Commission Implementing Regulation (EU) 2023/1301 of 26 June 2023 amending Commission Implementing Regulation (EU) 2019/159 imposing a definitive safeguard measure on imports of certain steel products

THE EUROPEAN COMMISSION,

Having regard to Regulation (EU) 2015/478 of the European Parliament and of the Council of 11 March 2015 on common rules for imports (1) and in particular Articles 16 and 20 thereof,

Having regard to Regulation (EU) 2015/755 of the European Parliament and of the Council of 29 April 2015 on common rules for imports from certain third countries (2), and in particular Articles 13 and 16 thereof,

Whereas:

(1) By Commission Implementing Regulation (EU) 2019/159 (‘the Definitive Regulation’) (3), the European Commission imposed a definitive safeguard measure on certain steel products (‘the safeguard measure’), which consists of tariff-rate quotas (‘TRQs’) with respect to certain steel products (‘the product concerned’) encompassing 26 steel product categories, set at levels preserving traditional trade flows on a per-product-category basis. A 25 % tariff duty applies only if the quantitative thresholds of these TRQs, which increase (currently by 4%) annually as a result of liberalisation, are exceeded. The safeguard measure was imposed for an initial period of three years, that is to say, until 30 June 2021.

(2) By Commission Implementing Regulation (EU) 2021/1029 (4) (‘the Prolongation Review Regulation’), the Commission prolonged the safeguard measure until 30 June 2024.

(3) The Commission made technical adjustments to the measure as a result of different functioning review investigations, by means of Commission Implementing Regulation (EU) 2019/1590 (5) (‘First functioning review regulation’), Commission Implementing Regulation (EU) 2020/894 (6) (‘Second functioning review regulation’), and Commission Implementing Regulation (EU) 2022/978 (7) (‘Third functioning review regulation’) respectively. The Commission also reviewed the measure following the withdrawal of the United Kingdom from the Union (8). The Commission adjusted the measure following certain events, in particular the imposition of an import ban on steel from Russia and Belarus in the context of Russia's unprovoked and unjustified military aggression against Ukraine (9), and the expiration of certain provisions in a bilateral agreement with preferential trading partners (10).

(4) Recital (85) of the Prolongation Review Regulation stated that “with a view to guaranteeing that the safeguard measure remains in place only to the extent that it is necessary, the Commission will carry out a review to determine whether, on the basis of the circumstances at that time, the safeguard measure should be terminated by 30 June 2023 namely after two years of prolongation”.

(5) In the Prolongation Review Regulation, the Commission further noted that, in addition to assessing the possible termination of the measure by 30 June 2023 in view of the circumstances present at that time, it may also use this review, in case of no early termination of the measure, to update the list of developing countries subject to and excluded from the measure based on 2022 import data and to assess whether the level of liberalisation continued to be appropriate.

(6) The Commission thus initiated a review investigation by means of a Notice of Initiation (‘the Notice’) published in the Official Journal of the European Union on 2 December 2022 (11). The Notice invited interested parties to provide evidence and data to determine whether it would be justified to terminate the measure by 30 June 2023.

(7) The Commission sought specific information from Union producers and users via questionnaires, which were made available to interested parties on the public file (‘TRON’) (12) as well as on the European Commission’s (DG TRADE) website (13).

(8) As in previous review investigations, the Commission devised a two-stage written procedure. First, parties had the possibility to send their submissions and where applicable, a reply to the questionnaires by 13 January 2023. The Commission made this information available on the public file and interested parties had the possibility to make comments (rebuttals phase). The Commission subsequently made the rebuttals available in TRON.

(9) At a later stage of the proceeding the Commission uploaded on TRON the updated set of questionnaire replies from Union producers to include the most recent data available, namely economic indicators of the last quarter of 2022. Interested parties were given the opportunity to comment on the updated information.

(10) As per the Prolongation Review Regulation, the safeguard measure was set to be in place until 30 June 2024. At that time, the Commission concluded that an increase in the volume of imports should the measure be terminated as originally expected, could undermine significantly any meaningful economic recovery and the efforts being made by the Union steel industry in its process of adjustment to a higher level of imports. Therefore, the measure could be terminated on 30 June 2023 only if the Commission concluded in view of the circumstances following the Prolongation review, and on the basis of the evidence available (including the submissions and rebuttals received from interested parties in the ongoing review investigation) that such early termination would be justified. Conversely, in the absence of positive evidence justifying an early termination, the measure would automatically continue to be in place until 30 June 2024.

(11) In order to carry out its assessment, the Commission examined the comments and evidence received from interested parties, including the questionnaire replies, and where necessary crosschecked the information against any other available sources that it gathered through its own research as part of the investigation. As will be explained below, the Commission concluded that, under current circumstances, the early termination of the safeguard measure would not be justified.

(12) Some interested parties claimed that the fact that some TRQs (be them country-specific or residual) were exhausted before the end of a given quarter would show that the existing volume of free-of-duty steel available from imports is insufficient. Accordingly, parties claimed that this situation resulted in users not being able to source the steel required for their businesses.

(13) The Commission observed that, like it had been the case since the imposition of the definitive safeguard measure in February 2019, certain origins exhausted TRQs in some product categories in the early days of a quarter also in the period assessed in this review investigation. However, as confirmed in previous investigations (14), this fact cannot lead to the conclusion that the safeguard measure creates a shortage of steel for users in general. In this respect, the Commission noted that the claims by some interested parties referred to the exhaustion of some specific TRQs in isolation, without referring to the overall availability of steel outside a specific origin that may have exhausted its country-specific TRQ quickly. Thus, the Commission confirmed that, whilst some specific origins were exhausted at a given moment in time in certain product categories, in general terms access to other origins remained largely available for those product categories.

(14) In this respect, the Commission assessed the overall TRQ use in the ongoing safeguard year (July 22-June 23) based on the data available at the time of making the determination, namely, the complete set of data of the first three quarters of the period (July 22 – March 23). This data showed the following TRQ use evolution: Table 1 TRQ use evolution (15)

(15) The Commission also assessed the TRQ use and availability on a per product category basis to confirm the overall trend displayed in Table 1. The combined assessment unequivocally showed that Union users had the possibility to source free-of-duty steel from several sources quarter after quarter across virtually all product categories, and that the available free-of-duty volumes were increasing (in some cases substantially) quarter after quarter.

(16) In view of these facts, the Commission concluded that the claims regarding shortage of imported steel (16) did not correspond to the data assessed. The analysis also showed an increasing volume of TRQs unused across categories. Relevant data regarding the evolution of the market, e.g. consumption in the Union market, showed a progressive slowing down in the second half of 2022 (See Section 4.2.2). Moreover, no evidence was provided showing that, with respect to the products under those exhausted TRQs, there was insufficient supply from Union producers.

(17) For these reasons, the Commission disagreed with the claims that the quick exhaustion of some TRQs (from some origins) in certain categories would have led to a shortage of steel in the Union market.

(18) Some interested parties argued that, because of some changes in the US Section 232 measure, the risk of trade diversion would have been allegedly reduced to the point that the safeguard measure would no longer be necessary on these grounds.

(19) The Commission had assessed the evolution of the US Section 232 measure in previous reviews and concluded that the changes in the US Section 232 measure did not alter the basis underpinning the assessment regarding the risk of trade diversion. (17) In the context of this investigation, the Commission looked into the latest developments of the US measure. In the first place, the Commission observed that the US Administration did not appear to have intentions to remove the measure in the near future, noting that “[t]he Biden Administration is committed to preserving U.S. national security by ensuring the long-term viability of our steel and aluminum industries, and we do not intend to remove the Section 232 duties as a result of these disputes” (18).

(20) Secondly, in light of the information presented by interested parties and its own analysis, the Commission established that the following changes to the US 232 measure had taken place since the Commission last assessed this argument in the Third Review Regulation of June 2022 (19): first, as of 1 June 2022, the US established a TRQ for the UK whereby certain volume of in-quota imports are exempted from the measure, while out-of-quota imports remain subject to the additional 25% duty. Second, as of 1 June 2022, the US suspended the measure for Ukraine temporarily.

(21) The analysis showed that the scope of the US Section 232 measure barely changed since the Commission last assessed it in the Third Review Regulation, which showed that the US market continues to be heavily shielded from steel imports.

(22) The Commission further assessed the evolution of imports into the US market (20), and confirmed that in overall terms, they had gone down by -10% in 2022 as compared to 2017, the year prior to the imposition of the US Section 232 measure (21). As regards imports into the US market from those countries that are the main steel supplying countries into the Union, the trend is much steeper, as their combined imports fell by -27%, representing a reduction of over 2 million tonnes.

(23) Therefore, the Commission confirmed that imports into the US market continued to be significantly below pre-Section 232 measure levels. With the US market still affected by the Section 232 measures, the Union market remains the largest steel importing market worldwide.

(24) The Commission also noted that interested parties did not provide any evidence in this investigation that would put into question the Commission’s findings in previous investigations and thus, did not alter the findings of those investigations with regard to the risk of trade diversion into the Union market stemming from the US Section 232 measure.

(25) Some interested parties observed that some Union producers had temporarily stopped or reduced production in some of their production sites due to the surge of costs associated to energy. In this respect, these parties argued that as a result there was a risk of shortage of supply in the market, and of increased prices due to reduced supply from the Union producers’ side.

(26) The Commission’s analysis showed that indeed, amid a spike in energy prices in the Union (22), several Union producers temporarily idled some production facilities to mitigate the impact on their economic performance (23). However, such measures were of temporary nature and the evidence available indicates that Union producers had either brought back most of the capacity into operation or were in the process of doing so (24).

(27) Therefore, the Commission concluded that the temporary idling of certain production facilities that took place mostly in the second half of 2022 was a temporary situation and it has been largely reversed by restarting previously idled production during the first months of 2023.

(28) In connection to the above argument, some interested parties also argued that imports from a variety of third countries are necessary to satisfy demand and that the safeguard measure constitutes an obstacle for sourcing without restrictions from specific origins at any given point in time. Some interested parties also made general claims concerning longer delivery times from Union producers and increased steel prices.

(29) In this regard the Commission noted that the safeguard measure was designed in a way to ensure that historical trade flows would continue to enter the Union market free-of-duty. Such historical volumes have furthermore been progressively liberalised year after year. The Commission, in previous reviews of the measure, explained that interested parties active in the steel sector needed to adapt to the existing regulatory framework (in this case, the existence of a safeguard measure) when conducting their business. As shown in recital (14), the data analysed in this review clearly showed that there has been an increasing volume of TRQs unused quarter after quarter across product categories and that Union producers had generally additional capacity available. Therefore, the fact that imports from one specific origin in a given category may have exhausted the relevant TRQ before the end of a quarter, does not mean that the safeguard measure has unduly restricted the ability of interested parties to source steel free-of-duty from other sources, including other third countries or the Union.

(30) Regarding delivery times, the Commission noted that the views among some interested parties appeared to differ regarding whether the Union delivery times were standard or whether they were abnormally long. In view of the contradictory claims on this subject among users, and the fact that no evidence was received showing that longer than usual delivery times was currently a common phenomenon in the Union, the Commission considered that delivery times could not be currently regarded as a supply issue.

(31) Regarding steel prices, the Commission assessed the evolution of prices in the Union and in other major steel markets and noted that in the first quarter of 2023 prices had drastically decreased when compared to the peak reached in 2022. Such a decrease in prices took place in a context of increasing energy costs for, among others, Union steel producers. The Commission considered that the evolution of prices in the Union market could thus not be directly linked to the safeguard measure, as a comparable trend which also coincided in time was observed in other major steel markets. In addition, the Commission noted that the availability of free-of-duty TRQs throughout the period ensured that users had generally alternative options to paying the 25% duty or sourcing from Union producers, thus not preventing relevant additional free-of-duty imports from entering the Union market.

(32) Therefore, the Commission concluded that the evolution of prices was showing a downwards trend towards the end of 2022, and that they had substantially decreased when compared to their peak earlier in 2022. Moreover, the Commission confirmed that these trends were also observed in other major steel markets, thus indicating that this was a rather global phenomenon not linked to the Union market and the safeguard measure.

(33) In view of the above elements, the Commission considered that interested parties did not demonstrate that the safeguard measure would have overall limited their ability to source steel free-of-duty in light of existing demand, nor have they shown how in the future that would be the case if the measure continued to be in place in light of forecasted demand and future TRQ levels (see Section 6).

(34) Some interested parties argued that because overall, TRQs across product categories were not being used, and in some cases showing a very low use level, the measure would no longer be necessary and therefore the Commission should terminate the safeguard measure.

(35) While Table 1 shows that the rate of TRQ use has undeniably gone down quarter on quarter, the Commission considered that conclusions cannot be drawn by assessing this fact in isolation. This fact should be put into a context of decreasing consumption. In this respect, the Commission assessed in further detail the extent of import pressure by looking at the total volume of imports and their share over total consumption in the same period, and by focusing on the TRQ use, notably those instances where country-specific TRQs by some origins were rapidly exhausted.

(36) First, regarding the overall volume of imports, the Commission noted that despite a slowdown in Union consumption notably in the second half of 2022, which impacted the level of TRQ use, imports in the year 2022 totalled 31.1 million tonnes. This constitutes the third highest level of imports in the last decade. In terms of market share, imports reached 19%, with an upwards increase towards the end of 2022 (reaching 21% in the last quarter of 2022). This is the second highest market share achieved by imports in the last decade (25), only exceeded by the share of imports in the year 2018, which also constituted the peak volume of imports in the last decade. Therefore, despite a reduction in the level of TRQ use in a situation of lower consumption, data shows that import pressure increased and remained, in terms of market share, close to the historically high levels reached just before the adoption of a definitive safeguard measure in early 2019.

(37) Secondly, in every quarter there were several country-specific TRQs which indeed were fully used in the early stages of a quarter. This phenomenon, which was addressed by the Commission in previous regulations (26), showed that there continued to be import pressure from certain origins in some product categories despite the overall availability of TRQ volumes, thus contributing to the increase in market share of imports in a context of decreasing demand.

(38) Lastly, and although interested parties arguing in favour of termination did not generally refer to it, the Commission considers that the assessment regarding existing and future import pressure on the Union market cannot be done in isolation, e.g., by looking only at the TRQ use. Rather, it needs to be done by looking at the several existing parameters in the sector, also including the evolution of overcapacity. In this regard, the Commission observed that global overcapacity in the steel sector had further increased.