# EUR-Lex - 52012PC0773 - EN

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# 52012PC0773

**Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL concerning the exercise of the Union's rights for the application and enforcement of international trade rules /* COM/2012/0773 final - 2012/0359 (COD) */**

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EXPLANATORY MEMORANDUM

1.           CONTEXT OF THE PROPOSAL

Grounds and
objectives

The present proposal
for a Regulation of the European Parliament and of the
Council reflects the Union's priority to enforce
effectively its trade rights. This objective was set out in the Commission
Communication on "Trade, growth and world affairs"[1] and endorsed in the Council conclusions of 21 December 2010[2].

The Union currently does not have a common legislative framework[3] to enforce its rights under international trade agreements. The present
proposal aims to remedy this situation.

General context

The Union may be called on to take unilateral measures to enforce and defend its rights and
interests under international trade agreements. This is the case under the
dispute settlement rules of the World Trade Organization (WTO), as well as
under bilateral or regional dispute settlement mechanisms. A similar situation
exists as regards trade safeguards and so-called "rebinding"
exercises under international agreements. Any such measures require rapid
action in order to function as an effective and credible tool to induce
compliance and in order to meet the deadlines set out in the Union's relevant
international commitments. This calls for rapid, efficient and flexible
decision-making within the structures provided by the Treaty of Lisbon.

Prior to the entry
into force of the Lisbon Treaty, the Union approached enforcement in an ad hoc
manner in the form of Regulations adopted by the Council on the basis of a
Commission proposal, based on former Article 133. On the other hand, after the entry into force of the Treaty of Lisbon, the Council and the
European Parliament are co-legislators under the ordinary legislative procedure
in relation to the measures defining the framework for implementing the common
commercial policy (Article 207 of the Treaty on the Functioning of the European
Union, "the TFEU"). Enforcement of rights under international trade
agreements is a typical executive function that may require adopting and
implementing measures within strict deadlines. It is appropriate for the
Council and the European Parliament to establish a clear and predictable framework
for the adoption of any such acts.

The practice prior
to the entry into force of the TFEU serves as an illustration of the
desirability to operate under procedures that enable quick and efficient decision-making
to enforce the Union's rights:

–
In the WTO dispute settlement case US-Foreign
Sales Corporation, the adoption of Council Regulation (EC) 2193/2003 of 8
December 2003 increasing customs duties on some imports from the US took 8 months from the adoption of a Commission proposal. The suspension of that measure,
through Council Regulation (EC) No 728/2006 of 15 May 2006, took 3 days to
adopt from the adoption of a Commission proposal.

–
In the WTO dispute settlement case US-Byrd,
Council Regulation (EC) No 673/2005 of 25 April 2005 increasing customs duties
on certain products originating in the US took approximately 2 months to be
adopted, from the adoption of a Commission proposal.

–
In WTO dispute settlement case US-wheat gluten,
Council Regulation (EC) No 1804/98 of 14 August 1998 reserved the EU rights to
rebalance the adverse effects of the US safeguards measures in accordance with
Article 8 of the WTO agreement on safeguards. Its adoption took 1 month from
the adoption of a Commission proposal.

–
In US-Steel, adoption of Council Regulation (EC)
No 1031/2002 of 13 June 2002 on safeguard rebalancing measures took 2 months;
repeal of rebalancing under the same case only took 4 days.

In the absence of an
appropriate legislative framework for the implementation of commercial policy
measures in situations similar to the above mentioned cases, it would be
necessary to resort to the
ordinary legislative procedure for the adoption of measures in certain
situations. It takes 15 to 31 months on average for the adoption of a
legislative act, a length which could affect the ability of the Union to exercise its rights effectively within the time frames defined in international
trade agreements.

The present draft
Regulation is rooted in the consideration that (a) the adoption of commercial
policy measures to enforce the Union's rights under international agreements is
a typical executive function that needs to be implemented within a framework of
common rules; (b) in the absence of an appropriate legislative framework, the
Union's ability to effectively enforce its rights may be compromised; (c) there
is a potential conflict between the relatively lengthy Union's decision-making
time frames and the time frames for the enforcement of rights under international trade agreements.

In this context, the present draft Regulation
proposes the creation of a common legislative framework
to enforce the Union's rights under international trade agreements, in line
with the Treaty of Lisbon. The Regulation proposes to empower the Commission to
adopt implementing acts in accordance with Article 291 of the TFEU, within the scope
established by this draft Regulation and within the limits and in accordance
with the criteria expressly set out. The scope of the
Regulation extends to adoption, suspension, modification and termination of
implementing acts with regard to:

(a)          Enforcement of the Union's rights under binding multilateral and bilateral dispute settlement rules;

(b)          Rebalancing measures under
multilateral and bilateral safeguard rules;

(c)          Rebalancing measures in cases of
modifications by a third country of its concessions under Article XXVIII GATT
1994.

Under the present draft Regulation, the
Commission may adopt the following types of commercial policy measures: customs
duties, quantitative restrictions on imports or exports of goods, and measures
in the area of public procurement. This approach results from the experience
gained over the years in the adoption of commercial policy measures, and it
reflects the fact that action in the selected areas is practicable and generally
effective. At the current stage of development of Union law, particularly
taking into account national regulations on services and intellectual property
and the limits to effective action inherent to the nature of those sectors, it
is appropriate to focus on other commercial policy areas for the purposes of
the Commission's empowerment. It should be noted that
so-called "cross retaliation" (i.e. suspension of concessions or
other obligations in a different sector from the one
where the violation was adjudicated) is generally
possible under WTO rules and that there is no
limitation on "cross retaliation" in the Union's free trade agreements. Should it prove necessary for the Union to resort to commercial
policy measures not covered by the draft Regulation, including with regard to
trade in services or the commercial aspects of intellectual property rights,
the Commission could make proposals for a legislative act on the basis of
Article 207 TFEU or resort to other applicable procedures.

A review clause establishes that the
Commission shall assess the functioning of the present Regulation three years after the first instance of implementation of the draft
Regulation occurred. The Commission shall issue a
report and, if the circumstances so warrant, may propose adequate measures to
improve the Regulation efficiency. In this context, consideration can be given
to the range of commercial policy measures under the Regulation such as trade
in services and intellectual property rights, in addition to goods.

With respect to government procurement,
under the terms of the WTO Agreement on Government Procurement ("the
GPA"), both in the version currently in force and in the revised version,
when a GPA Party fails to respect its commitments, other GPA Parties may
suspend concessions or other obligations only with regard to procurement
markets. Given this, it is important to foresee in the proposed draft
Regulation the possible adoption of commercial policy measures concerning
public procurement, in order to make it possible for the Union to effectively
enforce its legal rights with respect to government procurement covered by the Union's international obligations. Aside from the WTO dispute settlement system, which has
been used in several occasions to tackle practices contrary to the GPA, action
to enforce procurement commitments is also likely to arise in a bilateral
context, as recent bilateral trade agreements concluded by the Union include fully-fledged dispute settlement mechanisms. The Union has experience in the
implementation of commercial policy measures limiting access for third
countries to the Union's procurement markets, where necessary[4]. Due to the particularities of
public procurement, in particular the existence of an administrative procedure
that regulates and determines access to specific calls for tenders, it is
possible to foresee action as regards procurement of both goods and services.
Furthermore, commercial policy measures under this draft Regulation would match
the scope of the procurement commitments that are suspended –i.e. they would
apply to certain entities and above certain thresholds only. Finally, the
relationship between the present proposal and the Commission proposal for a
Regulation of the European Parliament and of the Council on the access of
third-country goods and services to the Union's internal market in public
procurement (COM(2012) 124 of 21 March 2012) should be noted. The latter
proposal aims at increasing the Union's leverage for the negotiation of terms
of access for the Union's goods, services and suppliers to the public
procurement markets of third countries: it thus focuses on the access to the
Union's procurement market of third country goods and services not benefiting
from any market access commitments under existing international agreements covering
public procurement. The present proposal, by contrast, deals in a horizontal
manner with the enforcement of such agreements: it thus completes the
regulation of international aspects of public procurement, in so far as it
provides a framework of rules that will allow the enforcement of procurement
provisions in international trade agreements.

2.           RESULTS OF CONSULTATIONS
WITH THE INTERESTED PARTIES AND IMPACT ASSESSMENTS

In the preparation of the present proposal,
two non-papers were circulated to the Council's Trade Policy Committee and the
European Parliament's International Trade Committee (INTA) on 19 September 2011
and 11 November 2011, respectively. Member States were consulted in two
technical meetings on 27 September and 28 November 2011 respectively.

The purpose of efficient and efficacious
enforcement of the Union's rights enjoys broad support.

No impact assessment of the present
proposal has been carried out, since: the present initiative does not have a
direct economic, social or environmental impact and the nature of the measures
at issue (case by case) does not in any case allow an ex-ante evaluation.

3.           LEGAL ELEMENTS OF THE
PROPOSAL

Summary

The Union does not have a common
legislative framework to enforce the Union's rights under international trade
agreements. The current initiative intends to remedy to this situation by proposing the establishment of a legislative instrument to allow
the Union to enforce and defend its rights in compliance with its international
obligations. Its objective is efficient and swift
implementation with a view to safeguarding the Union's interest. Accordingly,
on the basis of Article 207 of the TFEU, it proposes to empower the Commission
to adopt, suspend, modify or terminate implementing
acts to enforce the Union's rights within the structure of the Treaty of
Lisbon, i.e. in accordance with Article 291 of the TFEU.

Under WTO and bilateral dispute settlement
rules as well as multilateral and bilateral safeguard measures the Union may be required to take unilateral measures to defend its rights and interests. Enforcement
action under dispute settlement provisions or re-balancing measures requires
relatively swift action in compliance with the relevant trade rules and in
order to function as an effective tool to induce compliance.

The regulation must be adopted at Union
level. The common commercial policy is an exclusive competence of the Union.

Legal basis

Article 207 of the TFEU.

Structure of the
Regulation

The objective of the draft Regulation is to
lay down rules and procedures to ensure that the Union is in a position to
effectively exercise its rights to suspend or withdraw concessions in response to
breaches of by a third country of international trade rules with a view to
securing a satisfactory solution; and to rebalance concessions or other
obligations in the trade relations with third countries, when the import
treatment accorded to goods from the Union is altered.

The scope of the draft Regulation, as set
out in Article 3 covers the following situations:

(a)          Following the adjudication of
trade disputes under the WTO Dispute Settlement Understanding (DSU), when the Union has been authorised to suspend concessions or other obligations under the
multilateral and plurilateral agreements covered by the Dispute Settlement Understanding.

Under the WTO, suspension of concessions or
other obligations is governed by Article 22, paragraph 3 of the DSU; in case of
prohibited subsidies, Article 4.10 of the Agreement on Subsidies and
Countervailing Measures applies[5]
and with regard to so called actionable subsidies Article 7.9 of the Agreement
on Subsidies and Countervailing Measures.

(b)          Following the adjudication of
trade disputes under other international trade agreements, including regional
or bilateral agreements, when the Union has the right to suspend concessions or
other obligations under such agreements.

Such international trade agreements concluded
by the Union set out rules for dispute settlement which entitles the parties to
enforce their own rights in accordance with the rules set out in the relevant
agreement.

(c)          For the rebalancing of concessions
or other obligations, to which the application of a safeguard measure by a
third country may give right pursuant to either Article 8 of the WTO Agreement
on Safeguards (AoS) or the provisions on safeguard rules included in the Union's
regional or bilateral agreements.

Article 8 AoS, which only relates to goods[6], states that Members applying
safeguard measures generally must offer trade compensation to countries
affected by the safeguard adverse effects following consultation prior to the
application or extension of a safeguard measures, in accordance with Article
12, paragraph 3 of the AoS. In the event no agreement is reached, the affected
exporting Members individually may take re-balancing measures, not later than
90 days after the measure is applied. The right to take re-balancing measures
vis-à-vis the Member applying the safeguard may be exercised a) either three
years after the measure has come into effect or b) as soon as the measure is
found to be WTO-incompatible by the WTO Dispute Settlement Body (DSB) (the
three-year grace period set out in Article 8 of the AoS does not apply if the
measure is based on a relative increase in imports). Similarly rebalancing
measures may arise under the application of safeguard rules embedded in
bilateral or regional FTAs[7].

The existing Union legislation implementing
multilateral and bilateral safeguard measures does not regulate these aspects
of either Article 8 of the AoS or the relevant rules in the FTAs but rather
establishes the procedures for the application of safeguard measures by the Union. Any rebalancing measure would in principle be subject to the ordinary legislative
procedure, unless covered by the present single legislative framework.

(d)          In cases of modification of
concessions by a WTO member under Article XXVIII of the General Agreement on Tariffs and Trade (GATT) 1994, where no
compensatory adjustments have been agreed.

In case of modification of
a concession by another WTO member pursuant to Article XXVIII of the GATT 1994, if no agreement is achieved
with the members holding negotiating or supplying rights, the contracting party
which proposes to modify its concession is free to do. In this case, those
members[8]
holding a right may take rebalancing measures not later than six months after
such modification of the concession has occurred. Such rebalancing measures
would imply withdrawing, upon the expiration of thirty days from the day on
which written notice of the withdrawal of the concession is received by the
contracting parties, substantially equivalent concessions to those initially
negotiated with the contracting party that modifies or withdraws a concession.
So far the Union has not withdrawn concessions under Article XXVIII of the GATT
1994. However, should the possibility arise, trade re-balancing stemming from
modification of concessions by other WTO members under Article XXVIII GATT
respectively would occur within relatively short deadlines (not later than 6
months after the Member modifies or withdraws its concession). Effective
decision-making procedures to implement rebalancing measures would allow the Union
to engage credibly vis-à-vis its partner in rebinding negotiations and may
influence the course of negotiations on compensatory adjustment to the Union's advantage.

The Regulation is without
prejudice to the adoption of commercial policy measures under other procedures,
for instance with regard to commercial policy measures in the sector of
services and intellectual property rights following multilateral and regional
or bilateral dispute settlement adjudication.

Pursuant to Article 291 of
the TFEU, when action is necessary to enforce the EU rights under the
circumstances above mentioned the Commission shall adopt implementing acts in
accordance with the examination procedure (Article 4 "Exercise of the Union's
rights"). Implementing acts shall respect the rule that the level of
countermeasures should not exceed the level of nullification and impairment, generally
intended as the adverse impact on the Union resulting from the third country
measure, as defined in the relevant agreement (Article 2
"Definitions"). In
determining the scope of the implementing act to be adopted the Commission
shall also rely on various criteria, in addition to the interests expressed in
the public consultations and the Union's general interests, i.e. effectiveness of the measures in inducing compliance of third
countries with international trade rules; potential of the measures to provide relief to economic
operators within the Union affected by third country measures; availability of
alternative sources of supply for the products
concerned, in order to avoid or minimise any negative impact on downstream industries or final consumers within the Union; any
specific criteria that may be established in international trade agreements in
connection with the situations foreseen in Article 3.

The types of commercial
measures that may be enacted by means of an implementing act are measures concerning
imports or exports of goods and measures in the field of public procurement.

Import or export measures include
the suspension of tariff concessions and the imposition of new or increased
customs duties; introduction or increase of quantitative restrictions on
imports or exports, whether made effective through quotas, import or export licenses
or other measures.

The WTO Agreement on Government Procurement
states that any dispute arising thereunder shall not result in the suspension
of concessions or other obligations under any other covered agreement of the
WTO. Being so, it is important to foresee in
the proposed Regulation the possible adoption of commercial policy measures
concerning public procurement, in order to make it possible for the Union to effectively enforce its legal rights. Due to the particularities of public
procurement, in particular the existence of an administrative procedure that
regulates and determines access to specific calls for tenders, it is possible
to foresee action as regards procurement of both goods and services.

In this regard, the type of commercial policy measures that may be enacted concern
the exclusion from public procurement of tenders the total value of which is made up for more
than 50% of goods or services originating in the third country concerned;
and/or the imposition of a
mandatory price penalty on that part of the tender consisting of goods or
services originating in the third country concerned (Article 5 "Commercial
policy measures").

The examination procedure should be used for
the adoption, suspension, modification and termination of the implementing acts
determining the appropriate commercial policy measures for the exercise of the Union's
rights (Articles 4 "Exercise of the Union's rights" and 7 "Suspension, modification and termination of
measures"). In adopting implementing acts, and with a view to avoiding the
proliferation of additional structures, the Commission should be assisted by
the existing Trade Barrier Regulation Committee, established by Regulation (EC)
No 3286/94.

4.           BUDGETARY IMPLICATION

None.

The proposed Regulation provides a mechanism to enforce the Union's rights and
apportion responsibility between all institutions.

2012/0359 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT
AND OF THE COUNCIL

concerning the exercise of the Union's rights for the application and enforcement of international trade rules

THE EUROPEAN PARLIAMENT AND THE
COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union, and in particular Article 207 thereof,

Having regard to the proposal from the European
Commission,

After transmission of the draft legislative
act to the national Parliaments,

Acting in accordance with the ordinary
legislative procedure,

Whereas:

(1)       The Union has concluded a
number of multilateral, regional and bilateral international trade agreements
creating rights and obligations for the mutual benefit of the parties.

(2)       It is essential that the
Union possesses appropriate instruments to ensure the effective exercise of the
 Union's rights under international trade agreements, in order to safeguard its
economic interests. This is particularly the case in situations where third
countries enact trade restrictive measures that diminish the benefits accruing
to the Union's economic operators under international trade agreements. The Union should be in a position to react swiftly and in a flexible manner in the context of
the procedures and deadlines set out by the international trade agreements
which it has concluded. The Union should therefore adopt legislation defining
the framework for exercising the Union's rights in certain specific situations.

(3)       The WTO and other,
including regional or bilateral, dispute settlement mechanisms aim at finding a
positive solution to any disputes arising between the Union and the other party
or parties to those agreements. The Union should, nevertheless, suspend
concessions or other obligations, in accordance with those dispute settlement
rules, when other avenues to find a positive solution to a dispute have proven
unsuccessful. Action by the Union in such cases serves the purpose of inducing
compliance of the third country concerned with the relevant international trade
rules, in order to restore a situation of reciprocal benefits.

(4)       Under the WTO Agreement on
Safeguards, a WTO member proposing to apply a safeguard measure or seeking the
extension of a safeguard measure should endeavour to maintain a substantially
equivalent level of concessions and other obligations between it and the
exporting members, which would be adversely affected by such a safeguard
measure. Similar rules apply in the context of other, including regional or
bilateral international trade agreements concluded by the Union. The Union should take rebalancing measures by suspending concessions or other obligations in
cases where the third country concerned implements no satisfactory adjustments.
Action by the Union in such cases serves the purpose of inducing the
introduction of trade-enhancing measures by third countries in order to restore
a situation of reciprocal benefits.

(5)       Article XXVIII of the GATT
1994 and the related Understanding govern the modification or withdrawal of
concessions established in the tariff schedules of WTO Members. WTO members
affected by any such modification are entitled, under certain conditions, to
withdraw substantially equivalent concessions. The Union should adopt
rebalancing measures in such cases, unless compensatory adjustments are agreed.
Action by the Union would be aimed at inducing third countries to implement
trade-enhancing measures.

(6)       The Union should have the
possibility to enforce its rights in the area of government procurement in view
of the fact that the WTO Agreement on Government Procurement states that any
dispute arising thereunder shall not result in the suspension of concessions or
other obligations under any other covered agreement of the WTO.

(7)       This Regulation should
focus on those measures where the Union has experience in their design and
application; the possibility to extend the scope of this Regulation to the
sectors of services and intellectual property rights should be assessed in due
time with regard to the specificities of each area.

(8)       When enforcing the rights
of the Union, the origin of a good should be determined in accordance with Council
Regulation (EEC) No 2913/92 of the Council of 12 October 1992 establishing the
Community Customs Code[9];
with regard to enforcing the Union rights following dispute settlement in the
government procurement area, the origin of a service should be determined on
the basis of the origin of the natural or legal person providing it.

(9)       The Commission should evaluate
the functioning of this Regulation no later than three years after the first
instance of its implementation with a view to assessing and, if necessary, improving
its efficiency.

(10)     Implementing acts pursuant to this Regulation should be adopted subject
to specific criteria of appropriateness laid down in the Regulation.

(11)     The Council Regulation (EC)
No 3286/94 of 22 December 1994 laying down Community
procedures in the field of the common commercial policy in order to ensure the
exercise of the Community's rights under international trade rules, in
particular those established under the auspices of the World Trade Organization
(also known as the "Trade barrier Regulation"(TBR)) should be amended in order to reflect the adoption of this
Regulation with regard to the implementation of commercial policy measures.

(12)     In order to ensure uniform
conditions for the implementation of this Regulation, implementing powers
should be conferred to the Commission. Those powers should be exercised in
accordance with Regulation (EU) No 182/2011 of the European Parliament and of
the Council of 16 February 2011[10]
laying down the rules and general principles concerning mechanisms for control
by Member States of the Commission's exercise of implementing powers.

(13)     In
order to safeguard the Union's interests, the Commission should adopt
immediately applicable implementing acts where, in duly justified cases
relating to the need to adapt the commercial policy measures to the behaviour
of the third party concerned, imperative grounds of urgency so require,

HAVE ADOPTED THIS REGULATION:

Article 1

Objective

This Regulation lays down rules and
procedures in order to ensure an effective exercise of the Union's rights to
suspend or withdraw concessions or other obligations under international trade
agreements, with the aim of:

(a)          responding to breaches by third
countries of international trade rules which affect the interests of the Union, with a view to seeking a satisfactory solution.

(b)          rebalancing concessions or other
obligations in the trade relations with third countries, when the import
treatment accorded to goods from the Union is altered.

Article 2

Definitions

For the purposes of this Regulation the
following definitions apply:

(a)          "country" means any
State or separate customs territory;

(b)          "concessions or other
obligations" means tariff concessions or any other benefits that the Union
committed to apply in its trade with third countries by virtue of international
trade agreements to which it is a party,

(c)          "level of nullification or
impairment" means the degree to which the Union's interests under an international trade agreement are affected. Except as otherwise
defined in the relevant agreement, it shall include any adverse economic impact
resulting from a third country measure;

(d)          ‘mandatory price penalty’ means
an obligation for contracting authorities or entities conducting public
procurement procedures to increase, subject to certain exceptions, the price of
services and/or goods originating in certain third countries that have been
offered in contract award procedures.

Article 3

Scope

1.           This Regulation applies:

(a)     following the adjudication of trade
disputes under the WTO Dispute Settlement Understanding, when the Union has been authorised to suspend concessions or other obligations under the
multilateral and plurilateral agreements covered by the WTO Dispute Settlement
Understanding;

(b)     following the adjudication of trade
disputes under other international trade agreements, including regional or
bilateral agreements, when the Union has the right to suspend concessions or
other obligations under such agreements;

(c)     for the rebalancing of concessions or
other obligations, to which the application of a safeguard measure by a third
country may give right pursuant to Article 8 of the WTO Agreement on Safeguards
or to the provisions on safeguards included in other international trade
agreements, including regional or bilateral agreements;

(d)     in cases of modification of
concessions by a WTO member under Article XXVIII of the General Agreement on
Tariffs and Trade 1994, where no compensatory adjustments have been agreed.

2.           This Regulation is without
prejudice to the adoption of commercial policy measures under other relevant procedures
in cases where the measures provided for in Article 5 are not available or
would provide an inadequate or ineffective response to the situations referred
to in paragraph 1.

Article 4

Exercise
of the Union's rights

1.           Where action is necessary
to safeguard the interests of the Union in the cases referred to in Article
3(1), the Commission shall adopt an implementing act determining the
appropriate commercial policy measures. Such implementing act shall be adopted
in accordance with the examination procedure referred to in Article 8(2).

2.           Implementing acts adopted
pursuant to the first paragraph shall meet the following conditions:

(a)     Where concessions or other obligations
are suspended following the adjudication of a trade dispute under the WTO
Dispute Settlement Understanding, their level shall not exceed the level
authorised by the WTO Dispute Settlement Body.

(b)     Where concessions or other obligations
are suspended following the discharge of an international dispute settlement
procedure under a bilateral or a regional agreement, their level shall not
exceed the level of nullification or impairment resulting from the third
country measure at stake as determined by the Commission or through recourse to
arbitration, as the case may be.

(c)     In the case of rebalancing of
concessions or other obligations under provisions on safeguards in
international trade agreements, the Union's action shall be substantially
equivalent to the level of concessions or other obligations affected by the
safeguard measure, in accordance with the conditions of the WTO Agreement on
Safeguards or of the provisions on safeguards in regional or bilateral trade
agreements under which the safeguard measure is applied.

(d)     Concessions withdrawn in the trade
with a third country in connection with Article XXVIII of the GATT 1994 and the
related Understanding shall be substantially equivalent to the concessions
modified or withdrawn by that third country, in accordance with the terms
established in Article XXVIII of the GATT 1994 and the related Understanding.

3.           Commercial policy measures
in accordance with paragraph 1 shall be determined on the basis of the following
criteria, in light of available information and of the Union's general interest:

(a)     effectiveness of the measures in
inducing compliance of third countries with international trade rules;

(b)     potential of the measures to provide
relief to economic operators within the Union affected by third country
measures;

(c)     availability of
alternative sources of supply for the products
concerned, in order to avoid or minimise any negative impact on downstream industries or final consumers within the Union;

(d)     any specific
criteria that may be established in international trade agreements in
connection with the situations foreseen in Article 3.

Article 5

Commercial
policy measures

Without prejudice to any international
agreement to which the Union is a party, the commercial policy measures that
may be enacted by means of an implementing act pursuant to Article 4(1) shall
be:

(a)          the suspension of tariff
concessions and the imposition of new or increased customs duties, including
the re-establishment of customs duties at the most favoured nation level or the
imposition of customs duties beyond most favoured nation level, or the
introduction of any additional charge on imports or exports of goods;

(b)          the introduction or increase of
quantitative restrictions on imports or exports of goods, whether made
effective through quotas, import or export licences or other measures;

(c)          the suspension of concessions in
the area of public procurement, through:

(i)      the exclusion from public procurement of tenders the total value of which is made
up for more than 50% of goods or services originating in the third country
concerned; and/or

(ii)     the imposition of a mandatory price penalty on that part of the tender consisting of
goods or services originating in the third country concerned.

Article 6

Rules
of Origin

1.           The origin of a good shall
be determined in accordance with Council Regulation (EEC) No 2913/92 of 12
October 1992 establishing the Community Customs Code[11].

2.           The origin of a service
shall be determined on the basis of the origin of the natural or legal person
providing it. The origin of the service provider shall be deemed to be:

(a)     in the case of a natural person, the
country of which the person is a national or where he has a right of permanent
residence;

(b)     in the case of a legal person any of
the following:

(i)      if the service is provided other than
through a commercial presence within the Union, the country where the legal
person is constituted or otherwise organised under the laws of that country and
in the territory of which the legal person is engaged in substantive business
operations;

(ii)      if the service is provided through a
commercial presence within the Union, the Member State where the legal person
is established and in the territory of which it is engaged in substantive
business operations such that it has a direct and effective link with the
economy of a Member State concerned.

For the purposes of point (ii) if the legal
person is not engaged in substantive business operations such that it has a
direct and effective link with the economy of a Member State concerned, the
origin of the natural or legal persons which own, or control the legal person
providing the service.

The legal person providing the service shall be
considered to be "owned" by persons of a given country if more than
50 % of the equity interest in it is beneficially owned by persons of that
country and "controlled" by persons of a given country if such
persons have the power to name a majority of its directors or otherwise to
legally direct its actions.

Article 7

Suspension,
modification and termination of measures

1.           Where, subsequently to the
adoption of an implementing act pursuant to Article 4(1), the third country
concerned accords satisfactory compensation to the Union in the cases referred
to in Article 3(1)(a) and (b), the Commission may suspend the application of
that implementing act for the duration of the compensation period. The
suspension shall be decided in accordance with the examination procedure referred
to in Article 8(2).

2.           The Commission shall
terminate an implementing act adopted under Article 4(1) in any of the
following circumstances:

(a)     when the third country whose measures
were found to be inconsistent with international trade rules in a dispute
settlement procedure brings itself into compliance, or where a mutually
satisfactory solution has otherwise been reached;

(b)     in cases of rebalancing of concessions
or other obligations following the adoption by a third country of a safeguard
measure, when the safeguard measure is withdrawn or expires, or when the third
country concerned accords satisfactory compensation to the Union subsequently
to the adoption of an implementing act under Article 4(1);

(c)     in cases of modification of
concessions by a WTO member under Article XXVIII of the General Agreement on Tariffs and Trade 1994, when the third
country concerned accords satisfactory compensation to the Union subsequently
to the adoption of an implementing act under Article 4(1).

The termination shall be decided in accordance
with the examination procedure set out in Article 8(2).

3.           Where it is necessary to
make adjustments to commercial policy measures adopted under this Regulation, account
taken of the conditions and criteria laid down in Article 4(2) and 4(3), the
Commission may introduce any appropriate modifications in accordance with the
examination procedure set out in Article 8(2).

4.           On duly justified
imperative grounds of urgency relating to the termination or the modification
of the third country measure concerned, the Commission shall adopt immediately
applicable implementing acts suspending, modifying or terminating implementing
acts adopted under Article 4(1), as provided for in this Article, in accordance
with the procedure referred to in Article 8(3).

Article 8

Committee
procedure

1.           The Commission shall be
assisted by the committee established by Council Regulation (EC) No 3286/94. That
committee shall be a committee within the meaning of Article 3 of Regulation
(EU) No 182/2011.

2.           Where reference is made to
this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.

3.           Where reference is made to
this paragraph, Article 8 of Regulation (EU) No 182/2011 in conjunction with
Article 5 thereof, shall apply.

Article 9

Information
gathering

1.           The Commission shall seek
information and views regarding the Union's economic interests in specific
products or sectors, in the application of this Regulation, through a notice in
the Official Journal of the European Union or other suitable public
communication means.

2.           Information received
pursuant to this Regulation shall be used only for the purpose for which it was
requested.

3.           Neither the Commission nor
the Council, nor the European Parliament nor Member States, nor their officials
shall reveal any information of a confidential nature received pursuant to this
Regulation, without specific permission from the supplier of such information.

4.           The supplier of
information may request that information supplied be treated as confidential.
In such cases, it shall be accompanied by a non-confidential summary or a
statement of the reasons why the information cannot be summarised.

5.           If it appears that a
request for confidentiality is not justified and if the supplier is unwilling
either to make the information public or to authorise its disclosure in
generalised or summary form, the information in question may be disregarded.

6.           Paragraphs 2 to 5 shall
not preclude the disclosure of general information by the Union authorities.
Such disclosure must take into account the legitimate interest of the parties concerned
in not having their business secrets divulged.

Article 10

Review

No later than
three years after the first instance of adoption of an implementing act under
this Regulation, the Commission shall review its implementation and report to
the European Parliament and the Council.

Article 11

Amendments
to other acts

In Article 13(3) of Council Regulation (EC)
No 3286/94 [the TBR] is replaced by the following text:

"Where the Union, having acted in
accordance with Article 12(2), has to take a decision on the measures of
commercial policy to be adopted pursuant to Article 11(2)(c) or pursuant to
Article 12, it shall act, without delay, in accordance with Article 207 of the
Treaty and, as appropriate, Regulation No XX/XX or any other applicable
procedures".

Article 12

This Regulation shall enter into force on
the [...] day following that of its publication in the Official Journal of the
European Union.

This Regulation shall be binding
in its entirety and directly applicable in all Member States.

Done at Brussels,

For the European Parliament                       For
the Council

The President                                                 The
President

[1]               See COM (2010)612 final of 9.11.2010, section 4.

[2]               See Council conclusions on the EU’s trade policy of
21.12.2010, paragraph 8.

[3]               The EU has always acted on a case-by-case basis in
the past (Council Regulation on Commission proposal based on former - Article
133).

[4]               See
in this regard Council Regulation (EEC) No 1461/93 concerning access to public
contracts for tenderers from the United States of America; and Council
Regulation (EC) No 1836/95 completing the Annex to Regulation (EEC) No 1461/93
concerning access to public contracts for tenderers from the United States of America.

[5]               Under specific circumstances, Article 4.10 ASCM
grants authorization to the complaining member to take "appropriate
countermeasures".

[6]               The WTO Agreement on Safeguards and safeguards rules
under the FTAs only relate to trade in goods. WTO Members have yet to agree on
an emergency safeguards for services for which multilateral negotiations have
been mandated by Article X of the general agreement on trade in services (GATS).

[7]               E.g. Article 3.4 of the EU/Korea FTA: « 1. A Party applying a bilateral safeguard measure shall consult with
the other Party in order to mutually agree on appropriate trade liberalising
compensation in the form of concessions having substantially equivalent trade
effects or equivalent to the value of the additional duties expected to result
from the safeguard measure. The Party shall provide an opportunity for such
consultations no later than 30 days after the application of the bilateral
safeguard measure. 2. If the consultations under paragraph 1 do not result in
an agreement on trade liberalising compensation within 30 days after the
consultations begin, the Party whose goods are subject to the safeguard measure
may suspend the application of substantially equivalent concessions to the
Party applying the safeguard measure. 3. The right of suspension referred to in
paragraph 2 shall not be exercised for the first 24 months during which a
bilateral safeguard measure is in effect, provided that the safeguard measure
conforms to the provisions of this Agreement”.

[8]               On
condition they hold an “initial negotiating right”, a “principal supplying
interest” or a “substantial interest”.

[9]               OJ L 302, 19.10.1992, p. 1.

[10]             OJ L 55, 28.2.2011, p. 13.

[11]             OJ L 302, 19.10.1992, p. 1.