( ) Page: 1/6 NOTIFICATION UNDER ARTICLE 12.1(A) OF THE AGREEMENT ON SAFEGUARDS ON INITIATION OF AN INVESTIGATION AND THE REASONS FOR IT

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1 G/SG/N/8/UKR/1/Suppl.4 G/SG/N/14/UKR/1/Suppl.3 31 March 2015 ( ) Page: 1/6 Committee on Safeguards Original: English NOTIFICATIONS UNDER ARTICLE 12.1(B) TO THE COMMITTEE ON SAFEGUARDS ON FINDING A SERIOUS INJURY OR THREAT THEREOF CAUSED BY INCREASED IMPORTS NOTIFICATION UNDER ARTICLE 12.1(A) OF THE AGREEMENT ON SAFEGUARDS ON INITIATION OF AN INVESTIGATION AND THE REASONS FOR IT UKRAINE (Casing and pump-compressor seamless steel pipes) The following communication, dated 30 March 2015, is being circulated at the request of the Delegation of Ukraine. As a results of investigation the Interdepartmental Commission on International Trade (hereinafter - Commission) has taken its decision SP-182/2008/ of "On the application of special measures on imports of casing and pump-compressor seamless steel pipes regardless of country of origin and exports". Measures have been applied for three years from 1 October 2008 to 30 September 2011 by the introduction of import quotas. Annual special import quota amounted to 14,504 tons in the first year period. There were also gradual liberalization measures applied by increasing the annual special quota by 5% - up to 15,230 tons for the second year period, and by 10% - to 15,955 tons in the third year period. Measures had been applied to imports of goods to Ukraine of the following description: casing and pump-compressor seamless steel pipes with the outer diameter not exceeding mm, classified under the UKTZED 1 code After following nomenclature changes the goods are classified under UKTZED codes and Relevant notifications under article 12.1(a) and (b): G/SG/N/6/UKR/1-G/SG/N/8/UKR/1-G/SG/N/10/UKR/1 of 22 August On 30 September 2011 by its Decision SP 261/2011/ the Commission extended application of measures for 3 years with gradual liberalisation of import quota from 16,753 tons (1 October September 2012) to 17,591 tons (1 October September 2013) and finally to 18,471 tons (1 October September 2014). Relevant notifications are: G/SG/N/8/UKR/1/Suppl.1-G/SG/N/14/UKR/1 of 31 October 2011 and G/SG/N/8/UKR/1/Suppl.2-G/SG/N/14/UKR/1/Suppl.1 of 30 July 2013, G/SG/N/8/UKR/1/Suppl.2/Corr.1-G/SG/N/14/UKR/1/Suppl.1/Corr.1 of 8 August On 29 September 2014 the Commission has taken its decision SP-323/2014/ concerning initiation of the review of application of special measures and their extension for the period of review (6 months). 1 UKTZED is the Ukrainian Foreign Economic Activity Commodity Classification, was based on Harmonized System 2002 in that time. Since 2014 it is based on HS2012.

2 - 2 - Relevant notification is: G/SG/N/8/UKR/1/Suppl.3-G/SG/N/14/UKR/1/Suppl.2 of 6 October EVIDENCE, RELEVANT DATA AND THE APPLICABLE PERIOD OF REVIEW OF SAFEGUARD MEASURE CONTINUES TO BE NECESSARY TO PREVENT OR REMEDY SERIOUS INJURY Period of review investigation was determined from 1 October 2011 till 30 September Table 1 Indicators ІV quarter 2011 IIІ quarter 2012 ІV quarter 2012 III quarter 2013 ІV quarter 2013 III quarter 2014 Sales of goods produced by domestic industry on domestic market Sales, tons [ ] [ ] [ ] Relative indicators, % Rate of the increase/decrease, % Domestic industry share on the domestic market Share, % [ ] [ ] [ ] Relative indicators, % Rate of the increase/decrease, % Production Production, tons [ ] [ ] [ ] Relative indicators, % Rate of the increase/decrease, % Capacity utilization rate, % Relative indicators, % Rate of the increase/decrease, % Capacity utilization [ ] [ ] [ ] Productivity Productivity, tons/person [ ] [ ] [ ] Relative indicators, % Rate of the increase/decrease, % Gross profits/losses at domestic market sales Dollars USA [ ] [ ] [ ] Relative indicators, % Rate of the increase/decrease, % Domestic industry employment Employment, persons. [ ] [ ] Relative indicators, % Rate of the increase/decrease, % On the basis of analysis of these main economic and social indicators for the domestic industry there were made the following conclusions. The share of domestic industry on the domestic market has decreased in IV quarter 2013 III quarter 2014 period by 10.6%, as compared to IV quarter 2011 III quarter 2012 period. The production of the domestic industry has decreased in the period of IV quarter 2013 III quarter 2014 by 17% as compared to IV quarter 2011 III quarter 2012 period. The capacity utilization rate has decreased in IV quarter 2013 III quarter 2014 by 17% as compared to IV quarter 2011 III quarter 2012 period. The productivity rate has decreased in the period of IV quarter 2013 III quarter 2014 by 8% as compared to IV quarter 2011 III quarter 2012 period.

3 - 3 - The domestic industry gross profitability at domestic market sales has decreased in IV quarter III quarter 2013 period by 54% as compared to IV quarter 2011 III quarter 2012 period. Domestic industry employment has decreased by 21% in IV quarter III quarter 2014 period, as compared to the period of IV quarter 2011 III quarter Domestic industry employment has decreased by 21% in IV quarter III quarter 2014 period, as compared to the period of IV quarter 2011 III quarter Evidence that the safeguard measure continues to be necessary to prevent serious injury If the safeguard measures are ceased to apply, the probability of serious injury to domestic industry is supported by the world trends in development of production capacity for oil & gas pipes. It concerns increasing capacity of existing enterprises and establishment of new production enterprises in Russian Federation, China, USA, Brazil, Mexico, Kazakhstan and Saudi Arabia. There is a significant risk of a sharp decline in oil prices. The plants make steel pipe and tube for oil and gas exploration and drilling. With oil prices more than 5 year lows and hovering around $50 a barrel, energy companies have far less incentive to drill for new supply, reducing demand for the plant's products. Global capital expenditures for oil and gas exploration and production projects are expected to drop by 30% - 50% that could lead to a reduction in global demand for casing and tubing pipes by 10-30%. The global market trends for OCTG tubing and casing for balance between the demand and supply concurrently with the practice of some countries and unions, including the Eurasian Economic Union, the European Union, the United States, Canada and India, to apply trade remedies measures to protect the internal markets, may lead to a redistribution of consumption in Ukraine's domestic market for imported goods if the acting safeguards measures will be terminated. In view of the above mentioned information, there still exists the need to extend the application of safeguard measures on imports to Ukraine casing and pump-compressor seamless steel pipes to prevent substantial injury to domestic industry. 2 INFORMATION ON WHETHER THERE IS AN ABSOLUTE INCREASE IN IMPORTS OR AN INCREASE IN IMPORTS RELATIVE TO DOMESTIC PRODUCTION Table 2 Indicators ІV quarter 2011 IIІ quarter 2012 ІV quarter 2012 III quarter 2013 ІV quarter 2013 III quarter 2014 Import of goods to Ukraine Total imports, tons 11,559 10,433 12,116.5 Relative indicators, % Rate of the increase/decrease, % Imports relative to production of domestic industry Share, % [ ] [ ] [ ] Relative indicators, % Rate of the increase/decrease, % Share of import in consumption of goods on domestic market Share, % [ ] [ ] [ ] Relative indicators, % Rate of the increase/decrease, % Considering the data in Table 2, there were made the following conclusions. During the investigated period the import of goods to Ukraine decreased by 9.74% in ІV quarter 2012 IIІ quarter 2013 period, but in the period of IV quarter 2013 III quarter 2014 it was increased by 4.82%, as compared with ІV quarter 2011 IIІ quarter 2012 period.

4 - 4 - There is a tendency of increasing imports compared to the domestic production. In the period of ІV quarter 2013 IIІ quarter 2014 the share of import to the domestic production has increased by 26.7% as compared to ІV quarter 2011 IIІ quarter 2012 period. Share of import in consumption on domestic market has increased by 59.6 % in ІV quarter 2013 IIІ quarter 2014 period as compared to ІV quarter 2011 IIІ quarter 2012 period. 3 DESCRIPTION OF THE PRODUCT INVOLVED Casing and pump-compressor seamless steel pipes with the outer diameter not exceeding mm, classified under the UKTZED codes and DESCRIPTION OF ANY PART OF THE IMPORTED PRODUCT THAT WILL NO LONGER BE SUBJECT TO THE MEASURE Not applicable. 5 PRECISE DESCRIPTION OF THE PROPOSED MEASURE Extension of import quotas for 18 months period with further liberalization. Import quotas are administered through the issuance by the Ministry of Economic Development and Trade of Ukraine of special licenses. The special quota is allocated as follows: Country of export Period quota, tons ( ) Period quota, tons ( ) Russian Federation 6,830 13,865 Austria 1,408 2,858 Poland 632 1,284 Romania Slovak Republic India China Other countries Altogether 9,608 19,504 6 DATE OF INTRODUCTION OF THE MEASURE Following the notice in official edition of Ukraine. 7 EXPECTED DURATION OF THE MEASURE 18 months, from 1 April 2015 till 30 September DURATION OF THE MEASURE IS LESS THAN THREE YEARS Expected duration of the safeguard measure - 18 months. 9 EXPECTED TIMETABLE FOR PROGRESSIVE LIBERALIZATION OF THE MEASURE Gradual liberalization of safeguard measure is provided by increasing the special quota volume by 3%.

5 THE DEADLINE FOR INTERESTED PARTIES FOR PRIOR CONSULTATIONS WITH THOSE MEMBERS HAVING A SUBSTANTIAL INTEREST AS EXPORTERS OF THE PRODUCT CONCERNED 30 days from the date of this notification. 11 INFORMATION PROVIDED IF THE MEASURE IS BEING EXTENDED i. evidence that the industry concerned is adjusting and that the safeguard measure continues to be necessary to prevent or remedy serious injury Evidence that the safeguard measure continues to be necessary to prevent or remedy serious injury is provided in section 1,2. Evidence that the industry concerned is adjusting: Within ІV quarter 2011 IIІ quarter 2014 the domestic industry made significant investments into production of casing and pump-compressor seamless steel pipes. During this period the domestic industry has started operating the largest electric steel-melting complex for production of round steel billets in the Eastern Europe. "Interpipe Steel" has been designed to provide the Ukrainian's pipe production with its own steel billets. This project allowed for the complete production cycle of pipes - from scrap metal to the finished pipe products. The domestic industry produces seamless pipes under national and international standards for petroleum refining, petrochemical, oil and gas and power industries. The Ukrainian companies continue to improve the quality of their products under the international standards, for example, API standards. Ukrainian producers conduct research on development of new premium connections for casing and pump-compressor pipes according to standards API 5C5/ISO Thus the domestic producer effectively conducts planned adjustment activities while there is a need for safeguard for next one and half years for their completion. ii. reference to the WTO document that notified the initial application of the measure; G/SG/N/6/UKR/1-G/SG/N/8/UKR/1-G/SG/N/10/UKR/1 of 22 August years. iii. duration of the measure from initial application till the date at which it will be extended iv. precise description of the measure in place prior to the date of extension The extension of the measure in respect of import to Ukraine of casing and pump-compressor seamless steel pipes with the outer diameter not exceeding 406,4 mm was implemented in accordance with the Decision SP 261/2011/ of of the Commission from the date of publication (the notice was published on 4 October 2011 in "Uryadoviy Courier" No 182). Annual volume of special quota for imports of goods to Ukraine in the fourth year period ( ) was 16,753 tons. Gradual liberalization of measures was provided by increasing the annual special quota by 5% - up to 16,753 tons in the fourth year period, 5% - to 17,591 tons for the fifth year period and 5% to 18,471 tons at the sixth year period.

6 - 6 - Annual amount of special quota was allocated as follows: Country of export Fourth year period quota, tons ( ) Fifth year period quota, tons ( ) Sixth year period quota, tons ( ) Russian Federation 11,910 12,506 13,131 Austria 2,455 2,577 2,706 Poland 1,103 1,158 1,216 Romania Slovakia India China Other countries The safeguard measures were extended for 6 months from 1 October 2014 in accordance with the Decision SP 323/2014/ of of the Commission (the notice was published on 1 October 2014 in "Uryadoviy Courier" No 180). Gradual liberalization of measures is provided through increasing the annual special quota by 1% Exporting country Quota for the period Russian Federation 6,631 Austria 1,367 Poland 614 Romania 117 Slovak Republic 95 India 40 China 27 Other 437 Total 9, i. The major exporting Members of imports of the product involved Russian Federation, Austria, Poland, Romania, Slovak Republic. ii. not applicable.