RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG83/3
20 September 2000
(00-3753)
Committee on Regional Trade Agreements Original:  English
FREE TRADE AGREEMENT BETWEEN HUNGARY AND LITHUANIA
Communication from Hungary
I. BACKGROUND INFORMATION ON THE AGREEMENT
1. Membership, Dates of Signature, Ratification and Entry into Force
Date of Signature: 13 November 1998 in Budapest (the Republic of Hungary)
Ratification: 12 February 1999, amendments – 8 March 2000 (the
Republic of Hungary)
9 November 1999 (the Republic of Latvia)
Provisional Application: -Entry into Force: 1 March 2000
2. Type of Agreement
Type of Agreements: Free-trade area
Plan and Schedule: The objective of the Agreement is to establish a free-trade
area in conformity with the definition set out in
Article XXIV:8(b) of GATT 1994 and with the
Understanding on the Interpretation of Article XXIV of the
GATT (1994) created by the Agreement establishing theWTO.
3. Scope
The provisions of the Free Trade Agreement between the Republic of Hungary and the
republic of Lithuania (hereinafter the Agreement) are applied to products originating in the Parties to
the Agreement and falling within Chapters 1 to 97 of the Harmonised Commodity Description and
Coding System (HS). The Agreement envisages the elimination of duties and other barriers to trade in
respect of substantially all the trade between the Parties in accordance with the requirement of
Article XXIV GATT 1994.
The Agreement also contains provisions on state aid, state monopolies, competition,
intellectual property rights and public procurement.WT/REG83/3
Page 2
4. Trade Data
See Annex.
II. TRADE PROVISIONS
1. Import Restrictions
1.1 Duties and charges
Pursuant to Article 4 of the Agreement, the basic duty to which the successive reductions of
customs duties set out in the Agreement are applied, is the Most Favoured Nation rate of duty in force
on 1 April 1998 in Lithuania and on 29 February 1992 in  Hungary.  However if after entry into force
of the Agreement, any tariff reduction is applied on an  erga omnes basis, such reduced duties shall
replace the basic duties.
Regarding agricultural concessions if the tariff reduction on an erga omnes  basis leads to the
disappearance of concessions granted by any Party, the concerned Party shall re-establish the level of
margin of preferences proportionally to those granted by the Agreement.
In accordance with Articles 3 and 5 of the Agreement, the Parties to the Agreement shall
introduce no new customs duty on imports or charge havi ng equivalent effect as well as no duties of a
fiscal nature.
The existing customs duties on imports of industrial products and all charges having
equivalent effect were abolished between the Parties to the Agreement on 1 March 2000, except forproducts included in Annex II and III.  The customs duties of products listed in Annex II and III shall
be abolished on 1 January 2001.  Concessions on agricultural products are contained in Protocol 1.
According to this Protocol:
- Hungary shall grant preferential treatment to the agricultural products originated in
Lithuania listed in Annex A of the Protocol 1 from 1 March 2000;
- Lithuania shall grant preferential treatment to the agricultural products originated in
Hungary listed in Annex B/1 of the Protocol 1 from 1 March 2000;
- Lithuania grants that the customs duties, for products originating in Hungary listed in
Annex B/2 of Protocol 1, shall not increase.
1.2 Quantitative restrictionsPursuant to Article 7 of the Agreement, the Parties to the Agreement shall introduce no new
quantitative restrictions on imports or measures having equivalent effect and all existing ones wereabolished on the date of entry into force of the Agreement except as provided for in Annex V.
The Republic of Hungary shall progressively abolish quantitative restrictions on imports and
measures having equivalent effect thereto on industrial products originating in the Republic of
Lithuania  (overwear, textile piece goods) by 1 January 2001.
The Republic of Lithuania abolished all quantitative restrictions on imports and measures
having equivalent effect thereto on industrial products originating in the Republic of Hungary on the
date of entry into force of the Agreement, i.e. 1 March 2000.WT/REG83/3
Page 3
1.3 Common external tariff
The Agreement does not envisage the establishment of a Common External Tariff.
2. Export Restrictions
2.1 Duties and charges
Export duties and charges are governed by the provisions of Article 6 of the Agreement.  The
Parties to the Agreement shall introduce no new customs duty on exports or charge having an
equivalent effect and all existing ones were abolished on the date of entry into force of the Agreementexcept as provided for in Annex IV.  The customs duties on exports of products listed in Annex IV
shall be abolished on 1 January 2001.
2.2 Quantitative restrictions
In accordance with Article 8 of the Agreement,  the Parties to the Agreement shall introduce
no new quantitative restrictions on exports and measure having equivalent effect.  All existing
quantitative restrictions and measures having equivalent effect on exports of products originating in
the Parties were abolished on the date of entry into  force of the Agreement, except those that might be
required for the administration of international obligations.
3. Rules of Origin
Rules of origin of goods and related methods of customs administration co-operation are
specified in Article 4 and in Protocol 2 to the Agreement, which is integral part of it.  In this Protocol,the principles and rules for a definition of the concept of “originating products”, for a proof of origin,
for a rule of “drawback and exemption”, territorial requirements, arrangements for administrative co-
operation and other provisions are laid down.
The Parties to the Agreement apply the concept of the Pan-European cumulation.The implementation of this new origin network has two major consequences.  Firstly,
semi-finished products originating in any country of the system and which are further processed or
assembled in other partner country may always be considered as originating products.  Secondly,
originating products can be traded between any of the countries involved in the system.
With regard to territorial requirements, the principle of territoriality is established and the
terms related to direct transport and exhibitions, as well as the prohibition of drawback of, or
exemption from, customs duties, are set out in the Protocol 2.
In the area of proof of origin, the document EUR 1 is used as a movement certificate in trade
between the Parties to the Agreement.  The ar rangements for administrative co-operation cover
inter alia , mutual assistance, verification of proofs of origin, dispute settlement, penalties and free
zones.
4. Standards
4.1 Technical barriers to trade
The Agreement does not contain any specific provision relating to technical barriers to trade.WT/REG83/3
Page 4
4.2 Sanitary and phytosanitary measures
Article 13 of the Agreement contains provisions on veterinary, sanitary and phytosanitary
measures.  The veterino-sanitary and phytosanitary measures and the work of the veterinary services
will be in accordance with international convention s in this field.  The Parties to the Agreement also
commit themselves to apply their regulations in sanitary and phytosanitary matters in a
non-discriminatory fashion and not to introduce any new measure that has the effect of unduly
obstructing trade.
5. Safeguards
Each Party to the Agreement can apply safeguard measures on the conditions and in
conformity with the procedures specified in the Agreement.  These safeguard measures cover general
safeguards (Article 25), structural adjustment (Art icle 26), re-export and serious shortage (Article 27),
balance-of-payment difficulties (Article 30) and specific safeguard measures in agricultural sector
(Article 12).
Article 29 of the Agreement provides for a procedure for the application of safeguard
measures, which foresees consultations within a Joint Committee with a view of solving any
differences and finding a mutually acceptable solution.  The safeguard measures taken shall be the
subject of periodic consultations within the Joint Committee with a view to their relaxation as soon as
possible, or abolition when conditions no longer justify their maintenance.
6. Anti-Dumping and Countervailing Measures
As contained in Article 24 of the Agreement, the application of anti-dumping measures has to
be in accordance with Article VI of the General Agreement on Tariffs and Trade, as well as with theconditions and provisions laid down in Article 29 of the Agreement.
7. Subsidies and State-aid
7.1 State-aid
As provided for in Article 21 of the Agreem ent, the Parties to the Agreement adopted an
obligation to avoid any aid granted by a State Part y to the Agreement, or through state resources in
any form whatever, which distorts or threatens to distort competition by favouring certain
undertakings or the production of certain goods.  The agricultural products are excluded form the
above mentioned provisions.
If a Party to the Agreement considers that a particular practice is incompatible with the
provisions of the Agreement or such practice causes or threatens to cause a serious prejudice to the
interest of that Party or material injury to its domestic industry, the concerned Party may take
appropriate measures under the conditions of and in accordance with the provisions of Article 29 of
the Agreement.  Such appropriate measures may only be taken in conformity with the procedures andunder the conditions of the WTO and any other relevant instruments negotiated under its auspices
which are applicable between the Parties.
7.2 State monopolies
Article 18 of the Agreement contains an obligation for the Parties to adjust progressively any
state monopoly of commercial character so as to ensure that by the end of the year following the entry
into force of the Agreement no discrimination regarding the conditions under which goods are
procured and marketed exists between nationals of the Parties.WT/REG83/3
Page 5
7.3 Rules of competition concerning undertakings
Article 20 sets out the rules of competition concerning undertakings.  The following are
incompatible with the proper functioning of the Agreement insofar as they may affect trade betweenthe Parties:
- all agreements between undertakings, decisions by associations of undertakings and
concerted practices between undertakings which have as their object or effect the
prevention, restriction or distortion of competition;
- abuse by one or more undertakings of a dominant position in the territories of the
Parties as a whole or in substantial part thereof.
These provisions shall apply to the activities of all undertakings including public undertakings
and undertakings to which the Parties grant special or exclusive rights.  Undertakings entrusted with
the operation of services of general economic interest or having the character of a revenue-producing
monopoly, shall be subject to these provisions in so far as the application of these provisions does notobstruct the performance, in law or in fact, of the particular public tasks assigned to them.
With regard to agricultural products these provisions shall not apply to such agreements,
decisions and practices which form an integral part of a national market organisation.
If a Party considers that a given practice is incompatible with the provisions of the Agreement
in the field of rules of competition and if such practice causes or threatens to cause serious prejudice
to the interest of that Party or material injury to its domestic industry, it may take appropriate
measures under the conditions and in accordance with the procedure set out in Article 29 of the
Agreement.
7.4 Public procurementIn Article 22 of the Agreement, the Part ies to the Agreement commit themselves to
progressively develop their respective regulations  for public procurement with a view to grant
suppliers of the other Party access to contract award procedures on their respective public
procurement markets.  The Parties shall endeavour to accede to the relevant Agreement negotiatedunder the auspices of the World Trade Organization.
8. Sector-Specific Provisions
With the exception of agriculture, the Agreement does not contain any specific provisions
applicable to trade between the Parties to the Agreement in individual sectors.
III. GENERAL PROVISIONS OF THE AGREEMENT
1. Exceptions and Reservations
The Agreement includes provisions regarding general and security exceptions (Articles 16
and 17).  The Parties to the Agreement may prohibit or restrict their imports, exports or goods in
transit justified on the grounds of public morality, public policy or public security;  the protection ofhuman, animal or plant life or health;  the protection of national treasures possessing artistic, historic
or archaeological value;  the protection of intellectual property;  the rules relating to gold or silver;  of
the conservation of exhaustible natural resources if such measures are made effective in conjunctionWT/REG83/3
Page 6
with restrictions on domestic production or consumption.  Such prohibitions or restrictions must not
be a means of arbitrary discrimination or a disguised restriction on trade between the Parties.
For the reasons of security each Party to the Agreement may take any appropriate measure,
which it considers necessary, in order to prevent disc losure of information contrary to its essential
security interests and to protect its essential security interests or to implement its international
obligations or its national policies.
2. Accession
There is no provision in the Agreement that allows other countries to accede to the
Agreement.
3. Dispute Settlement Procedures
The provisions regarding the dispute settlement are not contained in the Agreement.
4. Relation with Other Trade Agreements
As contained in Article 34 of the Agreement, the Agreement does not prevent the
maintenance or establishment of customs unions, free-trade areas or arrangements for frontier trade to
the extent that they do not affect the trade regime and in particular, the provisions concerning rules oforigin provided for by the Agreement.
The Agreement does not contain any provision which establishes any specific relation with
other bilateral, plurilateral and/or multilateral trade arrangements.  However, in the preamble to the
Agreement as well as in other Articles, a reference to the GATT 1994 and to WTO is made.
5. Institutional Framework
In accordance with Article 32 of the Agreemen t, the Joint Committee of the representatives of
the Parties to the Agreement is established in which each Party shall be represented.
The main task of the Joint Committee is to su pervise and to administer the implementation of
the Agreement.  The Joint Committee may take decisi ons in the cases provided for in the Agreement.
On other matters, it may make recommendations.  The Joint Committee shall keep under review the
possibility of further removal of the obstacles to trade between the Parties.
In respect of the procedures of the Joint Committee referred to in Article 33, the Joint
Committee meets whenever necessary but at least once a year and acts by consensus.  Each Party to
the Agreement may request that a meeting of Joint Committee be held.  The Joint Committee may
decide to set up such subcommittees and working groups as it considers necessary to assist it in
accomplishing its tasks.
For the purpose of the Agreement the Joint Committee shall adopt its rules of procedure
which, inter alia,  contain provisions for convening meetings and for the designation of the Chairman
and the term of office.WT/REG83/3
Page 7
IV. OTHER
The Agreement covers trade in goods; trade in serv ices is not subject to the provisions of the
Agreement. Article 31 of the Agreement contains an  evolutionary clause providing for the possibility
of extending the coverage of the Agreement to new fields.WT/REG83/3
Page 8
ANNEX
Lithuania - Imports from Hungary, 1996-99
(Thousand US$)
Year H.S.
Chapter 1996 1997 1998 1999
Total 44,600.7 70,235.3 62,684.6 56,525.5
1 57.7 67.6 48.0 11.3
2 592.7 1,221.4 85.7 109.2
4 4.5 140.7 1.9 -
5 51.2 724.1 - -
6-- 1 . 3 3 . 7
7 47.5 41.8 267.0 246.3
8 317.2 375.0 560.5 797.8
9 16.7 9.8 6.6 6.6
10 - 369.9 276.1 1 006.3
11 32.0 83.2 156.1 276.4
12 1,592.7 1,359.8 1,036.1 458.0
13 - 0.1 - -
14 - - - 4.0
15 428.0 2,129.3 2,743.3 1,579.3
16 4.7 2.2 - 1.2
17 8.7 10.1 42.8 161.3
18 - 31.4 44.4 44.6
19 428.0 1,062.1 1,045.6 679.6
20 2,364.0 5,875.9 7,085.6 8,332.2
21 279.5 770.2 948.6 938.2
22 372.5 4,304.9 3,869.0 4,138.0
23 - - 170.6 276.1
24 4,530.7 9,111.2 11,791.4 15,048.6
25 1.7 - 5.0 27.2
27 - 3.4 15.1 16.3
28 - - 7.1 18.4
29 5.7 94.3 100.5 25.0
30 10,330.2 13,489.7 7,659.7 5,404.1
32 25.2 8.4 128.4 134.5
33 21.2 1,341.9 1,587.9 646.9
34 0.5 29.1 181.3 319.1
35 4.5 0.8 33.9 61.2
36 - - - 1.8
37 - 2.2 - 0.8
38 25.5 91.6 176.8 140.6
39 2,816.7 3,691.9 2,791.2 1,294.6
40 2,056.5 1,525.3 808.6 312.9
41 81.5 - - -WT/REG83/3
Page 9
Year H.S.
Chapter 1996 1997 1998 1999
42 9.7 46.3 56.6 12.6
43 - 29.3 12.7 168.8
44 155.0 408.8 435.9 100.0
45 - - - 3.3
47 - 0.1 - -
48 5,972.7 6,737.3 6,700.8 5,892.4
49 124.5 137.8 154.9 90.7
52 - - 2.0 4.3
53 9.5 7.5 - -
54 703.2 1,331.6 1,070.1 277.9
55 14.7 1.4 8.4 10.2
56 477.7 436.1 283.5 183.7
57 - - 8.6 0.0
58 - - - 0.5
59 17.7 6.7 35.8 29.6
61 7.2 15.2 135.6 178.4
62 120.2 96.2 115.3 198.6
63 59.2 35.4 437.5 59.6
64 - 113.5 234.2 523.0
65 - - 0.2 0.1
66 0.8 0.2 0.4 0.1
68 - 58.9 40.1 184.2
69 198.2 204.7 98.4 66.2
70 0.3 70.6 471.5 372.2
71 - - 0.0 -
72 24.0 33.2 1.5 167.2
73 2,704.7 213.7 177.8 109.7
74 2.0 31.4 0.5 6.1
76 48.2 71.7 9.7 40.7
79 - 0.3 - -
80 - - - 0.3
82 98.5 11.5 19.8 31.5
83 127.7 283.7 413.7 154.0
84 1,659.0 2,796.8 1,557.6 1,612.9
85 2,023.7 4,503.2 3,972.8 1,985.3
86 1,087.2 1,162.1 789.2 218.5
87 973.0 1,574.8 592.6 485.4
88 - - - 3.2
90 298.7 1,229.1 912.2 187.3
91 12.0 6.7 0.9 -
92 - 0.1 - -
94 343.7 553.5 142.5 488.3
95 51.5 38.8 81.6 119.1
96 1.8 6.7 15.9 15.4
97 - - 16.9 21.5
98 513.5 10.4 - -WT/REG83/3
Page 10
Hungary - Imports from Lithuania, 1996-99
(US$)
Year H.S.
Chapter 1996 1997 1998 1999
Total 8,379,531 4,999,916 5,108,519 4,647,523
1 0 588 2,493
2 415,487 258,327 - 24,738
3 0 51,450 - 13,896
4 52,301 988,519 673,953 177,084
5 180,285 77,098 65,006 16,464
16 0 - - 3,411
19 3 - - -
20 0 2 - 2,412
22 35,458 - - -
23 0 - - 7,447
25 541,387 51,073 - -
27 377,371 392,945 509,436 644,414
28 17,477 9,817 8,171 38,562
29 0 3,354 303,173 4,745
30 0 1,375 - 125
31 0 - - 85,768
33 0 - 5,872 33
34 0 - 3,536 679
35 15,146 328,126 780,352 707,012
37 0 329 3 75
39 57,331 236,742 52,273 36,719
40 4,972 2,661 3,127 5,831
41 168,540 10,202 26,559 -
42 0 - 349 -
44 4,840,881 1,349,214 1,003,997 1,077,740
46 0 - - 12,699
47 134,993 - 6,272 327
48 127,189 7,753 17,192 19,366
49 720 15 928 235
51 36,565 68,450 22,103 27,165
52 38,671 43,458 1,551 1,887
53 139,123 186,788 518 -
54 7 26,164 340,089 498,177
55 34,673 16,629 106,972 167,110
56 0 - - 19,000
57 7,230 14,085 - 0
61 796 9,317 49,574 26,960
62 48,348 40,931 213,467 155,827
63 1,312 894 4 1
64 11,218 22,583 53,070 101,245
65 0 - 24
66 0 - 13 -
68 1,026 6,876 1,543 1,260
69 55,153 16,754 58,796 33,271
70 151,868 862 31,098 8,239
72 36,809 21,710 14,530 -
73 29,545 57,176 22,004 33,607WT/REG83/3
Page 11
Year H.S.
Chapter 1996 1997 1998 1999
74 20,156 134 - -
76 0 - 240 243
82 18,132 - 422 22,824
83 618 118 925 1,359
84 194,659 304,611 257,433 40,509
85 61,132 200,236 108,896 101,230
87 106,943 94,935 295,857 106,416
88 311,914 41,467 - 248,400
89 500 - - -
90 5,195 13,838 14,900 19,148
91 320 6 - -
94 90,041 15,742 33,980 106,055
95 7,987 27,130 18,003 44,791
96 0 20 - -
97 49 - 1,744 500
Imports of Lithuania from Hungary, 1999,
by Different Duty Levels According to the Agreement
Duty Rate Agricultural products
(%)Industrial products
(%)
0% 0 100
Less than MFN 75.9 0
MFN 24.1 0
Total imports : 56,525,500 US$
Imports of Hungary from Lithuania, 1999,
by Different Duty Levels According to the Agreement
Duty Rate Agricultural products
(%)Industrial products
(%)
0% 0 100
Less than MFN 82.8 0
MFN 17.2 0
Total imports : 4,647,523 US$
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