6.10.2017   

EN

Official Journal of the European Union

L 258/1

(1)

On 21 April 2015 the Council authorised the Commission to open negotiations with the United States of America for an agreement on reinsurance. The negotiations were successfully concluded by an exchange of letters between the lead negotiators on 12 January 2017.

(2)

The Bilateral Agreement between the European Union and the United States of America on prudential measures regarding insurance and reinsurance (‘the Agreement’) should be signed.

(3)

With a view to enabling the setting-up of the Joint Committee under the Agreement, which will provide a forum for the Union and the United States of America to exchange information on the proper implementation of the Agreement, and in order to allow for the implementation of harmonised practices by supervisory authorities in the Union as regards group supervision which are already possible under the current Union legal framework in that area, Articles 4 and 7 of the Agreement should be applied on a provisional basis, pending the completion of the procedures necessary for the conclusion of the Agreement,

6.10.2017   

EN

Official Journal of the European Union

L 258/3

(1)

On 21 April 2015, the Council authorised the Commission to open negotiations with the United States of America for an Agreement on reinsurance. The negotiations were successfully concluded by an exchange of letters between the lead negotiators on 12 January 2017.

(2)

The Agreement should be signed on behalf of the European Union in English, subject to its conclusion at a later date. For this purpose, Decision (EU) 2017/1792 (1) should be amended accordingly,

(1)

Article 2 is replaced by the following:

‘Article 2

The President of the Council is hereby authorised to designate the person(s) empowered to sign the Agreement on behalf of the Union as well as the exchange of letters between the European Union and the United States of America concerning language arrangements. The signature of the Agreement shall take place together with the signature of the exchange of letters.’;

(2)

the following article is inserted:

‘Article 3a

The Agreement shall be signed in English. Pursuant to Union law, the Agreement is also drawn up by the Union in the Bulgarian, Croatian, Czech, Danish, Dutch, Estonian, Finnish, French, German, Greek, Hungarian, Italian, Latvian, Lithuanian, Maltese, Polish, Portuguese, Romanian, Slovak, Slovenian, Spanish and Swedish languages. These additional language versions should be authenticated by an exchange of diplomatic notes between the European Union and the United States of America. All authenticated versions shall be of equal value.’.

6.10.2017   

EN

Official Journal of the European Union

L 258/4

(a)

the elimination, under specified conditions, of local presence requirements imposed by a Party or its supervisory authorities on an assuming reinsurer which has its head office or is domiciled in the other Party, as a condition for entering into any reinsurance agreement with a ceding insurer which has its head office or is domiciled in its territory or for allowing the ceding insurer to recognise credit for reinsurance or credit for risk mitigation effects of such reinsurance agreement;

(b)

the elimination, under specified conditions, of collateral requirements imposed by a Party or its supervisory authorities on an assuming reinsurer which has its head office or is domiciled in the other Party, as a condition for entering into any reinsurance agreement with a ceding insurer which has its head office or is domiciled in its territory or for allowing the ceding insurer to recognise credit for reinsurance or credit for risk mitigation effects of such reinsurance agreement;

(c)

the role of the Host and Home supervisory authorities with respect to prudential group supervision of an insurance or reinsurance group whose worldwide parent undertaking is in the Home Party, including, under specified conditions, (i) the elimination at the level of the worldwide parent undertaking of Host Party prudential insurance solvency and capital, governance, and reporting requirements, and (ii) establishing that the Home supervisory authority, and not the Host supervisory authority, will exercise worldwide prudential insurance group supervision, without prejudice to group supervision by the Host Party of the insurance or reinsurance group at the level of the parent undertaking in its territory; and

(d)

the Parties' mutual support for the exchange of information between supervisory authorities of each Party, and recommended practices for such exchange.

(a)

‘Ceding insurer’ means an insurer or reinsurer that is counterparty to an assuming reinsurer under a reinsurance agreement;

(b)

‘Collateral’ means assets, such as cash and letters of credit, pledged by the reinsurer for the benefit of the ceding insurer or reinsurer to guarantee or secure the assuming reinsurer's liabilities to the ceding insurer arising from a reinsurance agreement;

(c)

‘Credit for reinsurance or credit for risk mitigation effects of reinsurance agreements’ means the right of a ceding insurer under prudential regulatory framework to recognise amounts due from assuming reinsurers relating to paid and unpaid losses on ceded risks as assets or reductions from liabilities respectively;

(d)

‘Group’ means two or more undertakings, at least one of which is an insurance or reinsurance undertaking, where one has control over one or more insurance or reinsurance undertakings or other non-regulated undertaking;

(e)

‘Group Supervision’ means the application of regulatory and prudential oversight by a supervisory authority to an insurance or reinsurance group for purposes including protecting policyholders and other consumers, and promoting financial stability and global engagement;

(f)

‘Home Party’ means the Party in whose territory the worldwide parent of the insurance or reinsurance group or undertaking has its head office or is domiciled;

(g)

‘Home supervisory authority’ means a supervisory authority from the Home Party;

(h)

‘Host Party’ means the Party in which the insurance or reinsurance group or undertaking has operations, but is not the territory in which the worldwide parent undertaking of the insurance or reinsurance group or undertaking has its head office or is domiciled;

(i)

‘Host supervisory authority’ means a supervisory authority from the Host Party;

(j)

‘Insurer’ means an undertaking which is authorised or licensed to take up or engage in the business of direct or primary insurance;

(k)

‘Parent’ means a regulated or unregulated undertaking that directly or indirectly owns or controls another undertaking;

(l)

‘Personal Data’ means any information relating to an identified or identifiable natural person;

(m)

‘Reinsurer’ means an undertaking which is authorised or licensed to take up or engage in the business of reinsurance activities;

(n)

‘Reinsurance activities’ means the activity consisting of accepting risks ceded by an insurer or by another reinsurer;

(o)

‘Reinsurance agreement’ means a contract whereby an assuming reinsurer has accepted risk ceded by an insurer or reinsurer;

(p)

‘Supervisory authority’ means any insurance and reinsurance supervisor in the European Union or in the United States;

(q)

‘Undertaking’ means any entity engaged in economic activity;

(r)

‘U.S. State’ means any State, commonwealth, territory, or possession of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, American Samoa, Guam, or the United States Virgin Islands;

(s)

‘Worldwide’ means all operations or activities of a group wherever they occur; and

(t)

‘Worldwide parent undertaking’ means the ultimate parent undertaking of a group.

(a)

maintain or adopt any requirement to post collateral in connection with cessions from a Host Party Ceding Insurer to a Home Party Assuming Reinsurer and any related reporting requirement attributable to such removed collateral, or

(b)

maintain or adopt any new requirement with substantially the same regulatory impact on the Home Party Assuming Reinsurer as collateral requirements removed under this Agreement or any reporting requirement attributable to such removed collateral,

(a)

maintain or adopt any requirement to post collateral in connection with cessions from a Host Party Ceding Insurer to a Home Party Assuming Reinsurer and any related reporting requirement attributable to such removed collateral, or

(b)

maintain or adopt any new requirement with substantially the same regulatory impact on the Home Party Assuming Reinsurer as collateral requirements removed under this Agreement or any reporting requirement attributable to such removed collateral,

(a)

maintain or adopt any requirement for a Home Party Assuming Reinsurer to have a local presence, or

(b)

maintain or adopt any new requirement with substantially the same regulatory impact on the Home Party Assuming Reinsurer as local presence,

(a)

the assuming reinsurer has and maintains on an ongoing basis,

(b)

the assuming reinsurer has and maintains on an ongoing basis:

(c)

the assuming reinsurer agrees to provide prompt written notice and explanation to the supervisory authority in the territory of the ceding insurer if:

(d)

the assuming reinsurer provides written confirmation to the Host supervisory authority of consent to the jurisdiction of the courts of the territory in which the ceding insurer has its head office or is domiciled, in accordance with applicable requirements of that territory for providing such consent. Nothing in this Agreement shall limit or in any way alter the capacity of parties to a reinsurance agreement to agree to alternative dispute resolution mechanisms;

(e)

where applicable for ‘service of process’ purposes, the assuming reinsurer provides written confirmation to the Host supervisory authority of consent to the appointment of that supervisory authority as agent for service of process. The Host supervisory authority may require that such consent be provided to it and included in each reinsurance agreement under its jurisdiction;

(f)

the assuming reinsurer consents in writing to pay all final judgments, wherever enforcement is sought, obtained by a ceding insurer, that have been declared enforceable in the territory where the judgment was obtained;

(g)

the assuming reinsurer agrees in each reinsurance agreement subject to this Agreement that it will provide collateral for 100 percent of the assuming reinsurer's liabilities attributable to reinsurance ceded pursuant to that agreement if the assuming reinsurer resists enforcement of a final judgment that is enforceable under the law of the territory in which it was obtained or a properly enforceable arbitration award, whether obtained by the ceding insurer or by its resolution estate, if applicable;

(h)

The assuming reinsurer or its legal predecessor or successor, where applicable, provides the following documentation to the Host supervisory authority, if requested by that supervisory authority:

(i)

the assuming reinsurer maintains a practice of prompt payment of claims under reinsurance agreements. The lack of prompt payment will be evidenced if any of the following criteria is met:

(j)

the assuming reinsurer confirms that it is not presently participating in any solvent scheme of arrangement, which involves Host Party Ceding Insurers, and agrees to notify the ceding insurer and its supervisory authority and to provide 100 percent collateral to the ceding insurer consistent with the terms of the scheme should the assuming reinsurer enter into such an arrangement;

(k)

if subject to a legal process of resolution, receivership, or winding-up proceedings as applicable, the ceding insurer, or its representative, may seek and, if determined appropriate by the court in which the resolution, receivership, or winding-up proceedings is pending, may obtain an order requiring that the assuming reinsurer post collateral for all outstanding ceded liabilities; and

(l)

the assuming reinsurer's Home supervisory authority confirms to the Host Party supervisory authority on an annual basis that the assuming reinsurer complies with subparagraph (b).

(a)

prior to imposing any such requirements the Host supervisory authority communicates with the assuming reinsurer and, except for exceptional circumstances in which a shorter period is necessary for policyholder and other consumer protection, provides the assuming reinsurer with 30 days from the initial communication to submit a plan to remedy the defect and 90 days from the initial communication to remedy the defect, and informs the Home supervisory authority;

(b)

only where, after the expiry of this period of 90 days or less under exceptional circumstances as set out in (a), the Host supervisory authority considers that no or insufficient action was taken by the assuming reinsurer, the Host supervisory authority may impose any of the requirements as set out in paragraphs 1 to 3; and

(c)

the imposition of any of the requirements set out in paragraphs 1 to 3 is explained in writing and communicated to the assuming reinsurer concerned.

(a)

Without prejudice to subparagraphs (c) to (h) and participation in supervisory colleges, a Home Party insurance or reinsurance group is subject only to worldwide prudential insurance group supervision including worldwide group governance, solvency and capital, and reporting, as applicable, by its Home supervisory authorities, and is not subject to group supervision at the level of the worldwide parent undertaking of the insurance or reinsurance group by any Host supervisory authority.

(b)

Notwithstanding subparagraph (a), Host supervisory authorities may exercise supervision with regard to a Home Party insurance or reinsurance group as set out in subparagraphs (c) to (h). Host supervisory authorities may exercise group supervision, where appropriate, with regard to a Home Party insurance or reinsurance group at the level of the parent undertaking in its territory. Host supervisory authorities do not otherwise exercise worldwide group supervision with regard to a Home Party insurance or reinsurance group, without prejudice to group supervision of the insurance or reinsurance group at the level of the parent undertaking in the territory of the Host Party.

(c)

Where a worldwide risk management system, as evidenced by the submission of a worldwide group Own Risk and Solvency Assessment (ORSA), is applied to a Home Party insurance or reinsurance group according to the applicable law, the Home supervisory authority that requires the ORSA provides a summary of the worldwide group ORSA:

Where no such worldwide group ORSA is applied to a Home Party insurance or reinsurance group, according to applicable law, the relevant U.S. State or EU Member State's supervisory authority provides equivalent documentation which is prepared consistent with applicable law of the Home supervisory authority as referred to in subparagraphs (i) and (ii) above.

(d)

The summary of the worldwide group ORSA, or the equivalent documentation as set out in subparagraph (c), includes the following elements:

(e)

Notwithstanding subparagraph (a), if the summary of the worldwide group ORSA, or, where applicable, equivalent documentation as set out in subparagraph (c), exposes any serious threat to policyholder protection or financial stability in the territory of the Host supervisory authority, that Host supervisory authority may impose preventive, corrective, or otherwise responsive measures with respect to insurers or reinsurers in the Host Party.

Prior to imposing such measures, the Host supervisory authority consults the insurance or reinsurance group's relevant Home supervisory authority. The Parties encourage supervisory authorities to continue to address prudential insurance group supervision matters within supervisory colleges.

(f)

Prudential insurance group supervision reporting requirements as set out in the applicable law in the territory of the Host Party do not apply at the level of the worldwide parent undertaking of the insurance or reinsurance group unless they directly relate to the risk of a serious impact on the ability of undertakings within the insurance or reinsurance group to pay claims in the territory of the Host Party.

(g)

A Host supervisory authority retains the ability to request and obtain information from an insurer or reinsurer pursuing activities in its territory, whose worldwide parent undertaking has its head office in the territory of the Home Party, for purposes of prudential insurance group supervision, where such information is deemed necessary by the Host supervisory authority to protect against serious harm to policyholders or serious threat to financial stability or a serious impact on the ability of an insurer or reinsurer to pay its claims in the territory of the Host supervisory authority. The Host supervisory authority bases such information request on prudential supervisory criteria and, whenever possible, avoids burdensome and duplicative requests. The requesting supervisory authority informs the supervisory college of such a request.

Notwithstanding subparagraph (a), the failure of an insurer or reinsurer to comply with such an information request may result in preventive, corrective or otherwise responsive measures being imposed within the Host supervisory authority's territory.

(h)

With regard to a Home Party insurance or reinsurance group with operations in the Host Party and that is subject to a group capital assessment in the Home Party which fulfils the following conditions:

the Host supervisory authority does not impose a group capital assessment or requirement at the level of the worldwide parent undertaking of the insurance or reinsurance group according to the applicable law in its territory.

Where a Home Party insurer or reinsurer is subject to a group capital requirement in the territory of the Home Party, the Host supervisory authority does not impose a group capital requirement or assessment at the level of the worldwide parent undertaking of the insurance or reinsurance group.

(i)

Notwithstanding any provision in this Agreement, this Agreement does not and is not intended to limit or restrict the ability of EU supervisory authorities to exercise supervisory or regulatory authority over entities or groups that own or control credit institutions in the EU, have banking operations in the EU, or whose material financial distress or the nature, scope, size, scale, concentration, interconnectedness or mix of activities have been determined could pose a threat to the financial stability of the EU, including through exercise of: Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC, and Directives 98/78/EC and 2000/12/EC of the European Parliament and of the Council, Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (CRD IV), Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (CRR), Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council, Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending

Regulation (EU) No 1093/2010 and Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions, or other related laws and regulations.

Notwithstanding any provision in this Agreement, this Agreement does not and is not intended to limit or restrict the ability of the applicable U.S. supervisory authority to exercise supervisory or regulatory authority over entities or groups that own or control depository institutions in the United States, have banking operations in the United States, or whose material financial distress or the nature, scope, size, scale, concentration, interconnectedness, or mix of activities have been determined could pose a threat to the financial stability of the United States, including through exercise of authority pursuant to the Bank Holding Company Act (12 U.S.C. § 1841 et seq.), the Home Owners' Loan Act (12 U.S.C. § 1461 et seq.), the International Banking Act (12 U.S.C. § 3101 et seq.), the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. § 5301 et seq.), or other related laws or regulations.

(a)

upon mutual agreement of the Parties if either Party proposes consultation;

(b)

at least once within 180 days after the date of entry into force or provisional application of this Agreement, whichever is earlier, and once per year thereafter, unless the Parties otherwise decide;

(c)

if a written request for mandatory consultation is made by either Party; and

(d)

if either Party provides written notice of intent to terminate.

(a)

matters related to the implementation of the Agreement;

(b)

the effects of the Agreement, in the Parties' jurisdictions, on insurance and reinsurance consumers, and the commercial operations of insurers and reinsurers;

(c)

any amendments to this Agreement proposed by either Party;

(d)

any matter that requires mandatory consultation;

(e)

a notice of intent to terminate this Agreement; and

(f)

other matters as may be decided by the Parties.

(a)

the reduction, in each year following the date of entry into force or provisional application of this Agreement, of the amount of collateral required by each State to allow full credit for reinsurance by 20 percent of the collateral that the U.S. State required as of the January 1 before signature of this Agreement; and

(b)

the implementation of relevant U.S. State credit for reinsurance laws and regulations consistent with Article 3, as the method for adopting measures in conformity with paragraphs 1 and 2 of that Article.

(a)

the European Union shall provisionally apply Article 4 of this Agreement until the date of entry into force of this Agreement and then apply Article 4 thereafter by ensuring that supervisory authorities and other competent authorities follow the practices set forth therein from the seventh day of the month following the date on which the Parties have notified each other that their internal requirements and procedures necessary for the provisional application of this Agreement have been completed.

The United States shall provisionally apply Article 4 of this Agreement until the date of entry into force of this Agreement and then apply Article 4 thereafter by using best efforts and encouraging supervisory authorities and other competent authorities to follow the practices set forth therein from the seventh day of the month following the date on which the Parties have notified each other that their internal requirements and procedures necessary for the provisional application of this Agreement have been completed;

(b)

On the date of entry into force of this Agreement, or 60 months after signature of this Agreement, whichever is later:

(c)

where under Article 4, subparagraph (i), measures are applied by the applicable U.S. supervisory authorities outside the territory of the United States to an EU insurance or reinsurance group, the distress or activities of which the Financial Stability Oversight Council has determined could pose a threat to the financial stability of the United States, through application of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. § 5301 et seq.), either Party may terminate this Agreement under an accelerated mandatory consultation and termination. Where, under Article 4, subparagraph (i), measures are applied by an EU supervisory authority outside the territory of the European Union to a U.S. insurance or reinsurance group, in relation to a threat to the financial stability of the EU, either Party may terminate this Agreement under an accelerated mandatory consultation and termination;

(d)

until the date set forth in subparagraph (b), and without prejudice to the mechanisms set forth therein, the reinsurance provisions of Article 3, paragraphs 1 and 2 shall apply with respect to an EU reinsurer in a U.S. State on the earlier of:

(e)

from the date of provisional application as set out in subparagraph (a) and for 60 months thereafter, in the application of Article 4, subparagraph (h), supervisory authorities in the European Union shall not impose a group capital requirement at the level of the worldwide parent undertaking of the insurance or reinsurance group, with regard to a U.S. insurance or reinsurance group with operations in the European Union;

(f)

from the date of signature of this Agreement, during the 60 month period referred to in subparagraph (b), if a Party does not meet the obligations of Article 3, with respect to local presence requirements, the supervisory authorities of the other Party may, after mandatory consultation, impose a group capital assessment or group capital requirement at the level of the worldwide parent undertaking on an insurance or reinsurance group which has its head office or is domiciled in the other Party;

(g)

Article 3, paragraph 3 shall be implemented and applicable in the territory of the EU no later than 24 months from the date of signature of this Agreement, provided that the Agreement has been provisionally applied or has entered into force;

(h)

subject to subparagraphs (b) and (d), Article 3, paragraphs 1 and 2 shall be implemented and fully applicable in all of the territory of both Parties no later than 60 months from the date of signature of this Agreement by both Parties, provided that the Agreement has entered into force; and

(i)

as from the date of entry into force or provisional application of this Agreement, whichever is earlier, both Parties shall apply Articles 7, 11 and 12.

6.10.2017   

EN

Official Journal of the European Union

L 258/22

(1)

Article 3(1)(a) of Commission Delegated Regulation (EU) No 906/2014 (2) provides that expenditure relating to the financing costs incurred by Member States in mobilising funds to buy in products is to be determined in accordance with the methods set out in Annex I to that Regulation.

(2)

Point I.1 of Annex I to Delegated Regulation (EU) No 906/2014 provides that the financing costs in question are to be calculated on the basis of a uniform interest rate for the Union fixed by the Commission at the beginning of every accounting year. This interest rate corresponds to the average of the 3-month and 12-month forward Euribor rates, recorded in the 6-month reference period to be determined by the Commission, preceding the notification from the Member States provided for in the first paragraph of point I.2 of that Annex, with a weighting of one third and two thirds respectively.

(3)

In order to determine the interest rates applicable for a given accounting year, the first paragraph of point I.2 of Annex I to Delegated Regulation (EU) No 906/2014 provides that Member States have to notify the Commission, at its request, of the average interest rate they actually bore during the reference period referred to in point I.1 of that Annex, no later than the deadline referred to in that request.

(4)

Furthermore, in accordance with the second paragraph of point I.2 of Annex I to Delegated Regulation (EU) No 906/2014, in the absence of any notification from a Member State, in the form and by the deadline referred to in the first paragraph of that point, the interest rate borne by that Member State has to be considered to be 0 %. Where a Member State declares that it did not bear any interest costs because it did not have agricultural products in public storage during the reference period, the Commission has to fix that interest rate in accordance with the third paragraph of that point.

(5)

In accordance with point I.3 of Annex I to Delegated Regulation (EU) No 906/2014, the interest rate determined on the basis of point I.2 of that Annex is to be compared with the uniform interest rate fixed on the basis of point I.1 of that Annex. The interest rate applicable to each Member State has to be the lower of these two interest rates. However, for the purpose of reimbursing Member States expenditure, negative interest rates cannot be taken into account.

(6)

The interest rates applicable for the 2018 EAGF accounting year should be fixed taking those various factors into account.

(7)

In order to avoid a legal vacuum with regard to the interest rate applicable for calculating the costs of financing intervention measures, it is appropriate that the new rate applies retroactively from 1 October 2017,

6.10.2017   

EN

Official Journal of the European Union

L 258/24

(1)

On 7 July 2016, the European Commission (‘the Commission’) initiated an anti-dumping investigation with regard to imports into the Union of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in Brazil, Iran, Russia, Serbia and Ukraine (‘the countries concerned’) on the basis of Article 5 of Regulation (EU) 2016/1036 of the European Parliament and of the Council (‘the basic Regulation’). It published a Notice of Initiation in the Official Journal of the European Union  (2) (‘the Notice of Initiation’).

(2)

The investigation was initiated following a complaint lodged on 23 May 2016 by the European Steel Association (‘Eurofer’ or ‘the complainant’) on behalf of more than 90 % of the total Union production of certain hot-rolled flat products of iron, non-alloy or other alloy steel.

(3)

In the Notice of Initiation, the Commission invited interested parties to come forward in order to participate in the investigation. It specifically informed the complainant, other known Union producers, the known exporting producers, the authorities of the countries concerned, known importers, suppliers and users, traders and associations known to be concerned about the initiation and invited them to participate.

(4)

Interested parties were given the opportunity to make their views known in writing and to request a hearing with the Commission and/or the Hearing Officer in trade proceedings. All interested parties who so requested and showed that there were particular reasons why they should be heard were granted a hearing.

(5)

In the Notice of Initiation, the Commission stated that it might sample the interested parties in accordance with Article 17 of the basic Regulation.

(6)

In the Notice of Initiation, the Commission stated that it had provisionally selected a sample of Union producers. The Commission selected a sample on the basis of the highest representative production and sales volumes whilst ensuring a geographical spread. The Commission invited interested parties to comment on the provisional sample, but no comments were received.

(7)

As a result, the final sample consisted of six Union producers located in five different Member States. It accounts for over 45 % of Union production.

(8)

The Commission asked unrelated importers to provide the information specified in the Notice of Initiation in order to decide whether sampling was necessary and, if so, to select a sample. All of the seven importers which came forward were members of a consortium named ‘Consortium for Imports of Hot-Rolled Flats’ (‘the Consortium’). This Consortium has been established ad hoc for the purpose of the investigation by more than 30 users and unrelated importers mainly but not exclusively located in Italy. They consist mainly of SMEs.

(9)

Stemcor London Ltd, member of the Consortium volunteered to fully cooperate by submitting a questionnaire reply. This unrelated importer was located in London, UK and traded the product concerned for a value amounting to more than 30 million GBP during the investigation period. This unrelated importer was visited on spot.

(10)

Given the small number of known exporting producers in Iran, Russia, Serbia and Ukraine no sampling was envisaged for those countries.

(11)

Given the potentially large number of exporting producers in Brazil, the Commission asked all exporting producers in Brazil to provide the information specified in the Notice of Initiation in order to decide whether sampling was necessary and, if so, to select a sample. In addition, the Commission asked the Mission of Brazil to the European Union to identify and/or contact other exporting producers, if any, that could be interested in participating in the investigation.

(12)

Five producers provided the information and agreed to be included in the sample. The Commission found that two of these companies were related and therefore considered them as one (group of) exporting producers.

(13)

In accordance with Article 17(1) of the basic Regulation, the Commission selected a sample of three exporting producers on the basis of the largest representative volume of exports to the Union which could reasonably be investigated within the time available. In accordance with Article 17(2) of the basic Regulation, all known exporting producers and the Brazilian authorities were consulted on the selection of the sample. No comments were received.

(14)

The selected sample represents 97,3 % of the total exports of Brazil to the Union as reported by the four cooperating exporting producers.

(15)

The Commission sent questionnaires to the complainant, all sampled Union producers, all known exporting producers in Iran, Russia, Serbia and Ukraine and the three sampled producers in Brazil, to users and importers that made themselves known within the deadlines set out in the Notice of Initiation.

(16)

Questionnaire replies were received from Eurofer, the six sampled Union producers and their related steel service centres, one user on behalf of the Consortium, one sampled unrelated importer and nine groups of exporting producers in the countries concerned.

(17)

Furthermore, the Consortium submitted comments after the initiation of this proceeding. In addition, several other users, mainly from Poland and the Baltic States, the Employers' Confederation of Latvia and the Association of Mechanical Engineering and Metalworking Industries of Latvia also submitted comments after the initiation of the proceeding.

(18)

The Commission sought and verified all the information deemed necessary for a determination of dumping, resulting injury and Union interest. Verification visits pursuant to Article 16 of the basic Regulation were carried out at the premises of the following companies:

(19)

The investigation of dumping and injury covered the period from 1 July 2015 to 30 June 2016 (‘the investigation period’).The examination of trends relevant for the assessment of injury covered the period from 1 January 2013 to the end of the investigation period (‘the period considered’).

(20)

On 11 October 2016, the complainant submitted a request for registration of imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel from the countries concerned under Article 14(5) of the basic Regulation. On 21 November 2016, the complainant provided updated import data concerning its request for registration. After carefully analysing the request and supporting data, the Commission concluded that the conditions for registration were only fulfilled in respect of imports from Brazil and Russia.

(21)

Accordingly, on 6 January 2017, the Commission published a Commission Implementing Regulation making imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in Brazil and Russia subject to registration (3) as of 6 January 2017 onwards.

(22)

On 4 April 2017, the Commission informed all interested parties through an information document (‘the Information Document’) that it would continue the investigation without imposing provisional measures on imports into the Union of the product concerned originating in the countries concerned. The Information Document contained the essential facts and considerations on the basis of which the Commission decided to continue the investigation without the imposition of provisional measures.

(23)

Subsequent to the disclosure of the Information Document, interested parties made written submissions providing comments on the information and findings disclosed. Interested parties who requested to be heard were also granted a hearing.

(24)

On 4 May 2017, a hearing in the presence of the Hearing Officer in trade proceedings was held with the complainant. On 15 May 2017, hearings were held with two Russian exporting producers, namely MMK and PAO Severstal. On 1 June 2017, a hearing took place with the Consortium. On 8 June 2017, a second hearing was held with the complainant. Moreover, on 13 June 2017, a hearing was held with the Ukrainian exporting producer Metinvest Group.

(25)

The Commission considered all oral and written comments to the Information Document submitted by interested parties before reaching its final determination. These comments are addressed in this regulation.

(26)

In addition, the Commission requested users who came forward at initiation stage to provide more data on the mechanical engineering sector and other sectors in order to assess the potential impact of measures on downstream sectors other than tubes and pipes more precisely. It also invited interested parties to comment on the appropriate form of measures, if any.

(27)

After the disclosure of the Information Document, 18 additional users came forward and requested to be registered as interested parties. Registration as interested party was granted to 17 out of the 18. Seven out of these 18 users asked for anonymity since they feared retaliation. This request was granted to six out of the seven. The remaining one was not registered as interested party as it did not justify, despite several reminders, its request for anonymity.

(28)

Moreover, the Commission continued to seek and verify all information it deemed necessary for reaching its definitive findings. For this purpose, it sent additional post-investigation period (‘post-IP’) questionnaires to the six sampled Union producers, to 74 users (including members of the Consortium) and 12 users' associations.

(29)

Post-investigation period questionnaire replies were received from all six Union producers and from 23 users. In addition, two out of the 12 users' associations provided additional information. Furthermore, the complainant, one Union producer (4), and selected users (mainly (5) based on geographical spread) were informed that the Commission services would come to verify relevant data on spot.

(30)

Thereafter, five additional verification visits were carried out during the period 29 May – 9 June 2017 at the premises of the following interested parties in the European Union:

(31)

All parties were informed of the essential facts and considerations on the basis of which the Commission intended to impose definitive anti-dumping measures. They were also granted a period within which they could make representations subsequent to the final disclosure.

(32)

Following the final disclosure on 17 July 2017 (‘the final disclosure’), another hearing in the presence of the Hearing Officer in trade proceedings was held on 27 July 2017 with the complainant. In that hearing, Eurofer raised a couple of procedural and substantive points.

(33)

With respect to the former, it argued that the Commission had failed to give effect to the recommendations of the Hearing Officer in trade proceedings which the latter issued after the hearing of 4 May 2017 (see recital (24)). In his report of 23 June 2017, the Hearing Officer was of the opinion that the services should disclose the dumping and injury margins before the Union interest test is carried out ‘without actual data used in the calculations’ (6). Moreover, he urged the Commission services ‘to disclose the final document to the interested parties timely providing sufficient time for comments, at least 30 days instead of customary 10 days' period’ (7).

(34)

The Commission noted that it had received the recommendations of the Hearing Officer on 23 June 2017, which was close to the date of the final disclosure (17 July 2017). On the injury margin, it decided that there was little purpose in disclosing the raw figures without underlying calculations at the end of June as an extra-step, when the interested parties were to receive the full calculations on the injury margin anyway with full final disclosure in the near future through final disclosure. During the hearing of 27 July 2017, Eurofer indeed confirmed that it had received comprehensive information on the injury margin with the General Disclosure Document and that the issue had become moot. On the deadline for comments upon final disclosure, Article 20(5) of the Basic Regulation provides representations made after final disclosure shall be taken into consideration only if received ‘within a period to be set by the Commission in each case, which shall be at least 10 days’. The final disclosure was submitted to the interested parties on 17 July 2017 with a deadline to comment on 7 August 2017, i.e. providing for three weeks. While this deadline falls short of the 30 days recommended by the Hearing Officer, it nevertheless gave twice as much time than the statutory minimum. The Commission therefore considered to have complied with the essence of the Hearing Officer's recommendation, namely to provide for ‘sufficient’ time to make useful comments on a document which reproduced in large parts the information the Commission had already shared with the parties in the Information Document of 4 April (see recital (22)).

(35)

With respect to the substantive issues raised before the Hearing Officer, the Commission decided to address them in the relevant parts of this regulation below, as they were raised again in the written comments received upon final disclosure.

(36)

On 3 August 2017, a hearing was held with the Iranian exporting producer, namely the Mobarakeh Steel Company. The Iranian exporting producer raised at a hearing the issue of a clerical error made in its dumping calculation. The exporting producer explained that certain values were mistakenly rounded, probably due to their length.

(37)

The Commission analysed this claim and concluded that indeed there was a clerical error in the dumping calculation for the Iranian exporting producer, which had to be corrected. As such, the dumping calculation and calculations based on it needed to be recalculated with the following outcome: the revised dumping margin and anti-dumping duty rate for Mobarakeh Steel Company amounted to 17,9 %, and, consequently, the revised MIP, adjusted for the increase in raw material prices amounted to 468.49 euro per tonne.

(38)

All parties were accordingly informed of this revision by means of an additional final disclosure on 4 August 2017 and were invited to comment thereon.

(39)

The Commission considered all oral and written comments to the final disclosure and the additional final disclosure submitted by interested parties before reaching its final determination. These comments are addressed in this regulation, and, where appropriate, modified its findings accordingly.

(40)

Hot-rolled flat steel products are produced through hot rolling; this is a metal forming process in which hot metal is passed through one or more pairs of hot rolls to reduce the thickness and to make the thickness uniform, whereby the temperature of the metal is above its recrystallization temperature. They can be delivered in various forms: in coils (oiled or not oiled, pickled or not pickled), in cut lengths (sheet) or narrow strips.

(41)

There are two main uses of the hot-rolled flat steel products. First, they are the primary material for the production of various value added downstream steel products, starting with cold-rolled (8) flat and coated steel products. Second, they are used as an industrial input purchased by end users for a variety of applications, including in construction (production of steel tubes), shipbuilding, gas containers, cars, pressure vessels and energy pipelines.

(42)

The Commission excluded tool steel and high-speed steel from the product scope of the anti-dumping proceeding concerning imports of certain hot-rolled flat products of iron, non-alloy or other alloy steel originating in the People's Republic of China (9).

(43)

In the absence of any comments regarding the product scope and the like product during this particular investigation, and in order to have the same product scope in the various proceedings, concerning certain hot-rolled flat products of iron, non-alloy or other alloy steel, the Commission also decided to exclude tool steel and high-speed steel from the product scope in this case.

(44)

Interested parties were informed of these exclusions through the Information Document. The Commission did not receive any comments in this regard.

(45)

The product concerned (‘HRF’) was thus defined as certain flat-rolled products of iron, non-alloy steel or other alloy steel, whether or not in coils (including ‘cut-to-length’ and ‘narrow strip’ products), not further worked than hot-rolled, not clad, plated or coated originating in Brazil, Iran, Russia and Ukraine.

The product concerned does not include:

The product concerned is currently falling within CN codes 7208 10 00, 7208 25 00, 7208 26 00, 7208 27 00, 7208 36 00, 7208 37 00, 7208 38 00, 7208 39 00, 7208 40 00, 7208 52 10, 7208 52 99, 7208 53 10, 7208 53 90, 7208 54 00, 7211 13 00, 7211 14 00, 7211 19 00, ex 7225 19 10, 7225 30 90, ex 7225 40 60, 7225 40 90, ex 7226 19 10, 7226 91 91 and 7226 91 99.

(46)

The investigation showed that the following products have the same basic physical characteristics as well as the same basic uses:

(47)

In the absence of any comments, the Commission confirmed that the product concerned produced and sold in the countries concerned and the one produced and sold by the Union industry are like products, within the meaning of Article 1(4) of the Basic Regulation.

(48)

The Commission set out in this section the general methodology it used for the dumping calculations. Where warranted, any country- or company-specific issues relevant for those calculations were addressed in the country-specific sections below.

(49)

The Commission first examined whether the total volume of domestic sales for each cooperating exporting producer was representative, in accordance with Article 2(2) of the basic Regulation. The domestic sales are representative if the total domestic sales volume of the like product to independent customers on the domestic market per exporting producer represents at least 5 % of its total export sales volume of the product concerned to the Union during the investigation period.

The normal value for the non-representative types (i.e. those of which domestic sales constituted less than 5 % of export sales to the Union or were not sold at all in the domestic market) was calculated on the basis of the cost of manufacturing per product type plus an amount for selling, general and administrative costs and for profits. For domestic sales made in the ordinary course of trade the profit per product type for the product types concerned was used. For all other transactions that were not made in the ordinary course of trade, an average profit was used.

The Commission subsequently identified the product types sold domestically that were identical or comparable with the product types sold for export to the Union and examined whether the domestic sales by each cooperating exporting producer for each product type were representative, in accordance with Article 2(2) of the basic Regulation. The domestic sales of a product type are representative if the total volume of domestic sales of that product type to independent customers during the investigation period represents at least 5 % of the total volume of export sales of the identical or comparable product type to the Union.

(50)

The Commission next defined the proportion of profitable sales to independent customers on the domestic market for each product type during the investigation period in order to decide whether to use actual domestic sales prices for the calculation of the normal value, in accordance with Article 2(4) of the basic Regulation.

(51)

The normal value was based on the actual domestic price per product type, irrespective of whether those sales were profitable or not, if:

(52)

In this case, the normal value was the weighted average of the prices of all domestic sales of that product type during the investigation period.

(53)

The normal value was based on the actual domestic price per product type of only the profitable domestic sales of the product types during the investigation period, if:

(54)

When there were no or insufficient sales of a product type of the like product in the ordinary course of trade or where a product type was not sold in representative quantities on the domestic market, the Commission constructed the normal value in accordance with Article 2(3) and (6) of the basic Regulation.

(55)

Normal value was constructed by adding the following to the average cost of production of the like product of each cooperating exporting producer during the investigation period:

(56)

The exporting producers exported to the Union either directly to independent customers or through related companies acting as traders and/or importers.

(57)

When the exporting producer exported the product concerned directly to independent customers in the Union, including through traders, the export price was established on the basis of prices actually paid or payable for the product concerned when sold for export to the Union, in accordance with Article 2(8) of the basic Regulation.

(58)

When the exporting producers exported the product concerned to the Union through a related company acting as an importer, the export price was constructed on the basis of the price at which the imported product was first resold to independent customers in the Union, in accordance with Article 2(9) of the basic Regulation. The export price was also, in accordance with the same Article, constructed when the product concerned was not resold in the condition in which it was imported. In such cases, adjustments to the price were made for all costs incurred between importation and resale, including SG&A expenses, and for profits.

(59)

The Commission compared the normal value and the export price of the exporting producers on an ex-works basis.

(60)

Where justified by the need to ensure a fair comparison, the Commission adjusted the normal value and/or the export price for differences affecting prices and price comparability, in accordance with Article 2(10) of the basic Regulation.

(61)

There were five exporting producers in Brazil during the investigation period. After the selection of the sample, one exporting company, Aperam Inox América do Sul S.A., explained to the Commission that it had mistakenly reported sales to Africa that were only in transit through the Union as export sales to the Union. Therefore, during the investigation period, it had no exports of the product concerned to the Union. It also explained that it has a common shareholding with ArcelorMittal Brasil S.A (‘AMB’). Based on this, the Commission decided to treat these two companies as related companies.

Usinas Siderúrgicas de Minas Gerais S.A. (‘Usiminas’) and Companhia Siderúrgica Nacional (‘CSN’) also have a common shareholding. Usiminas claimed that they should be considered as unrelated companies because there is currently a proceeding with the Brazilian competition authority that prevents CSN form exercising any rights in relation to Usiminas. The Commission verified the claim and the evidence provided by Usiminas and concluded that CSN was not able to exercise their rights in relation to Usiminas. The Commission accepted the claim and treated these companies as unrelated. Both companies did not object when the Commission informed its decision in the document informing the companies about non imposition of provisional measures. The decision, on whether these two companies are related or not, may change in subsequent reviews in case the Brazilian competition authority would rule differently in the future.

(62)

On the domestic market, all exporting producers sold the like product directly and through related and unrelated traders. Most of the sold like product was further processed into a product which either remained the like product or became another downstream product.

(63)

Usiminas exported the product concerned to the Union directly to independent customers. The other two exporting producers mostly exported to the Union unprocessed (non-slit) coils, which were either resold or further processed by their related company in the Union.

(64)

Normal value for the three exporting producers was established in line with the general methodology set out in section 3.1.1. above.

(65)

For the three exporting producers, the normal value was based on the domestic price for respectively 14 %, 35 % and 91 % of the product types exported to the Union representing respectively 54 %, 78 % and 99 % of the exported sales volume to the Union. The normal value for the remaining product types was constructed as set out under recitals (54) and (55).

(66)

After the disclosure of the Information Document, Usiminas claimed that the SG&A amount was not calculated at an ex-works level and that certain costs were not related to the product concerned and therefore should have been excluded from the SG&A amount.

(67)

The Commission accepted the claim and corrected the SG&A amount accordingly.

(68)

After the disclosure of the Information Document, CSN claimed that the last version of the SG&A table submitted during the verification visit should have been used for establishing the SG&A amount. This version would be more accurate because certain costs related to exports were only allocated to export sales and not to domestic sales.

(69)

The Commission rejected this claim because the allocation method of the last version of the SG&A table submitted by the company could not be verified as it was provided at the end of the verification visit. Instead, the Commission calculated the SG&A amount based on a previous version that was submitted during the verification visit and which could be verified. However, this version contained some errors and these were manually corrected by the Commission and disclosed to CSN. CSN did not further comment on this disclosure. The Commission did not allocate export cost to domestic sales in the calculation. The allocation method used by the Commission was not disputed by CSN.

(70)

The export price for the three exporting producers was established in line with the general methodology set out in section 3.1.2. above.

(71)

For Usiminas, who sold the product concerned to the Union directly to independent customers, the export price was established in accordance with Article 2(8) of the basic Regulation.

(72)

The other two exporting producers sold the product concerned to the Union via related parties. Nevertheless, also for these exporting producers the export price was established in accordance with Article 2(8) of the basic Regulation because the Commission could verify that the prices between related parties were at arm's length and reflected market prices.

(73)

The Commission compared the normal value and the export price of the exporting producers on an ex-works basis.

(74)

Where justified by the need to ensure a fair comparison, the Commission adjusted the normal value and/or the export price for differences affecting price comparability, in accordance with Article 2(10) of the basic Regulation. Adjustments were made for transport, insurance, handling, loading and ancillary costs (in the range between 3,4 % and 4,6 % as expressed on the net turnover), discounts, rebates and quantities (in the range between 0,2 % and 3,5 % as expressed on the net turnover) and credit costs(in the range between 1,8 % and 2,3 % as expressed on net turnover).

(75)

All exporting producers made a claim under Article 2(10)(b) of the basic Regulation for a duty drawback adjustment, arguing that the existence of a duty drawback scheme for certain raw materials would imply that all their domestic sales would incorporate an indirect tax compared to the export sales.

(76)

The exporting producers were however unable to demonstrate that the mere existence of the duty drawback scheme would affect price comparability. In addition, during the verification visit, the exporting producers confirmed that the duty drawback scheme does not affect the sales price. This claim could therefore not be accepted.

(77)

Usiminas made a claim under Article 2(10)(d)(i) of the basic Regulation for a level of trade adjustment, arguing that all their domestic sales were made to end users, whilst all their export sales to the Union were to related or unrelated traders.

(78)

The exporting producer was however unable to demonstrate any consistent and distinct price differences for different levels of trade on either its domestic or export market. This claim could therefore not be accepted.

(79)

After the disclosure of the Information Document, Usiminas claimed that the credit cost adjustment should also be deducted when constructing the normal value.

(80)

The Commission rejected the claim because the credit cost adjustment is an adjustment made to actual prices to reflect the agreed credit period irrespective of the actual date of payment. It is a pure price adjustment which is not warranted when the normal value is constructed.

(81)

For the exporting producers, the Commission compared the weighted average normal value of each type of the like product with the weighted average export price of the corresponding type of the product concerned, in accordance with Article 2(11) and (12) of the basic Regulation.

(82)

In its comments to the final disclosure, CSN claimed that the revised CIF values used for the calculation of the underselling margin should also have been used for the dumping margin calculation. The claim was accepted and the dumping calculation was corrected accordingly.

(83)

The weighted average dumping margin for the cooperating producers, not included in the sample, was calculated in accordance with Article 9(6) of the basic Regulation. This margin was established on the basis of the margins established for the three sampled exporting producers.

(84)

The level of cooperation in Brazil is high because the exports of the cooperating exporting producers constituted almost 100 % of the total Brazilian exports to the Union during the investigated period. On this basis, the Commission decided to set the country wide dumping margin applicable to all other companies at the same level as that established for the sampled company with the highest dumping margin, i.e. Usiminas.

(85)

The dumping margins, expressed as a percentage of the CIF Union frontier price, duty unpaid, are as follows:

(86)

There is only one exporting producer of the product concerned in Iran, which cooperated fully with this investigation. The majority of its sales to the Union were direct sales to independent buyers, however some were done via a related trader based in Germany.

(87)

Normal value for the sole exporting producer was established in line with the general methodology set out in section 3.1.1. above. As a result, the normal value for 61 % of product types representing 67 % of the volume exported by the exporting producer to the Union was based on the domestic price in the ordinary course of trade. The normal value for the remaining product types was constructed. However, if the weighted average price of a product type was below the unit cost of production the normal value was constructed in line with the methodology set out in recital (55) above.

(88)

The exporting producer also argued the Commission used a wrong SG&A expenses ratio for the ordinary course of trade test and for the construction of the normal value. This indeed was a rounding error, which was subsequently corrected. This change had no impact on the dumping margins established in recital (98).

(89)

The export price was established using the general methodology set out in section 3.1.2. above and in particular Article 2(8) of the basic Regulation.

(90)

The Commission compared the normal value and the export price of the sole exporting producer on an ex-works basis.

(91)

Where justified by the need to ensure a fair comparison, the Commission adjusted the normal value and/or the export price for differences affecting price comparability, in accordance with Article 2(10) of the basic Regulation. Adjustments were made for transport, insurance handling, loading and ancillary expenses (in the range between 1 % and 3 %), packaging (in the range between 0 % and 1 %), credit costs (in the range between 1 % and 3 %), commissions (in the range between 0,1 % and 2 %), other discounts (in the range between 0 % and 0,5 %), other factors (in the range between 0 % and 1 %). An adjustment on the basis of Article 2(10)(i) was also made for export sales via the related trader in the Union (in the range between 2 % and 6 %).

(92)

In its comments on the final disclosure the complainant argued that these adjustments appear to be high and called on the Commission to give further explanation for these adjustments. The Commission cannot give further details concerning these adjustments without disclosing business confidential information. All these adjustments were analysed and verified by the Commission in line with its duty under Article 9(6) of the basic Regulation.

(93)

In its comments on the Information Document, the exporting producer argued that, when constructing the normal value, the Commission did not deduce the allowances related to cost. This claim is factually incorrect as the Commission did deduce these allowances. The exporting producer reiterated this claim in its comment on the final disclosure. The Commission explained its methodology on this point to the exporting producer and no further comments were received.

(94)

When assessing the allowances the Commission reviewed the evidence related to the adjustment based on the duty drawback scheme. The evidence at the Commission's disposal demonstrated that, whilst the exporting producer received what it claimed to be a reimbursement of duties, there is no evidence that it has paid any duty in the first place as, according to the information the exporting producer submitted, all the main raw materials were sourced domestically. Therefore, the duty was not ‘borne […] by materials physically incorporated [in the product]’ within the meaning of Article 2(10)(b) of the basic Regulation, which is a precondition for the adjustment. Such adjustment was therefore not made.

(95)

The Commission compared the weighted average normal value of each type of the like product with the weighted average export price of the corresponding type of the product concerned, in accordance with Article 2(11) and (12) of the basic Regulation.

(96)

In its comments on the final disclosure, the exporting producer pointed to a clerical error in the dumping calculation. The Commission corrected the clerical error, which was due to unnecessary rounding of certain long values, and amended its calculation accordingly. All interested parties were informed of this change with an additional final disclosure.

(97)

The level of cooperation from Iran was very high as the exports of the cooperating exporting producer constituted approximately 100 % of the total exports to the Union during the investigation period. On this basis, the Commission established the country wide dumping margin at the same level as for the sole exporting producer.

(98)

The dumping margins, expressed as a percentage of the CIF Union frontier price, duty unpaid, are as follows:

(99)

In their comments on the Information Document, the complainant argued that the dumping margin calculated on the basis of the data they have collected was significantly higher. The interested party called on the Commission to provide further details on how the dumping margin for Iran was calculated.

(100)

The Commission based its calculation on actual company data that was verified on the spot. The interested party in question did not have access to this level of information and this potentially explains the discrepancy. The Commission cannot provide more details regarding the calculation without disclosing the exporting producer's business confidential information.

(101)

In their comments on the additional final disclosure the complainant requested further information on this clerical rounding error pointing out that a 5 percentage points reduction in the level of the dumping margin is unlikely to be due to a rounding error.

(102)

The Commission cannot disclose the detailed dumping calculation to other than the directly concerned interested party since this will disclose business confidential information. As explained in recital (96) above, the error concerned the unnecessary rounding of certain long values with more than 13 digits (for example 112.769.871.468,69 was erroneously taken in the calculation as 1,13). Such long values concerned the most important export transactions converted in the local Iranian currency for the dumping calculation. Thus the 5,1 percentage points drop of the dumping margin.

(103)

There are three exporting producers of the product concerned in Russia, which cooperated fully with this investigation. They account for almost the totality of all imports of the product concerned from Russia into the Union during the investigation period.

(104)

Normal value for all three exporting producer was established in line with the general methodology set out in section 3.1.1. above. As a result, the normal value for the majority of product types exported to the Union for all three exporting producers was based on the domestic price (76 % representing 98,9 % of the exported quantities, 49 % representing 86,7 % of the exported quantities and 73 % representing 96,6 % of the exported quantities respectively).

(105)

The normal value for the remaining types was constructed under the methodology described above in recitals (54) and (55) either because there were no domestic sales or the sales quantities on the domestic market were too small to be considered representative (less than 75 MT per product type).

(106)

The exporting producers exported to the Union either directly, via related importers in the Union, or via related traders/importers based in Switzerland. The related companies in Switzerland purchased the product concerned from the exporting producers and further sold it to the Union and other countries.

(107)

The export price was established using the general methodology set out in section 3.1.2. above.

(108)

Following the disclosure of the Information Document, Severstal contested the applicability of adjustments made for SG&A expenses and profit under Article 2(9) of the basic Regulation for sales via their related Swiss trader/importer, SSE.

(109)

In their view, the adjustments are only appropriate on a transaction-specific basis for transactions where the terms of sale require that a product be delivered after customs clearance, i.e. for transactions where the related party acts as an importer. However, for the majority of the sales via their related trader/importer in Switzerland the delivery terms do not require the trader/importer in Switzerland to clear the goods at customs. At the same time, Severstal claimed that their related traders/importers based in Switzerland should be considered as part of the producer's exporting network and not as importers.

(110)

The Commission rejected this claim. The investigation established that SSE did perform import functions for the sales of the product concerned during the investigation period. The different incoterms (CIF, CFR, FOB, DAP or CIF) do not alter the fact that SSE was operating as a related importer to the Union market. In light of the fact that the trader/importer is related to the exporting producer, Article 2(9) of the basic Regulation implies that the data of such trader/importer is unreliable and therefore an adjustment was warranted.

(111)

The Commission further found that SSE could not be considered as part of the producer's exporting network. There is no exclusive relationship between the parent company and the subsidiary in Switzerland as regards sales to the EU. The investigation established there were also other sales departments within the group dealing with exports to the EU. More particularly, the parent company in Russia maintained three different export channels to the EU for the product concerned, namely direct sales, sales via the related service centre in Latvia and sales via their related trader/importer in Switzerland.

(112)

The Commission therefore concluded that adjustments for SG&A and profit for all types of sales transactions via the related Swiss trader/importer should be applied in accordance with Article 2(9) of the basic Regulation.

(113)

Upon disclosure, Severstal reiterated its strong disagreement about the Commission's application of Article 2(9) of the basic Regulation. Moreover, it alleged an incoherent treatment by the Commission when compared with other exporting producers with related importers/traders either inside or outside the Union.

(114)

The Commission confirmed its approach that related traders/importers could be treated under Article 2(9) of the basic Regulation when they perform import functions, even if they are situated outside the Union. As set out in recital (110) that was the case for SSE, whereas the related traders/importers from other exporting producers were in different situations, depending on the varying functions of each company.

(115)

Moreover, Severstal took issue with the Commission's determination that SSE could not be considered part of its exporting network. However, for the Commission Severstal's underlying reasoning, such as full control of SSE by the mother company and allocation of profits and losses to the mother company did not outweigh the factors set out in recital (111) pointing to the contrary. Accordingly, SSE cannot be considered as the internal export department of Severstal.

(116)

Following the disclosure of the Information Document, the exporting producer NLMK also contested the applicability of adjustments made for SG&A expenses and profit under Article 2(9) of the basic Regulation for sales via their related Swiss subsidiary Novex.

(117)

It claimed that Novex did not act as a related importer, to the extent that it did not import the product concerned into the Union. In so far as the application of Article 2(9) implies that a related party must be acting as an importer, no adjustment on the basis of Article 2(9) could be applied to Novex's export price.

(118)

In support of this claim NLMK argued that on the export markets, it sells iron and steel products systematically through two related traders, namely Novex in Switzerland and Novexco (Cyprus) Limited, in Cyprus. Novex is in charge of exports sales to the Union, whereas Novexco sells to the rest of the world. These companies act as NLMK's export sales department and there is no other function or department within the NLMK Group in charge of dealing with such export sales. There is no direct export sale by NLMK of iron and steel products.

(119)

Novex and Novexco are 100 % subsidiaries of NLMK, to which NLMK has entrusted its export sales function not only for the product concerned but for all the product portfolio of NLMK. These two related companies act under NLMK's economic control, both by virtue of the NLMK Group's capital structure and from an economic standpoint. Importantly, Novex and Novexco market only products sourced from their related companies within the NLMK Group. Thus, they perform no autonomous economic activity that could be carried out independently outside of the NLMK Group.

(120)

While all of NLMK's export sales of iron and steel products are made through Novex and Novexco, these related companies normally do not act as importers of those products in the EU or elsewhere, with the exception of grain oriented electrical steel products (GOES), which are sold on DDP delivery terms. All other export sales carried out by Novex and Novexco are based on delivery terms that do not involve them acting as importers with respect to the relevant iron and steel products.

(121)

NLMK considered therefore that Novex could not be qualified as the ‘importer’ of the relevant products, to the extent it did not perform the customs clearance of the goods or any other functions performed by an importer.

(122)

Moreover, NLMK argued that Novex's staff participates in the strategy sales planning committee of the NLMK Group and contributes, based on its knowledge of the export markets, to the Group's sales planning and pricing. Thus, NLMK is not only fully aware of the Novex price to the first unrelated customer but such price is set together by NLMK and Novex staff acting together. At the same, in the sector of the product concerned, the main customers, at least in the case of NLMK exports to the Union, are trading companies, which prefer to customs clear the products themselves so as to optimize costs. Also, purchasing the product concerned on FOB terms, port of export, or CIF terms allows trading companies on a short notice to sell the cargo to any destination that offers the best price which might not necessarily be in the Union. There is therefore little value for traders in having the product being customs cleared by the supplier into the Union.

(123)

In summary, NLMK considered that whereas GOES is mostly supplied to the processors directly, other iron and steel products are mostly supplied to unrelated traders in the Union. The difference in customers types result in a difference in terms of agreed Incoterms and corresponding role played by Novex and Novexco. This result in a situation where, according to NLMK, the situation witnessed in the GOES investigation is not representative of the actual role of Novex, as undertaken with regard to the product concerned or other iron and steel products. NLMK concluded that Novex should be treated as an internal sales department of NLMK.

(124)

The Commission recalled that the assessment of whether or not a producer and a related trader should be treated as a single economic entity and the related trader as an internal sales department of the producer must consider the general functions of the related trader and, therefore, must also take into account activities relating to products other than the product concerned. (10)

(125)

While the investigation confirmed that Novex did not perform import functions for the product concerned in the investigation period, the following should be noted as to the qualification of Novex for the purpose of this case. Novex is established as a trader under Swiss law. (11) According to its articles of association, its object is the purchase, sale, distribution and commerce of steel products and raw materials, in Switzerland and abroad. There is no formal limitation in terms of suppliers of the products to be traded. Furthermore, NLMK and Novex signed comprehensive framework contracts that govern the sale and purchase between the parties. For example, these contracts establish detailed procedures for claims of non-compliant goods, provides for penalties in cases of delays of payment or delivery of goods, as well as for third party arbitration in case of disputes. The Commission further noted that the principal activities of Novex according to its 2015 Financial Statements are the trading of steel, including any interest earning activities, and that a significant part of its purchases of steel are from companies in the NLMK Group.

(126)

Furthermore, NLMK has itself recognised in their submission dated 7 June 2017 that for GOES products, Novex acts as a related importer, a fact that corroborates the conclusion that Novex is not akin to an internal sales department of NLMK.

(127)

For these reasons, the Commission concluded that the relationship between Novex and NLMK was not one of an integrated and internal sales department that could make the two legal entities constitute a single economic entity, but was instead considered equivalent to that of an agent working on a commission basis within the meaning of Article 2(10)(i) of the basic Regulation.

(128)

Following final disclosure, NLMK reiterated its claim that it and its related trader Novex constitute a single economic entity. It felt that the Commission had failed to take into account the economic reality of the relationship between the two entities. In particular, it criticised that the Commission's approach on Novex was formalistic and theoretical. Novex was not registered as a trading company and the lack of a formal limitation was immaterial, as they did not source from other sources in reality. Moreover, even if there were a contract between NLMK and Novex, there would be an effective solidarity between the two entities. Novex's results were allegedly fully consolidated in the group's accounts.

(129)

The Commission rejected these claims. In order to assess the relationship between Novex and NLMK, the existence of a framework contract governing the sale and purchase between the two cannot be dismissed as theoretical or formal. Rather, it shows that the two entities have different functions and that there was no relationship of subordination between them. Moreover, it is uncommon for an internal sales department to carry out import functions, which Novex did at least for one steel product (GOES). Finally, Novex could at any time decide to buy HRF from other sources, which an integrated export sales department would not. Accordingly, the Commission maintained its position that an adjustment under Article 2(10)(i) of the basic Regulation was justified.

(130)

Following final disclosure, also MMK contested, for the first time, the application of Article 2(9) basic Regulation in relation to its related trader MMK Trade Steel AG. Echoing the legal views of Severstal, it also maintained that full control by the mother company and the allocation of profits and losses to the Russian parent showed that MMK Trade Steel AG was part of a single exporting network.

(131)

The Commission reiterated its legal position that related traders/importers could be treated under Article 2(9) of the basic Regulation when they perform import functions, even if they are situated outside the Union. MMK Trade Steel AG fell into that category as already found in the investigation into cold-rolled flat steel products from the People's Republic of China (12).

(132)

It follows that the Commission could also not accept the claim that MMK and MMK Trade Steel AG would form a single economic entity. In any event, MMK also operated its own export department in Russia and sold part of its steel to Europe directly. Accordingly, MMK Trade Steel AG cannot be considered as the internal export department of MMK.

(133)

The Commission compared the normal value and the export price of the exporting producers on an ex-works basis.

(134)

Where justified by the need to ensure a fair comparison, the Commission adjusted the normal value and/or the export price for differences affecting price comparability, in accordance with Article 2(10) of the basic Regulation. Adjustments were made for physical characteristics (in the range between 0 % and 2 %), transport, insurance handling, loading and ancillary expenses (in the range between 1 % and 8 %), packaging (in the range between 0 % and 1 %), credit costs (in the range between 0 % and 2 %), commissions (in the range between 0 %-4 %), other factors (in the range between 0 % and 1 %).

(135)

Following the disclosure of the Information Document, Severstal claimed that some SG&A adjustments were incorrectly made, namely finance income and transport costs adjustments.

(136)

According to the company, the finance income should have been taken into account for the determination of the SG&A percentage. Moreover, this income for the related subsidiary in Switzerland was at the same time an expense for Severstal as reported in the G-PL table in its questionnaire response, which had in turn been taken into account when determining whether sales on the domestic market were made in the ordinary course of trade.

(137)

The Commission rejected this claim. Severstal produces and sells a great range of products and was not able to demonstrate that the financial income in question, which is a general loan extended from the Swiss subsidiary to the parent company, was related to the product concerned.

(138)

Following disclosure, Severstal repeated its claim and argued that the above-mentioned financial income is ‘interests from loans granted to finance long production cycle products of Severstal, which the product concerned is part of’. Moreover, it asked to allocate the relevant amount to the product concerned only. For the Commission, though, this claim could not be entertained lacking any more detail why a general loan for ‘long production cycle products’ was also related to the product concerned.

(139)

With regard to transport cost adjustment, Severstal claimed that the Commission had deducted a wrong amount of transport costs as a portion of the SG&A.

(140)

The Commission accepted Severstal's claim regarding transport costs and used the actual transport costs as reported by the company for the calculations. To avoid double counting, they were set at zero, as they had already been taken into consideration in the calculation for allowances.

(141)

For the exporting producers, the Commission compared the weighted average normal value of each type of the like product with the weighted average export price of the corresponding type of the product concerned, in accordance with Article 2(11) and (12) of the basic Regulation.

(142)

The level of cooperation in Russia is high because the exports of the cooperating exporting producers constituted almost 100 % of the total exports to the Union during the investigated period. Therefore, the Commission decided to set the country wide dumping margin applicable to all other companies at the same level as that established for the company with the highest dumping margin, i.e. Public Joint Stock Company Magnitogorsk Iron & Steel Works (PJSC MMK) group.

(143)

The dumping margins, expressed as a percentage of the CIF Union frontier price, duty unpaid, are as follows:

(144)

There is only one exporting producer of the product concerned in Serbia, which cooperated fully with this investigation. The majority of its sales to the Union were direct sales to independent buyers, however, some were done via a related importer based in Slovakia.

(145)

Normal value for the sole exporting producer was established in line with the general methodology set out in section 3.1.1. above. As a result, the normal value for 23 % of product types representing 71 % of the volume exported by the exporting producer to the Union was based on the domestic price in the ordinary course of trade. Whenever the total volume of domestic sales of a product type to independent customers during the investigation period represented less than 5 % of the total volume of export sales of the identical or comparable product type to the Union the normal value for that type was constructed by using that type's SG&A and profit rather than the weighted average SG&A and profit. However, if the weighted average price of a product type was below the unit cost of production the normal value was constructed in line with the methodology set out in recital (55) above.

(146)

The export price was established using the general methodology set out in section 3.1.2. above and in particular Article 2(8) of the basic Regulation. For sales via the related importer, the export price was constructed on the basis of Article 2(9) of the basic Regulation.

(147)

The Commission compared the normal value and the export price of the sole exporting producer on an ex-works basis.

(148)

Where justified by the need to ensure a fair comparison, the Commission adjusted the normal value and/or the export price for differences affecting price comparability, in accordance with Article 2(10) of the basic Regulation. Adjustments were made for transport, insurance handling, loading and ancillary expenses (in the range between 5 % and 9 %), credit costs (in the range between 0 % and 1,5 %), bank charges (in the range between 0 % and 1 %), commissions (in the range between 0,5 % and 2 %).

(149)

The Commission compared the weighted average normal value of each type of the like product with the weighted average export price of the corresponding type of the product concerned, in accordance with Article 2(11) and (12) of the basic Regulation.

(150)

The level of cooperation from Serbia was very high as the exports of the cooperating exporting producer constituted approximately 100 % of the total exports to the Union during the investigation period. On this basis, the Commission established the country wide dumping margin at the same level as for the sole exporting producer.

(151)

The dumping margins, expressed as a percentage of the CIF Union frontier price, duty unpaid, are as follows:

(152)

There is one group of three related exporting producers of the product concerned in Ukraine (collectively referred to in this section as ‘the exporting producer’), which cooperated fully with this investigation. Two of the production sites are based in Mariupol in the Donetsk region, which, during the investigation, was a conflict zone. Following a request of the exporting producer, the Commission decided to exclude from the calculations one of these sites, which had only minor export volumes to the Union.

(153)

In their comments on the Information Document, the complainant requested the Commission to explain its decision to exclude one Ukrainian company from the calculation of the dumping margin.

(154)

The Commission excluded the company because the minor portion of its sales in relation to the sales of the group would not have affected the dumping margin. Furthermore, due to the military activities in the area, the verification of the relevant data was impossible. The Commission considered this situation as a force majeure.

(155)

On the domestic market the exporting producer sold the like product directly and through a related trader.

(156)

All sales of the exporting producer to the Union were done via a related trader in Switzerland. The trader sold the product concerned to both related and unrelated importers in the Union.

(157)

Normal value for the exporting producer was established in line with the general methodology set out in section 3.1.1. above. The normal value for one of the production sites was based exclusively on domestic prices in the ordinary course of trade. The normal value for the other production site was based partially on domestic prices in the ordinary course of trade (for 38 % of the product types representing 12 % of the total volume of exports to the Union from that site) and partially was constructed. Whenever the total volume of domestic sales of a product type to independent customers during the investigation period represented less than 5 % of the total volume of export sales of the identical or comparable product type to the Union the normal value for that type was constructed by using that type's SG&A and profit rather than the weighted average SG&A and profit. However, if the weighted average price of a product type was below the unit cost of production the normal value was constructed in line with the methodology set out in recital (55) above.

(158)

The exporting producer claimed an adjustment to the costs of production of one of the production sites based in the conflict zone, namely Ilyich Iron and Steel Works of Mariupol (‘Ilyich’), on the account of abnormal production costs caused directly and indirectly by the military operations in the area. The exporting producer proposed to establish the level of the adjustment by comparing the evolution of unit cost in Ilyich to the evolution of unit cost in the production site not affected by the conflict, namely Integrated Iron and Steel Works Zaporizhstal (‘Zaporizhstal’). In order to establish what the exporting producer referred to as ‘unit cost’, for each production site the exporting producer took the costs of all goods sold and divided it by the volume of hot rolled steel products produced in the given calendar year. The exporting producer followed this pattern from 2013 (the pre-conflict period) until 2015 and on this basis proposed to adjust the costs of Ilyich downwards by a certain percentage.

(159)

Following careful consideration, the Commission considered the adjustment quantification method proposed as inappropriate. First, what was referred to as ‘unit cost’ was not cost of a unit of hot rolled flat steel as it included the cost of all goods sold, which included other goods. These other goods formed significant part of the production in Zaporizhstal and even greater part of the production in Ilyich. The adjustment quantification method completely disregarded the other products' output and cost developments. The output and costs of other products did not remain constant throughout the period the exporting producer proposed to use in the method. Indeed, the exporting producer admitted in its submission that Ilyich experienced a substantial increase in production of some of the other products between 2012 and 2016. The adjustment quantification method attributed those increasing costs to the decreasing output of hot rolled flat steel thereby inflating, possibly significantly, the increase in, what they called, unit cost. Second, even if the costs the exporting producer proposed to use were the actual cost of production of hot rolled flat steel products, they proposed to compare the production quantity with the cost of sales, which disregarded the stock variation. The exporting producer should have either compared the production quantity with the cost of production or quantity sold with the cost of sales. Third, the adjustment quantification method compared the trends up until calendar year 2015 and proposes to apply the outcome of this calculation — i.e. the reduction — to the investigation period data (1 July 2015 to 30 June 2016). This is incorrect as the method should have followed the trends up until the investigation period.

(160)

In its comments on the Information Document, the exporting producer did not address the shortcomings of the adjustment quantification method discussed above. Instead, it compared the cost of manufacturing per product type between the two sites during the investigation period, arguing that the outcome of this exercise is similar to what the adjustment quantification method yield. However, the exporting producer ignored the fact that the very reason for coming up with the adjustment quantification method was that the cost of the two sites cannot be simply compared in a given year as they were different before the conflict to begin with. Indeed, according to the data used for the quantification method the ‘unit cost’ in 2013 in Ilyich was much higher than the ‘unit cost’ in Zaporizhstal. This difference expressed as a ratio is greater than the difference in the cost of manufacturing per product type between the two sites during the investigation period, which the exporting producer wanted to use to support the method.

(161)

In its comments on the final disclosure, the exporting producer argued that the Commission had not engaged in a constructive dialogue with the exporting producer by requesting or specifying the additional information it may have deemed necessary for a proper assessment of the claim. According to the exporting producer, the only time the Commission came forward specifying which information and methodology was necessary in order to assess the claim was in the final disclosure of 17 July 2017.

(162)

The Commission noted that this claim is factually incorrect. Detailed explanation of the shortcomings of the proposed adjustment method was communicated to the exporting producer on 4 April 2017 in Annex 4 to the Information Document. The reason for including this detailed description was to give the exporting producer the opportunity and sufficient time to address these shortcomings. As mentioned in recital (160) above, the exporting producer did not do so.

(163)

In its comments on the final disclosure the exporting producer argued that goods other than hot rolled steel products referred to in recital (159) above did not form- a significant part of the production in Zaporizhstal and in Ilyich. To support this claim, the exporting producer referred to the data submitted to the Commission on 16 February 2017, concerning production quantities in Ilyich.

(164)

On this point, the Commission noted that the data referred to by the exporting producer was submitted, after the verification visit already took place and thus could not be verified. Furthermore, the data concerns production quantity in tones, and does not concern their costs or value. The quantity produced does not reflect the costs of production, especially considering that the other products include more added-value and thus added-cost products such as cold-rolled and galvanised steel. As to the data used by the Commission for its assertions, with its reply to the antidumping questionnaire, the exporting producer submitted the data on the turnover generated by the entire mill, the turnover generated by the relevant division of the mill and the turnover generated by the product concerned. This turnover data was verified by the Commission during the visit and was used as proxy for costs, showing that non-hot rolled steel products formed a significant part of the production in Ilyich.

(165)

In further comments on the final disclosure, the exporting producer disagreed with the Commission's comment in recital (159) above regarding the increase in production of non-hot rolled steel products unduly inflating the ‘unit costs’ used in the method. The exporting producer claimed that the overall increase of the total cost of goods sold by Ilyich defies the Commission's logic that an increase of output of other products could inflate the ‘unit cost’ calculated for the hot rolled steel products.

(166)

The Commission disagreed with this comment. As mentioned above, the exporting producer established the ‘unit cost’ by dividing the entire costs of goods sold (including that of non-hot rolled steel products) by the quantity of hot rolled steel goods produced by the plant during the relevant periods. As acknowledged by the exporting producer, during the period taken into consideration by the method, the quantity of some of the non-hot rolled steel products increased significantly. The resulting increased costs of production of these products were attributed by the method proposed by the exporting producer to hot rolled steel products thereby inflating the ‘unit costs’ (i.e. adding to the increase of the ‘unit costs’ throughout the relevant period) on the basis of which the exporting producer proposed to adjust the costs in Ilyich. This remains true independent of whether the overall cost of goods sold by the mill increased, decreased or remained constant.

(167)

With regard to the Commission's comment in recital (159) that the method should have followed the trends up until the investigation period, the exporting producer claimed in its comments on the final disclosure that it was unable to provide the data for the investigation period to be used in the method as the audited report for 2016 was unavailable until recently.

(168)

On this point, the Commission pointed out that the exporting producer was able to submit substantial amounts of investigation period data for the purpose of completing the anti-dumping questionnaire. It is therefore unclear why the exporting producer was unable produce investigation period data for the purpose of substantiating the method proposed. This is more so considering that, as mentioned in recital (162) above, the exporting producer had the opportunity and the time to do so.

(169)

Finally, in its comments on the final disclosure, the exporting producer insisted that the difference in cost of production per product type during the investigation period between the two production sites, discussed in recital (160) above, supports the adjustment method as the difference is similar as the one developed by the method.

(170)

The Commission disagreed with this comment. In its comments, the exporting producer did not address the fact that, according to the data used for the quantification method, the ‘unit cost’ in 2013 (i.e. under the normal pre-conflict conditions) in Ilyich was much higher than the ‘unit cost’ in Zaporizhstal. This difference expressed as a ratio is greater than the difference in the cost of manufacturing per product type between the two sites during the investigation period. This means that, either the gap between the unit costs of Ilyich and Zaporizhstal shrunk between 2013 and the investigation period (i.e. the unit cost of Ilyich has decreased relatively to the unit costs of Zaporizhstal) or the ‘unit costs’ used in the method are completely unreliable. As explained in recital (159) above, at least the latter is true as the ‘unit costs’ under the method are distorted by inclusion of cost of sales of other products, which evolved differently in both sites during the relevant period. It follows that the difference in cost of production per product type during the investigation period does not support the accuracy of the method proposed by the exporting producer.

(171)

For the reasons outlined above, this claim was rejected.

(172)

Zaporizhstal acknowledged in their financial statements significant losses due to the foreign currency exchange differences arising from translation of transactions not denominated in Ukrainian hryvnia. The exporting producer argued that these expenses, not being incurred in the ordinary course of trade, should be established in accordance with Article 2(6)(c) of the basic Regulation, and capped at a level which represents the normal operating conditions of the company.

(173)

The Commission disagreed with this argument. These losses were duly recorded in the company's accounts and were incurred during the investigation period. The Commission therefore rejected this claim, considering those as being part of the company's SG&A expenses related to its operation and included them in the normal value calculation.

(174)

In its comments on the Information Document the exporting producer acknowledged that the financial expenses used in the calculation of the SG&A expenses of Zaporizhstal were dully recorded in the company's accounts and were incurred during the investigation period. The exporting producer then reiterated its argument that the SG&A expenses in question should have been based on Article 2(6)(c) of the basic Regulation, as some of the financial expenses were not related to the production and/or sale of the products. To support this argument the exporting producer submitted a new dataset, well after the verification visit took place and the claim was originally made. Finally, the exporting producer pointed out several provisions in the basic Regulation which govern construction of SG&A expenses and require such construction to be ‘reasonable’.

(175)

The Commission disagreed with this analysis. According to Article 2(6) of the basic Regulation, SG&A expenses shall be based on actual data pertaining to production and sales. Only when such amounts cannot be determined can Article 2(6)(c) be triggered. As acknowledged by the exporting producer, the actual SG&A expenses data is available in its accounts and includes the financial expenses at issue. The argument that some of the financial expenses do not relate to the production and/or sale of products has to be rejected. First, the data submitted by the exporting producer to support this claim cannot be verified at this stage of the investigation. The exporting producer had ample time and pre-notification to furnish this information when verifications took place but did not take advantage of this opportunity. Second, Zaporizhstal is only active in production and sales of its products. No evidence to the contrary has ever been presented by the exporting producer. The reference to the requirement that the construction of SG&A expenses is to be reasonable is misplaced as the Commission did not construct the SG&A expenses in question but established it in accordance with the requirements of Article 2(6) of the basic Regulation. This claim was therefore rejected.

(176)

In its comments on the final disclosure, the exporting producer argued that the expenses at issue did relate to the overall economic operation of the plant, but not to the operation involving the production and sales of the product concerned. The exporting producer further argued that the Commission did not address the evidence concerning its request to exclude these expenses. The exporting producer then argued that the Commission dismissed even the mere fact that any evidence was submitted in support of the claim at all, by stating that no evidence to contradict that Zaporizhstal is only active in production and sales of its products has been presented. Finally, in relation to the Commission's comment regarding the new dataset submitted to support the exclusion of some of the financial expenses, the exporting producer stated that this claim as such was made in the reply to the anti-dumping questionnaire and the relevant data was in the audited report submitted with that reply.

(177)

In reply to the above, the Commission noted that the exporting producer made two requests related to this claim. The first request, made in the reply to the anti-dumping questionnaire and then substantiated in its communication of 5 January 2017, was to adjust the financial expenses of Zaporizhstal to the historical level under normal operating conditions. The second request, made for the first time in the comments on the Information Document on 2 May 2017, after the verifications of Zaporizhstal, was to adjust the SG&A expenses by excluding the expenses allegedly not related to the production and/or sales of the product concerned.

(178)

As explained in recital (175) above, the Commission cannot adjust financial expenses of Zaporizhstal to historical level under normal operating conditions, because in accordance with Article 2(6) of the basic Regulation, SG&A expenses shall be based on actual data pertaining to production and sales. This data was available to the Commission and was used in the relevant calculation. No new arguments on this point were provided in the exporting producer's comments on the final disclosure, therefore no further explanation is necessary.

(179)

Regarding the second request, i.e. to adjust Zaporizhstal's normal value to exclude the expenses allegedly not related to the production and/or sales of the product concerned, the Commission noted that it is not clear from the comments on the Information Document that these expenses do not relate directly or indirectly to the production and/or sales of the product concerned. As mentioned above, to the Commission's knowledge, Zaporizhstal's activities are limited to the production and sale of its product. Its financial expenses therefore would normally in one way or another be related to these activities. Indeed, the items mentioned by the exporting producer in the comments on the Information Document as not relating to the production and/or sales of the product concerned involve cash flow related investments, loans to raw material producing subsidiaries, or liabilities stemming from employee benefits. These expenses appear to be at least indirectly linked to the production and/or sales of the product concerned.

(180)

Further verification of this issue was impossible as this request was not made until 2 May 2017, well after the relevant verification visit was concluded (that is, 24 November 2016). In the Communication of 5 January 2017, also submitted after the relevant verification visit, the exporting producer mentioned that some of the financial expenses related to loans were taken up for a general purpose and were not related to the production and sales of the product concerned. No further details on this point were provided at that time as the exporting producer did not request exclusion of these loans but maintained its claim to adjust financial expenses of Zaporizhstal to the historical level under normal operating conditions.

(181)

On this point, in its comments on the final disclosure the exporting producer argued that the Commission was provided during the verification visit at Zaporizhstal with a ‘complete and comprehensive version of auditor reports which clearly raise the issue of additional financial expenses of the mill not related to the production and sales of the product concerned’. The exporting producer then argued that the Commission could have used this opportunity to verify and to request, if necessary, any further clarifications regarding the evidence submitted by Zaporizhstal.

(182)

The Commission first noted that, as pointed out by the exporting producer, the complete annual reports of Zaporizhstal were not provided until the verification visit, despite being requested in the anti-dumping questionnaire. The Commission then noted that, as communicated to the exporting producer in the pre-verification letter of 27 October 2016, the purpose of the visit was to verify the information in the replies to the questionnaires by agreeing details recorded therein to source documents, cost and financial accounting records and audited financial statements. The issue of some of the financial expenses of Zaporizhstal allegedly being unrelated to the production and sales of the product concerned was not raised until 2 May 2017 and was only touched upon in the communication of 5 January 2017. Both of these occurred after the verification visits at the premises of Zaporizhstal were already concluded. Therefore, the examination of the issue and the verification of these expenses were not and could not have been on the Commission's work program for that visit. To argue that the issue of non-production or sales related financial expenses was raised simply by these expenses being recorded in the audited reports disregard the purpose of the verification visit and the Commission's role in it, as communicated to the exporting producer in the pre-verification letter prior to its commencement. This read in conjunction with the fact that the complete audited reports were provided only during the verification visit and, as mentioned above, it being far from clear that the relevant expenses are not related to production and sales of the product concerned, must lead to this part of the claim being rejected.

(183)

For the reasons outlined above this claim was rejected.

(184)

The export price was established using the general methodology set out in section 3.1.2. above and in particular Article 2(8) of the basic Regulation. For sales via the related importers, the export price was constructed on the basis of Article 2(9) of the basic Regulation.

(185)

The exporting producer claimed that the Swiss trader — Metinvest International SA (‘MISA’) — was acting as a mere export department of the production sites, as it did not carry out customs clearance of the goods supplied into the Union. Furthermore, the exporting producer claimed that no deduction for trader's SG&A expenses and profit (or a nominal commission) should be made since Article 2(9) of the basic Regulation is not applicable to the present case in view of the fact that the trader is not located in the Union.

(186)

The Commission did not construct the export price under Article 2(9) of the basic Regulation for export sales to independent buyers via the Swiss trader. However, even if the responsibility for the customs clearance is on the buyer, this does not change the fact that the sales are performed by the related trader, which is bearing SG&A expenses and which is normally seeking to make a profit for its services. Therefore, as noted in recital (194), the Commission considered that an adjustment under Article 2(10)(i) of the basic Regulation is warranted.

(187)

In its comments on the Information Document, the exporting producer claimed that MISA is not a profit driven trader but a related company entrusted with tasks normally falling within the responsibilities of an internal export sales department.

(188)

On the basis of the evidence at its disposal, the Commission disagreed with this claim. MISA is a profit-driven company, which describes itself as seeking to find the right balance between profitability, customer satisfaction and risk management. MISA activities are not limited to the sales of Metinvest Group's products. MISA and the production sites have different owners. Finally, MISA signs detailed sale and purchase contracts with the production sites. These agreements contain clauses on penalties for none- or underperformance of the respective obligations, as well as third party dispute resolution, more commonly found in contacts between independent traders rather than production and sales department of one company. On the basis of this evidence the Commission concludes that the relationship between MISA and the two production sites is more that of an agent than an integrated sales department. As explained in recital (194), the relevant adjustment is warranted whenever MISA participates in a transaction.

(189)

In its comments on the final disclosure, the exporting producer inferred from the application of Article 2(8) of the basic Regulation to the sales via MISA that the Commission accepted that MISA acts as an export sales department of the group. The exporting producer then again disagreed with the application of Article 2(10)(i) of the basic Regulation, arguing that MISA does not act as an agent or a trader. To underline this point, the exporting producer argued that MISA sells only an insignificant and a niche share of products not manufactured by the group. The exporting producer then argued that the fact that MISA is seeking to find the right balance between profitability, customer satisfaction and risk management, or that it signs detailed sale and purchase contracts with the production sites, or that it has its own director and staff, different from the mills in Ukraine, would be requirements stemming from compliance with necessary legal requirements in Ukraine and Switzerland.

(190)

As explained above, the Commission did not accept that MISA acted as an export sales department of the group. MISA acted as a related trader and therefore the Commission applied Article 2(8) in conjunction with Article 2(10)(i) of the basic Regulation. Furthermore, MISA not only sells an insignificant or a niche share of products not manufactured by the group, although this alone is of significant importance for this determination. MISA also sells substantial amounts of third-party products to the group. As to the evidence described in recital (188) above, the exporting producer merely argued that these elements are required by law and do not negate MISA's position as an export department. No further details as to what laws require which element were provided. Furthermore, the exporting producer did not explain why elements such as being profit-driven (which was previously disputed by the exporting producer in its comments on the Information Document) or having agreements with clauses on penalties for non- or underperformance of the respective obligations, as well as third party dispute resolution would not negate MISA's position as an export department. Therefore, no further comments on this point are required.

(191)

For the reasons outlined above this claim was rejected.

(192)

The Commission compared the normal value and the export price of the sole exporting producer on an ex-works basis.

(193)

Where justified by the need to ensure a fair comparison, the Commission adjusted the normal value and/or the export price for differences affecting price comparability, in accordance with Article 2(10) of the basic Regulation. Adjustments were made for import charges (in the range between 0,1 % and 0,7 %), transport, insurance handling, loading and ancillary expenses (in the range between 1 % and 8 %), packing (in the range between 0 % and 0,1 %), credit costs (in the range between 0 % and 0,7 %), after-sales costs (in the range between 0,1 % and 0,4 %), bank charges (in the range between 0 % and 0,3 %) and commissions (in the range between 0 % and 0,2 %).

(194)

Furthermore, as all sales to the Union were done via the related trader in Switzerland, a relevant adjustment on the basis of Article 2(10)(i) of the basic Regulation was made.

(195)

The exporting producer claimed a level of trade adjustment under Article 2(10)(d)(i) of the basic Regulation, arguing that the sales channels of the like product in the domestic market were significantly different from those of sales of the product concerned to the Union, and thus price comparability was affected. They also argued that consistent and distinct differences existed in functions and prices for the different levels of trade in the domestic market and in the export sales to the Union.

(196)

The exporting producer did not demonstrate consistent and distinct differences in functions and prices of the seller for the different levels of trade in the domestic market of the exporting country. Indeed, the data provided by the exporting producer did not support such finding. The Commission therefore rejected this claim.

(197)

In its comments on the Information Document, the exporting producer strongly opposed this justification as arbitrary and unsubstantiated. Yet it did not provide any evidence that there were consistent and distinct differences in functions and prices of the seller for the different levels of trade in the domestic market of the exporting country. Instead, it focused only on the first part of this requirement arguing that there are consistent and distinct differences in functions and prices in the sales at different levels of trade in different markets, omitting the requirement that this should be demonstrated in the domestic market. Indeed, the Commission verified the prices of the seller for the different levels of trade in the domestic market and was unable to find consistent and distinct differences.

(198)

The exporting producer argued that if the Commission believed that Article 2(10)(d)(i) of the basic Regulation does not apply, the Commission should have resorted to Article 2(10)(d)(ii) of the basic Regulation. In doing so, aside of a vague reference to prima facie evidence, the exporting producer did not give a single argument why this provision would be applicable. The relevant levels of trade did exist in the domestic market and it has not been clearly demonstrated that certain functions relate to levels of trade other than the one which is to be used in the comparison. This provision is therefore inapplicable to the case at hand.

(199)

In its comment on the final disclosure, the exporting producer argued that the Commission contradicted itself in its reasoning by pointing out that, whilst various levels of trade on the domestic market exist, the exporting producer did not demonstrate consistent and distinct differences in functions and prices of the seller for these levels.

(200)

The Commission did not see a contradiction in this statement.

(201)

Furthermore, the exporting producer argued that in its communication of 5 January 2017 it did provide the Commission with its analysis and comparison of the various levels of trade in the domestic market, identifying and comparing the levels of trade on the domestic market and demonstrating a consistent difference in prices between these levels.

(202)

The Commission replied by pointing out that in the relevant communication the company compared different domestic sales channels — not levels of trade — of one of its production sites. In this already flawed comparison the exporting producer further argued that the channel most comparable to the Union sales channel is the direct one, i.e. the one without the involvement of its domestic trader. No evidence as to why this would be the case was provided, especially considering that all its sales to the Union were done via a related trader in Switzerland, i.e. MISA. The Commission therefore maintained that the exporting producer did not demonstrate that there were consistent and distinct differences in functions and prices of the seller for the different levels of trade in the domestic market of the exporting country.

(203)

In its comments on the final disclosure, the exporting producer also claimed that the Commission did not address the fact that it submitted a revised export sales listing of its related company MISA. In that list, the exporting producer had addressed the Commission's note with regard to identification of the levels of trade for a large number of transactions, which was inaccurate in the original reply to the anti-dumping questionnaire. The exporting producer claimed that it cannot be said that this information was submitted too late in the investigation, since the Commission could have verified it, if necessary, during its verification visit of the company's related entities in the Union.

(204)

The Commission disagreed with this statement. The additional information on sales listing of MISA was provided after the verification of MISA. To ensure that precisely such a situation is avoided, prior to its verification at the premises of MISA, in its communication of 17 January 2017, the Commission had reminded the company that, if a claim or any of its aspects require verification, it must be submitted at a reasonable time prior to the verification visit so that the case team can prepare the relevant part of the visit. Finally, even if the Commission was able to verify this data at the premises of MISA, this would not change the fact that, as mentioned above, the exporting producer did not demonstrate that there were consistent and distinct differences in function and price of the seller for the different levels of trade in the domestic market of the exporting country.

(205)

In its comments on the final disclosure, the exporting producer also reiterated its claim that, if the Commission considered that the evidence submitted by the company in support of its Article 2(10)(d)(i) of the basic Regulation claim failed to demonstrate the consistent and distinct differences in functions and prices of the seller for the different levels of trade in the domestic market, the very same evidence could have been used by the Commission for the application of a special adjustment under Article 2(10)(d)(ii), i.e. in cases of the ‘absence of the relevant levels on the domestic market’. However, as mentioned above, the Commission found that the relevant levels of trade did exist on the domestic market. The exporting producer did not demonstrate that there were consistent and distinct differences in functions and prices of the seller for these levels, but this does not change the fact that these levels were present on the domestic market. The conditions for the application of Article 2(10)(d)(ii) of the basic Regulations were therefore not met.

(206)

For the reasons outlined above this claim was rejected.

(207)

The exporting producer also claimed that, for the sake of fair comparison, the normal value should be adjusted on the account of costs of transport of the like product between the production site and the related domestic trader.

(208)

According to Article 2(10)(e) of the basic Regulation an adjustment shall be made for differences in the directly related costs incurred for conveying the product concerned and/or the like product from the premises of the exporting producer to an independent buyer, where such costs are included in the prices charged. This provision does not cover the costs of transport between two related parties, which do not appear to be reflected in the price charged to the independent buyer. Therefore, the Commission rejected this claim.

(209)

After the Information Document, the exporting producer submitted a new dataset for the sales of the related importers. This dataset was subsequently verified by the Commission. These new figures affected the dumping calculation originally established in the Information Document.

(210)

For the exporting producer, the Commission compared the weighted average normal value of each type of the like product with the weighted average export price of the corresponding type of the product concerned, in accordance with Article 2(11) and (12) of the basic Regulation.

(211)

The level of cooperation from Ukraine was very high as the exports of the cooperating exporting producer constituted more than 95 % of the total exports to the Union during the investigation period. On this basis, the Commission established the country wide dumping margin at the same level as for the sole exporting producer.

(212)

The dumping margins, expressed as a percentage of the CIF Union frontier price, duty unpaid, are as follows:

(213)

Within the Union, 17 companies provided production and sales data in the standing exercise and indicated that they produced the like product during the investigation period. Based on the available information from the complaint, these 17 companies represent around 90 % of the production of the like product in the Union.

(214)

Apart from these 17 companies, there were five other companies which produced the like product during the investigation period.

(215)

One interested party claimed that the inclusion of the data of the Italian producer Ilva would distort the injury picture of the entire Union steel industry given the particular situation of this company (13) and, therefore, this Italian producer should be excluded. However, under Article 4(1) of the basic Regulation, the term ‘Union industry’ refers to the Union producers as a whole of the like products or the major proportion thereof. As the Commission had no reason to restrict its analysis to a major proportion, it was bound to analyse the entire industry, including Ilva. Therefore, this claim was rejected.

(216)

The total Union production during the investigation period was established at around 72.9 million tonnes. The Commission established this figure on the basis of information from the complainant and from all known producers in the Union. As indicated in recital (7), six Union producers were selected in the sample representing more than 45 % of the total Union production of the like product, which was found to be a representative sample.

(217)

The business model of the Union producers and their degree of vertical integration varies. Nevertheless, the Union industry can overall be characterised as an industry with a high degree of vertical integration, as further explained in recital (219) below.

(218)

As mentioned in recital (45) above, the product concerned falls within a number of CN codes including certain ex codes. In order not to underestimate Union consumption, and in view of the apparent marginal impact of such codes on total consumption, import volumes of CN ex codes have been fully accounted for the purpose of calculating Union consumption.

(219)

As the Union industry is mostly vertically integrated and the product concerned is regarded as a primary material for the production of various value added downstream products, starting with cold-rolled products, captive and free market consumptions were analysed separately.

(220)

The distinction between captive and free market is relevant for the injury analysis. In addition, transfer prices are set on the captive market within the groups according to various price policies. By contrast, production destined for the free Union market is in direct competition with imports of the product concerned, and prices are free market prices.

(221)

To provide a picture of the Union industry that is as complete as possible, the Commission obtained data for the entire activity of the like product and determined whether the production was destined for captive use or for the free market. The Commission found that around 58 % of the total Union producers' production was destined for captive use during the investigation period.

(222)

After the disclosure of the Information Document, the Serbian exporting producer noted that the free market consumption of the product concerned declined between 2015 and the investigation period by over 1.2 million tonnes and that this implies a huge decrease in Union consumption during the second half of 2015. It therefore requested that the Commission further investigated whether the sales data provided by the Union industry on the free market were truly accurate.

(223)

The Commission analysed the sales and consumption data provided by the Union industry and confirmed that the data provided for the free market consumption by the Union industry were accurate and reliable.

(224)

The Commission established the Union captive consumption on the basis of the captive use and captive sales on the Union market of all known producers in the Union. On this basis, the Union captive consumption developed as follows:

Table 1

Captive consumption on the Union market (tonnes)

(225)

During the period considered the Union captive consumption on the Union market remained stable.

(226)

The Commission established the Union free market consumption on the basis of (a) the sales on the Union market of all known producers in the Union and (b) the imports into the Union from all third countries as reported by Eurostat, thereby also considering the data submitted by the cooperating exporting producers in the countries concerned. On this basis, the Union free market consumption developed as follows:

Table 2

Free market consumption (tonnes)

(227)

During the period considered, the Union free market consumption increased by around 5 %. The increase is mainly due to the economic recovery of the downstream industry.

(228)

The Commission examined whether imports of the product concerned originating in the countries concerned should be assessed cumulatively, in accordance with Article 3(4) of the basic Regulation.

(229)

That provision stipulates that the imports from more than one country shall be cumulatively assessed only if it is determined that:

(230)

The margins of dumping established in relation to the imports from the countries concerned are listed above under section 3 ‘Dumping’. All these margins are above the ‘de minimis’ threshold laid down in Article 9(3) of the basic Regulation.

(231)

The volumes of imports from Brazil, Iran, Russia and Ukraine were assessed to be not negligible within the meaning of Article 3(4) of the basic Regulation. Brazil, Iran, Russia and Ukraine held, in the investigation period, a market share of 1,79 %, 3,32 %, 4,29 % and 3,17 % respectively, as mentioned in the table 3 below.

(232)

On the other hand, import volumes from Serbia were found to be negligible within the meaning of Article 3(4) of the basic Regulation. Indeed, the volume of imports from Serbia decreased from 427 558 tonnes in 2015 to about 354 000 tonnes in the IP, translating it into a market share of only 1,04 %. It is the Commission's practice to consider ‘negligible’ a market share below the 1 % threshold established by the basic Regulation at initiation stage. However, the Commission found in this case that 1,04 % is still negligible because 0,04 % should be regarded as immaterial, in particular when, in relative terms, Serbian import volumes are considerably lower than the volumes from each of the four other countries. Indeed, Serbia's import volumes were almost half the volumes from Brazil, the second lowest country in terms of import volumes.

Table 3

Import volume (tonnes) and market share

(233)

Following the final disclosure and in the hearing of 27 July 2017, the complainant argued that the Serbian exports should be cumulatively assessed with the imports from the four other countries as Serbian exports exceeded the 1 % de minimis threshold. In its view, the 1 % threshold does not allow for any exception, however small its additional percentage would be.

(234)

The Commission rejected this argument. The decision as to whether or not imports should be assessed cumulatively must be based on all the criteria set out in Article 3(3) of the basic Regulation. Article 3(4) of the basic Regulation does not accord any particular weight to any of these individual criteria. While it is true that imports from a country cannot be cumulated if their volume is negligible, the converse does not mean that they ipso facto do have to be cumulated. Moreover, the basic Regulation does not explicitly fix any negligibility thresholds. While Article 5(7) of the basic Regulation may serve as guidance concerning negligible import volumes, Article 3(4) does not incorporate by reference these thresholds. Rather, the wording gives sufficient flexibility to the Commission to carry out a case-by-case analysis taking into account that the ‘extra’ volumes of 0,04 % were immaterial.

(235)

Furthermore, the Commission found that Serbian export prices were different from the exporting prices of the four other countries concerned for the following reasons:

Table 4

Import prices (EUR/tonne)

(236)

In this respect, the price setting, combined with the negligible volume, suggest that the Serbian exporting producer is rather a price follower than a price setter for the product concerned. This is also exemplified by the fact that its price decrease between 2015 and the investigation period is lower also in relative terms, compared to the price decrease of the four other countries concerned.

(237)

Following the final disclosure, during the hearing of 27 July 2017 (see recital -(33)), the complainant requested the Commission services to provide data on undercutting and underselling for the Serbian exporting producer in order to be able to review the statements of the Commission, as set out in recitals (235) and (236), that the Serbian exporting producer is rather a price follower than a price setter. Moreover, in the complainant's view there is no evidence that Serbia is a price follower.

(238)

The Commission noted that it had disclosed above the average price of imports from the countries concerned. These data show that the Serbian import prices had been the highest in 2013 (468 euro per tonne) and remained the highest in the following years up to the price in the IP (365 euro per tonne). Moreover, the index in the table 4 above showed that the relative decline of Serbian prices went from 100 to 78 with the year 2013 indexed as 100, whereas the other four countries showed a decline to 75 (Brazil), 70 (Iran), 72 (Russia) and Ukraine (74). The complainant was therefore able to review the Commission's finding that the Serbian exporting producer was rather a price follower than a price setter both with respect to the import price and its relative decline between 2013 and the IP. The Commission did not use undercutting or underselling data for this assessment because undercutting and underselling calculations only give a snapshot during the investigation period and so do not allow for a price comparison of the trend over a number of years. As the complainant did not provide further reasons for the need to the final disclosure of undercutting and underselling data beyond review of the statements set out in recitals (235) and (236) above, the Commission, consequently, rejected that request.

(239)

Given that the complainant did not contest the figures as laid out in Table 4, the Commission thus confirmed its finding that the Serbian exporter only followed a price trend set by other importers rather than pursuing an aggressive pricing strategy as a price leader.

(240)

Therefore, the Commission concluded that the imports from Serbia should not be cumulatively assessed with the imports from the four other countries. As a consequence of the finding that imports from Serbia were de minimis, protective measures are unnecessary with regard to the imports of HRF originating in Serbia. Thus, in accordance with Article 9(2) of the basic Regulation, the proceeding should be terminated with regard to the imports from Serbia.

(241)

The Commission also assessed the conditions of competition between the dumped imports from the four other countries concerned and the conditions of competition between the dumped imports and the like product and found that they were similar. Indeed, the imported products competed with each other and with the like product produced in the Union. The products are interchangeable and were marketed in the Union through comparable sales channels, being sold to similar categories of end customers.

(242)

Following the initiation of the investigation, several parties submitted comments regarding the cumulative assessment of the effects of the imports from the countries concerned. The Mission of Ukraine to the European Union, the Ministry of Industry and Trade of Russia and one Russian exporting producer, and two exporting producers from Brazil contested the appropriateness of a cumulative assessment of their countries' imports with the other investigated countries' and claimed that their countries' imports should not be cumulated therewith. The Mission of Ukraine to the European Union argued that Ukrainian import volumes were stable during the period 2011-2016, in contrast to the other countries and that there is a significant difference between the geographical structure of imports from Ukraine on the one hand and from Brazil, Iran, Serbia and Russia on the other hand. The Ministry of Industry and Trade of Russia was of the opinion that an exhaustive evaluation of the conditions of competition needed to be made. The Russian exporting producer argued that its imports over the period considered actually decreased, that part of its imports were captive intra-group supplies, not entering as such the Union free market and that the product types sold were different. Moreover, one Brazilian exporting producer argued that it did not follow a similar price trend and that these imports were distributed through different sales channels compared to the imports from the four other countries concerned. Another Brazilian exporting producer argued that Brazilian imports were negligible and that the imports from Brazil did not follow the same trends as those from the four other countries concerned in terms of volume, market share and price.

(243)

The Commission rejected these arguments. Imports from Russia and Ukraine to the Union have increased in absolute terms during the period considered. Moreover, even if the imports had decreased over the period considered, this fact is not a criterion for determining whether the volume of imports is negligible within the meaning of Article 3(4) of the basic Regulation.

(244)

The conditions of competition between the dumped imports from Brazil, Iran, Russia and Ukraine and the like product were assessed to be similar for the reasons below.

(245)

On the basis of the above, the Commission concluded that the conditions for conducting a cumulative assessment of the effects of the imports from Brazil, Iran, Russia and Ukraine were met. Consequently, these imports were examined cumulatively for the purposes of the injury determination.

(246)

Following the disclosure of the Information Document, the Commission received several submissions regarding the cumulative assessment of the countries concerned, which are addressed in the recitals below.

(247)

The complainant argued that imports from Serbia caused injury to the Union producers similarly to imports from the other four countries. In this respect, the complainant referred to the fact that imports from Serbia doubled in absolute volume and in market share in the period between 2013 and the investigation period, that their prices also dropped in this period and that imports from Serbia undercut the Union producers by appreciable amounts during the investigation period. Moreover, the complainant also claimed that imports from Serbia have a market share of 1,04 %, which is just above the 1 % threshold of Article 5(7) of the basic Regulation. In addition, the complainant referred to a potential risk of circumvention since the termination with regard to Serbia would allow the Chinese parent company of the sole Serbian exporting producer to sell to the Union via its Serbian subsidiary.

(248)

The Commission rejected the allegation that imports from Serbia caused injury to the Union producers similarly to imports from the other countries for the reasons set out below.

(249)

In addition, two sampled Brazilian exporting producers claimed that the cumulative assessment of imports from Brazil with those from Iran, Russia and Ukraine was unwarranted for the reasons as set out in the two following recitals.

(250)

One argued that more than one-third of imports from Brazil did not enter into competition with products from Iran, Russia and Ukraine, thereby proving that the sales channels of imports from Brazil were different from those of Iran, Russia and Ukraine. Furthermore, this exporting producer argued that, similarly to Serbia, Brazilian prices were significantly higher than the average prices of Iran, Russia and Ukraine and that the Brazilian exporting producers were also rather price followers than price setters. Finally, it argued that none of the Brazilian producers undercut the prices of the Union industry.

(251)

The other Brazilian exporting producer argued that such a cumulative assessment was inappropriate due to negligible Brazilian import volumes (as was the case for Serbia) and the difference in conditions of competition. In this respect, concerning the negligible volumes, the Brazilian exporting producer argued that the market share of Brazil only exceeded the 1 % threshold as from 2015 and only amounted to 1,79 % during the investigation period. In addition, its import volumes were too small to contribute to any injury and, thus, similarly immaterial. Concerning the different conditions of competition, it referred to the fact that nearly 60 % of the imports of the product concerned from Brazil during the investigation period were sales or transfers to related European companies, which do not enter in direct competition with, and therefore face different conditions of competition than, products destined for the free market. Moreover, it disputed the Commission statement in the Information Document that imports from Brazil and the like Union product are interchangeable. It argued in this context that Brazilian exporting producers mainly export commercial types of HRF, which have different physical, chemical and technical characteristics as well as different end uses than the products sold by the Union industry, which are mainly high quality types of HRF. In addition, it contested that Brazilian exporting producers use similar sales channels to exporting producers from the other countries concerned. It argued that those producers usually sell directly to independent customers in the Union free market, contrary to the majority of the imports from Brazil. Finally, it made comments on prices similar to the ones presented by the other Brazilian exporting producer.

(252)

The Commission rejected the claims of the two sampled Brazilian exporting producers as set out below.

(253)

First, the Commission considered for the purpose of defining consumption the totality of Brazilian imports, irrespective of the fact these included intra-group supplies. This is because, in the absence of such imports, companies would have most likely sourced HRF from other sources available in the Union free market, including the like product produced by the Union industry.

(254)

Second, the sales channels from Brazil are, for part of its sales, not different to those of Iran, Russia and Ukraine. All cooperating producers of Brazil, Iran, Russia and Ukraine use similar sales channels, by either selling directly or via a related trader/importer, located either inside or outside the Union. Moreover, concerning the argument that 60 % of the imports of the product concerned from Brazil during the investigation period were sales or transfers to related European companies, which do not enter in direct competition with, and therefore face different conditions of competition than, products destined for the free market, the following can be noted. Part of the imports of the product concerned from Russian exporting producers were also sales to related European companies of which part was further processed by these related European companies. Consequently, these exporting producers face the same conditions of competition.

(255)

Third, as set out in the table 4, the Commission acknowledged that the Brazilian prices are higher than the average prices of Iran, Russia and Ukraine. Nevertheless, the table 4 also showed that the Brazilian prices were consistently lower than the Serbian import prices during the period considered, i.e. the years 2013, 2014, 2015 and the investigation period.

(256)

Fourth, concerning the argument that Brazilian exporting producers are also rather price followers than price setters, the Serbian exporting producer price was assessed in combination with its negligible volumes. Thus, the same conclusion cannot be reached with regards to Brazil.

(257)

Fifth, concerning the volumes, as set out in table 3, Brazilian imports amounted to 608 541 tonnes during the investigation period, compared to 354 145 tonnes of Serbian imports. Accordingly, Brazilian HRF import volumes were more than 70 % higher than Serbia's, and represented a market share of 1,79 %, compared to 1,04 % of Serbia. As a result, these imports were not considered negligible.

(258)

Finally, concerning the allegation of a different product mix of the Brazilian exporting producers, their products were clearly in direct competition with Union products and products from other exporting producers. Contrary to the exporting producer claim, the investigation showed that all types of the product concerned, including the types sold by Brazilian exporting producers, were also manufactured and sold by the Union producers. In this respect, the Commission noted that more than 99,9 % of all product types sold by the three Brazilian exporting producers were also sold by the sampled Union producers during the investigation period. Furthermore, a cumulative assessment is performed on a country-wide basis with regard to the full scope of the product concerned rather than taking only into consideration certain types of the product concerned.

(259)

Following the final disclosure, the Brazilian exporting producer CSN reiterated that the sales channels and import prices from Brazil are substantially different from those of imports from Iran, Russia and Ukraine. Regarding the sales channels, it mentioned that its subsidiary Lusosider is neither a trader nor a mere importer but a user of HRF. It argued that in particular the situation of NLMK Europe was not the same as the situation of Lusosider. It also mentioned that Lusosider did not have easy access to HRF sold on the Union market. Concerning import prices, it mentioned that the price trend of imports from Brazil follow the same upward trend as prices of imports from Serbia.

(260)

The Commission rejected these claims as unfounded: Regarding the sales channels, there were other Russian subsidiaries located in Latvia and in Poland with a Russian parent company other than NLMK which partially used and processed to some extent the HRF during the IP which they procured from their Russian parent company. Moreover, despite the allegation that Lusosider had not easy access to HRF sold on the Union market, the Commission had been informed during a hearing that Lusosider was supplied from other sources during the investigation period, such as Turkey, Taiwan and Russia. Moreover, the Commission has no evidence on file that Union producers did not want to supply Lusosider nor did Lusosider provide such evidence. In addition, concerning prices, the Commission recalled that the Brazilian prices were consistently lower than the Serbian import prices during the period considered, i.e. in the years 2013, 2014, 2015 and the investigation period (see recital (235)). Therefore, the Commission did not accept the request of the Brazilian exporting producer that the imports from Brazil should not be cumulatively assessed with the imports from the three other countries.

(261)

The Commission therefore concluded that all criteria set out in Article 3(4) are met for the four other countries and therefore imports from Brazil, Iran, Russia and Ukraine were examined cumulatively for the purposes of the injury determination.

(262)

Imports into the Union from Brazil, Iran, Russia and Ukraine developed as follows:

Table 5

Import volume (tonnes) and market share

(263)

The above table shows that, in absolute figures, imports from the countries concerned increased significantly during the period considered. In parallel, the total market share of their imports into the Union went up by almost 5 percentage points (from 7,45 % in 2013 to 12,57 %, or an increase by 69 %) during the period considered.

(264)

The Commission established the prices of imports on the basis of Eurostat data. The weighted average price of imports into the Union from Brazil, Iran, Russia and Ukraine developed as follows:

Table 6

Import prices (EUR/tonne)

(265)

The average prices of the imports from the countries concerned decreased from 442 EUR/tonne in 2013 to 323 EUR/tonne during the investigation period. During the period considered, the decrease of the average unit price of the dumped imports was 27 %.

(266)

The Commission assessed the price undercutting during the investigation period by comparing:

(267)

The price comparison was made on a type-by-type basis for transactions at the same level of trade, duly adjusted where necessary, and after deduction of rebates and discounts. The result of the comparison was expressed as a percentage of the Union producers' turnover during the investigation period. The main adjustments related to delivery costs (varying between 3,4 % and 8,9 % per sampled Union producer), credit costs (varying between 0,1 % and 0,4 %), and discounts (varying between 0,1 % and 2 %).

(268)

As mentioned in recital (16), only one unrelated importer submitted a questionnaire reply. On the basis of the evidence collected during the verification at this unrelated importer, a post-importation cost established at 7 EUR/tonne was added.

(269)

On the basis of the above, the dumped imports from the majority of the sampled exporting producers concerned were found to undercut the Union industry prices in a range between 8,45 % and 17,74 % as can be seen in the table below. No undercutting was found for all the Brazilian companies.

Table 7

Undercutting margins

(270)

After the disclosure of the Information Document, the complainant and the Iranian exporting producer noted that the information provided in the Information Document and in one of its annexes was inconsistent. While the document stated that no undercutting was found for the Iranian company, a specific annex showed an undercutting margin of 8,45 % for the Iranian company.

(271)

In response to these comments, the Commission confirms that the narrative of the Information Document incorrectly made a reference to the Iranian company and that the undercutting margin provided in the annex was correct.

(272)

Following the final disclosure, the Brazilian exporting producer Usiminas claimed that Articles 3(2) and 3(3) of the basic Regulation require the Commission to conduct a proper analysis of the price effect of dumped imports and to give consideration to whether there had been significant price undercutting. Such an analysis should not be limited to a simple mathematical comparison but also consist of a dynamic assessment of price developments and trends in the relationship between the prices of the dumped imports and those of domestic like products over the duration.

(273)

The Commission rejected this claim: It first provided the weighted average unit sales prices of the Union producers on the free market in the Union in the table under recital (295). Thereafter, as set out in recital (297), the Commission stated that the Union producers had to follow the downward price spiral and reduced their sales price significantly, in particular during 2015 and the investigation period. As the product concerned is a commodity, Union producers had to follow the decreasing price spiral. Similar comments by the Commission can be found in recital (387). Moreover, it also refers to its analysis of the other factors, which combined or separately could not break the causal link between dumped imports. (see recital (390). The Commission's analysis was, consequently, not limited to a simple mathematical comparison. Last but not least, neither did the Brazilian exporting producer provide any argument nor is the Commission aware of why such additional analysis would make the undercutting analysis more meaningful given the commodity type nature of the product concerned.

(274)

In accordance with Article 3(5) of the basic Regulation, the examination of the impact of the dumped imports on the Union industry included an evaluation of all economic indicators having a bearing on the state of the Union industry during the period considered.

(275)

The macroeconomic indicators (production, production capacity, capacity utilisation, sales volume, stocks, growth, market share, employment, productivity and magnitude of dumping margins) were assessed at the level of the whole Union industry. The assessment was based on the information provided by the complainant, which was then cross-checked with data provided by Union producers and available official statistics (Eurostat).

(276)

The analysis of microeconomic indicators (sale prices, profitability, cash flow, investments, return on investments, ability to raise capital, wages and cost of production) was carried out at the level of the sampled Union producers. The assessment was based on their information, duly verified.

(277)

To provide a picture of the Union industry that is as complete as possible, the Commission obtained data for the entire production of the product concerned and determined whether the production was destined for captive use or for the free market. For some injury indicators relating to the Union industry, the Commission analysed separately data related to the free and the captive market and made a comparative analysis. These factors are: sales, market share, unit prices, unit cost, profitability, and cash flow. However, other economic indicators could meaningfully be examined only by referring to the whole activity, including the captive use of the Union industry. These factors are: production, capacity, capacity utilisation, investments, return on investments, employment, productivity, stocks and labour costs. For these factors, the Commission can only conduct a meaningful assessment by referring to the whole activity of the Union industry. This analysis is in line with case-law of the Union courts and the WTO. (14)

(278)

The total Union production, production capacity and capacity utilisation developed over the period considered as follows:

Table 8

Production, production capacity and capacity utilisation

(279)

During the period considered, the Union industry's production volume slightly decreased about 1.7 million tonnes (– 2 %).

(280)

The reported capacity figures refer to technical capacity, which implies that adjustments, considered as standards by the industry, for set-up time, maintenance, bottle necks and other normal stoppages have been taken into consideration. The production capacity decreased during the period considered due to the reduction of some production capacity mainly in Belgium and Italy.

(281)

The capacity utilisation rate remained relatively stable during the period considered, ranging between 74,1 % and 76,2 %.

(282)

The Union industry's sales volume and market share in the free market developed over the period considered as follows:

Table 9

Sales volume and market share (free market)

(283)

The Union industry sales volume in the Union free market decreased 5 % during the period considered from 27.5 million tonnes to 26 million tonnes.

(284)

During the period considered, the Union industry's market share in terms of Union consumption went down more than 8 percentage points, from 85,1 % to 76,7 %. The decrease in sales volume in the Union free market and the loss of Union industry's market share coincided in time with an increase of consumption in the free Union market, which is an indicator of the deterioration of the competitive position of the Union steel producers.

(285)

As far as the captive market in the Union is concerned, the captive volume and market share developed over the period considered as follows:

Table 10

Captive volume on the Union market and market share

(286)

The Union industry captive volume (composed of captive transfers and captive sales in the Union market) in the Union market in absolute figures remained relatively stable during the period considered.

(287)

The share of the captive use (expressed as a percentage of total production) of the Union industry slightly increased over the period considered, from 56,9 % in 2013 to 58,2 % during the investigation period.

(288)

The employment was calculated by taking only the employees directly working for the like product in the different steel mills of the Union producers. This method provided accurate data which is relatively easy to determine.

(289)

Employment and productivity developed over the period considered as follows:

Table 11

Employment and productivity

(290)

The level of the Union industry employment decreased during the period considered. The Commission established during the investigation that such decrease was caused by the need to reduce production costs and gain efficiency in view of the increasing competition from dumped imports on the market. This resulted in a reduction of workforce by 5 % during the period considered, without taking into consideration any indirect employment. As a consequence and despite the slightly decreasing production volume (– 2 %) over the period considered, the productivity of the Union industry's workforce, measured as output per person employed per year, increased (+ 3 %). This shows that the Union industry was trying to adapt to the changing market conditions in order to remain competitive.

(291)

Stock levels of the Union producers developed over the period considered as follows:

Table 12

Inventories

(292)

Most types of the like product are produced by the Union industry based on specific orders of the users. Therefore, stocks were not considered to be an important injury indicator for this industry. This is also confirmed by the analysis of the evolution of the closing stocks as a percentage of production. As can be seen above, this indicator remained relatively stable at ca. 3,4 % to 3,7 % of the production volume.

(293)

All dumping margins from Brazil, Iran, Russia and Ukraine were significantly above the de minimis level. The impact of the magnitude of the actual high margins of dumping on the Union industry was not negligible, given the volume and prices of imports from Brazil, Iran, Russia and Ukraine.

(294)

The Union consumption (free market) increased around 5 % during the period considered, while the sales volume of the Union industry on the Union free market decreased around 5 %. The Union industry thus lost market share, contrary to the market share of the imports from Brazil, Iran, Russia and Ukraine which increased significantly during the period considered.

(295)

The weighted average unit sales prices of the Union producers on the free market in the Union developed over the period considered as follows:

Table 13

Sales prices in the free market in the Union

(296)

The table above shows the evolution of the unit sales price on the Union free market as compared to the corresponding cost of production. Sales prices have on average been lower than the unit cost of production, with the exception of 2014 when the Union market started picking up and market shares of the imports from the four other countries concerned was lower than in the investigation period.

(297)

The cost of production remained generally higher than the decreasing sales prices, with the exception of 2014. In order to limit the loss in market share, and because the product concerned is a commodity, the Union producers had to follow the downward price spiral and reduced their sales price significantly, in particular during 2015 and the investigation period. As the product concerned is a commodity, Union producers had to follow the decreasing price spiral.

(298)

Among the sampled producers, certain hot-rolled flat products of iron, non-alloy or other alloy steel for captive consumption were transferred or sold at transfer prices for further downstream processing using different pricing policies (mainly at cost for captive transfers, and at transfer prices for captive sales). Therefore, no meaningful conclusion can be drawn from captive use price evolution.

(299)

The average labour costs of the Union producers developed over the period considered as follows:

Table 14

Average labour costs per employee

(300)

During the period considered, the average wage per employee went up by 4 %.

(301)

Profitability, cash flow, investments and return on investments of the Union producers developed over the period considered as follows:

Table 15

Profitability, cash flow, investments and return on investment

(302)

The Commission established the profitability of the Union producers by expressing the pre-tax net loss of the sales of the like product on the free market in the Union as a percentage of the turnover of those sales.

(303)

Profitability developed negatively over the period considered: losses were incurred during all periods, with the exception of 2014. While the losses in the year 2013 were partly linked to the aftermath of the Eurozone debt crisis, the Union steel producers could partly recover during 2014 and the first half of 2015. As shown in the table under recital (295), the unit sales price decreased 23 % during the period considered, due to the heavy price pressure exerted by the dumped imports from the second half of 2015 onwards. This led to a significant loss of 7,8 % during the investigation period, which is the worst result during the period considered.

(304)

The net cash flow is the ability of the Union producers to self-finance their activities. The trend in net cash flow followed a similar downward trend as the profitability, and became negative, at unsustainable levels.