Commission Implementing Regulation (EU) 2024/1782 of 24 June 2024 amending Implementing Regulation (EU) 2019/159, including the prolongation of the safeguard measure on imports of certain steel products

• (113) Furthermore, as explained in Section 3.2.2.(e) the information available to the Commission suggested that not only the US Section 232 measure would very likely remain in place, but that the USA and other third countries were increasing the number of trade actions against imports from third countries. Thus, increasing the risk of trade diversion from such measures, including US Section 232 measure.

4.3.   The Union market is sufficiently protected by other trade defence instruments

• (114) Some parties claimed that the Union steel industry is already sufficiently protected by means of numerous anti-dumping and countervailing measures on a wide range of products. In this regard, the cumulative effect of the different trade defence instruments creates a situation of overprotection for the Union industry.

• (115) The Commission notes that each of the different trade defence instruments serve a different purpose. The safeguard is an erga omnes measure which deals with import surges resulting from unforeseen developments causing or threatening to cause serious injury and anti-dumping and countervailing measures are oriented to protect a domestic industry from unfair trade practices (injurious dumping or subsidisation). When the legal conditions corresponding to the imposition (or extension) of the different instruments are met, the EU or any other WTO member is entitled to use different instruments simultaneously.

• (116) In the EU, as recalled in previous investigations ¹¹³, the safeguard instrument is compatible with the application of other Trade Defence Instruments without producing excessive protection since the EU legal framework ¹¹⁴provides for a mechanism to avoid double remedy on the same product. This mechanism ensures that when imports under the safeguard exceed the volume of free-of-duty TRQ, then the 25 % is not cumulated to the applicable anti-dumping and/or countervailing duty so that it does not lead to an effect on trade greater than desirable. Furthermore, the EU’s General Court confirmed the legality of the Commission’s practice in this respect in a challenge concerning the steel safeguard measure ¹¹⁵. On these grounds, the Commission rejected the above claims.

4.4.   Import volumes declined and low TRQ use demonstrates low import pressure

• (117) Some interested parties argued that there is less import pressure due to decreased demand and low TRQ use.

• (118) However, despite a reduction in the level of TRQ use in a situation of lower consumption (-14 % in the period 2021- 2023) and lower imports (-17 % in the same period), data shows that import pressure in terms of market share of imports remains high. Even while declining slightly in 2023, the market share of imports continued to be close to record levels, with a 21.5 % share. This level is significantly higher than the average market share before the adoption of definitive safeguard measures in early 2019 (16.4 %).

• (119) Moreover, as explained in Section 3.2.2.(a) the combined average volumes of exhausted TRQs represented 32 % (nearly two million tonnes per quarter) of the total average volume of imports in the ongoing safeguard year. In terms of origins, the continued import pressure from certain origins in some product categories ¹¹⁶ despite the overall availability of TRQ volumes, contributed to the overall increase in market share of imports in the period considered in a context of decreasing demand.

• (120) Therefore, the Commission considers that the lower use of TRQs does not necessarily imply a reduction in the import pressure which could justify the termination of the measure by 30 June 2024.

4.5.   The quick exhaustion of some TRQs indicates that there is insufficient steel for imports

• (121) Some interested parties (mainly exporters and users) claimed that some TRQs are exhausted quickly or consistently and that therefore the free of duty quota volumes are insufficient. This creates allegedly shortage of supply.

• (122) The Commission has assessed this claim in previous investigations and confirms also for the current review that the quick exhaustion of some TRQs 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 (see Section 3.2.2. b).

• (123) Moreover, evidence from different parties was not conclusive of the allegation that the Union industry is not able to supply. To the contrary, the low utilisation rates in most of product categories would suggest that the sourcing from the Union industry is a real possibility.

• (124) Therefore, the Commission rejected this claim.

4.6.   Performance of the Union industry

• (125) Some interested parties claimed that the there is no evidence that the Union industry is in a vulnerable state and others raised that the injury factors identified are not attributable to an increase in imports (or a potential increase in imports), but rather to global conditions. In particular, other factors affecting the performance of the Union industry are allegedly the increase of energy costs and the increase of transportation costs. Finally, other parties mentioned that the injury has not been checked across all product categories.

• (126) In this respect, the Commission notes that the requirements to prolong a safeguard measure under Article 7.1 of the WTO Agreement on Safeguards and Article 19(2) of the Basic Safeguards Regulation, namely the necessity to prevent or remedy serious injury and that the domestic industry is adjusting, do not require that an increase in imports takes place during the period considered. The Commission established that there is a likelihood that, should the safeguard lapse, imports would increase resulting in serious injury to the Union industry.

• (127) With regard to the alleged necessity to demonstrate injury in all product categories, the Commission reminds that the product scope englobes all product categories as a single product, and therefore the injury assessment is done over the product covered by the investigation as whole and not per product categories. When appropriate, the Commission has shown that an analysis per product family does not change the conclusions reached at the level of the product as a whole.

• (128) Therefore, the Commission rejected the above claims.

4.7.   The safeguard has caused price increase and reduced competitiveness of downstream industries

• (129) Some users claimed that the safeguard measure has caused an increase of prices, which is eroding the competitiveness of downstream steel using industries. Users have also claimed that imports of finished and semi-finished products have increased since they have gained competitiveness compared to the same products produced by these users in the EU, due to an increase of input costs caused by the safeguard.

• (130) The Commission did not receive evidence supporting price or competitiveness claims. However, according to price information assessed by the Commission (see Section 3.4.2 on Union interest), prices in the Union market followed the same or a very similar trend than that of other markets, thus indicating that the safeguard measure was not creating an anomaly in terms of price trends in the Union.

• (131) Therefore, the Commission rejected the above claims.

4.8.   The Union industry is not adjusting

• (132) A number of parties challenged the adjustment efforts made by the Union industry since the application of the safeguard measure. Based on that, they considered that the safeguard measure could not be extended since one of the legal requirements for extension was not met. Parties claimed that the adjustments were mainly focusing on decarbonization of the EU steel industry and also that these plans were not yet implemented.

• (133) Union producers have submitted to the Commission numerous examples of adjustments that have been decided recently and that are currently in different phases of implementation. Moreover, the Commission has found that, in addition to the examples provided by the Union industry, there were a large number of actions undertaken by Union producers of all sizes to improve competitiveness, even if market conditions were challenging. Some of these examples are mentioned in Section 3.3 of this Regulation.

• (134) Therefore, the Commission rejected the above claims.

• (135) Several interested parties argued that most of the adjustment measures of the Union industry were induced by the environmental obligations imposed by EU legislation and policies and therefore, they could not be considered as adjustments to improve competitiveness against imports.

• (136) In this respect, the Commission found that the adjustment actions undertaken by companies in whatever context normally respond to different reasons and are at the same time serving multiple objectives. Often, an adjustment to improve the environmental performance of a certain installation would bring about energy efficiency improvements or a new range of green products would also cater for growing demand. In any case, all the adjustments assessed by the Commission, either oriented at plant modernisation, process efficiency or closing down of underutilised facilities, would bring about competitiveness improvements that in a market such as the Union market equals to being better prepared to facing import competition.

5. LENGTH OF THE PROLONGATION

• (137) The Commission found that the Union steel safeguard continues to be necessary to prevent serious injury and that there is evidence that the Union industry continues implementing measures to adjust to a market situation characterised by a higher import pressure. However, according to Article 19 of the Basic Safeguards Regulation, transposing Article 7.2 of the WTO Agreement on Safeguards, the duration of a safeguard measure “must be limited to the period of time necessary to prevent or remedy serious injury and to facilitate adjustment on the part of Union producers”.

• (138) The maximum duration of a safeguard measure is 8 years, except for developing country WTO members. This means that the Union can only extend the existing safeguard measure until 30 June 2026 as a maximum.

• (139) In this investigation, the Commission has found that the prolongation of the measure is necessary. Some of the elements that motivated the imposition of measures in 2019 are still present, namely high level of steel overcapacity, the high number of trade defence measures applied by other countries and the risk of trade diversion from the US Section 232 measure as well as from other measures taken by third countries since 2019.

• (140) Moreover, the situation of the Union industry is currently fragile while it continues to adjust amidst high and increasing import pressure from exporting countries. The information analysed did not show any signs that any of the key elements justifying the prolongation of the measure would disappear or substantially improve in the near future.

• (141) In addition, the latest market outlooks on world steel consumption only foresee a modest recovery of +1.7% in 2024 (barely recovering 2022 figures) and of +1.2% 2025 (resulting in consumption levels remaining below 2021 volumes).

• (142) Against this background, to ensure that the measure provides an effective and meaningful safety net to Union producers, the Commission considers it appropriate to prolong the measure for two additional years until 30 June 2026. The measure will automatically lapse at the end of the 8-year period.

6. INCLUSION OF MOZAMBIQUE WITHIN THE SCOPE OF THE MEASURE

• (143) Under the EU-Southern African Development Community Economic Partnership Agreement, the EU committed to exclude imports from the Southern African Development Community (‘SADC’) countries from the application of multilateral safeguards for a period of 5 years. As such, when that deadline expired, the EU included imports from South Africa and most SADC members within the scope of the steel safeguard measure. ¹¹⁷ In the case of Mozambique, this exemption expired at a later stage.

• (144) As a result, the Commission considered it appropriate to bring Mozambique within the scope of the safeguard measure as from 1 July 2024 to comply with the Most Favoured Nation (‘MFN’) obligation under WTO rules.

• (145) Due to the exclusion, the import data of Mozambique was not used in the original findings made by the Commission in the Definitive Safeguard Regulation concerning evidence on the existence of an increase of imports. ¹¹⁸ This was a result of the application of the principle of parallelism, ¹¹⁹ whereby the investigating authority cannot consider in its analysis those origins excluded from the application of the measure.

• (146) Since imports from Mozambique will not be excluded from the measure any longer, the Commission needs to reassess the original findings which led to the application of definitive measures, by incorporating the import data from Mozambique already available at the time of the original investigation.

• (147) As to the assessment of the increase of imports, the table below shows the total imports into the EU covered by the steel safeguard in the period considered in the Definitive Safeguard Regulation (2013-2017), including imports from Mozambique:

Table 14

Import volume (after inclusion of Mozambique) and market share

	2013	2014	2015	2016	2017	MRP
Imports (tonnes)	18 453 646	22 011 946	26 692 843	29 283 252	30 271 064	31 476 287
Imports from Mozambique (tonnes)	25	0	0	0	492	0
	0,00014  %	0,00000  %	0,00000  %	0,00000  %	0,00163  %	0,00000  %
index 2013=100	100	119	145	159	164	171
Market share	12,78  %	14,48  %	16,97  %	17,97  %	18,19  %	18,88  %
Source: Eurostat and 2018 Union Industry questionnaire replies.	Source: Eurostat and 2018 Union Industry questionnaire replies.	Source: Eurostat and 2018 Union Industry questionnaire replies.	Source: Eurostat and 2018 Union Industry questionnaire replies.	Source: Eurostat and 2018 Union Industry questionnaire replies.	Source: Eurostat and 2018 Union Industry questionnaire replies.	Source: Eurostat and 2018 Union Industry questionnaire replies.

• (148) Imports increased in absolute terms by 71% during the original period of analysis, as well as the import market share (from 12.78% in 2013 to18.19% in 2017).

In view of the updated figures, the Commission confirmed that the original assessment on increased imports remains unchanged. In addition, given the insignificant amount of imports from Mozambique into the Union in relation to total imports, the Commission considered that the original findings on threat of serious injury, causation, Union interest and unforeseen developments still prevail. The updated list of developing countries included in or excluded from the measure containing Mozambique is part of the current review (Annex III.2).

• (149) Based on the above assessment, the new TRQs applicable form 1 July 2024 (Annex IV) will include imports from Mozambique.

7. ASSESSMENT OF THE FUNCTIONING OF THE MEASURE

• (150) Once the Commission concluded that the prolongation of the measure was appropriate and that imports of Mozambique should fall within the scope of the measure, the Commission examined whether technical adjustments to the functioning of the measure would be necessary. Following a detailed analysis of all the submissions received, the Commission reached the following conclusions. These conclusions are organized in the following sections, as per the structure in the Notice of Initiation.

7.1.   Allocation and management of tariff rate quotas

• (151) In this section, the Commission analysed the evolution and patterns of the use of tariff rate quotas and the comments parties made in that respect. On that basis, it determined whether any adjustment resulting from changed circumstances was warranted in the Union interest.

Comments from interested parties

• (152) Some parties (Union industry) requested to eliminate the quarterly carry-over of unused quotas to the next quarter (at least for the last quarter) or alternatively, to cap the carry over to a maximum of 4 % of the TRQ unused on a quarterly basis, while others (certain exporting countries and users) requested to shift the unused country-specific quotas (‘CSQ’) to the residual quota of the following quarter.

• (153) In addition, certain exporting countries and users requested to remove the system of CSQ for certain categories (or even for all categories) and have the quotas administered globally within each quarter to maximize the use of quotas. Others requested that some of the TRQs currently being administered globally be administrated with CSQ and residual TRQs.

• (154) The Commission also received requests to recalculate all quotas, based on a new reference period in order to capture a recent change in trade flows and requests to increase the level of quotas. Some interested parties also requested to eliminate the quotas for certain countries and to redistribute these amounts among other origins.

• (155) The Union industry requested to remove the pro-rata splitting of the 25% out-of-quota duty volumes on the day of exhaustion of a particular TRQ, among all declarations accepted on that day.

Assessment

• (156) As a preliminary observation, the Commission noted that many of the above claims were contradictory with each other. In particular, the Commission did not identify a coherent and widespread substantiated claim that would justify reassessing the existing core structure of the TRQ administration, in particular as regards the time period used for the calculation of TRQ volumes and the combination of CSQ and residual TRQs in most product categories.

• (157) The safeguard measure has been in place for about six years. The TRQ structure has proven to be effective and consistent throughout the years. Where justified, the Commission has made the necessary adjustments to the quota management in order to keep the quotas effective and up to date with market developments. However, there are basic elements of the TRQ structure that are core and provide predictability and coherence to the measure and that, therefore, the Commission does not see any reason to amend.

• (158) In this regard, as explained in previous reviews of the measure, the TRQs, whether country-specific or residual, were allocated based on the export performance in the reference period of the original investigation ¹²⁰. This reference period cannot be changed, as suggested by a number of parties, since recalculating all TRQs based on more recent flows which are covered by the measure would be against the objective of maintaining traditional trade flows that existed before the measure was introduced.

• (159) The system of quarterly administration of TRQs has proven to be effective in bringing about stability to the Union market, avoiding overall sudden surges of imports that would destabilise the market and ensuring an orderly and predictable flow of imports throughout the year. This system also allows that traditional trade flows in terms of volumes and origins are permitted without any additional duty, and where appropriate, it has given the possibility for certain origins to increase their free-of-duty exports beyond their traditional trade flows ¹²¹.

• (160) The current system of TRQ administration is designed to strike a balance among opposing interests. First, it works to the benefit of the Union industry because it avoids a flood of imports in a short period with the ensuing negative effects on the market. Second, it is also beneficial for certain third countries and certain Union users, which would otherwise be unduly crowded out from the market by other larger suppliers and would not be able to supply Union users, which would be in turn prevented from buying the material they need from these specific origins. Lastly, it allows larger exporting countries to exceed their traditional trade flows in most product categories by accessing the residual quota in the last quarter of a period when the incumbent suppliers were not able to fully use the quotas.

• (161) Implementing some of the changes requested by interested parties would severely disrupt the balance of interests among interested parties and would thus be against the overall Union interest and the effective functioning of the measure. This includes the Union industry request concerning the pro-rata splitting of the duty on the day of quota exhaustion. In this regard, the provisions of Article 51.4 of Commission Implementing Regulation (EU) 2015/2447 defining the pro-rata basis are applicable and do not provide for any flexibility.

• (162) Furthermore, in their submissions, parties have not provided evidence as to how the current TRQ system would not be appropriate and how the different adjustments they proposed would be in the overall Union interest (and not just in their individual interest) and compatible with the logic and a proper functioning of the measure.

• (163) For these reasons, the Commission considered that maintaining the current system of quota administration (quarterly administration and a combination of country-specific and residual quota save for few justified exceptions in the Union interest), as well as preserving the carry-over of unused quotas and the access to the residual quota in the last quarter of the safeguard year (Q4) continue to be appropriate, and that is fair vis-a-vis all interested parties.

• (164) However, while the current system of TRQ administration is appropriate, the Commission nevertheless considered that it requires some technical adjustments to adapt to recent market developments, such as changes in trade flows, and to improve its effectiveness. These changes will be explained further below and will be assessed together with some claims made under Section 7.2 “Crowding out of traditional trade flows” and Section 7.6 “Other changes of circumstances”.

7.2.   Crowding out of traditional trade flows

• (165) Due to the system of carry-over of unused quotas from quarter to quarter within a safeguard year ¹²², the last quarter of the safeguard year (April-June) is usually the quarter where unused volumes are the highest. In order to maximize the use of quotas at the end of the safeguard year, the Commission introduced in the Definitive Safeguard Regulation a mechanism whereby larger exporters having exhausted their CSQ could also access the residual quota volumes in the last quarter.

• (166) Under the first functioning review in 2019, the Commission observed that this system could result in undue crowding out of smaller suppliers in the residual quotas. This trend expanded to more categories after 2019. Therefore, in the functioning review of 2020, the Commission devised a system whereby the access of CSQ countries to the residual quota in the last quarter of a safeguard year would be based on the actual use of the residual quota in the previous quarters by those countries subject to the residual TRQ. This adjustment sought to protect the flows in the last quarter of smaller suppliers that are the natural beneficiaries of residual quotas ¹²³.

• (167) In order to minimize the displacement of traditional origins in the residual quotas, while continuing to allow additional access in those categories where it is necessary to ensure the maximum use of the quota, the Commission created a system whereby each product category would fall within one of the following three different groups, corresponding to three different access scenarios. This system fulfils one of the key principles and objectives of the safeguard measure, namely, to ensure that traditional trade flows in terms of origins are preserved.

• (168) The three regimes currently in place are the following:

• — No access – where incumbent suppliers under the residual quota were able to exhaust the residual quotas by themselves, and crowding out effects in the last quarter had been identified;

• — Limited access – where incumbent suppliers were able to use only part of the residual quota available to them, and additional origins were needed, in limited amounts, to exhaust quotas;

• — No limitation – where the residual quotas were not highly used and no crowding out effects were identified.

Comments from interested parties

• (169) There were no claims concerning the current system of allowing access to CSQ countries to the residual quota of the last quarter of a safeguard year.

• (170) Under this Section, the Union industry requested the Commission to investigate crowding out risks in all product categories as a result of the significant increase of imports of new exporting countries. This request is treated separately in Section 7.3.

Assessment

• (171) In overall terms, the Commission considered that the current system has proven to be fit to purpose. It ensures that Union users maximise their chances of using up the residual quota, and also that traditional trade flows within the residual quota in terms of origins are respected (which is equally in the interest of users). In addition, the Commission did not receive submissions pointing to any particular problem in the functioning of this feature of the measure.

• (172) Nevertheless, the Commission assessed whether, based on the most recent data available, crowding out in the residual quota in the last quarter had taken place. This assessment was made on the basis of import data and quota use per origin and category from 1 April 2023 until 31 March 2024.

• (173) Based on this assessment, the Commission concluded that the current system should remain in place. However, the Commission considered that it could be simplified in a way that it would ensure predictability to market operators and also prevent any potential crowding out in the future. Accordingly, the Commission considered that the functioning of the measure should be modulated by allowing two regimes, instead of the current three. The first regime, ‘no access’ would apply to those categories where the average use of the residual in a given category has been very high. The second regime, ‘access’, would apply to the other categories and it would allow access to the residual in the last quarter to the volumes that have not been used on average by the incumbent exporting countries under the residual TRQ. In a few categories a special regime continues to apply.

Adjustment

• (174) On this basis the access regimes per product category were adapted as follows (for specific volumes see Annex I (IV.3) to this Regulation):

• — No access: 3B, 14, 16, 20, 26

• — Access: 2, 3A, 4A, 5, 6, 9, 10, 12, 13, 15, 18, 19, 21, 22, 24, 25B, 27, 28

• (175) The categories for which this system does not apply (in line with the principles applied in the previous functioning review) are the following:

• — Special regime: 1 and 4B.

The current regime that grants access to the residual quota in the last quarter to CSQ countries with a 30% cap per exporting country continues to be appropriate in order to ensure sufficient variety of sources of supply while avoiding crowding out effects through excessive additional imports beyond traditional trade flows.

• — Global administration: 7, 8, 17, 25A.

The possibility to access the last quarter is not applicable, as there are no countries exporting under a country-specific quota.

• (176) Overall, by this feature, the measure would continue allowing access to the residual quota in the last quarter in the large majority of product categories. At the same time, the system ensures that the additional volumes that some countries may export under this system do not unduly crowd out countries without a CSQ. From now on, countries where there is in principle no risk of crowding out, will also be protected against a potential sudden future change in trade flows in line with the average use in the residual TRQ in the current safeguard year. This system ensures broad access of available volumes to users while preserving the effectiveness of the measure as far as Union producers are concerned. Therefore, the current system is the most suitable in the overall Union interest.

7.3.   Adjustments to improve the effectiveness of the measure in certain residual TRQs

Comments by interested parties

• (177) The Commission considered that it was necessary to jointly assess certain claims made under Section 7.1 (Allocation and management of Tariff Rate Quotas), Section 7.2 (Crowding out of traditional trade flows) above and Section 7.6 (Other changes of circumstances). This is because the underlying cause motivating these claims appears to be the same.

• (178) In essence, the claims concerned a change of pattern in the trade flows in a few product categories, whereby exporters that did not export significant quantities in the period of reference (2015-2017) and therefore were not allocated country specific quotas, were entering the Union market through some residual quotas in significant volumes.

• (179) Parties claimed that this change of pattern in trade flows could be considered as a change of circumstances of a lasting nature since these new exporters had undertaken significant increases of production capacities in recent years. These flows were allegedly crowding out other origins in the residual quotas and interested parties suggested modifications in the TRQs administration. These suggested changes included the creation of CSQs to protect certain flows in residual quotas, the creation of new regimes to prevent TRQ consumption from certain origins in all quarters, the transfer of unused amounts to residual quotas in the next quarter, splitting of categories or setting up a cap in residual quotas.

Assessment

• (180) The Commission has analysed the import flows in the residual quotas in a number of categories for which interested parties had made claims.

• (181) The analysis confirmed that recent market developments have resulted in a significant decrease of exports of traditional suppliers to the Union under the residual quotas in some categories while exports from new countries of origin have increased under the same residual quotas. This change of trade flows was creating a series of negative effects to the functioning of the measure in some categories, as it will be explained below.

• (182) The Commission found that the claims were founded for two product categories. As a result, an adjustment to the functioning of the measure was necessary to ensure its effectiveness and the preservation of traditional trade flows in the Union interest.

(a) Product category 1 – Non alloy and other alloy hot rolled sheets and strips

• (183) Product category 1 (hot-rolled flat products, ‘HRF’) is, in overall terms, a very important product category under the safeguard measure for various reasons. It consistently represents, by far, the largest share of imports (8.5 million tonnes in 2023) accounting for 31% of total imports under the measure in 2023. It also represents 34% of the total production of the Union industry and around 25% of its domestic sales in terms of volume. This category has many uses, and it is considered as a sort of commodity, and it is therefore particularly sensitive to price changes. HRF can be used as a final product in construction or automotive amongst others, but it is also used as input for producing further downstream products, notably product category 2 (cold-rolled flats), which then can be further processed into, for instance, category 4 (metallic coated sheets) which in turn can be processed into category 5 (organic coated steel). HRF is also used as input for producing some tubes. Therefore, because its weight over the total Union production of the product concerned and its interrelation with several other product categories, the developments on this category are particularly relevant for the effectiveness of the safeguard measure.

• (184) Therefore, due to its particular importance, an effectively managed TRQ for this category increases the chances of an effective measure overall. As a result, it has undergone special scrutiny and its functioning has been reviewed several times in previous reviews to adapt its administration to the prevailing market conditions.

• (185) In addition, the residual quota of this category is the largest individual TRQ under the measure with around 1 million tonnes initially available each quarter.

• (186) As to the current situation, since October 2023 (three consecutive quarters ¹²⁴), the residual TRQ has been consistently exhausted on the first day of the quarter.

• (187) This has created an imbalance on the market throughout the remainder of those quarters by making available very large amounts immediately, thus generating substantial import pressure.

• (188) Import pressure was particularly acute in this product category as imports continued to gain ground despite an overall substantial drop in steel consumption in the Union. In fact, the market share of imports in this product category reached 30% in 2023, substantially above the average for the product concerned as a whole.

• (189) The phenomenon of early exhaustion has been caused, notably, by the very strong penetration of Vietnam and Egypt, which started exporting product category 1 to the Union only in the second half of 2022, and by end-2023 accounted to more than 45% of imports under this TRQ. As a result, in some of these quarters, other smaller but historically present exporting countries in this category such as Switzerland have been crowded out.

Image omitted; see official source

• Source: DG TAXUD TRQ database, * Until 5.4.2024https://ec.europa.eu/taxation_customs/dds2/taric/quota_consultation.jsp.

• (190) In order to bring about more stability to the market in this important product category and hence ensure that the effectiveness of the measure is not undermined by market developments, the Commission determined that an adjustment was appropriate.

Adjustment

• (191) Based on the above, the Commission considered that imposing a limitation to the maximum volume that one single country can export under the residual TRQ on a quarterly basis was the most appropriate solution.

• (192) After careful consideration of all the interests at stake, including that of the exporting countries affected and their Union users, the Commission considered that a 15% cap per single country over the TRQ volume initially available in each quarter is appropriate. ¹²⁵

• (193) This level of cap ensures, on the one hand, that import penetration on the first day of the quarter would be limited in volumes under the residual TRQ, hence reducing the import pressure on the market. On the other hand, it will allow the most affected exporting countries to still export relevant volumes, above their historical trade flows prior to the safeguard and generally, also above their volumes exported on the first years under the safeguard measure. In addition, it protects the interests of those Union users and exporting countries that had been consistently crowded out.

• (194) The Commission considered that this adjustment does not pose any risk to the availability of product category 1 in the Union market for a number of reasons. First, there are substantial unused CSQs from other large suppliers and there are other suppliers that may increase to some extent their presence under the residual TRQ. Second, the Union industry has capacity available to increase its domestic production, as shown in Table 5. This would contribute to bringing its capacity utilisation to healthier levels, which in turn would help the Union industry improve its overall economic performance. Lastly, given the forecasted market projections, it appears highly unlikely that the combined volumes of unused CSQs plus the capacity available of Union producers would not be sufficient to meet the demand in the future.

• (195) For these reasons the Commission considered that the adjustment is in the overall Union interest as it improves the functioning of the measure, increasing its effectiveness, while avoiding undue crowding out and ensuring sufficient diversity of supply for Union users.

(b) Product category 16 – Non alloy and other alloy wire rod

• (196) In addition to product category 1, the Commission also found that a change in the pattern of imports was disrupting the balance of origins in the residual TRQ of product category 16 thus negatively impacting the functioning of the measure. In this category, the residual TRQ started to be filled in the first days of the quarter in two of the last three quarters assessed ¹²⁶.

• (197) The Commission’s assessment showed that, in general, until the quarter July-September 2023 there were a diversity of exporting countries that were regularly exhausting the residual TRQ. The import share per country varied depending on the quarter. Algeria was on average ¹²⁷ using 39 % of the total TRQ residual volume, Bosnia and Herzegovina around 23 %, Korea 9 % and Japan 7 %. Several other countries were on average using the remaining 20 %.

• (198) In designing the definitive safeguard measure, and in the different functioning reviews, the Commission sought to preserve traditional trade flows in terms of volumes and origins. The objective of preserving traditional volumes was achieved by calculating TRQs based on past trade flows, while the objective of preserving traditional origins was achieved by establishing CSQs.

• (199) However, smaller traditional supplying countries that did not qualify for a CSQ in a given product category were potentially exposed to sudden and abrupt changes in the trade flows within their respective residual TRQs. This was precisely the situation faced by certain exporting countries in product category 16 and which prevented them from continuing exporting meaningful volumes to their detriment and that of their Union users.

Image omitted; see official source

• Source: DG TAXUD TRQ database, * Until 5.4.2024https://ec.europa.eu/taxation_customs/dds2/taric/quota_consultation.jsp.

• (200) As of the quarter July-September 2023 the composition of origins changed abruptly within the residual TRQ in this product category, with Malaysia and Egypt suddenly exporting very large amounts. Their combined average use of this TRQ before that quarter was 0 %. However, in the last three quarters for which full data was available, their combined average share of imports reached up to 76 %. This resulted in a massive reduction of free-of-duty imports from all other exporting countries which used to have a stable presence on the Union market. In fact, some of them virtually stopped exporting under this TRQ. Notably the share of TRQ use of Bosnia and Herzegovina dropped to 2%, Korea’s to 4 %, Japan’s to 1 % and others’ to 1 %.

• (201) Therefore, this aggressive penetration into the Union market from Malaysia and Egypt has clearly crowded out other origins that exported regularly under this TRQ by substantially reducing their presence (Algeria) or almost eliminating it completely (e.g. Bosnia and Herzegovina, Japan, Korea) to their detriment and that of their Union users.

Adjustment

• (202) Based on the above findings, the Commission considered that a limitation of the maximum volume of free-of-duty imports per country of origin and per quarter was the most appropriate action to restore a more balanced distribution of origins in this residual TRQ, and hence, ensure a better functioning of the measure. The Commission considered it appropriate to set this limitation at 15 % per single country of the TRQ initially available at the beginning of each quarter.

• (203) With this adjustment the Commission seeks to prevent undue crowding out effects on smaller traditional supplying origins, and therefore, ensure the availability to Union users of volumes from these origins. On the other hand, the 15 % cap would continue allowing the most affected exporting countries to continue exporting relevant amounts free-of-duty substantially above their historical levels, which were in some cases non-existent. Furthermore, it would allow Union users sufficient diversity of origins. Lastly, considering the consistent past performance of other countries under the residual TRQ, the Commission considers that it is reasonable to assume that the residual TRQ in this category will continue to be fully used.

• (204) The Commission considers that this adjustment is in the interest of the Union since it warrants that a variety of sources of supply is available for Union users and at the same time, prevents disruptive flows, in favour of market stability.

7.4.   Update of the list of WTO developing country Members excluded from the scope of the measure based on their most recent level of imports

• (205) According to point 2.C of the Notice of Initiation, the Commission announced that it would review whether imports from a developing WTO Member exceeded the 3% threshold in the relevant period (namely, the year 2023) and, if needed, update the list of WTO developing country Members that should be included in, or excluded from the scope of the measure.

Comments from interested parties

• (206) Several parties requested an update of the list of WTO developing country members excluded from the scope of the measure using the most recent import data. The Union industry, in addition, requested the exclusion of import volumes from Ukraine from the data used for the calculation determining which developing country WTO Members are excluded from the scope of the measure.

Assessment

• (207) According to Article 9 of the WTO Agreement on Safeguards and Article 18 of the Basic Safeguard Regulation, a safeguard measure shall not be applied against a product originating in a WTO developing country Member, as long as its share of imports remains below 3% of the total imports in a given product category. If the share of imports of all WTO developing country Members below the 3% threshold account for more than 9% of total imports in a given category, the safeguard measure applies to all WTO developing country members. The Commission has reviewed and updated the list of developing countries on a regular basis.

• (208) The last update of the list took place in June 2023, in the context of the review investigation to assess a possible early termination of the safeguard measure ¹²⁸. As in previous review investigations, the Commission has updated the list of developing countries subject to and excluded from the measure based on a calculation of their share of imports using the most recently available consolidated import data, i.e. year 2023 import statistics ¹²⁹. No change to the methodology followed in previous reviews was deemed appropriate.

Adjustment

• (209) The changes resulting from this update which are applicable from 1 July 2024 are the following (updated table in Annex II (III.2) to this Regulation):

• — All developing countries are included in categories 5 and 24 because the sum of all import shares in 2023 that were below 3% is higher than 9%;

• — Albania is included in category 28;

• — Brazil is excluded in categories 1 and 2;

• — China is included in categories 4B, 13, 17 and excluded in categories 2, 3A, 7 and 15;

• — India is included in categories 25A, 27 and excluded in categories 16 and 17;

• — Indonesia is excluded in category 9;

• — Kazakhstan is excluded in category 19;

• — Malaysia is excluded in category 9;

• — North Macedonia is excluded in category 26;

• — Oman is excluded in category 13;

• — South Africa is excluded in category 4A;

• — Tunisia is included in category 4A;

• — Türkiye is included in category 7;

• — United Arab Emirates are included in category 25A;

• — Vietnam is included in category 2 and excluded in category 26.

7.5.   Level of Liberalisation

• (210) Under WTO ¹³⁰ and EU ¹³¹ rules, a WTO Member applying a safeguard measure shall progressively liberalise it after one year of imposition at regular intervals during the period of application. The objective of liberalisation is to progressively allow more import competition into the market while the domestic industry is adjusting to an increased level of imports.

• (211) WTO law does not establish any particular requirement as to the form or concrete pace of liberalisation, other than such liberalisation should occur progressively at regular intervals during the period of application.

• (212) The EU steel safeguard measure has been liberalised yearly since 2019 and the appropriateness of the liberalisation rate has been assessed and modified on several occasions ¹³². The current yearly liberalisation rate, since July 2022, is 4%.

• (213) Within the scope of the investigation the Commission committed to assessing whether the current level of liberalisation remained appropriate or whether it should be revised.

Comments from interested parties

• (214) Some interested parties (notably exporting producers and Union users) requested that the Commission increased the level of liberalisation beyond 4%. Some exporting producers argued that the position of the Union industry was robust and alleged that trade diversion had not taken place or that its risk had diminished. The Union industry requested a decrease of the liberalisation pace based on evidence of decreased consumption levels and outlooks for the upcoming months. On that basis, the Union industry argued that there would be no risk of shortage on the Union market.

Assessment

• (215) In order to determine the appropriateness of the current level of liberalisation, the Commission conducted both a backward-looking and a forward-looking analysis.

• (216) Regarding its backward-looking assessment, data shows that the liberalisation rate has outpaced the evolution of consumption. While TRQs have been increased by almost 25 % (including the 5 % top-up applicable since February 2019), consumption decreased by -17 % over the same period. These opposing trends have therefore significantly widened the gap between the level of TRQs and the market demand.

• (217) As to the forward-looking assessment, as explained in Section 3.2.2.(h) above, the steel market has shown clear signs of deceleration. World’s steel consumption saw a –1,1 % ¹³³ decline in 2023 compared to the previous year. In the Union, consumption went down at a much steeper rate, -6 % ¹³⁴. The latest market outlooks on world steel consumption only foresee a modest recovery of +1.7 % in 2024 (barely recovering 2022 figures) and of +1.2 % 2025 (resulting in consumption levels remaining below 2021 volumes). As shown in Section 3.2.2.(h) the outlook for the Union market is expected to follow a similar trend.

• (218) While the levels of TRQ use have varied from country to country and from category to category, there were substantial volumes unused at the end of each safeguard year, and that continued to be the case in the ongoing sixth safeguard year ¹³⁵.

• (219) In view of the recent negative trends and outlook on steel consumption in the world and the Union steel market and the fact that TRQs were widely available across product categories, the Commission considered that it is not in the Union interest to increase further the current large gap between the pace of TRQ volume increase and that of steel consumption.

Adjustment

• (220) In view of the ever-growing gap between consumption (including the expected consumption) and the TRQ volumes, and the existing high levels of import pressure, which are very likely to persist, the Commission considered that maintaining or increasing the 4% rate would seriously undermine the effectiveness of the measure. In addition, the Commission confirmed that there was sufficient TRQ available generally across product categories.

• (221) Against this background, the Commission considered that establishing the liberalisation rate at 1% was appropriate to ensure the effectiveness of the measure.

• (222) Consequently, the TRQs will continue to increase yearly by 1% as of 1 July 2024 for all product categories. The specific volumes for the period 1 July 2024 – 30 June 2026 (on a quarterly basis) are set out in Annex IV.1 to this Regulation.

• (223) Together with other adjustments presented in this Regulation, this rate of liberalisation will contribute to improving the effectiveness of the measure in a period where the Union market is suffering significant import-driven tensions, caused by the negative effects of overcapacity and the resulting responses to it across the world, in a context of weak demand. Union users will continue to have sufficient free-of-duty volumes available under existing TRQs.

7.6.   Other changes of circumstances that may require an adjustment to the level or allocation of the tariff-rate quota

• (224) In the Notice of Initiation, the Commission defined the scope of claims under this chapter as any other issues not falling under Sections 7.1-7.2 and 7.4-7.5 above to the extent that they concern lasting changes of circumstances as compared to the situation prevailing during the original investigation – whose effects may need to be reviewed and may justify, inter alia, an adjustment to the level or allocation of the tariff-rate quotas in specific product categories. Interested parties were requested to provide sufficient evidence substantiating their submissions, as well as specific proposals on how to address any developments affecting a product category.

Comments from interested parties

• (225) The requests received in this respect can be split into two types. The first type concerned changes of a lasting nature in the demand of certain product categories, and the second type concerned a change of a lasting nature with regard to new supplying countries.

(a) Increased demand for certain categories

• (226) Requests under this type referred to changes in the product scope, usually removing product categories from the scope of the measure, increasing TRQ allocations or granting a country specific quota to a particular origin on the basis of projections of a rapid increase in demand for a particular category, and where the Union industry was allegedly not able to supply in sufficient quantities.

Assessment

• (227) In this regard, evidence submitted by interested parties did not justify any adjustment based on the claims made concerning changes of circumstances. The claims typically concerned specific origins within certain product categories. In all cases there were available duty-free volumes during the last three quarters (July 2023-March 2024). Therefore, such claims were not in line with the overall Union interest but rather concerned the specific preferences of given stakeholders. Claims on the availability of supply from Union producers were also extensively rebutted by the Union industry and the Commission considered that the evidence available on the file, including the TRQ use, did not support the claims concerning a potential shortage of steel.

Conclusion

• (228) Therefore, the Commission concluded that there was not sufficient evidence justifying adjustments to the functioning of the steel safeguard based on changes of circumstances due to alleged future increased demand in particular product categories.

(b) Changes in trade flows – New exporting countries

• (229) A number of parties (Union industry, exporters and users) raised that there had been changes in trade flows and that it represented a change of circumstance of a lasting nature. According to certain parties (Union industry) this change of trade flows is the result of a new and complex regional dynamics of global steel excess capacities that would deserve changes in the TRQ administration.

• (230) Claims related to the change of trade flows were also made under Section 7.1 (Allocation and Management of TRQs) and Section 7.2 (Crowding out of traditional trade flows) above.

• (231) Interested parties claimed that, while some country specific quotas remain largely unused in certain product categories, new flows are entering the Union market through residual quotas. As a result, they requested the Commission to make some adjustments to the TRQ administration.

Assessment

• (232) In the investigation the Commission identified new trade flows entering the market in certain product categories. The Commission addressed these claims with the adjustments described in Section 7.3 above.

8. CHANGE OF CN CODES IN PRODUCT CATEGORIES 22, 24 AND 26

• (233) On 1 January 2022, as a result of updates ¹³⁶ to the Union customs nomenclature (CN), certain CN codes concerning steel tubes subject to the scope of the steel safeguard were modified ¹³⁷. The product categories affected were 22 (seamless stainless tubes and pipes), 24 (other seamless tubes) and 26 (other welded pipes).

• (234) This change was not reflected in the latest review of the measure ¹³⁸ in June 2023 and as a result, the volume of imports used in that review for the purpose of the calculation of the list of developing countries was not fully accurate for these categories.

• (235) As a consequence, the list of developing countries subject to the measure applying from 1 July 2023 had a material impact in two of the three categories mentioned above. Should the Commission have used the updated CN codes in its last review, the changes in the list of developing countries with respect to the list actually published on 1 July 2023 (applicable until 30 June 2024) would have been the following:

• — Category 24: the 9% threshold for developing countries would have been reached. Therefore, all developing countries exporting under this category should have been subject to the measure from 1 July 2023.

• — Category 26: imports from North Macedonia and Vietnam would have been below the 3% individual threshold and therefore, should have been excluded from the measure from 1 July 2023.

• (236) The changes to the list of developing countries subject to the measure as a result of the change of codes is summarized as follows:

AS PUBLISHED	AS PUBLISHED	AS PUBLISHED	AS PUBLISHED		CORRECTED	CORRECTED	CORRECTED	CORRECTED
Country / Product group	22	24	26		Country / Product group	22	24	26
Argentina		X			Argentina		X
Brazil		X			Brazil		X
China	X	X	X		China	X	X	X
Egypt					Egypt		X
India	X	X	X		India	X	X	X
Indonesia					Indonesia		X
Kazakhstan					Kazakhstan		X
Malaysia					Malaysia		X
Mexico		X			Mexico		X
Moldova					Moldova		X
North Macedonia			X		North Macedonia		X
Oman					Oman		X
Türkiye			X		Türkiye		X	X
Ukraine	X	X			Ukraine	X	X
United Arab Emirates		X			United Arab Emirates		X
Vietnam			X		Vietnam		X
All other developing countries					All other developing countries		X

• (237) The updated list of developing countries subject to the measure, applicable in the period 1 July 2023 – 30 June 2024, is in Annex III (III.2) to this Regulation.

• (238) The practical consequences of these changes in the list of developing countries subject to the measure applying from 1 July 2023 to 30 June 2024 are the following:

• — For Category 24, the fact that all developing countries should have been subject to the measure as from 1 July 2023 has no practical implication. All the countries that should have been subject to the measure would have exported through the residual quota. The residual quota was never exhausted since 1 July 2023 and the volumes remaining at the end of the period were sufficiently large to cover for the total volume of exports originating in the WTO developing country Members that should have been covered under this category. Therefore, either with the old or the new codes, none of the countries that should have been included would have had to pay duties.

• — For Category 26, there is a double effect resulting from having used outdated codes. This is because the residual quota was exhausted in two quarters since 1 July 2023. ¹³⁹ On the one hand, according to information from DG TAXUD ¹⁴⁰, some imports from North Macedonia and Vietnam paid the 25% duty as a result of the residual duty-free quota being filled. On the other hand, the fact that these two countries’ exports were unduly accounted under the residual quota caused the exhaustion of that quota and therefore, other exporters had to unduly pay duties. For the current quarter, it is yet not known whether the residual quota for category 26 is going the be exhausted.

• (239) Based on the above, the Commission acknowledges the right of the importers having paid duties in category 26 from 1 July 2023 until 31 December 2023 with respect to imports originating from certain countries to request the reimbursement of these duties to the national customs authorities in accordance with the applicable customs legislation. These countries are the following:

• — Quarter 01/07/2023-30/09/2023: Bosnia and Herzegovina, Canada, Israel, India, Japan, North Macedonia, South Korea, Singapore, United States, Serbia, and Vietnam;

• — Quarter 01/10/2023-31/12/2023: Australia, Bosnia and Herzegovina, Canada, India, Japan, South Korea, New Caledonia, North Macedonia, Singapore, United States, Kosovo, Serbia, and Vietnam.

• (240) The acceptance of reimbursement requests for the current quarter (1 April 2024 to 30 June 2024) will be subject to additional verification on whether the payment of duties was a consequence of the Commission not having reflected the new codes in the developing countries’ calculation or not.

• (241) In view of Article 109 of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council ¹⁴¹ when an amount is to be reimbursed following a judgment of the Court of Justice of the European Union, the interest to be paid should be the rate applied by the European Central Bank to its principal refinancing operations, as published in the C series of the Official Journal of the European Union on the first calendar day of each month.

9. FINAL REMARKS

• (242) This Regulation amending the ongoing safeguard measure also complies with the obligations arising from the bilateral Agreements signed with certain third countries.

• (243) The measure provided for in this Regulation is in accordance with the opinion of the Committee on Safeguards established under Article 3(3) of the EU Basic Safeguard Regulation and Article 22(3) of Regulation (EU) 2015/755 respectively,

HAS ADOPTED THIS REGULATION:

Article 1

Regulation (EU) 2019/159 is amended as follows:

• (1) Article 1, paragraph 2, is amended as follows:

‘2.   For each of the product categories concerned, and with the exception of product categories 7, 8, 17 and 25a, a part of each tariff-rate quota is allocated to the countries specified in Annex IV.’

;

• (2) Article 1, paragraph 3, is amended as follows:

‘3.   The remaining part of each tariff-rate quota, as well as the tariff-rate quota for product categories 7, 8, 17 and 25a, shall be allocated on a first-come-first-served basis, based on a tariff-rate quota established equally for each quarter of the period of imposition.’

;

• (3) Article 1, paragraph 5, is amended as follows:

‘5.   Where the relevant tariff-rate quota under paragraph 2 is exhausted for one specific country, imports from that country for some product categories can be made under the remaining part of the tariff-rate quota for the same product category. This provision shall only apply during the last quarter of each year of application of the definitive tariff-rate quota. For product categories 3B, 14, 16, 20 and 26 no further access to the remaining part of the tariff-rate quota will be allowed. For product categories 2, 3A, 4A, 5, 6, 9, 10, 12, 13, 15, 18, 19, 21, 22, 24, 25B, 27 and 28 only access to a specific volume within the tariff-rate quota volume initially available in the last quarter, will be allowed. In product categories 1 and 4B no exporting country shall be allowed to use, on its own, more than 30 % of the residual tariff-rate quota volume initially available in the last quarter of each year of application of measures.’

;

• (4) Paragraph 7 is added to Article 1:

‘7.   A maximum import volume of 15 % per country of the available free-of duty quota at the beginning of the quarter established in Annex IV.1 to this Regulation shall be applicable to countries importing through the ‘Other countries’ quota in product categories 1 and 16. The maximum import volume applies to countries not having a country specific quota and is applicable in all quarters.’

;

• (5) Article 2.2, second sentence is deleted;

• (6) Article 6.2 is deleted;

• (7) In Article 10, the second subparagraph is modified as follows:

‘It shall apply until 30 June 2026.’;

• (8) Annex IV is amended by Annex I to this Regulation;

• (9) Annex III.2 is replaced from 1 July 2024 by Annex II to this Regulation;

• (10) Annex III.2 is replaced from 1 July 2023 to 30 June 2024 by Annex III to this Regulation.

Article 2

• — for quarter 01/07/2023-30/09/2023: Bosnia and Herzegovina, Canada, Israel, India, Japan, North Macedonia, South Korea, Singapore, United States, Serbia, and Vietnam;

• — for quarter 01/10/2023-31/12/2023: Australia, Bosnia and Herzegovina, Canada, India, Japan, South Korea, New Caledonia, North Macedonia, Singapore, United States, Kosovo, Serbia, and Vietnam.

Article 3

This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Union. It shall apply from 1 July 2024.

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

Done at Brussels, 24 June 2024.

For the Commission

The President

Ursula VON DER LEYEN