WORLD TRADE  
ORGANIZATION  WT/REG142/3 
18 March 2004  
 
(04-1212) 
Committee on Regional Trade Agreements Original:   English 
   
EUROPEAN COMMUNITY – CROATIA INTERIM AGREEMENT 
 
   The following communication, dated 17 March 2004, is being circulated at the request of the Delegations of the European Communities and Croatia.  
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Communication from the Parties
 
  I. BACKGROUND INFORMATION ON THE AGREEMENT 
1. Membership, Dates Of Signatures, Ratification And Entry Into Force 
 Pending entry into force of the Stabilisation and Association Agreem ent (SAA) between the 
European Communities and its Memb er States with Croatia, signed on 29 October 2001, the trade and 
trade-related provisions of the SAA have been im plemented by means of an Interim Agreement on 
Trade and Trade-related Matters.  
 
 The Interim Agreement on Trade and Trad e-related Matters between the European 
Communities and Croatia (hereinafter the Interim Agreemen t) was signed in Luxembourg on             
29 October 2001 and entered into force on 1st March 2002.    
 It consolidates and enhances, on a contractual basis, the Autonomous Trade Preferences to the 
South East Europe countries approved by the EU on 18 September 2000 and applied to Croatia with 
immediate effect.  2. Type Of Agreement 
 The Interim Agreement establishes a free-tr ade area with a transitional period lasting a 
maximum of six years starting from its entry into force. 
 3. Scope 
 All sectors (HS Chapter 1-97) are covered by the Interim Agreement. Textiles and clothing, 
Steel and Processed agricultural products are dealt with  within respectively Protocols 1, 2 and 3 to the 
Agreement.  
  The arrangements regarding trade in wine are de fined in an additional Protocol to the Interim 
Agreement.  
4. Trade Data 
 Croatian exports to the European Union (EU) amounted to € 2.460 million in 2002, while EU 
exports to Croatia were € 6.480 million in the same year. About 55% of Croatia's total external trade 
is with the EU. Textiles and clothing, machinery a nd agricultural products domi nate Croatian exports WT/REG142/3 
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to the EU; Machinery, transportation material and chemicals are the most significant EU exports. Annex 1 contains statistical da ta on EU trade with Croatia. 
   
II. TRADE PROVISIONS 
 The trade provisions of the Interim Agreemen t establish a free-trade area on the basis of 
asymmetry by the EC: i.e. immediate liberalisation on the side of the EC, gradual liberalisation for 
Croatia.  Establishment of the FTA is completed within a maximum six-year transitional period. 
 1. Import Restrictions 
 The provisions on the gradual and asymmetric abolition of import restrictions for products 
originating in the EC or Croatia relate to al most all products covered by Chapters 1-97 of the 
Combined Nomenclature with specific arrangement s regarding textiles and clothes (Protocol N°1), 
steel (Protocol N°2) and processed ag ricultural products (Protocol 3).  
 
 1.1 Duties And Charges 
   1.1.1. Industrial Products    All Products within Chapters 25-97 of the co mbined nomenclature are considered to be 
industrial products, with the exception of the produc ts listed in Annex I § I, (ii) of the WTO 
Agreement on Agriculture. 
   1.1.1. A  - EC tariff elimination on industrial products 
  All customs duties on industrial products, or equivalent measures, are eliminated upon entry 
into force.  
   1.1.1. B - Croatian tariff eliminati on on industrial products 
  All customs duties on industrial products, or equivalent measures, are eliminated upon entry 
into force with the exception of: 
 
• Products listed in Annex I: reduction over a period of three years, from entry into 
force, i.e. 1st March 2002 (to 60% of the basic duty on entry into force, 30% on the second year) to 1st January 2004 when remaining duties shall be abolished,  
 
• Products listed in Annex II: reduction over a period of six years, from 1st March 2002 
(reduction to 70% the first year, to 50% of the basic duty in the second year, then 
40%, 30%, 15%), until 1st January 2007 when a ll remaining duties shall be abolished. 
 
• Textiles and Clothing (Protocol N°1): For products in Annex I of protocol 1: 
reduction over a period of three years from  1st March 2002 (to respectively 60% of 
the basic duty and to 30% in the second year) to 1st January when all remaining duties shall be abolished. For products in  Annex II of protocol 1: reduction over a 
period of five years (to respectively 65% of the basic duty on 1st March 2002, to 50% 
the 2nd year, then 35% and 20%) to 1 January 2006 when all remaining duties shall be abolished. 
  WT/REG142/3 
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• Steel, CET chapter 72 (Protocol N°2): reduction over a period of five years, from    
1st March 2002 (to 65% of the basic duty, 50% the 2nd year, then 35%, 20%) to        1st January 2006 when all remaining duties shall be abolished. 
   1.1.2. Agricultural And Fisheries Products 
 
 All products within Chapters 1-24 of the comb ined nomenclature, together with the products 
listed in Annex I § I, (ii) of the WTO Agreement on Agriculture.    1.1.2. A – EC tariff elimination on agricultural and fishery products  
 
 All customs duties and measures having equiva lent effect, on imports of agricultural and 
fishery products, are abolished upon entry into for ce of the Interim Agreemen t other than those of 
heading Nos 0102, 0201, 0202 and 2204 with sp ecific arrangements and exceptions regarding: 
 
• Products covered by chapters 7 and 8 of the combined nomenclature for which the 
Common Customs Tariff provides for the application of ad valorem  customs duties 
and a specific customs duty, the e limination applies only to the ad valorem  part of the 
duty.  
 
• “Baby beef” as defined in Annex III: the customs duties applicable is 20% of the ad 
valorem  duty and 20% of the specific duty as laid down in the Common Customs 
Tariff of the EC, within the limit of an annual tariff quota of 9,400 tonnes expressed 
in carcass weight.  
 
• The arrangements regarding trade of wine are defined in an additional protocol to the 
Interim Agreement: exemption from custom s duties within the limit of an annual 
tariff quota of 45,000 hl with yearly increases of 10,000 hl provided that at least 80% of the eligible quantity has been utilised in  the previous year. The yearly increase is 
applied until the sum of the tariff quota reaches 70,000 hl.  
 
• Certain fisheries products: the tariff lines concerned and the tariff conditions being 
listed in Annex V(a).  
   1.1.2. B – Croatia tariff elimination on agricultural and fishery products  
 
 From the entry into force of the Interim Arrangement, Croatia is to: 
 
• Abolish its customs duties applicable on ag ricultural products listed in Annex IV (a) 
upon entry into force of the agreement and on products listed in Annex IV (c) from 
the first year after entry into  force of the agreement.  
 
• Abolish its customs duties applicable on ag ricultural products listed in Annex IV (b) 
within limits of tariff quotas indicated for each product listed in that Annex. The tariff quotas are to be increased yearly by the qua ntities indicated for each product in that 
annex. 
 
• Progressively reduce its customs duties appli cable on agricultural products listed in 
Annex IV (d) within the limits of tariff quotas and in accordance with a timetable 
indicated for each product.  
 WT/REG142/3 
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• Reduce progressively to 50% of the MFN duty the customs duties on imports 
originating in the EC listed in Annex IV(e), in accordance with the timetable 
indicated for each product in that annex;  
 
• Reduce progressively to 50% of the MFN duty the customs duties on imports 
originating in the EC listed in Annex IV(f),  within the limits of tariff quotas and in 
accordance with the timetable indicated  for each product in that annex; 
  From the date of entry into force of the Ag reements, Croatia is to grant specific concessions 
on imports of certain fish and fisheries products originating in the EC, listed in Annex V(b), in 
accordance with the provisi ons specified therein.  
 
  1.1.3. Processed Agricultural Products 
  The EC and Croatia are to apply to processed  agricultural products the duties detailed in, 
respectively, annexes I and II of Protocol 3, in accordance with the timetable and conditions specified 
therein. 
 
 1.2 Quantitative Restrictions   The EC and Croatia abolished all quantitative restrictions and measures having equivalent 
effects upon entry into force of the Interim Agreement (1st March 2002).  
 1.3 Common External Tariff 
  There is no provision for the establishment of a Common External Tariff.  2. Export restrictions 
 Special provisions outlined in the Standstill, General Safeguard and Shortage clauses (see 
Safeguards).  3. Rules Of Origin 
 The criteria for defining the originating status  of products in the framework of the Interim 
Agreement with Croatia (rules of origin) is define d in Protocol 4 of the Interim Agreement, as 
mentioned in Article 28 (SAA Art 41).    The normal criteria for defining the originating status of a product has been retained (Protocol 4 Title II) and includes provisions for non-origina ting materials that have been sufficiently 
transformed to be considered originating (Ar ticle 6). The processing requirements are listed on 
product-by-product basis in Article 7 and Annexes I and II to Protocol 4.  Cumulation possibilities 
exist on a bilateral basis (Articles 3 and 4).   The “no-drawback rule” has been  introduced in order to avoid circumvention of tariffs (Title 
IV). Provisions on this matter are to be applied fro m 1st January 2003, while a partial derogation to 
the rule in favour of Croatia is applicable until 31st December 2005, with possible review on a mutual 
agreement.     The necessary administrative procedures to claim preferential treatment are established under Title V. Evidence of the originating status of products  is to be furnished on the basis of a movement 
certificate EUR.1 or an “invoice declaration”, as provided in Annex III and IV to the Protocol.  
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 The rules of origin are in line with the Comm on Declaration with regard to Preferential Rules 
of Origin contained in Annex II to the Agreement on Rules of origin as set out in the Final Act of the 
Uruguay Round. The rules of origin contained in Pr otocol 4 will not result in higher tariff barriers to 
third countries.  
4. Standards 
 The Interim Agreement does not provide for co-operation to reduce differences in the field of 
conformity assessment.  
(a) Technical Barriers To Trade 
 No provision. 
 
(b) Sanitary And Phytosanitary Measures 
 No provision. 
 
5. Safeguards 
 Under the Interim Agreement the parties can take emergency measures in the following cases: 
 
(a) Appropriate measures (priority being gi ven to those which least disturb the 
functioning of the Agreement) may be undertaken when any product is being 
imported in such increased quantities a nd under such conditions as to cause or 
threaten to cause : 
- serious injury
 to domestic producers of like or directly competitive products 
in the territory of one of the importing parties, or  
- serious disturbances  in any sector of the economy or difficulties which could 
bring about serious deterioration in the economic situation of the region    
(art.  25). 
(b) Appropriate measures (priority being gi ven to those which least disturb the 
functioning of the Agreement) may be undertaken in case of: 
- a critical shortage , or threat of, of foodstuffs or other products essential to the 
exporting Party, or  
- re-export to a third country  of a product against which the exporting Party 
maintains quantitative export restrictions, export duties or measures or 
charges having equivalent effect (Article 26).  
 The difficulties arising from one or the other s ituations are referred for examination to the 
Interim Committee which may take any decision need ed to put an end to such difficulties. If no 
satisfactory solution has been reached within 30 da ys of the matter being refereed to the Interim 
Committee, the importing Party may adopt the appr opriate measures to remedy the problem. On 
exceptional and critical circumstances, precautionary measures may be taken by one Party which shall 
inform the other Party immediate thereof.   The EC and Croatia shall not take safeguard  measures that exceed what is necessary to 
remedy the difficulties arisen. When taken, the saf eguard measures are notified immediately to the 
Interim Committee and shall be subject to periodic consultations. WT/REG142/3 
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 When serious balance of payments difficulties
, or imminent threat thereof, occur, restrictive 
measures may be adopted in accordance with th e conditions established under the WTO Agreement, 
including measures relating to imports, which sha ll be of limited duration and may not go beyond 
what is necessary to remedy the balance of paym ents situation. A time schedule to remove the 
measures shall be presented as soon as possible (Article 34).  
 
 If, given the particular sensitivity of agricultural and fisheries markets , imports of products 
originating in one Party, which are the subject of concessions under the Interim Agreement, cause 
serious disturbance  to the markets in the other Party, both Parties shall enter into consultations 
immediately to find an appropriate solution. Pending such solution, the Party concerned may take the 
appropriate measures it deems necessary (Article 18). 
 6. Anti-Dumping And Countervailing Measures 
 The parties of the Interim Agreement may ta ke anti-dumping measures in accordance with the 
Agreement on implementation of Article VI of  the GATTT 1994 and its own related internal 
legislation. 
  The Interim Committee shall be informed of  the dumping case as soon as the authorities of 
the importing Party have initiated an investigation. When no end has been put to the dumping within 
the meaning of Article VI of the GATT or no other sa tisfactory solution has been reached within      
30 days of the matter being referred to the Inte rim Committee, the importing Party may adopt the 
appropriate measures. 
  The Interim Agreement does not contain any pr ovisions relating to countervailing measures.
  7. Subsidies And State-Aid 
 Are considered as incompatible with the proper functioning of the Agreement in so far as they 
may affect trade between the Parties:  
- any agreement which would prevent, restrict or distort competition,  
 - any abuse of dominant position,   
 
- any state aid which distorts or threatens trade, with the exception of provisions 
regarding trade in agricultural and fisheries products. 
  These practices shall be regulated on the basis of the relevant rules of the Treaty establishing 
the European Community, each party ensuring that the relevant provisions are applied within four 
years after entry into force of the Agreement. Th e Agreement includes transparency provisions on 
public aid.   In case of practices incompatible with these rules, a Party to the Agreement may take 
appropriate measures, after consu ltation within the Interim Committee, or after thirty working days 
following referral for such consultation.  
  Croatia shall progressively adjust any State monopolies of a commercial character so as to ensure that, by the end of the fourth year follo wing the entry into force of this Agreement, no 
discrimination regarding the conditions under which goods are procured and marketed exists between 
nationals of the Member States and Croatia. The Interim Committee shall be informed about the 
measures adopted to attain this objective.    WT/REG142/3 
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8. Sector-Specific Provisions 
(a) Textiles:  
 Protocol N°1 sets out the conditions and timet able for Croatia’s reduction of its customs 
duties on certain categories of textiles and clothing (as listed in Annex I of the Protocol).      
(b) Steel :  
 Protocol N°2 contains four main provisions :  
 
- It sets out the conditions and timetable for Croatia’s reduction of its customs duties on 
steel products over a four years period;  
 
- It sets the principle of a restructuring of the Croatia’s steel sector within a period of 
two years;  
 - It specifies the conditions under which Croa tia may exceptionally, within a period of 
five years after entry into force of the Ag reement, grant public aid dedicated to the 
reform and conversion of its steel industry;  
 - It entrusts the Interim Committee to m onitor the implementation aspects of this 
Protocol. Appropriate measures may be taken by  either party, when they consider that 
a particular practice is incompatible with the terms of the Protocol and that it causes 
or threatens to cause prejudice to the interest s of the party or material injury to its 
domestic industry. Such measures may be taken after consultation within a contact 
group on steel, after 30 working days following such consultation. 
 
(c) Agricultural and Fisheries products: Chapter II 
- Agricultural products originating in Croatia  benefit on imports into EC from the 
abolition of customs duties and charges having equivalent effect with the exception of 
heading Nos 0102, 0201, 0202 and 2204 and special provisions (products covered by chapter 7 and 8) of the combined nomenclature  as set out in Article 14.1. Article 14.2. 
(baby beef), Article 14.4. and Article 15.1. (fisheries listed in Annex V.a.), 
 
- Agricultural products originating in the EC  benefit on imports into Croatia from the 
provisions set out in Art. 14.3. which singles out four categories of products:  
 
 Products listed in Annex IV (a) for wh ich all customs duties are abolished, 
from the date of entry into force of the Agreement,  
 
 Products listed in Annex IV (b) for whic h customs duties are abolished within 
tariff quotas with yearly increases in the tariff quotas quantities, 
  Products listed in Annex IV (c) for wh ich all customs duties are abolished, 
from the first year after the date of entry into force of the Agreement, 
 
 Products listed in Annexes IV(d), (e ) and (f) for which customs duties are 
reduced progressively in accordance with a specific timetable for each product. 
  The arrangements regarding trade in wines are defined in an additional protocol 
to the Interim Agreement.   
 WT/REG142/3 
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 No later than 1st July 2006, the EC and Cr oatia will assess, in the Interim Committee, the 
situation of their trade in agricultural and fisher ies products with a view to determining further 
liberalising measures to be applied by the Community and Croatia.  
(d) Processed Agricultural Products 
 Protocol N°3 sets out the duties, conditions a nd timetables to be applied by the EC and  
Croatia on processed agricultural products.  9. Other 
 A. Co-Operation In Customs Administration
 
 
 Mutual assistance between administrative aut horities in customs matters of the Parties will 
take place in accordance with the prov isions of Protoc ol 5 (art.6).  
  B. Customs Unions, Free Trade Areas Or Arrangements For Frontier Trade 
 
 
 The Interim Agreement does not preclude th e maintenance or establishment of Customs 
unions, Free trade areas or Arrangements for frontier trade except in so far as they alter the trade 
arrangements provided for in this Agreement (art 23).   III. GENERAL PROVISIONS OF THE AGREEMENT 
1. Exceptions And Reservations  
 Articles 29 and 44 contain sta ndard exceptions clauses on national security, public morality, 
law and order and public security, the protection of life and health of humans, animals or plants, 
national treasures, industrial and commercial pr operty and rules related to gold and silver. 
 
2. Accession  
 Either Party may denounce this Agreement by notifying the other party, the Interim 
Agreement ceasing to apply six months af ter the date of such notification. 
  The Interim Agreement does not contain any pr ovision allowing other countries to accede to 
this Agreement. Neither does the Stabilisation and Association Agreement. 
 3. Dispute Settlement Procedures 
 The parties may refer to the Interim Committe e any dispute relating to the application or 
interpretation of the Interim Agreement. The Inte rim Committee may settle the dispute by means of 
binding decision (Article 42). 
 4. Relations With Other Trade Agreements 
 The Interim Agreement does not preclude th e maintenance or establishment of Customs 
unions, Free trade areas or Arrangements for frontier trade except in so far as they alter the trade 
arrangements provided for in this Agreement. 
 
 The Interim Agreement and the future Stabili sation and Association Agreement are intended 
to contribute to regional trade integration within the South East Europe region. This objective is to be 
met by the implementation by the countries of th e region of the series of measures for trade  WT/REG142/3 
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liberalisation and facilitation agreed upon  in the Memorandum of Understanding signed on               
27 June 2001 in the framework of the Stability Pact for South Eastern Europe.  5. Institutional Framework 
 Articles 38 to 41 establish an Interim Committe e which shall perform the duties assigned to it 
in the Interim Agreement. It shall have the power to take decisions and ma ke recommendations in the 
cases provided for in the Agreement. The Interim Committee may be assisted in the performance of 
its duties by subcommittees. It will be composed of representatives of the EC and representatives of 
the Government of the Republic of Croatia.   
 
IV. OTHER 
(a) Investment And Related Payments  
 The Interim Agreement includes provisions on  exchange rate policy, balance-of-payments 
difficulties, and transfers. On the latter, Article 33 s tipulates that no restrictive measures shall apply to 
transfers related to investment and to the repatria tion of amounts invested or reinvested. Article 43 
specifies that the application of the Arrangement  by both Parties shall not give rise to any 
discrimination between the nationals and the compani es of one of the Party and those of the other.  
 
(b) Competition Provisions  
 Anti-competitive activities are r ecognised as incompatible with the proper functioning of the 
Interim Agreement and will be assessed on the basis of  the criteria arising from the application of the 
rules of the Treaty establishing the European Community (Article 35). 
 
(c) Intellectual Property Rights 
 Provisions on intellectual property rights are included under Article 36 and Annex VI.  
 
 Croatia shall take the necessary measures in order to guarantee no later than three years after entry into force of the agreement a level of pr otection on intellectual, industrial and commercial 
property rights similar to that existing in the Comm unity, including effective means of enforcing such 
rights. The Interim Committee may decide to oblige Croatia to accede to specific multilateral 
conventions in this area. 
 
 The Interim Committee shall be referred to in  case difficulties arise with the protection of 
intellectual, industrial and commercial property w ith the view to reaching mutually satisfactory 
solutions.   
(d) Co-operation 
 The Interim Agreement foresees the strengtheni ng of co-operation, notably through mutual 
assistance between administrative authorities in customs matters. WT/REG142/3 
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ANNEX 1 
 
Trade Data
 
  
Note: The following tables show the development of trade between the EC  and CROATIA over the 
period 1998-2002.  For ease of comparison, figures are also given for the development of EC trade with all third countries. 
 
Table I
 
 
Share of CROATIA in Total EU Trade 1998-2002 (Billion ECU/EUR) 
 
Extra-EU CROATIA Year 
Exports Imports Total Exports Imports Total 
1998 733.4 710.5 1444.0 4.4 1.8 6.2 
1999 760.2 779.8 1540.0 4.0 1.9 5.9 
2000 941.3 1033.3 1974.6 4.6 2.2 6.8 
2001 983.0 1028.1 1995.6 5.4 2.5 7.9 
2002 990.9 987.3 1978.2 6.5 2.4 8.9 
(Source: Eurostat/Comext)  
  
Table II
 
 
Share of CROATIA in Total EU Trade 1998-2002 (Percentage) 
 
Trade in Croatia with the EU, % of tota l Trade in EU with Croatia, % of total Year 
Exports Imports Total Exports Imports Total 
1998 54.4 43.9 50.6 0.6 0.3 0.4 
1999 54.7 48.1 52.4 0.5 0.2 0.4 
2000 53.8 54.4 54.2 0.5 0.2 0.3 
2001 60.5 58.5 59.2 0.6 0.2 0.4 
2002 51.3 54.5 53.5 0.7 0.2 0.5 
(Source: Eurostat/Comext and IMF) 
  
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