AGREEMENT

between the European Community and the Kingdom of Nepal on trade in textile products

THE EUROPEAN COMMUNITY,

of the one part, and

THE KINGDOM OF NEPAL,

of the other part,

DESIRING to promote, with a view to permanent cooperation and in conditions providing every security for trade, the orderly and equitable development of trade in textile products between the European Community (hereinafter referred to as "the Community") and the Kingdom of Nepal (hereinafter referred to as "Nepal"),

HAVE AGREED AS FOLLOWS:

Article 1

1. This Agreement shall apply to trade in textile products listed in Annex I and originating in Nepal.

2. Exports from Nepal to the Community of products listed in Annex I and originating in Nepal shall, from the date of entry into force of this Agreement, be free from quantitative limits. However, quantitative limits may subsequently be introduced under conditions specified in Article 4.

3. Should quantitative limits be introduced, exports of the textile products made subject to quantitative limits shall be subject to a double-checking system as specified in Protocol A.

4. From the time of entry into force of this Agreement, exports of products listed in Annex II not subject to quantitative limits shall be subject to the double-checking system referred to in paragraph 3.

5. Following consultations in accordance with the procedures set out in Article 11, exports of products in Annex I not subject to quantitative limits other than those listed in Annex II may be subject, subsequently to the entry into force of this Agreement, to the double-checking system referred to in paragraph 3 or to a prior surveillance system introduced by the Community.

Article 2

1. Imports into the Community of textile products covered by this Agreement shall not be subject to the quantitative limits established under this Agreement, provided that they are declared to be for re-export outside the Community in the same state or after processing, within the framework of the administrative system of control which exists within the Community.

However, the release for home use of products imported into the Community under the conditions referred to above shall be subject to the production of an export licence issued by the authorities of Nepal, and to proof of origin in accordance with the provisions of Protocol A.

2. Where the Community authorities ascertain that imports of textile products have been set off against a quantitative limit established under this Agreement, but that the products have subsequently been re-exported outside the Community, the authorities shall inform the Nepalese authorities within four weeks of the quantities involved and authorise imports of identical quantities of the same products, which shall not be set off against the quantitative limit established under this Agreement for the current or the following year, as appropriate.

Article 3

Should quantitative limits be introduced under Article 4, the following provisions shall apply:

1. In any Agreement year advance use of a portion of the quantitative limit established for the following Agreement year is authorised for each category of products up to 5 % of the quantitative limit for the current Agreement year.

Amounts delivered in advance shall be deducted from the corresponding quantitative limits established for the following Agreement year.

2. Carryover to the corresponding quantitative limit for the following Agreement year of the amounts not used during any Agreement year is authorised for each category of products up to 10 % of the quantitative limit for the current Agreement year.

3. Transfers in respect of categories in group I shall not be made from any category except as follows:

- transfers between categories 2 and 3 and from category 1 to categories 2 and 3 may be made up to 12 % of the quantitative limits for the category to which the transfer is made,

- transfers between the categories 4, 5, 6, 7 and 8 may be made up to 12 % of the quantitative limit for the category to which the transfer is made.

Transfers into any category in groups II, III, IV and V may be made from any category or categories in groups I, II, III, IV and V up to 12 % of the quantitative limit for the category to which the transfer is made.

4. The table of equivalence applicable to the transfers referred to above is given in Annex I to this Agreement.

5. The increase in any category of products resulting from the cumulative application of the provisions in paragraphs 1, 2 and 3 above during an Agreement year shall not exceed the following limits:

- 17 % for categories of products in groups I, II, III, IV and V.

6. Prior notification shall be given by the Nepalese authorities in the event of recourse to the provisions of paragraphs 1, 2 and 3 above, at least 15 days in advance.

Article 4

1. Exports of textile products listed in Annex I to this Agreement may be made subject to quantitative limits on the conditions laid down in the following paragraphs.

2. Where the Community finds, under the system of administrative control set up, that the level of imports of products in a given category listed in Annex I originating in Nepal exceeds, in relation to the preceding year's total imports into the Community from all sources of products in that category, the following rates:

- 2 % for categories of products in group I;

- 8 % for categories of products in group II;

- 15 % for categories of products in groups III, IV and V;

it may request the opening of consultations in accordance with the procedure described in Article 11 of this Agreement, with a view to reaching agreement on an appropriate restraint level for the products in such category.

3. Pending a mutually satisfactory solution, Nepal undertakes, from the date of notification of the request for consultations, to suspend or limit at the level indicated by the Community exports of the category of products in question to the Community or to the region or regions of the Community market specified by the Community.

The Community shall authorise the importation of products of the said category shipped from Nepal before the date on which the request for consultations was submitted.

4. Should the Contracting Parties be unable in the course of consultations to reach a satisfactory solution within the period specified in Article 11, the Community shall have the right to introduce a definitive quantitative limit at an annual level not lower than the level resulting from the application of the formula set out in paragraph 2, or 106 % of the level of imports reached during the calendar year preceding that in which imports exceeded the level resulting from the application of the formula set out in paragraph 2 and gave rise to the request for consultations, whichever is the higher.

The annual level so fixed shall be revised upwards after consultations in accordance with the procedure referred to in Article 11, with a view to fulfilling the conditions set out in paragraph 2, should the trend of total imports into the Community of the product in question make this necessary.

5. The annual growth rate for the quantitative limits introduced under this Article shall be determined in accordance with the provisions of Protocol B.

6. The provisions of this Article shall not apply where the percentages specified in paragraph 2 have been reached as a result of a fall in total imports into the Community, and not as a result of an increase in exports of products originating in Nepal.

7. In the event of the provisions of paragraphs 2, 3 or 4 being applied, Nepal shall to issue export licences for products covered by contracts concluded before the introduction of the quantitative limit, up to the volume of the quantitative limit fixed.

8. Up to the date of communication of the statistics referred to in Article 9(6), the provisions of paragraph 2 of this Article shall apply on the basis of the annual statistics previously communicated by the Community.

Article 5

1. In view of ensuring the effective functioning of this Agreement, the Community and Nepal agree to cooperate fully in order to prevent, to investigate and to take any necessary legal and/or administrative action against circumvention by transhipment, re-routing, false declaration concerning the country or place of origin, falsification of documents, false declaration concerning fibre content, quantities description or classification of merchandise and by whatever other means. Accordingly, Nepal and the Community agree to establish the necessary legal provisions and administrative procedures permitting effective action to be taken against such circumvention, which shall include the adoption of legally binding corrective measures against exporters and/or importers involved.

2. Should the Community believe on the basis of information available that the present Agreement is being circumvented, the Community will consult with Nepal with a view to reaching a mutually satisfactory solution. These consultations will be held as early as possible and at the latest within 30 days from the date of request.

3. Pending the results of the consultations referred to in paragraph 2, Nepal shall, as a precautionary measure, if so requested by the Community, take all necessary measures to ensure that, where sufficient evidence of circumvention is provided, adjustments of quantitative limits established under Article 4 liable to be agreed following the consultations referred to in paragraph 2 may be carried out for the quota year in which the request to open consultations in accordance with paragraph 2 was made, or for the following year if the quota for the current year is exhausted.

4. Should the Parties be unable, in the course of the consultation referred to in paragraph 2 to reach a mutually satisfactory solution, the Community shall have the right:

(a) where there is sufficient evidence that products originating in Nepal have been imported in circumvention of the present Agreement, to set off the relevant quantities against the quantitative limits established under Article 4;

(b) where sufficient evidence shows that false declaration concerning fibre content, quantities, description or classification of products originating in Nepal has occurred, to refuse to import the products in question;

(c) should it appear that the territory of Nepal is involved in transhipment or re-routing of products not originating in Nepal, to introduce quantitative limits against the same products originating in Nepal if they are not already subject to quantitative limits, or to take any other appropriate measures.

5. The Parties agree to establish a system of administrative cooperation to prevent and to address effectively all problems arising from circumvention in accordance with the provisions of Protocol A of this Agreement.

Article 6

1. Nepal shall monitor its exports of products under restraint or surveillance into the Community. Should a sudden and prejudicial change in traditional trade flows arise, the Community will be entitled to request consultations in order to find a satisfactory solution to those problems. Such consultations must be held within 15 working days of their being requested by the Community.

2. Nepal shall endeavour to ensure that exports of textile products subject to quantitative limits into the Community are spaced out as evenly as possible over the year due account being taken in particular of seasonal factors.

Article 7

In the event of denunciation of this Agreement as provided for in Article 14(3), the quantitative limits established pursuant to this Agreement shall be reduced on a pro rata temporis basis unless the Contracting Parties decide otherwise by common agreement.

Article 8

1. The classification of the products covered by this Agreement is based on the tariff and statistical nomenclature of the Community (hereinafter called the "combined nomenclature", or in abbreviated form "CN") and any amendments thereof.

Where any decision on classification results in a change of classification practice or a change of category of any product subject to this Agreement the affected products shall follow the trade regime applicable to the practice or category they fall into after such changes.

Any amendment to the combined nomenclature (CN) made in accordance with the procedures in force in the Community concerning categories of products covered by this Agreement or any decision relating to the classification of goods shall not have the effect of reducing quantitative limits introduced pursuant to this Agreement.

2. The origin of the products covered by this Agreement shall be determined in accordance with the rules in force in the Community.

Any amendment to these rules of origin shall be communicated to Nepal and shall not have the effect of reducing any quantitative limit established pursuant to this Agreement.

The procedures for control of the origin of the products referred to above are laid down in Protocol A.

Article 9

1. Nepal shall supply the Commission with precise statistical information on all export licences issued for categories of textile products subject to the quantitative limits established under this Agreement, or to a double checking system expressed in quantities and in terms of value and broken down by Member States of the Community.

2. The Community shall likewise transmit to the Nepalese authorities precise statistical information on import authorisations issued by the Community authorities and import statistics for products covered by the system referred to in Article 4(2).

3. The information referred to above shall, for all categories of products, be forwarded before the end of the month following the month to which the statistics relate.

4. Upon request by the Community, Nepal shall supply import statistics for all products covered by Annex I.

5. Should it be found on analysis of the information exchanged that there are significant discrepancies between the returns for exports and those for imports, consultations may be initiated in accordance with the procedure specified in Article 11 of this Agreement.

6. For the purpose of applying the provisions of Article 4, the Community undertakes to provide Nepalese authorities before 15 April of each year with the preceding year's statistics on imports of all textile products covered by this Agreement, broken down by supplying country and Community Member State.

Article 10

The Contracting Parties agree to examine the trend of trade in textile products and garments each year, in the framework of the consultations provided for in Article 11 and on the basis of the statistics referred to in Article 9.

Article 11

1. Save where it is otherwise provided for in this Agreement, the consultation procedures referred to in this Agreement shall be governed by the following provisions:

- as far as possible consultations shall be held periodically. Specific additional consultations may also be held;

- any request for consultations shall be notified in writing to the other Contracting Party;

- where appropriate, the request for consultations shall be followed within a reasonable period and in any case not later than 15 days following the notification by a report setting out the circumstances which, in the opinion of the requesting Party, justify the submission of such a request;

- the Contracting Parties shall enter into consultations within one month of notification of the request at the latest, with a view to reaching agreement or a mutually acceptable conclusion within one further month at the latest. This periods may be extended by common accord.

2. The Community may request consultations in accordance with paragraph 1 when it ascertains that during a particular year of application of the Agreement difficulties arise in the Community or one of its regions due to a sharp and substantial increase, by comparison to the preceding year, in imports of a given category of Group I subject to the quantitative limits established pursuant to this Agreement.

3. At the request of either of the Contracting Parties, consultations shall be held on any problems arising from the application of this Agreement. Any consultations held under this Article shall take place in a spirit of cooperation and with a desire to reconcile the differences between the Contracting Parties.

Article 12

In case problems arise in relation to the protection of trademarks, industrial designs or other intellectual property rights, consultations shall be held at the request of either contracting party in accordance with the procedure laid down in Article 11 with a view to finding a satisfactory solution.

Article 13

This Agreement shall apply, on the one hand, to the territories in which the Treaty establishing the European Community is applied and under the conditions laid down in that Treaty and, on the other hand, to the territory of Nepal.

Article 14

1. This Agreement shall enter into force on the first day of the month following the date on which the Parties notify each other of the completion of the procedures necessary for that purpose. In the meantime, it shall be applicable on a provisional basis, subject to reciprocity.

2. This Agreement shall apply until 31 December 2002.

The operation of this Agreement shall be reviewed prior to the accession of Nepal to the WTO to take account of the consequences thereof.

3. Either Contracting Party may at any time propose modifications to this Agreement or denounce it, provided that at least six months' notice is given. In that event, the Agreement shall come to an end on the expiry of the period of notice.

4. The Contracting Parties agree to enter into consultations not later than six months before the expiration of this Agreement with a view to possibly concluding a new Agreement.

5. The Annexes, Protocols, Agreed Minutes, Declarations and letters exchanged or attached to this Agreement, shall form an integral part thereof.

Article 15

This Agreement shall be drawn up in two copies in the Danish, Dutch, English, Finnish, French, German, Greek, Italian, Portuguese, Spanish, Swedish and Nepalese languages, each of these texts being equally authentic.

For the European Community

For the Kingdom of Nepal

ANNEX I

PRODUCTS REFERRED TO IN ARTICLE 1

1. When the constitutive material of the products of categories 1 to 114 is not specifically mentioned, these products are to be taken to be made exclusively of wool or of fine hair, of cotton or of man-made fibres.

2. Garments which are not recognisable as being garments for men or boys or as being garments for women or girls are classified with the latter.

3. Where the expression "babies' garments" is used, this is meant to cover garments up to and including commercial size 86.

GROUP I A

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GROUP I B

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GROUP II A

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GROUP II B

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GROUP III A

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GROUP III B

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GROUP IV

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GROUP V

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ANNEX II

Products without quantitative limits subject to the double-checking system referred to in Article 1(4) of the Agreement

(The full products descriptions of the categories listed in this Annex are to be found in Annex I to the Agreement)

Categories:

4, 5, 6, 7, 26.

Should imports of products of category 8 originating in Nepal reach 2 % of the preceding year's total imports into the Community from all sources of products in that category, they will be subject automatically to the double-checking system.

PROTOCOL A

TITLE I

CLASSIFICATION

Article 1

1. The competent authorities of the Community undertake to inform Nepal of any changes in the combined nomenclature (CN) before the date of their entry into force in the Community.

2. The competent authorities of the Community undertake to inform the competent authorities of Nepal of any decisions relating to the classification of products subject to this Agreement, within one month of their adoption at the latest. Such communication shall include:

(a) a description of the products concerned;

(b) the relevant category and the related CN codes;

(c) the reasons which have led to the decision.

3. Where a decision on classification results in a change of classification practice or a change of category of any product subject to the Agreement, the competent authorities of the Community shall provide 30 days' notice, from the date of the Community's communication, before the decision is put into effect. Products shipped before the date of entry into effect of the decision shall remain subject to the earlier classification practice, provided that the goods in question are presented for importation into the Community within 60 days of that date.

4. Where a Community Decision on classification resulting in a change of classification practice or a change of categorisation of any product subject to the Agreement affects a category subject to quantitative limits, the Contracting Parties agree to enter into consultation in accordance with the procedures described in Article 11 of the Agreement with a view to honouring the obligation under the second subparagraph of Article 8(1) of the Agreement.

5. In case of divergent opinions between Nepal and the competent Community authorities at the point of entry into the Community on the classification of products covered by this Agreement, classification shall provisionally be based on indications provided by the Community, pending consultations in accordance with Article 11 of the Agreement with a view to reaching agreement on definitive classification of the product concerned.

TITLE II

ORIGIN

Article 2

1. Products originating in Nepal for export to the Community in accordance with the arrangements established by the Agreement shall be accompanied by a certificate of Nepalese origin conforming to the model annexed to this Protocol.

2. The certificate of origin shall be certified by Nepalese competent governmental authorities if the products in question can be considered products originating in that country within the meaning of the relevant rules in force in the Community.

3. However, the products in Groups III, IV and V may be imported into the Community in accordance with the arrangements established by the Agreement on production of a declaration by the exporter on the invoice or other commercial document stating that the products in question originate in Nepal within the meaning of the relevant rules in force in the Community.

4. The certificate of origin referred to in paragraph 1 shall not be required for import of goods covered by a certificate of origin Form A completed in accordance with the relevant Community rules in order to qualify for generalised tariff preferences.

Article 3

The certificate of origin shall be issued only on application having been made in writing by the exporter or, under the exporter's responsibility, by his authorised representative. The competent Nepalese authorities shall ensure that the certificate of origin is properly completed and for this purpose they shall call for any necessary documentary evidence or carry out any check which they consider appropriate.

Article 4

Where different criteria for determining origin are laid down for products falling within the same category, the certificates or declarations of origin must contain a sufficiently detailed description of the goods, on the basis of which the certificate was issued or the declaration drawn up.

Article 5

The discovery of slight discrepancies between the statements made in the certificate of origin and those made in the documents produced to the customs office for the purpose of carrying out the formalities for importing the products shall not ipso facto cast doubt upon the statements in the certificate.

TITLE III

DOUBLE-CHECKING SYSTEM

Section I

Exportation

Article 6

The competent authorities of Nepal shall issue an export licence in respect of all consignments from Nepal of textile products subject to any definitive or provisional quantitative limits established under Article 4 of the Agreement, up to the relevant quantitative limits as may be modified by Articles 3, 5 and 7 of the Agreement, as well as of all consignments of textile products subject to a double-checking system without quantitative limits as provided for in Article 1(4) and (5) of the Agreement.

Article 7

1. For products subject to quantitative limits under the Agreement the export licence shall conform to the model 1 annexed to this Protocol and it shall be valid for exports throughout the customs territory to which the Treaty establishing the European Community applies.

2. Where quantitative limits have been introduced pursuant to the Agreement, each export licence must certify, inter alia, that the quantity of the product in question has been set off against the quantitative limit established for the category of the products concerned and shall only cover one of the categories of products subject to quantitative limits. It may be used for one or more consignments of the products in question.

3. For products subject to a double-checking system without quantitative limits the export licence shall conform to the model 2 annexed to this Protocol. It shall only cover one category of products and may be used for one or more consignments of the products in question. It shall be valid for exports throughout the customs territory to which the Treaty establishing the European Community applies.

Article 8

The competent authorities of the Community must be informed immediately of the withdrawal or modification of any export licence already issued.

Article 9

1. Exports of textile products subject to quantitative limits pursuant the Agreement shall be set off against the quantitative limits established for the year in which the shipment of the goods has been effected even if the export licence is issued after such shipment.

2. For the purpose of applying paragraph 1, shipment of the goods is considered to have taken place on the date of their loading onto the exporting aircraft, vehicle or vessel.

Article 10

The presentation of an export licence, pursuant to Article 12, shall be effected not later than 31 March of the year following that in which the goods covered by the licence have been shipped.

Section II

Importation

Article 11

Importation into the Community of textile products subject to quantitative limits or to a double-checking system pursuant to the Agreement shall be subject to the presentation of an import authorisation.

Article 12

1. The competent authorities of the Community shall issue the import authorisation referred to in Article 11, within five working days of the presentation by the importer of the original of the corresponding export licence.

2. The import authorisations concerning products subject to quantitative limits under the Agreement shall be valid for six months from the date of their issue for imports throughout the customs territory to which the Treaty establishing the European Community is applied.

3. The import authorisations for products subject to a double-checking system without quantitative limits shall be valid for six months from the date of their issue for imports throughout the customs territory to which the Treaty establishing the European Community is applicable.

4. The competent authorities of the Community shall cancel the import authorisation already issued whenever the corresponding export licence has been withdrawn.

However, if the competent authorities of the Community are notified of the withdrawal or the cancellation of the export licence only after the importation of the products into the Community, the relevant quantities shall be set off against the quantitative limits established for the category and the quota year concerned.

Article 13

1. If the competent authorities of the Community find that the total quantities covered by export licences issued by the competent authorities of Nepal for a particular category in any year exceed the quantitative limit established in accordance with Article 4 of the Agreement for that category, as may be modified by Articles 3, 5 or 7 of the Agreement, the said authorities may suspend the further issue of import authorisations. In this event, the competent authorities of the Community shall immediately inform the authorities of Nepal and the special consultation procedure set out in Article 11 of the Agreement shall be initiated forthwith.

2. Exports of products of Nepalese origin subject to quantitative limits or double checking system and not covered by Nepalese export licences issued in accordance with the provisions of this Protocol may be refused an import authorisation by the competent Community authorities.

However, without prejudice to Article 5 of the Agreement if the import of such products is allowed into the Community by the competent authorities of the Community, the quantities involved shall not be set off against the appropriate quantitative limits established pursuant to the Agreement, without the express agreement of the competent authorities of Nepal.

TITLE IV

FORM AND PRODUCTION OF EXPORT LICENCES AND CERTIFICATES OF ORIGIN, AND COMMON PROVISIONS CONCERNING EXPORTS TO THE COMMUNITY

Article 14

1. The export licence and the certificate of origin may comprise additional copies duly indicated as such. They shall be made out in English or French. If they are completed by hand, entries must be in ink and in printed script.

These documents shall measure 210 × 297 mm. The paper used shall be white writing paper, sized, not containing mechanical pulp, and weighing not less than 25 g/m2. If the documents have several copies only the top copy, which is the original, shall be printed with the guilloche pattern background. This copy shall be clearly marked as "original" and the other copies as "copies". Only the original shall be accepted by the competent authorities of the Community as being valid for the purpose of export to the Community in accordance with the provisions of the Agreement.

2. Each document shall bear a standardised serial number, whether or not printed, by which it can be identified.

This number shall be composed of the following elements:

- two letters identifying the exporting country as follows: NP;

- two letters identifying the intended Member State of customs clearance as follows:

AT= Austria

BL= Benelux

DE= Germany

DK= Denmark

EL= Greece

ES= Spain

FI= Finland

FR= France

GB= United Kingdom

IE= Ireland

IT= Italy

PT= Portugal

SE= Sweden;

- a one-digit number identifying quota year, as follows:

9 for 1999, 0 for 2000, 1 for 2001, 2 for 2002;

- a two-digit number from 01 to 99, identifying the particular issuing office concerned in Nepal;

- a five-digit number running consecutively from 00001 to 99999 allocated to the intended Member State of customs clearance.

Article 15

The export licence and the certificate of origin may be issued after the shipment of the products to which they relate. In such cases they must bear the endorsement "délivré a posteriori" or the endorsement "issued retrospectively".

Article 16

1. In the event of a theft, loss or destruction of an export licence or a certificate of origin, the exporter may apply to the competent Nepalese authorities which issued the document for a duplicate to be made out on the basis of the export documents in his possession. The duplicate of any such certificate or licence so issued shall bear the endorsement "duplicata" or "duplicate".

2. The duplicate shall bear the date of the original export licence or certificate of origin.

TITLE V

ADMINISTRATIVE COOPERATION

Article 17

The Community and Nepal shall cooperate closely in the implementation of the provisions of this Protocol. To this end, contacts and exchanges of views, including on technical matters, shall be facilitated by both Parties.

Article 18

In order to ensure the correct application of this Protocol, the Community and Nepal offer mutual assistance for the checking of the authenticity and the accuracy of export licences and certificates of origin issued or of any declarations made within the terms of this Protocol.

Article 19

Nepal shall transmit to the Commission of the European Communities the names and addresses of the authorities competent to issue and verify the export licences and the certificates of origin, together with specimens of the stamps used by these authorities and specimen signatures of officials responsible for signing the export licences and the certificates of origin. Nepal shall also notify the Community of any change in this information.

Article 20

1. Subsequent verification of certificates of origin or export licences shall be carried out at random, or whenever the competent authorities of the Community have reasonable doubt as to the authenticity of the certificate or licence or as to the accuracy of the information regarding the true origin of the products in question.

2. In such cases, the competent authorities of the Community shall return the certificate of origin or the export licence or a copy thereof to the competent Nepalese authorities, giving, where appropriate, the reasons of form or substance which justify an enquiry. If the invoice has been submitted, such invoice or a copy thereof shall be attached to the certificate or to the licence or their copies. The competent authorities of the Community shall also forward any information that has been obtained suggesting that the particulars given on the said certificate or licence are inaccurate.

3. The provisions of paragraph 1 shall also apply to subsequent verifications of the declarations of origin provided for in Article 2 of this Protocol.

4. The results of the subsequent verifications referred to in paragraphs 1 and 2 shall be communicated to the competent authorities of the Community within three months at the latest. The information communicated shall indicate whether the disputed certificate, licence or declaration, applies to the goods actually exported and whether these goods are eligible for export under the arrangements established by the Agreement. The information shall also include, at the request of the Community, copies of all the documentation necessary to fully determine the facts, and in particular the true origin of the goods.

Should such verifications reveal systematic irregularities in the use of declarations of origin, the Community may subject imports of the products in question to the provisions of Article 2(1) of this Protocol.

5. For the purpose of subsequent verification of certificates of origin, copies of the certificates as well as any export documents referring to them shall be kept for at least three years by the competent Nepalese authorities.

6. Recourse to the random verification procedure specified in this Article must not constitute an obstacle to the release for home use of the products in question.

Article 21

1. Where the verification procedure referred to in Article 20 or where information available to the competent authorities of the Community or of Nepal indicates or appears to indicate that the provisions of the Agreement are being circumvented or infringed, the two Contracting Parties shall cooperate closely and with the appropriate urgency in order to prevent or remedy any such circumvention or infringement.

2. To this end, the competent Nepalese authorities shall, on their own initiative or at the request of the Community, carry out appropriate inquiries, or arrange for such inquiries to be carried out, concerning operations which are, or appear to the Community to be, in circumvention or infringement of this Protocol. Nepal shall communicate the results of these inquiries to the Community, including any other pertinent information enabling the cause of the circumvention or infringement, including the true origin of the goods to be determined.

3. By agreement between the Community and Nepal, officials designated by the Community may be present at the inquiries referred to in paragraph 2 above.

4. In pursuance of the cooperation referred to in paragraph 1 above, the competent authorities of the Community and Nepal shall exchange any information considered by either contracting Party to be of use in preventing or remedying circumvention or infringement of the provisions of the Agreement. These exchanges may include information on the production of textile products in Nepal and on the trade in the type of products covered by the Agreement between Nepal and third countries, particularly where the Community has reasonable grounds to consider that the products in question may be in transit across the territory of Nepal prior to their importation into the Community. This information may include at the request of the Community copies of all available relevant documentation.

5. Where sufficient evidence shows that the provisions of this Protocol have been circumvented or infringed, the competent authorities of Nepal and the Community may agree to take the measures set out in Article 5(4) of the Agreement, and any other measures as are necessary to prevent a recurrence of such circumvention or infringement.

Annex to Protocol A, Article 2(1)

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Annex to Protocol A, Article 7(1): Model 1

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Annex to Protocol A, Article 7(3): Model 2

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PROTOCOL B

The annual growth rate for quantitative limits which could be introduced under Article 4 of the Agreement shall be fixed by agreement between the two Parties in accordance with the consultation procedure established in Article 11 of the Agreement. Such growth rate may in no case be higher than the highest rate applicable to corresponding products under bilateral agreements on trade in textiles concluded between the Community and other third countries having a level of trade equal to or comparable with that of Nepal.

AGREED MINUTE

Market access

In the context of negotiations for an Agreement on trade in textile products between the European Community and the Kingdom of Nepal, the Parties recorded their mutual understanding on the following matter:

Without prejudice to the other provisions of this agreement, each Party agrees not to take any measures, which may adversely affect the trade flows of textile and clothing products between the Parties during the validity of the Agreement.

DECLARATION

Having regard to the exceptional importance of exports of carpets in the Nepalese economy, in terms of source of foreign currency, of employment and share in the total foreign trade, the European Community declares its intention not to invoke the provision of Article 4 of this Agreement for products of category 58 manufactured in Nepal.