Proposal for a Council Regulation amending Regulation (EC) N° 954/2006 imposing a definitive anti-dumping duty on imports of certain seamless pipes and tubes of iron or steel originating, inter alia, in Russia
Date: 2008-07-17
Institutions: European Commission
Subjects: Russia, anti-dumping duty, anti-dumping legislation, import, originating product, piping

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 17.7.2008 
COM(2008) 472 final 

Proposal for a 

COUNCIL REGULATION 

amending Regulation (EC) N° 954/2006 imposing a definitive anti-dumping duty on 
imports of certain seamless pipes and tubes of iron or steel originating, inter alia, in 
Russia 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

Context of the proposal 

Grounds for and objectives of the proposal 

This  proposal  concerns  the  application  of  Council  Regulation  (EC)  No  384/96  of  22 
December 1995 on protection against dumped imports from countries not members of the 
European Community, as last amended by Council Regulation (EC) No 2117/2005 of 21 
December 2005 ('the basic Regulation') with regard to imports of certain seamless pipes 
and tubes of iron or steel originating in Russia. 

General context 

This proposal is made in the context of the implementation of the basic Regulation and is 
the  result  of  an  investigation  which  was  carried  out  in  line  with  the  substantive  and 
procedural requirements laid out in the basic Regulation. 

Existing provisions in the area of the proposal 

Measures are in force against imports of certain seamless pipes and tubes of iron or steel 
originating in Russia and were imposed by Council Regulation (EC) No 954/2006. 

Consistency with other policies and objectives of the Union 

Not applicable. 

Consultation of interested parties and impact assessment 

Consultation of interested parties 

Interested parties concerned by the proceeding have already had the possibility to defend 
their interests during the investigation, in line with the provisions of the basic Regulation. 

Collection and use of expertise 

There was no need for external expertise. 

Impact assessment 

This proposal is the result of the implementation of the basic Regulation. 

The  basic  Regulation  does  not  contain  provisions  for  a  general  impact  assessment  but 
contains an exhaustive list of conditions that have to be assessed. 

Legal elements of the proposal 

  Summary of the proposed action 

On  22  June  2007,  the  Commission  initiated  a  partial  interim  review  limited  to  the  level  of 
dumping  for  one  exporting  producer  of  certain  seamless  pipes  and  tubes  of  iron  or  steel, 
originating in Russia, on its own initiative. 

The investigation showed that the dumping margin established had decreased. As a result, the 
anti-dumping duty imposed on these exports has to be decreased accordingly.  

It  is  therefore  proposed  that  the  Council  adopt  the  attached  proposal  for  a  Regulation  which 

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should  be  published  in  the  Official  Journal  of  the  European  Union  by  11  August  2008  at  the 
latest.  

  Legal basis 

Council  Regulation  (EC)  No  384/96  of  22  December  1995  on  protection  against  dumped 
imports from countries not members of the European Community, as last amended by Council 
Regulation (EC) No 2117/2005 of 21 December 2005. 

  Subsidiarity principle 

The  proposal  falls  under  the  exclusive  competence  of  the  Community.  The  subsidiarity 
principle therefore does not apply. 

  Proportionality principle 

The proposal complies with the proportionality principle for the following reasons: 

  The form of action is described in the above-mentioned basic Regulation and leaves no scope 

for national decision. 

Indication  of  how  financial  and  administrative  burden  falling  upon  the  Community,  national 
governments, regional and local authorities, economic operators and citizens is minimized and 
proportionate to the objective of the proposal is not applicable. 

  Choice of instruments 

  Proposed instruments: regulation. 

  Other means would not be adequate for the following reason: 

Other means would not be adequate because the basic Regulation does not propose alternative 
options. 

Budgetary implication 

The proposal has no implication for the Community budget.  

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Proposal for a 

COUNCIL REGULATION 

amending Regulation (EC) N° 954/2006 imposing a definitive anti-dumping duty on 
imports of certain seamless pipes and tubes of iron or steel originating, inter alia, 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 9 and 11(3) thereof,  

Having  regard  to  Council  Regulation  (EC)  No  954/2006  of  27  June  2006  imposing  a 
definitive anti-dumping duty on imports of certain seamless pipes and tubes, of iron or steel 
('SPT') originating, inter alia, in Russia,  

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

Whereas: 

1. 

(1) 

2. 

(2) 

Existing measures 

A. PROCEDURE 

Following  an  investigation  (‘the  original  investigation’),  the  Council,  by  Regulation 
(EC)  No  954/20062,  imposed  a  definitive  anti-dumping  duty  on  imports  of  certain 
seamless pipes and tubes of iron or steel ('SPT') originating, inter alia, in Russia. 

Special monitoring 

After  the  entry  into  force  of  Council  Regulation  (EC)  No  954/2006  and  having 
informed the Advisory Committee, the Commission monitored with special attention 
the  evolution  of  SPT  imports  from  all  countries  concerned  by  the  measures.  This 
monitoring  showed  that  the  exports  of  the  Russian  exporting  producer  group  TMK 
Group (Volzhsky Pipe Plant, OJSC Taganrog Metallurgical Works, OJSC Sinara Pipe 
Plant and OJSC Seversky Pipe Plant) (hereinafter 'TMK', 'the company' or 'the group') 
to  the  Community  during  the  first  six  months  after  the  imposition  of  measures  had 
dropped dramatically. It also indicated that the level of duty as regards TMK should be 
re-examined.  Indeed,  the  cost  and  price  information  provided  by  TMK  in  the 
monitoring  questionnaire  indicated  that  the  group's  dumping  margin  would  be  lower 
than the current 35.8%.  

3. 

Initiation of an interim review 

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OJ  L56,  6.3.1996,  p.  1.  Regulation  as  last  amended  by  Regulation  (EC)  No  2117/2005  (OJ  L  340, 
23.12.2005, p. 17). 
OJ L 175, 29.6.2006, p. 4. 

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(3) 

(4) 

(5) 

(6) 

On the initiative of the Commission, a partial interim review of the Regulation above 
was  initiated  for  TMK,  on  the  basis  of  evidence  that  the  Commission  received  from 
that  exporter.  The  company  claimed  that  the  circumstances  which  had  led  to  the 
establishment of the measure in force, had changed and that these changes were of a 
lasting  nature.  It  is  recalled  that  TMK  did  not  cooperate  fully  in  the  original 
investigation  and  therefore  its  dumping  margin  was  calculated  on  the  basis  of  facts 
available, i.e. the normal value of another producer group in Russia which cooperated 
with  the  investigation  and  Eurostat  data.  According  to  TMK,  it  failed  to  cooperate 
during  the  original  investigation  mainly  because  of  the  significant  internal  changes 
which  had  already  begun  to  take  place  within  the  group  during  the  original 
investigation period. Due to these exceptional circumstances, which had an impact on 
the corporate governance of the group, as well as its accounting and auditing practices, 
TMK could not provide adequate evidence of its prices and costs during the original 
investigation.  According  to  the  company,  the  changes  in  its  organisation  since  the 
original  investigation  have  resulted  in  a  simpler  corporate  structure,  improved 
corporate  governance  and  a  switch  to  IFRS  accounting,  which  would  allow  it  to 
cooperate. It also provided prima facie evidence to show that a comparison of normal 
value based on its own domestic prices or costs and export prices to the Community 
would  lead  to  a  reduction  of  dumping  well  below  the  level  of  the  current  measure. 
Therefore it claimed that the continued imposition of the measure at the existing level, 
which  was  based  on  the  level  of  dumping  previously  established,  was  no  longer 
necessary to offset dumping.  

Having determined, after consulting the Advisory Committee, that sufficient evidence 
existed  for  the  initiation  of  a  partial  interim  review,  the  Commission  decided  on  its 
own  initiative  to  initiate  a  partial  interim review  in  accordance  with  Article  11(3)  of 
the basic Regulation, limited in scope to the level of dumping as far as the exporting 
producers/members  of  the  TMK  group  are  concerned.  The  Commission  published  a 
notice  of  initiation  on  22  June  2007  in  the  Official  Journal  of  the  European  Union3 
and commenced an investigation.  

The  Commission  officially  advised  TMK  and  its  related  companies,  as  well  as  the 
representatives  of  the  exporting  country,  of  the  initiation  of  the  interim  review. 
Interested  parties  were  given  the  opportunity  to  make  their  views  known  in  writing 
and to request a hearing. 

The  Commission  also  sent  questionnaires  to  TMK  and  its  related  companies  and 
received replies within the deadlines set for that purpose. The Commission sought and 
verified all the information it deemed necessary for the determination of dumping and 
carried out verification visits at the premises of the following companies: 

– 

– 

– 

– 

– 

– 

OJSC Volzhsky Pipe Plant, Russia 

OJSC Taganrog Metallurgical Works, Russia 

OJSC Sinara Pipe Plant, Russia 

OJSC Seversky Pipe Plant, Russia 

CJSC Trade House TMK, Russia 

TMK Europe GmbH, Germany 

3 

OJ C 138, 22.6.2007, p. 37.  

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4. 

(7) 

1. 

(8) 

2. 

(9) 

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– 

TMK Global AG, Switzerland 

TMK Italia s.r.l., Italy 

Review investigation period 

The investigation of dumping covered the period from 1 April 2006 to 31 March 2007 
(‘the review investigation period’ or ‘RIP’). 

B. REVIEW INVESTIGATION 

Product concerned 

The  product  concerned  by  the  current  review  is  the  same  as  that  in  the  original 
investigation,  i.e.  certain  seamless  pipes  and  tubes  of  iron  or  steel,  of  circular  cross-
section,  of  an  external  diameter  not  exceeding  406,4  mm  with  a  Carbon  Equivalent 
Value  (CEV)  not  exceeding  0,86  according  to  the  International  Institute  of  Welding 
(IIW) formula and chemical analysis4 originating in Russia ('the product concerned'), 
currently classifiable within CN codes ex 7304 11 00, ex 7304 19 10, ex 7304 19 30, 
ex 7304 22 00, ex 7304 23 00, ex 7304 24 00, ex 7304 29 10, ex 7304 29 30, ex 7304 
31 80, ex 7304 39 58, ex 7304 39 92, ex 7304 39 93, ex 7304 51 89, ex 7304 59 92 
and ex 7304 59 935.  

Like product 

The product produced and sold on the Russian domestic market and that exported to 
the  Community  have  the  same  basic  physical,  technical  and  chemical  characteristics 
and uses and are therefore considered to be alike within the meaning of Article 1(4) of 
the basic Regulation. 

C. RESULTS OF THE INVESTIGATION 

1. 

Normal value 

(10)  Sales on the domestic market are made via the related company, CJSC Trade House 

TMK, which then resells the product concerned to independent customers in Russia. 

(11) 

In  accordance  with  Article  2(2)  of  the  basic  Regulation,  it  was  first  examined,  with 
regard  to  the  four  cooperating  exporting  producers  of  the  group,  whether  their 
domestic  sales  of  the  like  product  to  independent  customers  were  representative,  i.e. 
whether  the  total  volume  of  such  sales  was  equal  to  or  greater  than  5%  of  the  total 
volume  of  the  corresponding  export  sales  to  the  Community.  The  total  volume  of 
domestic sales of the like product was found to be representative. The Commission's 
services  subsequently  identified  those  types  of  the  like  product  sold  on  the  domestic 
market  that  were  identical  to  or  directly  comparable  with  the  types  exported  to  the 
Community.  

(12)  For each type sold by the exporting producers on their domestic market and found to 
be  directly  comparable  with  the  type  of  the  product  concerned  exported  to  the 
Community, it was established whether domestic sales were sufficiently representative 

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The  CEV  shall  be  determined  in  accordance  with  Technical  Report,  1967,  IIW  doc.  IX-535-67, 
published by the International Institute of Welding (IIW). 
As presently defined in Commission Regulation (EC) No 1214/2007 of 20 September 2007 amending 
Annex I to Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the 
Common  Customs  Tariff  (OJ  L  286,  31.10.2007,  p.  1).  The  product  coverage  is  determined  in 
combining the product description in Article 1(1) of Council Regulation (EC) No 954/2006 (OJ L 175, 
29.6.2006, p. 4) and the product description of the corresponding CN codes taken together. 

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for the purposes of Article 2(2) of the basic Regulation. Domestic sales of a particular 
type 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 the product concerned exported to the Community. 

(13)  Subsequently,  it  was  examined  whether  each  type  of  the  product  concerned  sold 
domestically  in  representative  quantities  could  be  considered  as  being  sold  in  the 
ordinary  course  of  trade  pursuant  to  Article  2(4)  of  the  basic  Regulation,  by 
establishing  the  proportion  of  profitable  sales  to  independent  customers  on  the 
domestic market of the product type in question.  

(14) 

In cases where the sales volume of the relevant 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 where the weighted average price of that type was 
equal  to  or  above  the  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 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 of the 
total sales volume of that type or where the weighted average price of that type was 
below  the  cost  of  production,  normal  value  was  based  on  the  actual  domestic  price, 
calculated  as  a  weighted  average  of  profitable  sales  of  that  type  only,  provided  that 
these  sales  represented  10%  or  more  of  the  total  sales  volume  of  that  type.  In  cases 
where the volume of profitable sales of any product type represented less than 10% of 
the  total  sales  volume,  it  was  considered  that  this  particular  type  was  sold  in 
insufficient  quantities  for  the  domestic  price  to  provide  an  appropriate  basis  for  the 
establishment of the normal value. 

(15)  Wherever domestic prices of a particular product type sold by an exporting producer 
could  not  be  used  in  order  to  establish  the  normal  value,  another  method  had  to  be 
applied. In this regard, the Commission used constructed normal value. In accordance 
with Article 2(3) of the basic Regulation, normal value was constructed by adding to 
the  exporting  producer's  manufacturing  costs  of  the  exported  types,  adjusted  where 
necessary,  a  reasonable  percentage  for  selling,  general  and  administrative  expenses 
(‘SG&A’)  and  a  reasonable  margin  of  profit.  Pursuant  to  Article  2(6)  of  the  basic 
Regulation,  the  percentage  for  SG&A  and  profit  margin  were  based  on  the  average 
SG&A and profit margin of sales in the ordinary course of trade of the like product.  

(16)  With  regard  to  manufacturing  costs,  and  in  particular  energy  costs,  as  far  as  gas  is 
concerned,  it  was  examined  whether  the  gas  prices  paid  by  the  exporting  producers 
reasonably reflected the costs associated with the production and distribution of gas. 

(17) 

It was found that the domestic gas price paid by the exporting producers was around 
one fourth of the export price of natural gas from Russia. In this regard, all available 
data  indicates  that  domestic  gas  prices  in  Russia  are  regulated  prices,  which  are  far 
below market prices paid in unregulated markets for natural gas. Therefore, since gas 
costs were not reasonably reflected in the exporting producers' records as provided for 
in  Article  2(5)  of  the  basic  Regulation,  they  had  to  be  adjusted  accordingly.  In  the 
absence  of  any  sufficiently  representative,  undistorted  gas  prices  relating  to  the 
Russian  domestic  market,  it  was  considered  appropriate  to  base  the  adjustment,  in 
accordance  with  Article  2(5),  on  the  basis  of  information  from  other  representative 
markets. The adjusted price was based on the average price of Russian gas when sold 
for  export  at  the  German/Czech  border  (Waidhaus),  adjusted  for  local  distribution 
costs. Waidhaus, being the main hub for Russian gas sales to the EU, which is both the 

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largest  market  for  Russian  gas  and  has  prices  reasonably  reflecting  costs,  can  be 
considered  a  representative  market  within  the  meaning  of  Article  2(5)  of  the  basic 
Regulation. 

(18)  For those product types where the normal value was constructed, as described above, 
the  construction  was  done  on  the  basis  of  the  manufacturing  costs  of  the  exported 
types after the adjustment for the gas cost.  

2. 

Export price 

(19)  All  export  sales  of  TMK  are  made  via  related  companies  located  either  in  the 
Community  or  in  Switzerland.  Thus  the  export  price  was  established  on  the  basis  of 
Article 2(9) of the basic Regulation, i.e. using the resale prices actually paid or payable 
to the related company by the first independent buyer in the Community in the RIP, 
adjusted for all costs incurred between importation and resale and for profits. 

(20)  As  for  the  export  prices  charged  to  customers  in  the  Community  by  the  related 
company  in  Switzerland,  TMK  Global  AG,  TMK  claimed  that  it  would  be 
unwarranted  to  deduct  from  the  export  price  the  profit,  SG&A  and  commissions  or 
agency  fees  since  TMK  Global  acts  as  a  fully  integrated  export  sales  department 
outside the Community. According to TMK such deductions would only be warranted 
for companies located in the Community and forming a part of the group's importing 
network, as provided for in Article 2(9) of the basic Regulation.  

(21)  The  above  claim  was  accepted,  as  it  was  found  that  TMK  Global's  role  after  the 
organisational changes within the group had evolved into that of an export department 
responsible  for  exports  outside  the  Community  and  also  the  export  sales  to  the 
Community,  albeit  that  these  had  dropped  to  low  volumes  prior  and  during  the  RIP. 
Indeed,  TMK  Global  acts  as  a  'sales  hub',  which  simplifies  the  purchasing  and 
documentation processes for the front-offices located directly in the key-markets, i.e. 
TMK  North  America  and  TMK  Middle-East.  It  also  performs  other  functions  of  an 
export  department  with  regard  to  export  sales  to  its  key  markets,  as  well  as  to  the 
Community,  such  as  management  accounting  and  enforcement  of  goods  tracking 
standards. In the past, these functions were performed by the local export departments 
of  each  mill,  but  they  are  now  carried  out  by  TMK  Global  for  the  sake  of 
centralization and to ensure consistency. 

3. 

Comparison 

(22)  The  comparison  between  the  weighted  normal  value  and  the  weighted  export  price 
was made on an ex-works basis and at the same level of trade. In order to ensure a fair 
comparison,  account  was  taken,  in  accordance  with  Article  2(10)  of  the  basic 
Regulation,  of  differences  in  factors  which  were  demonstrated  to  affect  prices  and 
price  comparability.  On 
in  physical 
characteristics,  transport  costs,  insurance,  handling  charges,  credit  costs  and  import 
duties were made where applicable and justified. 

this  basis,  allowances  for  differences 

4. 

Dumping margin 

(23)  As  provided  for  under  Article  2(11)  of  the  basic  Regulation,  the  weighted  average 
normal  value  by  type  was  compared  with  the  weighted  average  export  price  of  the 
corresponding type of the product concerned. This comparison showed the existence 
of dumping.  

(24)  TMK's  dumping  margin  expressed  as  a  percentage  of  the  net,  free-at-Community-

frontier price, duty unpaid, was found to be 27.2%. 

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D. LASTING NATURE OF CHANGED CIRCUMSTANCES 

(25) 

(26) 

In  accordance  with  Article  11(3)  of  the  basic  Regulation,  it  was  also  examined 
whether the changed circumstances could reasonably be said to be of a lasting nature. 

In this respect it is recalled that TMK did not cooperate properly during the original 
investigation.  Therefore  its  dumping  margin,  which  forms  the  basis  of  the  currently 
applicable  duty  of  35.8%,  was  determined  on  the  basis  of  facts  available,  in 
accordance  with  Article  18  of  the  basic  Regulation.  As  for  the  facts  available,  the 
Commission  used  the  normal  value  established  for  another,  cooperating,  Russian 
producer group and Eurostat data.  

(27)  The insufficient cooperation which led to the use of facts available was caused mainly 
by significant internal changes which had already begun to take place within the group 
during  the  original  investigation  period.  Due  to  these  exceptional  circumstances, 
which  had  an  impact  on  the  corporate  governance  of  the  group  as  well  as  on  its 
accounting  and  auditing  practices,  TMK  could  not  provide  adequate  evidence  of  its 
prices and costs during the original investigation. 

(28) 

In the current investigation TMK cooperated fully. Indeed, in contrast to the original 
investigation,  when  the  group  was  still  in  a  state  of  flux,  the  data  provided  in  the 
questionnaire responses in the current investigation could be verified in a satisfactory 
manner. Hence, since the group provided reliable data with regard to the normal value 
and the export price, the dumping margin could be calculated based on its own data.  

(29)  Evidence  obtained  during  the  investigation  has  shown  that  the  changes  in  TMK's 
corporate structure and accounting practices, which allowed the group to cooperate in 
the  current  investigation,  are  to  be  considered  lasting  as  they  refer  to  the  long-term 
structure of the group.  

(30) 

(31) 

It is therefore considered that the circumstances that led to the initiation of this review 
are  unlikely  to  change  in  the  foreseeable  future  in  a  manner  that  would  affect  the 
findings of the current review. Therefore the changes are considered to be of a lasting 
nature. 

E. ANTI-DUMPING MEASURES 

In the light of the results of the investigation, it is considered appropriate to amend the 
anti-dumping  duty  applicable  to  imports  of  the  product  concerned  from  TMK  to 
27.2%.  The  amended  anti-dumping  duty  should  be  set  at  the  level  of  the  dumping 
margin  found,  as  it  is  lower  than  the  injury  margin  established  in  the  original 
investigation. 

(32) 

Interested parties were informed of the essential facts and considerations on the basis 
of which it was intended to recommend an amendment of Council Regulation (EC) No 
954/2006 and were given an opportunity to comment. 

F. UNDERTAKINGS 

(33)  Following the disclosure of the essential facts and considerations on the basis of which 
it  was  intended  to  recommend  amending  the  definitive  anti-dumping  duty  applicable 
to imports of the product concerned from TMK, the group offered a price undertaking 
in  accordance  with  Article  8(1)  of  the  basic  Regulation.  The  undertaking  offered  by 
TMK  did  not  alter  the  Commission's  initial  conclusion  that  the  product  concerned  is 
not suitable for an undertaking as set out in recitals (248)–(250) of Council Regulation 
(EC) No 954/2006. Indeed, the Commission considers that TMK's current undertaking 
offer  does  not  address  the  technical  difficulties  relating  to  the  product  concerned  as 

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stated in recital (248) of the above-mentioned Regulation to an extent that would make 
the offered price undertaking practicable.  

HAS ADOPTED THIS REGULATION: 

The  table  in  Article  1(2)  of  Council  Regulation  (EC)  No  954/2006  is  hereby  amended  by 
adding the following: 

Article 1 

Country 

Company 

Russia 

OJSC  Volzhsky  Pipe  Plant,  OJSC 
Taganrog  Metallurgical  Works, 
OJSC  Sinara  Pipe  Plant  and  OJSC 
Seversky Pipe Plant 

Anti-
dumping 
duty  

TARIC 
additional code 

27.2% 

A859 

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

Article 2 

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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