RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG53/4
27 April 1999
(99-1708)
Committee on Regional Trade Agreements Original:  English
CUSTOMS UNION BETWEEN THE EUROPEAN COMMUNITY
AND THE PRINCIPALITY OF ANDORRA
Questions and Replies
This document reproduces questions addressed to the Parties and the responses submitted by
the Delegation of the European Communities.  The questions and replies set out below are organized
in accordance with document WT/REG53/3.
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I. BACKGROUND INFORMATION ON THE AGREEMENT
1. Membership and Dates of Signature, Ratification and Entry info Force
GATT Article XXIV:7(a) stipulates that “Any contracting party deciding to enter into a
customs union or free-trade area, or an interim agreement leading to the formation of such a
union or area, shall promptly notify the Contracting Parties…”  It is our understanding that
once the agreement has been signed by the Parties,  it is considered that the contracting parties
have decided to enter into such customs union and that any notification made afterwards
beyond the date of signing is not in conformity with the said GATT Article.
We note that the Agreement between the EC and Andorra was signed on 28 July 1990,
coming into force on 1 July 1991, while the said notification of the Agreement can be considered
as established in March 1998, well after the origin al signing.  Thus, we would like to express our
concern over the lateness of notification, which,  in turn, is not in conformity with GATT
Article XXIV:7(a).
Could the parties explain why the notification was only made in 1998, when the
obligation in Article XXIV:7(a) is “prompt” notification?
The European Community acknowledges that notification of the Agreement should ideally
have taken place sooner.  Appropriate action was taken to correct this situation in February 1998.  It is
also relevant that at the time of signature and entry into force of the Agreement in 1990/91, the
Principality of Andorra did not enjoy the same international status it does now, following the
constitutional settlement of 1993.WT/REG53/4
Page 2
3. Scope
This Agreement on the Customs Union only includes industrial products.  Thus, as it
does not cover agricultural products, we consider that it is not in conformity with GATT
Article XXIV:8(a).
The Agreement contains provisions applicable to trade in all sectors.  A customs union
applies to products falling within Chapters 25 to 97 of the Harmonized System (HS);  other provisions
within the Agreement are applicable to trade in agricultural products (HS Chapters 1 to 24).  The
Parties are engaged in discussions on the future evolution of the Agreement.
It is clear that the Customs Union covers only industrial products and that agricultural
products are excluded from it.  It is not clear to us that this agreement satisfies the
“substantially all the trade” provisions of Article XXIV:8(a).  Further, it appears that products
which are not part of the Customs Union are el igible for “preferential” - less than MFN but
greater than zero - tariffs.  Article XXIV provid es for the elimination of tariffs not the reduction
of tariffs.  How do the parties justify the reduction, but not elimination of tariffs on intra-trade?This would appear to us to constitute the raising of trade barriers to third parties outside that
allowed by Article XXIV.  We see no legal basis for the maintenance of such non-zero
preferential tariffs.
The Agreement contains provisions applicable to trade in all sectors.  A customs union
applies to products falling within HS Chapters 25 to 97;  other provisions within the Agreement are
applicable to trade in agricultural products (HS Chapters 1 to 24).  The parties are engaged in
discussions on the future evolution of the Agreement.
The European Community does not share the view  that Article XXIV forbids partial tariff
liberalization between the Parties to a Customs Union or Free Trade Area, or that this constitutes a
raising of trade barriers to third parties.  The re quirement of Article XXIV:8 is for the elimination of
duties on substantially all the trade between the parties, while the general requirement of
Article XXIV:5 is that the level of duties applied to imports from third parties should not be raised.
4. Could the Parties explain the specific rules applying to agriculture in this agreement?
Products falling within HS Chapters 1 to 24 are not covered by the Customs Union.  Such
products originating in Andorra are exempt from import duties when imported into the Community;
products originating in the Community are subject to  the MFN duty rate when imported into Andorra,
except for products covered by Headings 24.02 and 24.03 which pay 60 per cent of the MFN duty.
II. TRADE PROVISIONS
1. Import Restrictions
1.3 Common External Tariffs
(i) Please explain, if any, the difference betw een this common external tariff with that of
the EC system.
(ii) Please indicate whether there were any cu stoms areas which had to apply higher tariff
rates than the concession rates when in troducing this common external tariff.WT/REG53/4
Page 3
(iii) Please explain the average tariff rate before and after the introduction of this common
external tariff.
For products covered by the Customs Union (HS Chapters 25-97), the common external tariff
is the same as that of the EC.  There is no common external tariff applicable to products inHS Chapters 1 to 24.
The average tariff rate on imports into the EC of products covered by the common external
tariff remained unchanged after entry into force of the Agreement.  The average EC tariff on industrial
products at the time was approximately 5.7 per cent (calculated on a trade-weighted basis) or 6.5 per
cent (calculated as a simple average).  EC duties were not raised as a result of the introduction of the
common external tariff.
For imports into Andorra of goods covered by the Customs Union, the EC common external
tariff replaced the “Taxa sobre al consum” (consumption tax) which was previously applied.  This tax
took the form of a charge based on the national consumption tax law, approved by the Andorran
Parliament on 30 December 1985.  Prior to the EC-Andorra Agreement, this tax was the only customscharge collected on goods imported into the customs territory of the Principality of Andorra.
3. Rules of Origin
Please explain whether the provisions on rules of origin require high-value added
conditions that would become restrictive measures to the non-parties.
The rules of origin foreseen in the appendix to the Agreement are applicable only to products
falling within Chapters 1 to 24.  The criterion applicable is that of “wholly obtained pr oducts” and as
such there is no value-added requirement.
Could the parties further explain the rules of  origin applying to goods covered by the
Customs Union and goods outside the Customs Union?  Is it correct that the pan-European
cumulation regime does not apply to this Agreement?
For the products covered by the Customs Union, no rules of origin are applied.
For the products outside the scope of the Customs Union, the rule of origin applicable is that
of "wholly obtained products".   Andorra is not directly part of the system of pan-European
cumulation on rules of origin.  Nevertheless, for products covered by the Customs Union, the
declaration annexed to each bilateral protocol on rules of origin applies.
4. Standards
Do the Parties have plans to negotiate any provisions on technical barriers to trade or
sanitary and phytosanitary measures?
The Parties have no such plans.
5. Safeguards
Could the Parties explain the provision on structural adjustment?  Has this provision
ever been used?
The scope of this question is unclear: what “provision on structural adjustment” is being
referred to?WT/REG53/4
Page 4
(i) Please clarify whether the provisions on safeguard measures in the Agreement will be
applied without discrimination to the parties and the non-parties.
(ii) When applying the safeguard measures according to GATT Article XIX and to the
Agreement on Safeguards, are these measures enforced based on rule of non-
discrimination?
(iii) What is the relationship between the provisions on safeguard measures in the
Agreement and the related provisions of the WTO Agreement?  Are these provisions the
same or are there differences between the two?  If the safeguard measures according to
GATT Article XIX and to the Agreement on Safeguards are not applied to the partiesand are thus applied in a form which is not in conformity with Article 2(2) of the
Agreement on Safeguards, this will become a source for concern.
(i) The relevant provisions of the Agreement (Article 10) establish a bilateral mechanism which
does not entail any discrimination.
(ii) The Agreement does not contain any provisions which in themselves permit the application of
safeguard measures according to GATT Article XIX and the WTO Safeguards Agreement.
(iii) The Agreement does not contain any provisions which relate to or affect the imposition of
safeguard measures according to GATT Article XIX and to the WTO Safeguards Agreement
Could the Parties explain how balance-of-payments (BOP) measures would be applied
toward the other Party to the Agreement?
The Agreement makes no provision for the application of BOP measures.
6. Anti-Dumping and Countervailing Measures
Please clarify whether the automatic extension on anti-dumping was imposed or not
when the Agreement between the Parties became effective.
Under Article 7 of the Agreement, Andorra and the EC apply a common anti-dumping regime
on products covered by the Customs Union.
9. Other
Has Andorra adopted the EU’s non-tariff measures regime?  Does Andorra ban the
importation of meat from animals treated with hormones?  Does Andorra apply the EC’s
import licensing regime for bananas?
Under Article 7 of the Agreement, Andorra adopts, for all products covered by the Customs
Union, the laws, regulations and administrative provisions applicable to customs matters in the
Community and necessary for the proper functioning of the Customs Union.
Annex II of the Agreement provides for the possibility that the Joint Committee may decide,
at the request of the Principality of Andorra, on derogations from the provisions of trade policyadopted by the Principality of Andorra under the Agreement, in order that imports of products
consumed in Andorra should not be affected by th e Agreement.  In this regard, Decision 2/96 of the
Joint Committee of 1 July 1996 (extended by Decision 1/98 of 20 October 1998) established a
surveillance procedure with a framework allowing for re-export to the EC of:WT/REG53/4
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- certain textile products originating in third countries, released for free circulation in
the Principality of Andorra and covered by HS Chapters 50-63;
- certain products originating in the People's Republic of China, also released for free
circulation in the Principality of Andorra.
As a supplement to the Agreement, in May 1997 the European Community and Andorra
agreed a Protocol on Veterinary Matters, which entered into force on 1 March 1998.  The purpose of
this Protocol is to maintain trad itional flows of trade in these produc ts between the Parties.  Under the
Protocol, Andorra applies Community veterinary rules applicable to trade in live animals and animal
products. A list of the Community veterinary provisions to be applied by Andorra should be drawn upby the Joint Committee.
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