MEMORANDUM OF UNDERSTANDING

between the European Community and the Arab Republic of Egypt on trade in textile products

The European Community (hereinafter the "Community") and the Arab Republic of Egypt on... December 1999 agreed that there is a need to renew for two years the existing system of administrative cooperation on textile products, done and initialled as a Memorandum of Understanding in Geneva on 26 November 1993 as last amended by Exchange of Letters initialled on 13 October 1995 and by a Memorandum of Understanding on 6 November 1997.

Both Parties confirm their readiness to seek acceptable solutions to any problems which might arise and hence to avoid recourse to measures which might be prejudicial to the interest of both Parties.

In this spirit of cooperation, both Parties agree that the trade in textile products between the Community and the Arab Republic of Egypt shall be based on the following provisions:

1. The Community will undertake not to apply safeguard measures provided for by Article 34 of the Cooperation Agreement between the Community and the Arab Republic of Egypt, as long as the imports of products listed in the Annex I are not higher than the levels indicated in the said Annex.

2. The administrative cooperation system agreed during the discussions and set out in Annex II will apply to the products covered by this Memorandum of Understanding.

3. The Community undertakes not to charge to the agreed levels imports intended for inward processing or re-export.

4. The Egyptian authorities undertake to organise their exports of the products listed in Annex I so that the agreed levels laid down therein are not exceeded.

5. The Parties shall cooperate in order to prevent sudden and prejudicial changes in traditional trade flows resulting in regional concentration of direct imports into the Community.

6. Egypt shall endeavour not to deprive certain regions of the Community which have traditionally had relatively small shares of Community quotas of imports serving as inputs for their processing industry.

7. The Egyptian authorities may, in their management of export, make use of the flexibility provisions laid down in Annex III.

8. The Parties shall cooperate fully in order to prevent, to investigate and to take any appropriate legal and/or administrative action against circumvention of the provisions of this Memorandum of Understanding.

9. At the request of either Party, consultations may be held to examine specific problems in the field of this Memorandum of Understanding. Such consultations shall be held within a maximum of 10 working days following a request by either Party.

10. The present regime will enter into force on 1st January 2000 and will last until 31 December 2001.

Signed at... on ...

For the Arab Republic of Egypt

For the European Community

ANNEX I

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ANNEX II

ADMINISTRATIVE COOPERATION

The system of administrative cooperation to be applied by the Community and the Arab Republic of Egypt in their trade in textile products will be as follows:

1. The Egyptian authorities (Cotton Textile Consolidation Fund) shall issue an export document for every consignment of products listed in Annex I of the Memorandum of Understanding. The export document shall correspond to the specimen as shown in Annex IV hereto.

(a) for products for which levels have been agreed and which are intended to enter into free circulation within the Community, export licences shall only be issued up to the agreed Community levels. Each licence must, in particular, certify that the amount in question has been charged against the level for the product category concerned. For such products for which no level has been agreed, export licences are issued without restriction but account is kept of the quantities issued.

Where export documents are cancelled the Egyptian authorities shall inform the Commission of the European Communities immediately, providing all the necessary information to prevent the relevant quantity from being set off against the limit concerned.

(b) The actual date of shipment shall determine the quota year against which goods are to be charged. To this end, the date shown on the bills of lading or airway bills or any other equivalent document shall be regarded as constituting proof.

2. The authorities of the Member States shall issue import documents or authorisations automatically within five working days on receipt of the request, provided that it is accompanied by the export document referred to under paragraph 1.

3. In order to facilitate this cooperation system:

- the Parties will exchange statistics about actual imports and exports as well as import and export documents issued during each calendar year,

- in addition, the Parties will exchange cumulative statistics on a quarterly basis. These data will be communicated to the other Party before the end of the third month following every quarter.

4. The classification of the products referred to in Annex I shall be based on the tariff and satistical nomenclature of the Community (hereinafter called the "Combined Nomenclature" or in abbreviate form "CN") and any amendments thereof.

No decision relating to the classification of goods or amendment to the Combined Nomenclature (CN) concerning the category of products in question, shall have the effect of reducing the agreed levels.

ANNEX III

FLEXIBILITIES

The flexibility shall be as follows:

1. The Egyptian authorities may carry over unused levels from the preceding year up to a maximum of 10 % of the levels for the year in progress.

2. Advance use of agreed levels for the next year may be made up to a maximum of 10 % of the levels for the year in progress.

3. The transfer between category 1 and category 2 is authorised within the limit of 7.5 % of the figure initailly agreed for the category to which the transfer is made.

ANNEX IV

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Agreed minute

With regard to the question of management of the levels below which the Community undertakes not to apply safeguards measures provided for by Article 34 of the Cooperation Agreement, the Arab Republic of Egypt makes clear its intention to take the necessary measures to ensure that Egyptian exports of products listed in Annex I do not exceed the Community agreed levels as provided for under the flexibility provisions in the Memorandum of Understanding itself.

The government of Egypt also takes note of the Community's desire to resume normal regime of trade as soon as possible. It recalls in this connection that the system governing access to the Community for cotton products originating in Egypt is one of free entry without quantitative restrictions or equivalent measures.

Signed at ... on ...

For the Arab Republic of Egypt

For the European Community

Agreed minute

Should the Community and the Arab Republic of Egypt conclude an association agreement, the Memorandum of Understanding on textiles emerging from these negotiations on ... December 1999, will take the form envisaged by the provisions of the agreement and of the joint declarations annexed to it.

Signed at ... on ...

For the Arab Republic of Egypt

For the European Community