sales volume to the Community, the domestic sales of the like product 
were found to be representative. 

(34)  Subsequently,  those  types  of  GOES  sold  domestically  by  the  applicant  that  were 
identical or directly comparable with the types sold for export to the Community were 
identified. 

(35)  For  each  type  sold  by  the  applicant  on  its  domestic  market  and  found  to  be  directly 
comparable with the type sold for export to the Community, it was established whether 
domestic sales were sufficiently representative for the purposes of Article 2(2) of the 
basic  Regulation.  Domestic  sales  of  a  particular  type  of  GOES  were  considered 
sufficiently representative when the total domestic sales volume of that type during the 
IP represented 5% or more of the total sales volume of the comparable type of GOES 
exported to the Community. 

(36)  An examination was also made as to whether the domestic sales of each product type 
could be regarded as having been made in the ordinary course of trade, in accordance 
with Article 2(3) and 2(4) of the basic Regulation, by establishing a proportion of the 
profitable sales to independent customers of the type in question. Domestic sales were 
considered profitable when the net sales value was equal or above the calculated cost 
of  production  of  each  type  concerned  (‘profitable  sales’).  In  cases  where  the  sales 
volume of a product type, sold at a net sales price equal to or above the calculated cost 
of production, represented more than 80% of the total sales volume of that type and in 
cases where the weighted average price of that type was equal to or above the unit cost 
of  production,  normal  value  was  based  on  the  actual  domestic  price,  calculated  as  a 
weighted average of the prices of all domestic sales made of that type during the IP, 
irrespective of whether these sales were profitable or not. In cases where the volume 
of profitable sales of a product type represented 80% or less, but 10% or more of the 
total sales volume of that type, normal value was based on the actual domestic price, 
calculated as a weighted average of profitable sales only. 

(37) 

In cases where the volume of profitable sales of a type represented less than 10% of 
the total sales volume of that type in the domestic market, it was considered that this 
type was sold in insufficient quantities for the domestic price to provide an appropriate 
basis for the establishment of the normal value. 

(38)  On this basis, it was found that overall domestic sales of the product concerned were 
not  made  in  the  ordinary  course  of  trade  within  the  meaning  of  Article  2(1)  of  the 
basic Regulation.  

(39)  Whenever domestic prices of a particular type could not be used in order to establish 
normal  value,  a  normal  value  had  to  be  constructed.  It  was  therefore  examined 
whether the cost of production in the country of origin, or the domestic prices of other 
producers  in  the  country  of  origin  could  be  used  as  a  basis  for  the  construction  of  a 
normal value in accordance with Articles 2(1) and 2(3) of the basic Regulation. 

(40)  As far as the costs of production of the product concerned reported by VIZ STAL are 
concerned,  they  had  to  be  corrected  taking  into  account  different  costs  of 

9 

 
 
  
 
manufacturing for different types of the product concerned. It was found that certain 
product  features  had  indeed  an  impact  on  costs  and  prices  of  a  certain  product  type. 
Therefore,  data  submitted  by  VIZ  STAL  on  cost  of  production  could  not  be  used  as 
such and findings on the basis of facts available had to be made. In the absence of any 
other  more  reasonable  method,  it  was  considered  that  the  difference  in  the  cost  of 
production of the various types of GOES should bear the same ratio as the difference 
in sales prices of these types. Therefore, costs for each type of GOES produced were 
assessed  on  the  basis  of  the  difference  between  average  domestic  sales  prices  of  a 
specific type of GOES in comparison to the overall average domestic sales price of all 
types.  

(41)  Furthermore, it is noted that VIZ STAL concluded a long term agreement with its raw 
material supplier, which was in force during the IP. The raw material purchased from 
this  supplier  was  hot  rolled  band  (’HRB’).  In  accordance  with  this  agreement,  the 
supplier  had  an  exclusive  right  to  supply  raw  material  for  this  exporting  producer 
during  the  IP.  The  supplier  produced  tailor-made  HRB  according  to  the  exporting 
producer’s  specifications.  The  exporting  producer  was  bound  to  purchase  the  entire 
production  of  HRB  of  its  supplier,  even  if  the  required  standards  were  not  met. 
Purchase prices were fixed in advance at a certain level and guaranteed regardless the 
quality  of  the  raw  material  delivered.  It  was  furthermore  found  that  technicians 
employed  by  the  exporting  producer  concerned  carried  out  regular  quality  checks  at 
the premises of the supplier. 

(42)  Although  the  investigation  did  not  bring  into  light  any  direct  shareholding  or 
controlling rights between these two companies, it had to be concluded, on the basis of 
the  information  collected  during  the  investigation  that  the  relationship  between  the 
exporting producer concerned and its supplier was particularly strong. Thus, the link 
between VIZ STAL and its supplier was not limited to the sale as such, but extended 
beyond  a  simple  sales  transaction.  In  particular,  VIZ  STAL  had  control  over  the 
production  of  HRB  at  its  supplier’s  production  site,  which  showed  that  these 
companies were also linked at the stage of the production process of HRB. Therefore, 
the relationship between VIZ STAL and its supplier was both, a sales relationship and 
a  manufacturing  relationship,  i.e.  it  went  largely  beyond  a  mere  buyer/seller 
relationship. 

(43)  On the basis of the above-referred agreement, it was furthermore concluded that VIZ 
STAL was not free to source raw material from other suppliers during the IP, but was 
depended on only one supplier. Thus, VIZ STAL had also to purchase HRB of a lower 
quality even if the raw material did not meet the required standards for the production 
of the product concerned. On the other hand, HRB prices could not be adapted in line 
with  the  quality  of  the  product  delivered,  due  to  the  fact  that  they  were  fixed  in 
advance.  On  the  other  hand,  VIZ  STAL’s  supplier  was  not  free  to  provide  other 
customers with HRB because it was bound to produce exclusively for VIZ STAL at a 
specific quality set by VIZ STAL. 

(44) 

It  was  subsequently  examined  whether  the  prices  between  these  parties  could  be 
considered reliable. In this respect, it was considered that purchase prices between VIZ 
STAL  and  its  supplier,  as  a  consequence  of  the  long  term  agreement  concluded 
between them, were set at an artificial level during the IP. The investigation revealed 
moreover that HRB prices followed an unusual development and remained at the same 
level throughout the IP, regardless the quality of the product purchased or other market 
conditions,  such  as  fluctuations  of  energy  prices,  one  of  the  most  important  raw 

10 

 
 
  
 
material  used  for  the  production  of  HRB.  It  was  also  considered  that  as  set  out  in 
recitals  (42)  and  (43),  VIZ  STAL  and  its  supplier  had  a  relationship  which  went 
beyond  a  mere  buyer/seller  relationship.  Therefore,  the  Commission  considered  that 
the costs associated with the purchase price of HRB were not reasonably reflected in 
VIZ STAL’s accounts within the meaning of Article 2(5) of the basic Regulation and 
had therefore to be adjusted. 

(45)  Subsequent to the disclosure, VIZ STAL claimed that it was completely independent 
from its HRB supplier and that both parties were in fact free to choose their business 
partners  with  regard  to  HRB.  However,  this  statement  contradicted  the  information 
provided  during  the  investigation  and  had  therefore  to  be  rejected.  VIZ  STAL  also 
argued  that  similar  contractual  arrangements  were  common  in  this  type  of  industry. 
This argument was not supported by any evidence and could not be confirmed by the 
findings of the present investigation. In any case, the existence of such arrangements 
was  considered  irrelevant  in  this  context.  Furthermore,  such  arrangements  and  their 
impact  on  costs  and  prices  related  to  the  product  concerned  would  have  to  be 
examined on a case by case basis.  

(46)  VIZ STAL objected to the Commission’s conclusion that HRB purchase prices did not 
follow  market  typical  fluctuations,  by  claiming  that  the  product  purchased  was  of  a 
specific quality and subject to particular market conditions as compared to other HRB 
types. It was also argued that the price development of HRB used for the production of 
GOES  in  the  Community  would  show  a  similar  pattern  than  in  Russia.  VIZ  STAL 
claimed  further  that  a  comparison  of  HRB  prices  with  energy  prices,  in  particular 
natural  gas,  would  be  inappropriate  because  the  main  raw  material  used  by  the  VIZ 
STAL’s  supplier  would  be  coal.  On  a  general  basis,  VIZ  STAL  contested  any  link 
between the evolution of energy prices and prices of steel products. 

(47)  The  information  provided  regarding  the  differences  in  quality  and  market  conditions 
between  various  HRB  types  was  neither  submitted  in  the  reply  to  the  questionnaire, 
nor during the on-spot verification, although a detailed product description concerning 
the HRB type purchased during the IP was specifically requested prior to the on-spot 
verification.  The  information  submitted  by  VIZ  STAL  after  the  on-spot  verification, 
i.e.  largely  outside  the  deadline  set  in  the  notice  of  initiation,  could  not  be  verified 
anymore and had therefore to be rejected. In any case, it is noted that HRB prices in 
the  Community  were  subject  to  significant  fluctuations  during  the  IP  and  that  there 
were also significant price fluctuations of other HRB types on the world market. These 
developments indicated that the fixed price for HRB on the Russian domestic market 
did  not  follow  market  typical  fluctuations,  but  was  influenced  by  the  relationship 
between VIZ STAL and its supplier.  

(48)  With  regard  to  energy  prices,  it  should  be  noted  that  VIZ  STAL’s  supplier  did  not 
submit  a  questionnaire  reply  and  was  as  such  not  investigated  during  this 
investigation.  Neither  did  VIZ  STAL  provide  any  evidence  supporting  its  claim. 
Therefore,  the  current  investigation  could  not  confirm  that  VIZ  STAL’s  supplier 
indeed used coal as a major input for the production of HRB. Likewise, VIZ STAL did 
not  provide  any  evidence  that  fluctuations  in  energy  and  steel  prices  would  not  be 
linked  to  each  other.  Therefore,  it  can  be  reasonably  expected  that  fluctuations  in 
energy  prices  should,  under  normal  conditions  in  a  free  market,  have  an  impact  on 
HRB prices. 

11 

 
 
  
 
(49)  Given  the  above,  the  reported  HRB  prices  were  not  considered  reliable.  HRB  costs 
had  therefore  to  be  adjusted.  Consequently,  the  Commission  had  to  establish  HRB 
prices  with  regard  to  this  applicant  on  the  basis  of  the  costs  of  other  producers  or 
exporters in the same country or, where such information was not available or could 
not be used, on any other reasonable basis. As mentioned in recitals (24) to (31), costs, 
including  HRB  costs  of  the  other  known  producer  of  HRB  in  Russia  could  not  be 
determined.  Since  no  other  producer  of  the  product  concerned  or  any  producers  of 
HRB in Russia were known to the Commission, HRB costs with regard to VIZ STAL 
had to be established on the basis of any other reasonable information. In the absence 
of  any  other  more  reliable  information,  the  cost  of  manufacturing  for  the  applicant 
could only be established on the basis of the prices of HRB in the Community.  

(50)  Subsequent  to  the  disclosure,  VIZ  STAL  claimed  further  that  the  HRB  prices  in  the 
Community should be adjusted for differences in physical characteristics, production 
process, transport cost and conditions of sale.  

(51)  As  far  as  differences  in  physical  characteristics  are  concerned,  they  were  taken  into 
account  by  excluding  high  quality  HRB  types  not  produced  in  Russia  when 
establishing  the  average  HRB  price  in  the  Community.  No  further  adjustment  was 
therefore warranted.  

(52)  With  regard  to  the  different  production  processes  used  in  Russia  and  in  the 
Community, VIZ STAL argued that the technology used in the Community required a 
higher  energy  input,  generated  more  waste  and  had  a  higher  production  yield. 
However,  although  the  production  process  mainly  used  in  the  Community  required 
indeed a higher energy input, it was found that it generated significantly lower waste 
rates. Therefore, the overall efficiency of the different processes was considered to be 
equal  and  invoked  similar  production  costs.  Consequently,  no  adjustment  was 
warranted.  

(53)  As for differences in sales conditions, VIZ STAL argued that prices in the Community 
would be at a “monopolistic” level, while it did not explain to what extend this had an 
effect on price or price comparison. It was furthermore established that the conditions 
of sales were similar on  both  markets, i.e. there was only one HRB producer selling 
the product on both domestic markets. In Russia, however, the prices were moreover 
influenced  by  the  relationship  between  the  exporting  producer  concerned  and  its 
supplier. Consequently, no adjustment was warranted. 

(54)  As  to  transport  costs  for  HRB  purchases,  no  adjustment  was  warranted  because  the 
Community  industry  prices  were  calculated  on  an  ex-works  basis,  i.e.  excluding 
transport costs. 

(55)  Subsequent to the disclosure, the Community industry claimed that energy prices (in 
particular gas) on the Russian domestic market would not be the result of the interplay 
of  free  market  forces,  which  should  be  taken  into  consideration  when  establishing 
costs  of  production  of  VIZ  STAL.  In  this  context,  it  is  noted  that  the  Commission 
provided the Community industry with the possibility to submit comments of granting 
MES to the two Russian exporting producers. The Community industry did not draw 
the  attention  to  the  need  to,  in  particular,  examine  the  effects  of  Russian  gas  prices 
when  subsequently  determining  normal  value  (see  recital  (23)  above).  While  gas 
prices in Russia may not be uniform across regions and customers, it was not possible 
at this late stage of the proceeding to investigate the matter of energy prices in more 

12 

 
 
  
 
detail. In any case, the investigation revealed that VIZ STAL’s direct energy input for 
the production of GOES was not significant and had therefore only a minor impact on 
its cost of production. As for its supplier of HRB, and as mentioned above in recital 
(48), this company was not directly investigated in the present interim review and no 
conclusions were made with regard to the reliability of the supplier’s main input cost. 
In  any  case,  since  prices  between  VIZ  STAL  and  its  supplier  were  found  unreliable 
and  replaced  by  prices  charged  on  the  Community  market,  any  possible  price 
distortion regarding energy input was already eliminated. 

(56) 

In  order  to  establish  the  full  cost  of  production  of  GOES,  selling,  general  and 
administrative  expenses  (‘SG&A’)  had  to  be  determined.  VIZ  STAL  claimed  that 
certain  expenses  occurring  prior  to  the  IP,  but  booked  during  the  IP  should  be 
considered  as  mere  accounting  costs  and  deducted  from  the  SG&A.  However,  no 
evidence has been provided whether or not such costs occurred de facto prior to the IP. 
Indeed, the expenses under consideration were considerably higher as compared to the 
previous  years,  so  that  an  actual  incurrence  of  these  costs  during  the  IP  cannot  be 
excluded.  

(57)  Furthermore,  in  accordance  with  Article  2(5)  of  the  basic  Regulation,  financial 
expenses had to be added to the reported SG&A. In this context, it was found that a 
related party granted VIZ STAL non-interest bearing loans on US-Dollar basis. Since 
SG&A did therefore not fully reflect all costs associated with the production and sale 
of  the  product  concerned,  the  amount  of  financial  expenses  under  normal  market 
conditions  was  added.  In  this  regard,  the  interest  rate  for  similar  loans  under  market 
conditions during the IP was applied to the loans received. In the absence of any more 
appropriate method, the total amount for interest expenses was allocated to the product 
concerned  on  the  basis  of  the  turnover  in  accordance  with  Article  2(5)  of  the  basic 
Regulation. 

(58)  VIZ  STAL  objected  to  the  adjustment  made  to  the  SG&A  with  regard  to  financing 
costs.  VIZ  STAL  argued  that  the  party  providing  the  loan  under  question  was  a 
majority shareholder of VIZ STAL and could also have chosen to increase the share 
capital instead, where no financial cost would have been incurred. Alternatively, VIZ 
STAL claimed that reimbursements have occurred during the IP and that the interest 
rate applied should be the rate which could be obtained on the domestic market of the 
provider of the loan. Finally, VIZ STAL claimed that part of the interest expenses (the 
nominal  interest  rate)  was  already  included  in  the  SG&A  and  should  not  be  double 
counted.  The  amount  of  the  additional  financial  costs  should  therefore  be  reduced 
accordingly. 

(59)  The first claim had to be rejected because costs should reflect all costs associated with 
the  production  and  sale  of  the  product  concerned,  which  has  not  been  the  case  as 
explained  above  in  recital  (57).  Under  normal  market  conditions  VIZ  STAL  would 
have  had  to  seek  finance  on  the  open  market  and  would  have  been  subject  to 
additional finance expenses which should be reflected in its costs. It is also noted that 
loans  and  equity  shares  are  not  simple  substitutes  because  they  have  completely 
different consequences. Thus, while a loan is paid back, this is not the case with share 
capital. 

(60) 

It was also considered that the most appropriate interest rate would be the one in the 
domestic market of the borrower, because such rate would most appropriately reflect 
the  costs  associated  with  the  production  and  sale  of  the  product  concerned  on  the 

13 

 
 
  
 
Russian  domestic  market,  for  which  normal  value  is  established.  In  any  case,  VIZ 
STAL  did  not  submit  any  supporting  evidence  with  regard  to  the  alleged  applicable 
interest rate on the domestic market of the provider of the loan. VIZ STAL submitted 
some additional information subsequent to the disclosure regarding the reimbursement 
of the working capital which could not be verified anymore due to the late stage of the 
proceeding  and  had  therefore  to  be  disregarded.  Furthermore,  no  evidence  was 
submitted that part of the interest expenses would already be included in the SG&A or 
that interests were in fact paid by VIZ STAL. This claim had therefore to be rejected. 

(61)  The  Community  industry  claimed  that  distortions  with  regard  to  the  evaluation  and 
depreciation of assets should  be  taken  into consideration  when  calculating  SG&A.  It 
was  also  claimed  that  SG&A  expenses  would  be  significantly  higher  than  in  the 
Community due to, in particular, higher after sales costs, higher R&D costs and higher 
costs for indispensable communication tools and IT systems. 

(62)  The  Community  industry  did  not  submit  any  supporting  evidence  with  regard  to  the 
above  claims.  These  claims  were  furthermore  made  at  very  late  stage  of  the 
proceeding  and  could  not,  therefore,  be  investigated  in  full  detail.  The  above  claims 
had therefore to be rejected. 

(63)  Furthermore, it was examined whether normal value could be established on the basis 
of  domestic  prices  of  other  producers  in  accordance  with  Article  2(1)  of  the  basic 
Regulation.  Since  for  the  other  applicant,  NLMK,  no  reliable  information  regarding 
domestic sales prices of the product concerned was available (as explained in recitals 
(24)  and  (31)  above)  and  given  that  there  were  no  other  co-operating  sellers  or 
producers  on  the  Russian  domestic  market  than  the  applicants,  no  information  was 
available to the Commission regarding the domestic sales prices of another producer. 

(64)  Therefore,  in  all  cases  where  constructed  normal  value  was  used,  normal  value  was 
constructed  by  adding  to  the  manufacturing  costs  of  the  exported  models,  adjusted 
where necessary, a reasonable amount for SG&A and a reasonable margin of profit in 
accordance with Article 2(3) of the basic Regulation. 

(65)  To this end, it was examined whether the SG&A incurred and the profit realised by the 
applicant  on  the  domestic  market,  corrected  as  described  above,  constituted  reliable 
data. Actual domestic SG&A expenses were considered reliable since domestic sales 
volume of the like product could be regarded as representative. However with regard 
to the fact that the overall domestic sales of the product concerned were not made in 
the  ordinary  course  of  trade  within  the  meaning  of  the  basic  Regulation  (see  recital 
(38)  above),  the  domestic  profit  margin  could  not  be  determined  in  accordance  with 
the  first  sentence  of  Article  2(6)  of  the  basic  Regulation.  Since  no  information  on 
SG&A and profit margin of other exporters or producers subject to this investigation 
was  available  and  since  VIZ  STAL  did  not  produce  and  sell  other  products  falling 
within the same general category of products than GOES, the domestic profit margin 
was established in accordance with Article 2(6)(c) of the basic Regulation, i.e. on the 
basis  of  any  other  reasonable  method.  In  the  absence  of  any  other  more  reliable 
information,  the  profit  margin  on  the  domestic  market  was  estimated  at  10%  of  the 
cost  of  production.  Given  that  investments  in  Russia,  which  is  still  considered  an 
emerging market economy with more dynamic growth prospects and higher inflation 
rates than in more developed economies and subsequently higher yield expectations on 
any  capital  investment,  the  profit  margin  of  10%  as  used  for  the  purposes  of  the 
present investigation was considered to be a conservative estimate.  

14 

 
 
  
 
b) Export price 

(66)  VIZ STAL was largely owned and controlled by a related holding/trading company in 
Switzerland. All export sales during the investigation period were made via the Swiss 
company to a related importer in the Community, which resold the product concerned 
to the final customers in the Community. Therefore, export prices were constructed on 
the  basis  of  resale  prices  to  the  first  independent  customer  in  the  Community  in 
accordance with Article 2(9) of the basic Regulation. 

(67)  Adjustments were made for all costs incurred between importation and resale by the 
related  importer  in  the  Community,  including  SG&A  costs,  and  a  reasonable  profit 
margin, in accordance with Article 2(9) of the basic Regulation.  

(68) 

In  this  context,  it  should  be  noted  that  as  mentioned  below  in  recital  (75),  an 
adjustment  was  made  to  the  export  price  for  the  credit  cost  (i.e.  financial  cost)  for 
payment  terms  granted  by  the  related  importer  to  the  first  independent  buyer  in  the 
Community under Article 2(10)(g) of the basic Regulation as claimed by VIZ STAL 
in its reply to the questionnaire. On the other hand, when constructing export prices in 
line with Article 2(9) of the basic Regulation, adjustments are also to be made for all 
costs incurred between importation and resale of the product concerned. The items for 
which  adjustment  is  to  be  made  include,  amongst  others,  a  reasonable  margin  for 
SG&A of the related importer. However, in some cases, these SG&A expenses might 
include  financial  expenses,  deriving  from  the  above  mentioned  payment  terms. 
Therefore,  in  order  to  avoid  a  double  deduction  of  financial  costs,  namely,  (i)  the 
financial costs deriving from the payment terms referred to above and deducted under 
Article 2(10)(g) of the basic Regulation, and (ii) the financial costs that are part of the 
SG&A of the related importer, the related importer was given an opportunity to submit 
confirming  evidence  that  a  part  of  its  financial  costs  were  incurred  to  finance  the 
payment  terms  granted  to  its  independent  customers  in  the  Community.  The  related 
importer  did,  however,  not  submit  any  substantiated  evidence  that  this  was  the  case 
and  therefore  the  related  importer’s  full  SG&A  costs  must  be  deducted  from  the 
constructed export price in line with Article 2(9) of the basic Regulation. 

(69)  Subsequent  to  the  disclosure,  VIZ  STAL  claimed  that  part  of  the  financial  costs 
incurred  and  deducted  from  the  export  price  under  Article  2(10)(g)  of  the  basic 
Regulation were included in the related importer’s SG&A and that the calculation of 
the constructed export price should therefore be revised to avoid a double deduction of 
these costs. It is noted that this claim was made for the first time after disclosure and 
that even at this point no confirming evidence was provided which could support VIZ 
STAL’s view. Moreover, the verification at the premises of the related importer could 
not confirm that credit costs granted by VIZ STAL to the independent customer in the 
Community were indeed borne by the related importer and thus included in its SG&A. 
Consequently, this claim had to be rejected. 

(70)  As  far  as  the  related  importer  in  the  Community  is  concerned,  the  investigation 
revealed that amortisation and depreciation costs incurred by the related importer were 
not  reported.  These  costs  were  therefore  added  to  the  total  SG&A  expenses 
accordingly. SG&A were then deducted from the resale price to the first independent 
customer in the Community in accordance with Article 2(9) of the basic Regulation. In 
this context, the Commission rejected the methodology applied by VIZ STAL in order 
to  calculate  allocation  ratios  used  to  allocate  total  SG&A  expenses  to  the  product 
concerned  on  the  one  hand,  and  to  “other  products”  on  the  other  hand.  VIZ  STAL 

15 

 
 
  
 
argued that its related importer acted as an agent with regard to transactions of certain 
other  products,  on  commission  basis.  The  related  importer’s  revenue  with  regard  to 
these  transactions  consisted  only  of  the  commissions  received  for  ‘other  products’. 
Therefore, the exporting producer argued that, in order to calculate allocation ratios on 
the  basis  of  the  turnover,  a  hypothetical  higher  turnover  should  be  used  for  sales  of 
‘other  products’  instead  of  the  lower  actual  revenue  booked  in  the  accounts  of  its 
related importer. It was argued that the hypothetical turnover should correspond to the 
sales price of these ‘other products’ in the Community. As a result, allocated SG&A 
expenses  would  increase  for  ‘other  products’,  while  they  would  decrease  for  the 
product  concerned.  VIZ  STAL  claimed  that  this  methodology  would  reflect  more 
appropriately  the  administration  costs  linked  to  operations  concerning  the  product 
concerned on the one hand and ’other products’ on the other hand. 

(71)  However,  it  was  found  that the related importer performed  the  functions  of  an  agent 
with regard to “other products”. The functions of an agent involve, by nature, a lower 
administrative burden as compared to the functions performed by an importer. Thus, 
an importer buys and resells the products under its own name, which involves not only 
a  higher  administrative  burden,  but  also  a  higher  risk.  Moreover,  an  importer  has 
typically to raise capital for purchasing goods. These factors should normally also be 
reflected  in  different  SG&A  expenses  between  an  importer  and  an  agent.  This 
difference  was,  however,  not  reflected  in  the  allocation  method  used  by  VIZ  STAL, 
which led to unreasonable results. 

(72)  Considering  the  above,  it  was  therefore  concluded  that  the  allocation  of  SG&A 
expenses  on  the  basis  of  actual  turnover  would  be  the  most  appropriate  method  in 
order to calculate SG&A for the different products involved. 

(73) 

In  the  absence  of  any  other  more  reliable  information,  the  reasonable  profit  margin 
was estimated at  5%. This was considered  appropriate  for  this  type  of  business.  The 
same profit margin was also used in the previous investigation, i.e. the expiry review 
mentioned in recital (2). 

c) Comparison 

(74) 

In  order  to  allow  a  fair  comparison  between  normal  value  and  export  price  as 
established  above,  account  was  taken  of  differences  in  factors,  which  were  found  to 
affect  prices  and  price  comparability  in  accordance  with  Article  2(10)  of  the  basic 
Regulation.  

(75)  Adjustments to the export price were reported by VIZ STAL for inland transport and 
freight  cost,  export  duty,  insurance  costs,  miscellaneous  charges,  credit  cost,  bank 
charges, import and other charges, stamp fees and slitting charges and granted because 
they were found to be reasonable, accurate and supported by verified evidence.  

d) Dumping margin 

(76)  As far as VIZ STAL is concerned, the weighted average normal value by product type 
was  compared  to  the  weighted  average  export  price  of  that  type  in  accordance  with 
Article 2(11) of the basic Regulation. 

(77)  The comparison showed the existence of dumping. The dumping margin expressed as 
is:  

the  Community  border 

a  percentage  of 

import  price  at 

the  CIF 

16 

 
 
  
 
VIZ STAL, Yekaterinburg: 14.7 % 

4.2. Lasting nature of the changed circumstances 

(78)  With regard to VIZ STAL, it was also examined whether the changed circumstances 
with  respect  to  the  original  investigation  could  reasonably  be  considered  to  be  of  a 
lasting nature. In this respect, the possible development of the normal value as well as 
the export price of the company was analysed. Specific consideration was given to its 
price levels of GOES on the domestic and the export market, its cost of production of 
GOES,  production  capacity  and  utilisation,  as  well  as  its  export  volume  to  the 
Community. 

(79) 

It  was  first  considered  that  during  the  original  investigation  the  applicant  did  not 
operate  under  market  economy  conditions.  However,  as  illustrated  above  in  recital 
(22),  during  the  investigation  period  of  the  current  interim  review  the  applicant  was 
able  to  evidence  that  it  fulfilled  the  criteria  set  out  in  Article  2(7)(c)  of  the  basic 
Regulation, i.e. it was granted MES. As a consequence, normal value of this applicant 
was determined on the basis of the verified data submitted by this company, instead of 
the information submitted by producers from an analogue country. 

(80)  Normal value for VIZ STAL was based on both domestic sales prices and constructed 
normal  value.  As  to  the  domestic  sales  prices  of  GOES,  it  could  be  established  that 
during  the  investigation  period  these  were  relatively  stable.  This  was  due  to  a  stable 
domestic  demand  and  consumption  which  is  not  expected  to  change  significantly  in 
the near future, as well as to the limited number of producers and users. Therefore, it is 
expected that domestic sales prices of GOES will not vary significantly in future. 

(81)  As far as the cost of production is concerned, it is recalled that costs had to be adjusted 
due  to  unreliable  input  prices  (HRB)  (see  recitals  (41)  to  (49)  above).  VIZ  STAL 
claimed  that  the  nature  of  the  relationship  to  its  supplier  has  changed  after  the 
investigation  period,  i.e.  VIZ  STAL  plans  to  source  HRB  increasingly  from  other 
suppliers,  including  suppliers  in  the  Community.  It  was  considered  whether  this  fact 
could  have  an  impact  on  VIZ  STAL’s  input  costs  and  consequently  on  the  cost  of 
manufacturing. However, it was found that any possible price increase of HRB is not 
very likely to have an effect on the normal value established in this investigation. This 
is  due  to  the  fact  that  normal  value  was  determined  on  the  basis  of  adjusted  cost  of 
manufacturing,  not  taking  into  consideration  the  unreliable  input  price.  Any  real 
increase in purchase prices of HRB up to a market value is therefore already included 
in the normal value used for the purpose of the determination of the dumping margin. 
Consequently,  it  is  reasonable to  assume  that  normal  value  of  this  applicant  will  not 
change significantly in the near future. 

(82)  The  Commission  also  examined  the  possible  development  of  export  sales  by  VIZ 
STAL as a consequence of the application of a lower duty rate. In this regard, it was 
considered that in the past, export sales of this company were limited in quantity due 
to  the  undertaking  in  force  accepted  during  the  original  investigation.  As  mentioned 
below  in  recital  (96),  it  was  found  that  this  type  of  undertaking  is  not  appropriate 
anymore.  Consequently,  it  was  examined  whether  a  lower  duty  rate  without 
quantitative  import  restrictions  would  result  in  a  significant  increase  in  exports  of 
GOES by the applicant to the Community at lower export prices than those prevailing 
in the IP. In this regard, it was considered that the applicant’s capacity utilisation rate 

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was over 90% during the investigation period. Furthermore, the investigation did not 
reveal  any  foreseen  investments  in  order  to  increase  the  applicant’s  capacity. 
Therefore,  it  could  be  reasonably  assumed  that  production  volume  would  remain 
stable and not significantly increase in the near future. Moreover, no reason was found 
why  the  applicant  should  shift  more  of  its  current  production  to  the  Community 
market. It was therefore concluded that the export volume of GOES by this company 
to the Community would not change significantly. 

(83)  As far as export prices are concerned, it is recalled that the undertaking in force was 
mainly of a quantitative character which allowed the applicant to set its export prices 
relatively  freely  within  a  determined  export  volume.  Indeed,  the  co-signers  of  the 
undertaking  in  question  were  only  deemed  to  follow  ’price  levels  prevailing  in  the 
Community  market’.  The  definitive  anti-dumping  duty  was  only  applicable  once  the 
quantitative  ceiling  was  reached.  Notwithstanding  the  Commission  findings  as 
outlined below in recitals (94) and (95), the export volume of large GOES from Russia 
during the IP was considered to fall within the quantitative ceiling of the undertaking. 
Therefore, the export price during the current investigation period did not contain the 
anti-dumping  duty  established  during  the  original  investigation.  Consequently, it can 
be concluded that for this company a lower dumping margin would not have an effect 
such as to lower significantly the current export prices. 

5. Conclusions 

(84)  According  to  Article  9(4)  of  the  basic  Regulation,  the  duties  should  not  exceed  the 
margin of dumping established but should be less than the margin if such lesser duty 
would  be  adequate  to  remove  the  injury  of  the  Community  industry.  Given  the  fact 
that the present interim reviews are limited to the examination of the dumping aspects, 
the  level  of  duties  imposed  should  not  be  higher  than  the  injury  levels  found  in  the 
original investigation as confirmed by the expiry review mentioned in recital (2). 

(85)  As mentioned in recital (29) of Commission Decision No 303/96/ECSC, the original 
definitive  dumping  margin  was  greater  than  the  injury  elimination  level  definitively 
determined  and  therefore  the  definitive  anti-dumping  duty  was  based  on  the  lower 
injury margin, namely 40.1%. Since the dumping margin found for VIZ STAL in this 
interim  review  is  lower  than  that  level,  the  amended  anti-dumping  duty  should  be 
based on this lower dumping margin, namely 14.7%. 

(86) 

It  follows  from  the  above  that  with  regard  to  VIZ  STAL  and  as  provided  for  by 
Article 11(3) of the basic Regulation, the anti-dumping duty imposed by Commission 
Decision No 303/96/ECSC and confirmed by Council Regulation (EC) No 151/2003 
on imports of GOES originating in Russia, should be amended. 

(87)  As far as NLMK is concerned, the present interim review should be terminated and the 
definitive anti-dumping duty imposed by Commission Decision No 303/96/ECSC and 
confirmed by Council Regulation (EC) No 151/2003 should be maintained.  

(88)  All parties concerned were informed of the essential facts on the basis of which it was 
intended  to  recommend  the  amendment  of  the  existing  measures  with  regard  to  VIZ 
STAL and to terminate the interim review with regard to NLMK and were given the 
opportunity to comment. Comments were received and taken into consideration where 
appropriate. All parties concerned were also granted a period to make representations 
subsequent to disclosure. 

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D. INTERIM REVIEW LIMITED TO THE FORM OF THE MEASURES 

(89)  As  stated  in  recital  (2),  the  interim  review  regarding  the  form  of  the  measure  for 
imports  of  GOES  originating  in  Russia  was  initiated  by  the  Commission  on  its  own 
initiative in order to examine the appropriateness and effectiveness of the undertaking 
accepted  by  Commission  Decision  No  303/96/ECSC.  The  investigation  was  carried 
out in conjunction with the expiry review concluded by Council Regulation (EC) No 
151/2003 and the interim reviews limited to dumping with regard to the applicants. 

(90) 

(91) 

In  this  regard,  it  is  noted  that  the  undertaking  originally  accepted,  was  in  essence,  a 
quantitative  undertaking  according  to  which  the  companies  undertook  to  ensure  that 
their exports to the Community were made within an overall volume ceiling. 

In accordance with Article 8(1) of the basic Regulation, the aim of undertakings is to 
eliminate the injurious effect of dumped imports. This is achieved through the exporter 
raising  its  prices  or  ceasing  exports  at  dumped  price  levels.  The  investigations  have 
shown  that  the  type  of  undertakings  originally  accepted,  which  simply  limited  the 
quantity  of  imports  into  the  Community  failed  to  raise  prices  to  non-injurious  levels 
and  thus  restore  fair  trade  on  the  Community  market.  Therefore,  in  this  case,  the 
undertakings  in  their  present  form  were  not  considered  as  appropriate  and  effective 
means to eliminate the injurious effect of the dumping. 

(92)  The original undertakings were not only signed by the applicants of the current interim 
reviews,  but  also  by  a  Russian  trader  exporting  the  product  concerned  during  the 
investigation  period  of  the  original  investigation  and  by  the  Russian  authorities  in 
order  to  guarantee  a  proper  monitoring  of  the  undertaking  in  question.  As  it  was 
already  established  during  the  expiry  review  mentioned  in  recital  (2),  the  co-signing 
trader, namely VO 'Promsyrioimport' (Moscow) ceased its export activities of GOES 
to the Community after the imposition of the definitive anti-dumping duties, prior to 
January  2000.  This  trader  was  therefore  not  considered  as  an  interested  party  in  the 
expiry review which lead to the maintainance of the definitive anti-dumping duties in 
January 2003. Neither did said trader come forward and affirm its interest to re-export 
GOES to the Community or requested to be treated as a potential interested party in 
the ongoing anti-dumping proceeding. 

(93)  Furthermore,  it  was  considered  that  given  the  changed  circumstances  in  Russia, 
meanwhile  fully  recognised  as  a  market  economy  country,  any  guarantees  of  the 
Russian  authorities  with  regard  to  a  proper  monitoring  of  undertakings  offered  by 
Russian  exporting  producers  in  the  framework  of  an  anti-dumping  investigation  are 
neither necessary nor compatible anymore with this new status. 

(94)  Finally, as mentioned in the notice initiating the interim review limited to the form of 
the  measures,  enforcement  problems  have  been  encountered  with  regard  to  the 
monitoring  of  the  undertaking,  with  consequences  on  the  remedial  effect  of  the 
measures. This was confirmed by the current investigation. Thus, it was found that the 
sales structure of both exporting producers, as well as the sales channels used did not 
allow  them  to  identify  the  final  destination  of  the  product  concerned.  As  a 
consequence, it could not be established whether products were indeed re-exported or 
released for free circulation in the Community (see also recital (95) below). Therefore, 
it  was  not  possible  to  determine  whether  the  reports  provided  by  the  exporting 
producers concerned, as required by the undertaking, were complete and correct. 

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(95) 

In  this  context,  it  should  be  noted  that  since  the  acceptance  of  the  undertaking  two 
different  types  of  export  licenses  were  introduced,  namely  type  A  licences  (exports 
destined  for  free  circulation  into  the  Community)  and  type  B  licences  (exports 
destined for import in the Community under other customs regimes). While for goods 
exported  under  type  A  licence  an  annual  quota  ceiling  had  to  be  respected,  goods 
exported under type B license were not subject to such quantitative limits. The related 
importers,  being  unable  to  identify  the  final  destination  of  the  imported  products, 
could not provide sufficient conclusive evidence on the subsequent re-export of goods 
which  have  left  Russia  with  an  export  licence  B.  Moreover,  it  was  found  in 
cooperation with the relevant custom’s authorities that a number of these imports have 
been  declared  for  free  circulation,  therefore  jeopardising  the  effectiveness  of  the 
undertaking.  The  procedures  used  by  the  companies  proved  to  be  insufficient  to 
correctly apply all conditions which are set out in the undertaking. Thus, the risk of a 
possible circumvention of the undertaking cannot be excluded.  

(96) 

In  the  light  of  the  above  considerations,  it  was  concluded  that  the  undertaking  in  its 
current  form  was  not  appropriate  anymore,  in  particular  as  far  as  the  effective 
monitoring  of  this  undertaking  was  concerned.  The  applicants,  as  well  as  the 
remaining co-signers of the undertaking, namely VO 'Promsyrioimport' (Moscow) and 
the Russian authorities were informed of the Commission’s conclusions and given the 
opportunity to comment. 

(97)  One  applicant,  NLMK,  objected  to  the  Commission’s  findings  with  regard  to  the 
appropriateness  of  the  undertaking.  This  applicant  claimed,  in  particular,  that  (i)  the 
licence  system  in  place  would  exclude  any  possible  circumvention;  (ii)  the  imports 
under the ceiling set out in the undertaking would be below the injury de minimis level 
and therefore assure the elimination of the injurious effects of dumping; and (iii) the 
change  in  the  number  of  co-signing  parties  would  not  be  a  sufficient  reason  to 
withdraw the acceptance of the undertaking. 

(98)  The  arguments  brought  forward  with  regard  to  the  enforcement  of  the  current 
undertaking contradicted the Commission’s findings (see recitals (94) and (95) above) 
and  were  not  supported  by  any  evidence.  The  conclusion  that  there  is  a  risk  of  a 
possible  circumvention  of  the  undertaking  cannot  be  excluded  either.  It  follows  that 
the  current  undertaking  does  not  sufficiently  guarantee  that  the  injurious  effect  of 
dumping  would  indeed  be  eliminated  and  is  consequently  considered  inappropriate. 
The change in the number of the co-signing parties should not be singled out, but has 
to be seen in the context of the overall significantly changed circumstances in Russia 
since the acceptance of the undertaking. These claims had therefore to be rejected. 

(99)  Finally, this applicant also claimed that the present interim review limited to the form 
of the measures should be concluded together with other interim reviews eventually to 
be  initiated  further  to  the  enlargement  of  the  European  Union  on  1st  May  2004.  It 
should be noted that the partial interim review of measures on imports of GOES from 
Russia  which  was  initiated  on  20  March  200412  will  assess,  in  the  light  of  the 
Community interest, whether there is a need to adapt the existing measures to avoid a 
sudden and excessively negative effect of the enlargement of the European Union on 
interested parties, including users, distributors and consumers. Accordingly, there is no 
direct  link  between  the  present  interim  review  limited  to  the  form  of  the  current 

12  

OJ C 70, 20.3.2004, p.15 

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measures  and  the  ongoing  partial  interim  review  in  the  framework  of  enlargement. 
This argument was therefore rejected.  

(100)  It  follows  from  the  above  that  the  undertaking  in  its  current  form  is  not  appropriate 

anymore. 

E. NEW UNDERTAKING OFFERS 

(101)  Subsequent to the disclosure of the essential facts and considerations, on the basis of 
which it was concluded that the level of the existing anti-dumping margin should be 
amended, where appropriate, and that the quantitative undertaking in its current form 
is  not  appropriate  anymore,  NLMK  offered  an  undertaking  in  accordance  with 
Article 8(1) of the basic Regulation. 

(102)  However, the level of co-operation of this company throughout the investigation, and 
the accuracy and reliability of the data it had provided was unsatisfactory (see recital 
(24)  above).  Therefore,  it  is  highly  unlikely  that  a  price  undertaking  from  this 
company  could  be  effectively  monitored.  For  this  reason,  the  acceptance  of  the 
undertaking  offered  by  NLMK  was  considered  impractical  within  the  meaning  of 
Article  8(3)  of  the  basic  Regulation.  It  was  therefore  concluded  that  the  undertaking 
offered subsequent to disclosure should not be accepted. 

(103)  The interested parties were informed accordingly and the reasons why the undertaking 
offered  could  not  be  accepted  disclosed  in  detail  to  the  applicant  concerned.  The 
Advisory Committee was consulted, 

HAS ADOPTED THIS REGULATION: 

Article 1 

The review of anti-dumping measures concerning imports of grain oriented cold-rolled sheets 
and strips of silicon-electrical steel with a width of more than 500 mm originating in Russia 
and  falling  within  CN  codes  7225 11 00  (sheets  of  a  width  of  600  mm  or  more)  and 
7226 11 00  (sheets  of  a  width  of  more  than  500  mm  but  less  than  600  mm)  with  regard  to 
Novolipetsk Iron & Steel Corporation (‘NLMK’) is hereby terminated. 

Article 2 

In Council Regulation No (EC) 151/2003, Article 1 is replaced by the following: 

‘1. A definitive anti-dumping duty is hereby imposed on imports of grain oriented cold-rolled 
sheets and strips of silicon-electrical steel with a width of more than 500 mm originating in 
Russia and falling within CN codes 7225 11 00 (sheets of a width of 600 mm or more) and ex 
7226 11 00 (TARIC code 7226 11 00 10) (sheets of a width of more than 500 mm but less 
than 600 mm). 

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2.  The  rate  of  the  definitive  anti-dumping  duty,  applicable  to  the  net,  free-at-Community 
frontier price, before duty, for the product manufactured by the following companies shall be: 

Company 

Duty rate 

TARIC additional code 

OAO  Viz  -  Stal,  28,  Kirov  St.,  620028 
Yekaterinburg GSP-715 

14.7% 

A516 

All other companies  

40.1% 

A999 

3. Unless otherwise specified, the provisions in force concerning customs duty shall apply. 

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

Article 3 

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

Done at Brussels,  

For the Council 
The President 

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