# Regulation (EU) No 654/2014 of the European Parliament and of the CouncilShow full title

Regulation (EU) No 654/2014 of the European Parliament and of the Council of 15 May 2014 concerning the exercise of the Union's            rights for the application and enforcement of international trade rules and amending Council Regulation (EC) No 3286/94 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         

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# Regulation (EU) No 654/2014 of the European Parliament and of the Council

# of 15 May 2014

# concerning the exercise of the Union's rights for the application and enforcement of international trade rules and amending                        Council Regulation (EC) No 3286/94 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                     

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 (2) 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(1),                        

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 possess 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. There is therefore a                              need for rules defining the framework for exercising the Union's rights in certain specific situations.

(3)The dispute settlement mechanisms set up by the Agreement establishing the World Trade Organization (WTO) and by other international                              trade agreements, including regional or bilateral agreements, 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, be able to suspend concessions                              or other obligations, in accordance with those dispute settlement mechanisms, when other avenues to find a positive solution                              to a dispute have proven unsuccessful. Action by the Union in such cases should serve 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 an extension of a safeguard                              measure has to endeavour to maintain a substantially equivalent level of concessions and other obligations between it and                              the exporting Members, which would be affected by such a measure. Similar rules are laid down in other international trade                              agreements concluded by the Union, including regional or bilateral agreements. The Union should take rebalancing measures                              by suspending concessions or other obligations in cases where the third country concerned implements no adequate and proportionate                              adjustments. Action by the Union in such cases should serve 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 General Agreement on Tariffs and Trade 1994 (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 should 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 public procurement when a trade partner fails to                              respect its commitments under the WTO Agreement on Government Procurement (GPA) or other international trade agreements. The                              GPA states that any dispute arising thereunder is not to result in the suspension of concessions or other obligations under                              any other covered agreement of the WTO. The Union's action should be aimed at ensuring the maintenance of a substantially                              equivalent level of concessions, as laid down in the relevant international trade agreements.

(7)Member States should ensure the application within their respective territories of commercial policy measures in the field                              of public procurement in the manner that is best suited to their administrative structures and practices, while respecting                              Union law.

(8)Commercial policy measures adopted under this Regulation should be selected and designed on the basis of objective criteria,                              including the effectiveness of the measures in inducing compliance of third countries with international trade rules, their                              potential to provide relief to economic operators within the Union affected by third country measures, and the aim of minimising                              negative economic impacts on the Union, including with regard to essential raw materials.

(9)This Regulation should focus on those measures in respect of which the Union has experience in design and application. The                              possibility to extend its scope in order to provide for the adoption of measures in the sector of intellectual property rights                              and additional measures concerning services should be assessed as part of the review on the functioning of this Regulation,                              with due regard to the specificities of each area.

(10)When enforcing the Union's rights, the origin of a good should be determined in accordance with Council Regulation (EEC) No 2913/92(2). When enforcing the Union's rights following dispute settlement in the area of public procurement, the origin of a service                              should be determined on the basis of the origin of the natural or legal person providing it. Contracting authorities or entities                              should apply normal precautions and exercise due diligence when assessing information and guarantees provided by tenderers                              as regards the origin of goods and services.

(11)The Commission should review the scope, functioning and efficiency of this Regulation, including possible measures in the                              sector of intellectual property rights and additional measures concerning services, no later than three years after the first                              instance of its implementation or no later than five years from its date of entry into force, whichever is the earlier. The                              Commission should report on its assessment to the European Parliament and the Council. The review may be followed up by appropriate                              legislative proposals.

(12)It is important to ensure an effective communication and exchange of views between the Commission on the one hand and the                              European Parliament and the Council on the other, in particular on disputes under international trade agreements that may                              lead to the adoption of measures under this Regulation.

(13)Council Regulation (EC) No 3286/94(3) should be amended in order to refer to this Regulation with regard to the implementation of commercial policy measures.

(14)In order to ensure uniform conditions for the implementation of this Regulation, implementing powers should be conferred on                              the Commission. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament                              and of the Council(4).

(15)In light of the high complexity involved in the examination of the multiple impacts that commercial policy measures adopted                              under this Regulation may have, and with a view to allowing sufficient opportunities to achieve the widest possible support,                              implementing acts should not be adopted by the Commission where, exceptionally, the committee referred to in this Regulation                              delivers no opinion on the draft implementing act presented by the Commission.

(16)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 commercial policy measures to the behaviour of the third party concerned,                              imperative grounds of urgency so require.

(17)This Regulation is without prejudice to the possible adoption of commercial policy measures on the basis of other relevant                              Union acts or of the provisions of the Treaty on the Functioning of the European Union, while respecting the applicable provisions                              in international trade agreements on the suspension or withdrawal of concessions or other obligations,

HAVE ADOPTED THIS REGULATION:

## Article 1U.K.Subject matter

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

responding to breaches by third countries of international trade rules which affect the Union's interests, with a view to                              seeking a satisfactory solution that restores benefits for the Union's economic operators;                           

rebalancing concessions or other obligations in the trade relations with third countries, when the treatment accorded to goods                              from the Union is altered in a way that affects the Union's interests.                           

## Article 2U.K.Definitions

For the purposes of this Regulation the following definitions apply:

"country" means any State or separate customs territory;

"concessions or other obligations" means tariff concessions or any other benefits that the Union has committed itself to applying                              in its trade with third countries by virtue of international trade agreements to which it is a party;                           

"level of nullification or impairment" means the degree to which the benefits accruing to the Union under an international                              trade agreement are affected. Except as otherwise defined in the relevant agreement, it includes any adverse economic impact                              resulting from a third country measure;                           

"mandatory price penalty" means an obligation on 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 3U.K.Scope

This Regulation applies:

following the adjudication of trade disputes under the WTO Understanding on Rules and Procedures Governing the Settlement                              of Disputes (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;                           

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;                           

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;                           

in cases of modification of concessions by a WTO member under Article XXVIII of the GATT 1994, where no compensatory adjustments                              have been agreed.                           

## Article 4U.K.Exercise of the Union's rights

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

2.Implementing acts adopted pursuant to paragraph 1 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 other international trade agreements, including regional or bilateral agreements, their level shall not exceed the level                        of nullification or impairment as a result of the third country measure concerned, 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 other                        international trade agreements, including regional or bilateral agreements, under which the safeguard measure is applied;                  

(d)where concessions are withdrawn in the trade with a third country in connection with Article XXVIII of the GATT 1994 and the                        related Understanding(5), they 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 referred to in 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 goods or services concerned, in order to avoid or minimise any negative                        impact on downstream industries, contracting authorities or entities, or final consumers within the Union;                  

(d)avoidance of disproportionate administrative complexity and costs in the application of the measures;                  

(e)any specific criteria that may be established in international trade agreements in connection with the cases referred to in                        Article 3.                  

## Article 5U.K.Commercial policy measures

1.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 consist of:                  

(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 the 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 regarding goods, services or suppliers in the area of public procurement, through:                  

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

the imposition of a mandatory price penalty on tenders of suppliers of goods or services established in and operating from                              the third country concerned and/or on that part of the tender consisting of goods or services originating in the third country                              concerned.                           

2.Measures adopted pursuant to paragraph 1(c) shall:                  

(a)include thresholds, according to the characteristics of the goods or services concerned, above which the exclusion and/or                        mandatory price penalty is to apply, taking into account the provisions of the trade agreement concerned and the level of                        nullification or impairment;                  

(b)determine the sectors or the categories of goods or services to which they apply, as well as any applicable exceptions;                  

(c)determine the contracting authorities or entities or categories of contracting authorities or entities, listed by Member State,                        whose procurement is covered. To provide the basis for this determination, each Member State shall submit a list of appropriate                        contracting authorities or entities or categories of contracting authorities or entities. The measures shall ensure that an                        appropriate level of suspension of concessions or other obligations and a fair distribution among Member States is achieved.                  

## Article 6U.K.Rules of origin

1.The origin of a good shall be determined in accordance with Regulation (EEC) No 2913/92.                  

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, either of the following:                  

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;                           

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 that Member State.                           

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

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 7U.K.Suspension, modification and repeal of measures

1.Where, after the adoption of an implementing act pursuant to Article 4(1), the third country concerned accords adequate and                        proportionate 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 repeal 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 in breach of 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 adequate and proportionate                        compensation to the Union after 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 GATT 1994, when the third country concerned                        accords adequate and proportionate compensation to the Union after the adoption of an implementing act under Article 4(1).                  

The repeal referred to in the first subparagraph shall be decided in accordance with the examination procedure referred to                     in Article 8(2).                  

3.Where it is necessary to make adjustments to commercial policy measures adopted under this Regulation, subject to Article                        4(2) and (3), the Commission may introduce any appropriate amendments in accordance with the examination procedure referred                        to 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, amending or repealing 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 8U.K.Committee procedure

1.The Commission shall be assisted by the committee established by 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.                  

Where the Committee delivers no opinion, the Commission shall not adopt the draft implementing act and the third subparagraph                     of Article 5(4) 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 9U.K.Information gathering

1.The Commission shall seek information and views regarding the Union's economic interests in specific goods or services or                        in specific sectors, in the application of this Regulation, through a notice in the *Official Journal of the European Union* or through other suitable public communication means, indicating the period within which input is to be submitted. The Commission                        shall take the input received into account.                  

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

3.Neither the European Parliament, nor the Council, nor the Commission, nor Member States, nor their respective 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 which presents the information in a generalised form 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 institutions of the Union and the authorities                        of the Member States. Such disclosure must take into account the legitimate interest of the parties concerned in not having                        their business secrets divulged.                  

## Article 10U.K.Review

1.No later than three years after the first instance of the adoption of an implementing act or no later than 18 July 2019, whichever                        is the earlier, the Commission shall review the scope of this Regulation, particularly as regards the commercial policy measures                        that may be adopted, as well as its implementation, and shall report its findings to the European Parliament and the Council.                  

2.Notwithstanding paragraph 1, the Commission shall undertake a review aimed at envisaging under this Regulation additional                        commercial policy measures suspending concessions or other obligations in the field of trade in services. The Commission shall                        examine, inter alia, the following aspects:                  

(a)international developments with regard to the suspension of other obligations under the General Agreement on Trade in Services                        (GATS);                  

(b)developments within the Union with regard to the adoption of common rules on services sectors;                  

(c)the effectiveness of possible additional commercial policy measures as a means to enforce the Union's rights under international                        trade agreements;                  

(d)available mechanisms to ensure the practical implementation, in a uniform and efficient manner, of possible additional commercial                        policy measures concerning services; and                  

(e)implications for service providers present in the Union at the time of adoption of implementing acts under this Regulation.                  

The Commission shall report its initial assessment to the European Parliament and the Council by 18 July 2017.

## Article 11U.K.Amendments to other acts

In Article 13 of Regulation (EC) No 3286/94, paragraph 3 is replaced by the following:

"3.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 on the Functioning of the European Union and, as appropriate, Regulation (EU) No 654/2014 of the European                           Parliament and of the Council(6) or any other applicable procedures.                  

## Article 12U.K.Entry into force

This Regulation shall enter into force on the twentieth 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, 15 May 2014.

*For the European Parliament*                            

*The President*                            

M. Schulz                            

*For the Council*                            

*The President*                            

D. Kourkoulas                            

U.K.

# Statement by the Commission

The Commission welcomes the adoption of the 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 and amending Council Regulation (EC)                           No 3286/94.                        

Under the Regulation, the Commission is empowered to adopt implementing acts in certain specific situations, on the basis                           of objective criteria and subject to the control of the Member States. In exercising that empowerment, the Commission intends                           to act in accordance with this Declaration.                        

When preparing draft implementing acts, the Commission will undertake extensive consultations with a view to ensuring that                           all relevant interests are duly taken into account. Through those consultations, the Commission expects to receive input from                           private stakeholders affected by third country measures or by possible commercial policy measures to be adopted by the Union.                           Similarly, the Commission expects to receive input from public authorities that may be involved in the implementation of possible                           commercial policy measures to be adopted by the Union. In the case of measures in the field of public procurement, in particular                           input from Member States’ public authorities will be duly taken into account in the preparation of draft implementing acts.                        

The Commission recognizes the importance of Member States receiving timely information when it is considering the adoption                           of implementing acts under this Regulation so as to enable them to contribute to fully informed decisions and will act to                           achieve this objective.                        

The Commission confirms that it will promptly transmit to the Parliament and to the Council draft implementing acts that it                           submits to the committee of Member States. Similarly, it will promptly transmit to the Parliament and the Council final draft                           implementing acts following the delivery of opinions in the committee.                        

The Commission will keep the Parliament and the Council regularly informed of international developments that may lead to                           situations requiring the adoption of measures under the Regulation. This will be done through the responsible committees in                           Council and in Parliament.                        

The Commission welcomes the Parliament’s intention to promote a structured dialogue on dispute settlement and enforcement                           issues and will fully engage in dedicated sessions with the responsible Parliamentary committee to exchange views on trade                           disputes and enforcement actions, including with regard to impacts on Union industries.                        

Finally, the Commission confirms that it attaches great importance to ensuring that the Regulation is an effective and efficient                           tool for the enforcement of the Union’s rights under international trade agreements, including in the field of trade in services.                           Therefore, the Commission will, in accordance with the provisions of the Regulation, review the scope of Article 5 with a                           view to covering additional commercial policy measures concerning trade in services as soon as the conditions for ensuring                           the workability and effectiveness of such measures are present.                        

1

Position of the European Parliament of 2 April 2014 (not yet published in the Official Journal) and decision of the Council                              of 8 May 2014.                           

2

Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code (OJ L 302, 19.10.1992, p. 1).                           

3

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 (OJ L 349, 31.12.1994, p. 71).                           

4

Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general                              principles concerning mechanisms for control by the Member States of the Commission's exercise of implementing powers (OJ L 55, 28.2.2011, p. 13).                           

5

Understanding "Interpretation and Application of Article XXVIII".

6

Regulation (EU) No 654/2014 of the European Parliament and of the Council of 15 May 2014 concerning the exercise of the Union's                              rights for the application and enforcement of international trade rules and amending Council Regulation (EC) No 3286/94 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                              (OJ L 189 27.6.2014, p. 50).".