Agreement

in the form of a Memorandum of Understanding between the European Community and the Federative Republic of Brazil on arrangements in the area of market access for textile and clothing products, initialled in Brasilia on 8 August 2002

1. Delegations of the European Community and the Federative Republic of Brazil met on 8 August 2002 with a view to discussing improvements in access to the respective markets of both Parties for textile and clothing products.

2.1. The Federative Republic of Brazil shall not apply tariffs on textiles and clothing at rates higher that those shown in Annex I.

2.2. The European Community shall suspend the application of the quantitative restrictions currently in force in respect of imports of textile and clothing products from Brazil, affecting product categories 1, 2, 2A, 3, 4, 6, 6C, 9, 20, 22 and 39.

2.3. The Parties shall exchange the necessary documents proving the implementation of their commitments.

3. The Parties agree that the European Community retains the right to re-apply the quota regime at the level applicable for the year in question, at the levels corresponding to their bilateral understanding notified under the current Agreement on textiles and clothing (ATC) and for a maximum period not extending beyond the duration of the ATC, in the event that Brazil fails to fulfil any of the obligations contained in paragraphs 2 and 5 of this Agreement in the form of a Memorandum of Understanding (hereinafter referred to as the "Memorandum of Understanding"). The Parties agree that Brazil retains the right to suspend the application of its commitments under paragraphs 2 and 5 should the European Community re-apply quotas in a manner inconsistent with its obligations under this Memorandum of Understanding or fail to fulfil any of the obligations contained in paragraph 5. The Parties agree to consult with each other pursuant to paragraph 6 before exercising this right.

4. Without prejudice to paragraph 3 and of the administrative cooperation as provided for in the bilateral textile agreement initialled on 12 September 1986 and its subsequent amendments, and for the purpose of exchanging information on trade in textiles and clothing in view of combating fraud, the Parties agree the following:

(a) the products set out in paragraph 2.2 shall be subject to the procedures provided for in the double-checking system set out in Articles 18 to 24 of Annex III to Council Regulation (EEC) No 3030/93. The double-checking system shall be introduced by the European Community as soon as the latter has suspended the quotas in accordance with paragraph 2. The Parties agree to keep the products set out in paragraph 2.2 subject to the double-checking system under review and may propose changes to it following consultations pursuant to paragraph 6. The European Community agrees that the products subject to the procedures foreseen in the abovementioned double-checking system will not, as a consequence of this system, suffer any trade restriction;

(b) The European Union shall closely cooperate with Brazil to ensure the originating status of the textiles and clothing products covered by this Memorandum of Understanding.

These procedures are subject to the provisions contained in Annex II.

5. The Parties agree to refrain from adopting any non-tariff measures that could hinder trade in textile and clothing products, of the kind indicated in the Agreed Minute attached hereto. In this context the Parties agree that quantitative limits shall not be introduced on the products referred to in paragraph 2 except in the event the European Community exercises the right to re-apply the quota regime pursuant to paragraph 3.

6. The parties agree that the balance of this Memorandum of Understanding, forming a package of mutual concessions freely extended between the Parties, depends on the full and faithful implementation of all the terms of this Memorandum of Understanding. As a result, the Parties agree to consult periodically in order to ensure the proper implementation of this Memorandum of Understanding. In addition, the Parties agree promptly to consult following the request of either Party concerning any aspect of this Memorandum of Understanding.

In the event that one Party seeks to exercise the right contained in paragraph 3, it shall provide the other with details of any alleged failure in writing. Consultations with a view to remedying the failure in question shall be held within 60 days of such a written request unless the Parties agree otherwise. In the event that the Parties cannot agree on appropriate remedial action within 60 days from the start of the consultations, the first Party shall have the right to proceed under paragraph 3.

7. The Parties agree to cooperate fully in respect of obligations inherent to the WTO or any of its Bodies.

8. The Parties agree that this Memorandum of Understanding is without prejudice to the possibility of seeking mutual concessions concerning market access from other trading partners in the sector.

9. The Parties agree that this Memorandum of Understanding is without prejudice to their rights to invoke the WTO Dispute Settlement Understanding.

10. All agreed minutes and declarations annexed to this Memorandum of Understanding shall form an integral part of it.

11. The Parties agree that this Memorandum of Understanding shall enter into force on the first day of the month following the day on which the Parties have notified each other that the internal procedures necessary to this end have been completed. In the meantime, it shall be applied provisionally on conditions of reciprocity.

Done at Brussels, 6 November 2002.

For the European Community

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For the Federative Republic of Brazil

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ANNEX I

Maximum import duties to be applied by Brazil

>TABLE>

The description of the products is deemed to be indicative only.

The scope of the arrangements provided for in Council Regulation (EEC) No 2658/87 is, for the purposes of this Annex, determined by the scope of the codes as they exist at the time of the adoptio of the latest amendment of the Regulation

ANNEX II

In order to avoid circumvention of import regulations applied by the Federative Republic of Brazil and the European Community:

1. In accordance with paragraph 4 of the Memorandum of Understanding, the European Community will subject to a double-checking system the categories previously under quotas, i.e. Categories 1, 2, 2A, 3, 4, 6, 6C, 9, 20, 22 and 39. In accordance with such a system, as provided for in Articles 18 to 24 of Annex III to Regulation (ΕEC) No 3030/93, the licensing offices of the European Community shall issue import licences automatically without restriction, within five days from the presentation of an export licence, and free of charge. Both Parties can enter into an administrative arrangements providing for the transmission of data concerning export licenses in an electronic form replacing the granting of export licences in a paper form.

2. The European Community will closely cooperate with Brazil to ensure the authenticity of the origin of exports from the European Union of textiles and clothing products covered by this agreement, and in particular the following:

CN(1) EU

5402 31 00

5402 32 00

5402 33 00

5402 41 00

5402 42 00

5402 52 00

5406 10 00

5407

5408

5501 30 00

5503 20 00

5503 30 00

5509 32

5513 11

5514 13 00

5515

5516 12 00

5516 13 00

5516 14 00

5516 22 00

5516 92 00

5804 10 90

5804 21

5810 92

5810 99

60

6103 43

6106 20 00

6106 90

6110 11

6110 12

6110 19

6110 30

6110 90

6111 30

6112 12 00

6203

6204

6205

6206

6208 22 00

6211 11 00

6211 33

6211 43

6305 10

6308 00 00

Such cooperation shall be carried out in accordance with the provisions of Title V of Protocol A in the Agreement between the European Communities and the Federative Republic of Brazil on trade in textile products on 12 September 1986.

(1) The products covered by this list are determined by the corresponding product description of Annex I to Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ L 256, 7.9.1987, p. 1). Regulation as last amended by Commission Regulation (EC) No 969/2002 (OJ L 149, 7.6.2002, p. 20).

ANNEX III

Agreed Minute (referred to in paragraph 5 of the Memorandum of Understanding)

In the context of the Agreement in the form of a Memorandum of Understanding on trade in textile and clothing products between the European Community and the Federative Republic of Brazil, initialled in Brasilia on 8 August 2002 and more particularly with reference to paragraph 5 thereof, the Parties recorded their understanding that non-tariff barriers related to all forms of hindrance to trade in the sector are not to be applied by any of the Parties. Bearing in mind their WTO commitments (rights and obligations), the Parties agree these non-tariff barriers include but are not limited to matters such as:

- any additional customs duties on the import or sale of products of EU or Brazilian origin in excess of those set out in the Agreement, or any fees and charges in connection with importation or exportation in excess of the approximate cost of services rendered(1),

- any taxes which are higher than any such taxes imposed on the production or sale of equivalent domestic goods,

- technical regulations or standards, or conformity assessment or certification rules, procedures or practices going beyond the purposes for which they are required,

- any indicative values resulting in effective application or minimum prices or arbitrary and fictitious prices or any customs valuation rules, procedures or practices giving rise to barriers to trade,

- rules, procedures or practices for pre-shipment inspection that are discriminatory, non-transparent, excessively lengthy or burdensome, and the imposition of customs controls for the clearance of goods to shipments that have already been subject of pre-shipment inspection,

- excessively burdensome, costly or arbitrary rules, procedures or practices concerning the certification of the origin of products or requiring direct shipment of goods from the country of origin to the country of destination,

- any non-automatic, discretionary or other licensing requirements, rules, procedures or practices imposing disproportionate burdens or having restrictive effects on imports. In particular application for automatic licenses submitted in an appropriate and complete form should be approved immediately on receipt, to the extent administratively feasible, but within a maximum of 10 working days,

- requirements or practices concerning marking, labelling, the description of composition of the product or the description of the manufacturing or products which, either in their formulation or in their application, are in any form discriminatory as compared with domestic products and not more trade restrictive than necessary to fulfil a legitimate objective(2),

- unduly long customs clearance delays or excessively burdensome, non-transparent or costly customs procedures, including inspection requirements, which have an unnecessary restrictive effect on imports,

- subsidies causing injury to the textile and clothing industry of the other Party.

In order to facilitate legitimate trade, notwithstanding the need of effective control, the Parties undertake to:

- cooperate and exchange information on all issues concerning customs legislation and procedures, and in particular to deal promptly with problems faced by operators arising from measures covered by this Agreement,

- provide effective, non-discriminatory and prompt procedures enabling the right of appeal against customs and other agency administrative actions, ruling and decisions affecting import or export of goods,

- establish an appropriate consultation mechanism between customs administrations and traders on customs regulations and procedures,

- publish, as far as possible through electronic means, and publicise new legislation and general procedures related to customs, as well as any modification, no later than the entry into force of any such legislation and procedures,

- cooperate with a view to reaching a common approach to issues relating to customs valuation, in particular the elaboration of a "code of good practices" in relation to working methods and operational aspects, the use of indicative or reference indices, appropriate documentation to certify the accuracy of the customs value and the use of securities. The Parties agree to open negotiations on the "code of good practices" at the entry into force of this Memorandum of Understanding and to conclude them as soon as possible.

Additional Agreed Minute

The European Community notes the commitment by the Government of Brazil to make its best endeavours so that the additional tax of 1,5 % applied on imports of goods into Brazil and initially expiring on 31 December 2002 will not be applied beyond that date for the products listed in Annex I to this Memorandum of Understanding. The European Community considers that the discontinuation of this tax for the products listed in Annex I to this Memorandum of Understanding from 31 December 2002 is part of the balance of concessions of the Agreement. If, however, this additional tax of 1,5 % is extended for the products listed in Annex I to this Memorandum of Understanding, the European Community agrees to grant a maximum period of three months, beginning 1 January 2003, for its expiration. Should such tax be extended beyond that date, the European Community and the Federative Republic of Brazil agree that the European Community can reintroduce the quota for either category 2A or for category 9 at the levels corresponding to their bilateral understanding notified under the current Agreement on textiles and clothing (ATC). Before reintroducing this quota, the European Community will notify Brazil of its intention of doing so. Brazil and the European Community agree to hold consultations prior to the reintroduction of such quota within 60 days of the request of either party. In the event the Parties cannot agree on appropriate remedial action within 60 days from the request for the consultations, the European Community will have the right to reintroduce the quota as from 1 June 2003 onwards.

Declaration

In the context of the Agreement in the form of a Memorandum of Understanding on trade in textile and clothing products between the European Community and the Federative Republic of Brazil and the Agreed Minute thereto initialled in Brasilia on 8 August 2002, and more particularly with reference to the possible reintroduction of quotas in the event of a failure by Brazil to fulfil the obligations referred to in paragraphs 2 and 5 in the same way as Brazil retains the right to suspend the application of its commitments on paragraphs 2 and 5, should the European Community re-apply quotas in a manner consistent with its obligations under this Memorandum of Understanding or fail to fulfil any of the obligations contained in paragraph 5, the Parties declare that the commitments entered into concerning non-tariff barriers are bilateral commitments entered into between the Parties independently of any multilateral commitments also applicable to the Parties. In consequence, the Parties agree that the application of these provisions is of a purely bilateral nature. The Parties further agree that these bilateral commitments are not intended to go beyond or place them under higher standards or obligations than the level of commitments they have entered into in a multilateral context. This Memorandum of Understanding is without prejudice to the rights and obligations of the Parties under multilateral agreements to which both are Parties.

With respect to existing taxes, fees or charges applied by any of the two Parties not covered by the Agreed Minute, it is understood they are subject to WTO rules.

(1) The Parties understand that the AFRMM is not covered by this provision.

(2) The European Community agrees that eco-labelling requirements in the textile sector will not be applied as an additional hindrance to imports from Brazil.