RESTRICTED
WORLD TRADE WT/REG41/2
5November 1997
ORGANIZATION(97-4833)
Original: English Committee onRegional Trade Agreements
FREE TRADE AGREEMENT BETWEEN THE CZECH REPUBLIC
AND THE REPUBLIC OFBULGARIA
Communication bytheParties
Thefollowing communication hasbeenreceived from thePermanent Missions oftheCzech
Republic andtheRepublic ofBulgaria, withtherequest thatitbedistributed toWTO Members.
______________
I. BACKGROUND INFORMATION ONTHE AGREEMENT
1. Membership, dates ofsignature, ratification andentry intoforce
Membership: theCzech Republic andtheRepublic ofBulgaria
Dateofsignature: 15December 1995 inPrague (Czech Republic)
Provisional application: from 1January 1996
Dateofratification: 7June1996
Entry intoforce: 7June1996
2. Type ofagreement
Type ofagreement: Free-trade area
Planandschedule: TheParties totheAgreement shallgradually establish afree
trade areainatransitional period ending on1January 1998
atthelatest.
3. Scope
Theprovisions oftheAgreement areapplied toallproducts (industrial andagricultural)
originating intheParties totheAgreement andfalling within Chapters 1to97oftheHarmonized
Commodity Description andCoding System (HS), without anyexclusions (seeArticles 2and11).The
Agreement envisages theelimination ofduties andother barriers totrade inrespect ofsubstantially
allthetrade between theParties inaccordance withtherequirement ofArticle XXIV:8 oftheGATT
1994. Inorder toensure theproper functioning oftheAgreement italsocontains provisions onstate
aid,statemonopolies, competition, intellectual property rights andpublic procurement.
4. Trade data
SeeAnnex.WT/REG41/2
Page2
II. TRADE PROVISIONS
Pursuant toArticle 4,foreachindustrial product thebasic duty, towhich thereductions of
customs duties setoutintheAgreement areapplied, istheMost Favoured Nation rateofdutyapplied
on1January 1995. However, ifafterentry intoforce oftheAgreement anytariff reduction isapplied
onanergaomnes basis, suchreduced duties willreplace thebasic duties.
TheAgreement initsChapter IIprovides alsoforliberalization oftradeinagricultural products.
TheParties totheAgreement granted eachother concessions onanumber ofthese products through
theannual tariff quotas enjoying apreferential rate.Thelevelofliberalization inagricultural sector,
laiddown intheAgreement, represents thefirstphase ofliberalization oftradeinagricultural products.
Although trade inagriculture willnotbefreeofallrestrictions attheendofthetransitional period,
theAgreement contains theprovisions onthebasisofwhich theParties totheAgreement could grant
eachother further concessions.
1. Import restrictions
1.1 Duties andcharges
Inaccordance withArticles 3and6,respectively, theParties totheAgreement shallintroduce
nonewcustoms duties onimports ofindustrial products aswellasnoduties ofafiscal nature. The
existing customs duties shallbeabolished on1January 1998 atthelatest, withfewexceptions. By
theendofthetransitional period, i.e.on1January 1998, theRepublic ofBulgaria shallapply import
customs duties onimports ofapartofmetallurgical products originating intheCzech Republic (7tariff
lines). These exceptions shallbeeliminated on1January 2000 atthelatest.
Inconformity withtheprovisions ofArticle 32oftheAgreement aswellasArticle XIIGATT
1994andotherrelevantbalance-of-paymentprovisions,Bulgariaintroduced,on4June1996,atemporary
import surcharge which isexpected tobeeliminated on1July2000. TheCzech Republic, pursuant
tothesame provisions, introduced, on21April 1997, atemporary import deposit scheme which was
withdrawn on21August 1997. Forfurther details onbothmeasures seerelevant documents ofWTO
Committee onBalance-of-Payments Restrictions1.
Inaccordance withArticle 5,theParties totheAgreement shallintroduce nonewcharges having
aneffect equivalent tocustoms duties onimports ofindustrial products. Theexisting charges were
abolished onthedateofentry intoforce oftheAgreement, except fortheproducts specified inAnnex
IItotheAgreement forwhich theimport taxwasabolished before theendof1996.
1.2 Quantitative restrictions
PursuanttoArticle8,thePartiestotheAgreementshallintroducenonewquantitativerestrictions
(QRs) ormeasures having anequivalent effect. Theexisting restrictions were abolished onthedate
ofentry intoforce oftheAgreement, withfewexceptions. TheCzech Republic applies QRsonimports
ofindustrial products andmeasures having equivalent effect thereto oncertain products originating
inBulgaria (uranium orthorium oresandtheirconcentrates, coal,lignite, radioactive chemical elements
andisotopes, natural andenriched uranium andnuclear fuelrods). These QRsshallbeabolished on
1January 2001 atthelatest.
1Seedocuments WT/BOP/N/18, WT/BOP/S/4, WT/BOP/S/4 andWT/BOP/R/34 forBulgaria andWT/BOP/N/19 and
Add.1, WT/BOP/S/3, WT/BOP/G/3, WT/BOP/R/33 andWT/BOP/N/29 fortheCzech Republic.WT/REG41/2
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1.3 Common External Tariff
TheAgreement doesnotenvisage theestablishment ofaCommon External Tariff.
2. Export restrictions
2.1 Duties andcharges
Export duties andcharges aregoverned bytheprovisions ofArticle 7.TheParties tothe
Agreement shallintroduce nonewcustoms dutyonexports orcharges having anequivalent effect.
Theexisting duties andcharges wereabolished onthedateofentry intoforce oftheAgreement, with
theexception oftheexport taxes applied bytheRepublic ofBulgaria oncertain products exported into
theCzech Republic (seasnails, fuelwood andwood intherough, waste ofpaper, waste andscrap
ofstainless steelandcopper products). These export restrictions areofaspecific nature andtheyshall
beabolished on1January 2001 atthelatest.
2.2 Quantitative restrictions
Inaccordance withArticle 9,theParties totheAgreement shallintroduce nonewQRsand
measures having anequivalent effect toQRs. Theexisting restrictions wereabolished onthedateof
entry intoforce oftheAgreement, except forthetemporary export bansforseveral products exported
from Bulgaria intotheCzech Republic. These export bansareapplied onanergaomnes basis and
shallbeterminated when conditions nolonger justify theirmaintenance.
On1January 1997, theCzech Republic abolished measures having equivalent effect toQRs
onexports ofproducts listed inAnnex Va.
3. Rules oforigin
Rules oforigin ofgoods andrelated methods ofadministrative co-operation arespecified in
Article 16andinProtocol 3totheAgreement which isanintegral partofit.InthisProtocol, the
principles andtherulesforadefinition oftheconcept of"originating products", foraproof oforigin,
foraruleof"drawback orexemption", territorial requirements, arrangements foradministrative
co-operation andother provisions arelaiddown.
Thegeneral criteria usedforthepurpose ofdetermining theorigin ofproducts towhich the
Agreement applies are,asfollows: wholly obtained products andsufficiently worked orprocessed
productsaredefined,togetherwithconditionswhichhavetobefulfilled,formanufacturingorprocessing
operations toeachcommodity item, andtheyarespecified intheannex totheProtocol. Thesimilar
criterion ofsubstantial transformation applies tocases ofinsufficient working orprocessing operations,
which arealsodefined. Withregard tothechanges intariffclassification, theParties totheAgreement
shallbeguided byaprinciple thatsuchchanges shallnotaffect timetables andschedules ofliberalization
andconcessions established intheAgreement.
Inrespect ofacumulation oforigin, theParties totheAgreement apply aprinciple ofbilateral
cumulation, withapossibility ofitsextension tothepaneuropean diagonal cumulation. Thediagonal
cumulation oforigin shallbeapplied between theParties totheAgreement andathirdpartyoncondition
thatthisthirdparty(theEuropean Union (EU), Central European FreeTrade Area(CEFTA), European
FreeTrade Association (EFTA) andBaltic countries) hasaFreeTrade Agreement orAgreement
Establishing Customs Union withbothParties totheAgreement andthatidentical rulesoforigin apply.WT/REG41/2
Page4
Withregard totheterritorial requirements, theprinciple ofterritoriality isestablished andthe
terms related todirect transport andexhibitions, aswellastheprohibition ofdrawback of,orexemption
from, customs duties, aresetoutintheprotocol. Thisconcept wastobederogated temporarily until
applied within theframework ofthediagonal cumulation between bothParties totheAgreement and
theEU.However, eachParty maydecide onitspartial application infullaccordance withthepossible
modalities ofpartial application agreed upon withtheEU.
Intheareaofproof oforigin, thedocument EUR 1isusedasamovement certificate intrade
between theParties totheAgreement. Thearrangements foradministrative co-operation cover, inter
alia,mutual assistance, dispute settlement, penalties, freezones etc.
4. Standards
4.1 Technical barriers totrade
TheAgreementcontainsAnnexVIdealingwiththeissueoftechnicalregulationsandamendments
thereto, where theprovisions oftheprocedure forthenotification ofdrafttechnical regulations are
setoutandspecified. However, theabove mentioned provisions arenotinforceandtheJointCommittee
(JC)shalldecide inthefuture onthedatefrom which these provisions shallbeimplemented.
4.2 Sanitary andphytosanitary measures
TheAgreement contains provisions (Article 15)ontheapplication ofveterinary, health-related
andphytosanitarymeasures.ThePartiestotheAgreementagreedthatthemeasuresconcerningveterinary
andphytosanitary control shallbeharmonized withtheEUlegislation andbetween theParties and
thattheveterino-sanitary measures andthework oftheveterinary services shallbeinaccordance with
theOffice International desEpizoodies Codex andother international conventions inthisfield. The
Parties totheAgreement alsocommit themselves nottointroduce discriminatory orother measures
which would limittheflowofinformation, animals, plants orproducts.
5. Safeguards
Each Party totheAgreement canapply safeguard andemergency measures ontheconditions
andinconformity withtheprocedures specified intheAgreement. These safeguard measures cover
general safeguards (Article 27),structural adjustment (Article 28),re-export andserious shortage of
goods (Article 29),balance-of-payments difficulties (Article 32)andspecial safeguard measures in
theagricultural sector (Article 14).
Article 31oftheAgreement provides foraprocedure fortheapplication ofsafeguard measures
which foresees consultations within aJCwithaviewofsolving anydifferences andfinding amutually
acceptable solution, aswellasperiodic reviews ofthemeasures withaviewtotheirgradual relaxation
andabolition.
6. Anti-dumping measures
Ascontained inArticle 26,theapplication oftheabove mentioned measures hastobein
accordance withArticle VIoftheGATT 1994 andtheAgreement onImplementation ofArticle VI
oftheGATT 1994, aswellaswiththeconditions andprovisions laiddown intheAgreement.WT/REG41/2
Page5
7. Subsidies andState-aid
TheAgreement contains provisions relating tosubsidies, stateaid,statemonopolies, rulesof
competition concerning undertakings andpublic procurement.
7.1 State aid
Asprovided forinArticle 23,theParties totheAgreement adopted anobligation toavoid
anyaidgranted byastatebeing aParty totheAgreement orthrough stateresources inanyformwhatever
which distorts orthreatens todistort competition byfavouring certain undertakings ortheproduction
ofcertain goods. Theagricultural products areexcluded from theabove mentioned provisions.
Ifaparty totheAgreement considers thataparticular practice, including thatinagriculture,
isincompatible withtheprovisions oftheAgreement orifsuchapractice causes orthreatens tocause
aserious prejudice totheinterests ofthatparty ormaterial injury toitsdomestic industry, theconcerned
party maytakeappropriate measures inaccordance withtheprocedure setoutintheAgreement. Such
measures mayonlybetaken inconformity withthecommitments undertaken intheWTO.
7.2 State monopolies
TheAgreement initsArticle 20contains anobligation fortheParties toadjust progressively
anystatemonopoly ofacommercial nature soastoensure, thatby1July1999nodiscrimination exists
inthisfieldbetween nationals oftheParties.
7.3 Rules ofcompetition
TheAgreement initsArticle 22callsalsoforanobservance ofaprinciple offreecompetition
between theundertakings oftheParties totheAgreement withtheaimtorefrain fromsuchpractices
which haveastheirobject oreffect theprevention, restriction ordistortion ofcompetition, aswell
astoavoid theabuse byoneormoreundertakings ofadominant position ontheterritories oftheParties.
Certain exemptions, intheformofadvantages, concessions andotherfavouring elements, from
theprovisionsrelatingtorulesofcompetitionconcerningundertakingsarepossible.Theymaybegranted
toundertakings ofparticular public tasks assigned tothem, andtothose entities which areentrusted
with theoperation ofservices ofgeneral economic interest orwhich have acharacter ofa
revenue-producing monopoly. Thesimilar exclusions inthisfieldarepossible foragricultural products,
since inthisareatherespective provisions oftheAgreement donotapply.
Ifaparty totheAgreement considers, thataparticular practice isincompatible withthe
provisions oftheAgreement inthefieldofrulesofcompetition andifsuchpractice causes orthreatens
tocause aserious prejudice totheinterests ofthatparty ormaterial injury toitsdomestic industry,
sotheconcerned party maytakeappropriate measures according totheprocedure setoutinthe
Agreement.
7.4 Public procurement
InArticle 24,theParties totheAgreement commit themselves toprogressively develop their
respective public procurement regulations withtheaimtogrant suppliers oftheother Party, bythe
endof1998 atthelatest, access tocontract award procedures ontheirrespective public procurement
markets. Thisaccess should bebased onaprinciple of"free competition" andhastobeinaccordance
withtheprovisions oftheWTO Agreement onGovernment Procurement.WT/REG41/2
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8. Sector-specific provisions
With theexception ofagriculture, theAgreement doesnotcontain anyspecific provisions
applicable totrade between theParties totheAgreement inindividual sectors.
9. Other issues
TheAgreement contains Protocol 3which isanintegral partofitandwhich deals withthe
co-operation incustoms administration. TheProtocol includes provisions onthemutual assistance in
customs matters between respective customs administrative authorities oftheParties totheAgreement.
TheParties should change information ontheirsituation incustoms matters andprovide theassistance
eachother.
III. GENERAL PROVISIONS OFTHE AGREEMENT
1. Exceptions andreservations
TheAgreement alsoincludes provisions regarding general andsecurity exceptions (Articles
18and19).TheParties totheAgreement mayprohibit orrestrict theirimports, exports ofgoods in
transit justified onthegrounds ofpublic morality, public policy orpublic security andonthegrounds
ofprotection ofhuman, animal orplant lifeorhealth, theprotection ofnational treasures possessing
artistic, historic orarchaeological value; protection ofintellectual property orrules relating togold
orsilver andtheconservation ofexhaustible natural resources ifsuchmeasures aremade inconjunction
withrestrictions ondomestic production orconsumption.
Suchprohibitions orrestrictions mustnotbeameans ofarbitrary discrimination oradisguised
restriction ontrade between theparties totheAgreement. Forthereason ofsecurity eachParty tothe
Agreement maytakeanyappropriate measures, which itconsiders necessary, inorder toprevent
disclosure ofinformation contrary toitsessential security interests andfortheirprotection orforthe
implementation ofitsinternational obligations oritsnational policies.
2. Accession
There isnoprovision intheAgreement thatallows othercountries toaccede totheAgreement.
3. Dispute settlement procedures
Theprovisions regarding thedispute settlement arenotcontained intheAgreement.
4. Relation withother trade agreements
AscontainedinArticle36,theAgreementappliestotraderelationsbetweentheCzechRepublic
andBulgaria. Itdoesnotprevent themaintenance orestablishment ofcustoms unions, freetradeareas
orarrangements forborder trade totheextent thattheydonotaffect negatively thetrade regime and,
inparticular, theprovisions concerning therules oforigin provided forbytheAgreement.
TheAgreement doesnotcontain anyprovision which establishes anyspecific relation with
other bilateral, plurilateral and/or multilateral trade agreements. However, inthepreamble tothe
Agreement, areference totheGATT 1994 andtheWTO ismade.WT/REG41/2
Page7
5. Institutional framework
Inaccordance withArticle 34,theJCwasestablished. Itconsists oftwomembers, eachfrom
oneParty totheAgreement. Themembers oftheJCarerepresentatives oftheGovernments. TheJC
isnotanintergovernmental orsupranational institution created tooperate theAgreement. Themain
taskoftheJCistosupervise andtoadminister theimplementation oftheAgreement.
TheJCmaytakedecisions inthecases provided forintheAgreement. Onother matters,
itmaymake recommendations. Inrespect oftheprocedures oftheJCreferred toinArticle 35,the
JCmeets, whenever necessary, butatleastonceayear, andactsbyacommon agreement. Eachparty
totheAgreement mayrequest thatameeting oftheJCbeheld. TheJCmaydecide tosetupsuch
subcommittees andworking groups asitconsiders necessary toassist itinaccomplishing itstasks.
Forthepurpose oftheAgreement, theJCshalladopt itsrulesofprocedure which, interalia,
contain provisions forconvening meetings andforthedesignation oftheChairman andhistermof
office.The operation ofnational entities oftheParties totheAgreement issubject totheprovisions
oftheAgreement andalsotoimplementing policies relating totheAgreement.
IV. OTHER
Before theentry intoforce theAgreement wasapplied provisionally. TheAgreement covers
trade ingoods; trade inservices isnotsubject totheprovisions oftheAgreement. InArticle 33it
contains anevolutionary clause providing forthepossibility ofextending thecoverage oftheAgreement
tonewfields.WT/REG41/2
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ANNEX
Imports oftheCzech Republic from Bulgaria
(in'000US$, f.o.b.)
HSSections 1994 1995 1996
I 31 13 174
II 1,935 3,857 4,150
III n.a. 6 n.a.
IV 365 547 1,163
V 161 648 65
VI 105 427 1,162
VII 223 170 381
VIII 465 76 122
IX 27 404 442
X 354 132 26
XI 595 756 918
XII 67 165 136
XIII 26 46 136
XIV 21 25 33
XV 4,190 4,247 4,526
XVI 3,782 4,154 6,031
XVII 1,622 1,733 2,314
XVIII 167 143 160
XX 128 90 222
XXI n.a. n.a. n.a.
TOTAL 14,296 18,090 22,632WT/REG41/2
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Imports oftheCzech Republic from theWorld
(in'000US$, f.o.b.)
HSSections 1994 1995 1996
I 145,095 198,891 208,611
II 498,511 656,060 739,720
III 60,335 82,489 80,930
IV 665,468 857,648 1,018,607
V 1,754,558 2,345,264 2,763,019
VI 1,602,156 2,301,529 2,473,705
VII 770,901 1,421,080 1,617,802
VIII 109,089 233,990 241,503
IX 104,460 196,147 202,244
X 501,174 816,597 886,407
XI 684,869 1,617,963 1,702,601
XII 134,129 242,097 260,598
XIII 257,899 424,169 470,763
XIV 49,675 86,339 65,366
XV 1,355,547 2,767,153 2,731,441
XVI 4,234,640 7,487,608 8.393.784
XVII 965,712 1,881,172 2,205,389
XVIII 681,340 964,589 960,761
XX 380,607 592,049 678,290
XXI 4,375 73,401 3,273
TOTAL 14,970,437 25,264,527 27,715,746WT/REG41/2
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Imports ofBulgaria from theCzech Republic
(in´000US$, c.i.f.)
HSSections 1994 1995 1996
I 228,0 535,4 1,031,9
II 469,3 98,6 97,3
III 54,6 0,1 0,5
IV 966,7 246,7 197,1
V 36,0 148,4 318,4
VI 5,873,5 8,022,3 3,609,8
VII 1,678,6 6,178,4 3,933,7
VIII 1,159,9 612,0 393,6
IX 5,7 42,0 79,7
X 3,389,1 4,214,7 3,406,6
XI 3,364,2 8,228,5 7,010,3
XII 270,6 231,7 106,3
XIII 1,434,6 2,586,3 2,165,1
XIV 66,1 67,8 75,6
XV 8,431,3 17,166,5 14,842,1
XVI 9,568,5 18,070,5 17,885,4
XVII 19,251,1 7,704,7 6,201,1
XVIII 339,3 1,542,6 675,9
XX 223,6 807,0 957,0
XXI 0,0 0,1 0,0
TOTAL 56,992,0 76,792,7 63,132,4WT/REG41/2
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Imports ofBulgaria from theWorld
(in´000US$, c.i.f.)
HSSections 1994 1995 1996
I. 64,1 63,2 30,9
II. 114,8 80,2 93,2
III. 21,5 21,8 20,2
IV. 261,9 296,6 207,2
V. 1302,2 1686,4 1496,9
VI. 366,6 612,2 442,7
VII. 149,1 210,2 162,7
VIII. 41,8 52,7 58,6
IX. 25,4 27 20,4
X. 123,3 223,8 141,4
XI. 347,7 484,9 411
XII. 41,1 50,8 49,6
XIII. 44,6 61,7 53,4
XIV. 3,6 8,1 3
XV. 291,3 402,7 258,4
XVI. 657,3 830,8 592,6
XVII. 263,1 276,6 166,1
XVIII. 93 117,5 87,3
XX. 43 64,1 47,3
XXI. 0,1 0,1 n.a.
TOTAL 4257,2 5575,7 4344,9