ADMINISTRATIVE ARRANGEMENTS

on trade in textile products between the European Community and Hong Kong

AGREED MINUTE

During consultations held between Hong Kong and the European Community, the two parties agreed that the relevant provisions of their bilateral Agreement on trade in textiles products, initialled on 2 October 1986, as last modified by the Exchange of Letters initialled on 25 November 1994, listed in Annex I to this Agreed Minute, shall form the basis of the administrative arrangements deemed necessary in relation to the implementation of the textiles and clothing restrictions between the European Community and Hong Kong. The list of such provisions is set out in Annex I to this Agreed Minute.

As a consequence, the administrative arrangements that have been agreed upon between the two parties pursuant to Article 2 (17), of the World Trade Organization (WTO) Agreement on Textiles and Clothing (ATC) in order to implement the textiles and clothing restraints between the European Community and Hong Kong are set out in Annex II to this Agreed Minute. The administrative arrangements in Annex II are drawn up on the basis of the provisions listed in Annex I to this Agreed Minute.

For Hong Kong

For the European Community

ANNEX II

Article 1

Classification system

The classification of the products covered by these administrative arrangements is based on the tariff and statistical nomenclature of the European Community (the Community) (hereinafter called the ‘combined nomenclature’, or in abbreviated form ‘CN’) and any amendments thereof.

Article 2

Determination of origin of covered products

The origin of the products covered by these administrative arrangements shall be determined in accordance with the rules in force in the Community and the procedures for control of the products set out in Protocol A.

If any amendment is made to the rules of origin, the Community shall, with the agreement of Hong Kong, take appropriate measures to avoid any possible consequent reduction of Hong Kong's ability to use the quantitative limits established under Article 2 of the Agreement on Textiles and Clothing (ATC).

The Community undertakes that any amendment made to the rules of origin shall continue to be based on criteria not requiring, in order to confer originating status, more extensive operations than those constituting a single complete process.

Article 3

Double-checking

Hong Kong agrees to restrain its exports to the Community of the products described in the notification of the Community to the Textiles Monitoring Body (TMB) under Article 2 (1) of the ATC to the limits set out therein as increased by the growth rates provided under Article 2 of the ATC and as may be modified by the flexibility provisions notified to the TMB under Article 2 (1) of the ATC, until such time as these products are integrated into GATT 1994 under paragraphs 6, 8 or 9 of Article 2 of the ATC. Exports of restrained textile products shall be subject to a double-checking system specified in Protocol A.

Article 4

Reimports after OPT

Hong Kong and the Community recognize the special and differential character of reimports of textile products into the Community after processing in Hong Kong, Such reimports may be provided for outside the quantitative limits established under Article 2 of the ATC provided that they are effected in accordance with the regulations on economic outward processing in force in the Community.

Article 5

Imports into Community for re-export after processing

1. Exports to the Community of textile products covered by these administrative arrangements shall not be subject to quantitative limits established under Article 2 of the ATC, 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 within the Community of products imported under the conditions referred to above shall be subject to the production of an export licence issued by the Hong Kong authorities and to proof of origin, in accordance with the provisions of Protocol A.

2. Where the competent authorities in the Community have evidence that products exported from Hong Kong and set off by Hong Kong against a quantitative limit established under Article 2 of the ATC have been subsequently re-exported outside the Community, the authorities concerned shall notify Hong Kong of the quantities involved. On receipt of such notification, Hong Kong may authorize exports for the current or the following year of identical quantities of products, within the same category, which shall not be set off against the quantitative limits established under Article 2 of the ATC.

Article 6

Statistical verification of carry-over

Hong Kong shall provide the Community with export data showing the amounts of carry-over available in any given year. If substantial statistical differences exist between the export data from which the amount to be carried over is calculated and the Community's data the Community may, within the first 120 days of the following year, request consultations in accordance with the procedures referred to in Article 12 (1) of these administrative arrangements on the amounts involved. Any such request shall be accompanied by full particulars of the alleged statistical differences. Where such a request is made, the portions carried over shall not be used until the parties have completed consultations. If no such request is made within a 120-day period, the portion carried over shall be presumed to have been calculated correctly.

Article 7

Exchange of statistical information

1. Hong Kong undertakes to supply the Community with precise statistical information on all export licences issued by the Hong Kong authorities for all categories of textile products subject to the quantitative limits established under Article 2 of the ATC. Hong Kong shall set out in its periodical statistical reports the maximum export levels for each category subject to a quantitative limit established under Article 2 of the ATC and the rate of utilization of these levels.

2. The Community shall likewise transmit to the Hong Kong authorities precise statistical information on import documents issued by the Community authorities in respect of export licences issued by Hong Kong. This information shall, for all categories of products, be transmitted before the end of the second month following the quarter to which the statistics relate.

3. The information referred to in paragraph 1 shall, for all categories of products, be forwarded before the end of the month following the month to which the statistics relate.

4. The Community shall transmit to the Hong Kong authorities import statistics for products covered by Article 5 (1) of these administrative arrangements.

5. The information referred to in paragraph 4 shall, for all categories of products, be transmitted before the end of the third month following the quarter to which the statistics relate.

6. Should it be found on analysis of the information exchanged above 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 12 of these administrative arrangements. Any such consultations shall be resolved on the basis of the agreed descriptions of the products set out in the notification under Article 2 (1) of the ATC.

Article 8

Amendments to classification

1. The authorities of Hong Kong shall be informed of any amendment to the combined nomenclature or any decision, made in accordance with the procedures in force in the Community, relating to the classification of products covered by these administrative arrangements. Any such amendment or any decision which results in a modification of the classification of products covered by these administrative arrangements shall not have the effect of reducing Hong Kong's ability to use the quantitative limits established under Article 2 of the ATC. The procedures for the application of this paragraph are set out in Protocol A.

2. In the case of divergent opinions between Hong Kong and the competent Community authorities at the point of entry into the Community on the classification of products subject to quantitative limits established under Article 2 of the ATC, consultations in accordance with Article 12 (1) of these administrative arrangements shall be held with a view to reaching agreement on the appropriate classification of the products concerned and to resolving any difficulties arising therefrom. For this purpose, the authorities of Hong Kong shall be informed by the competent authorities of the Community as soon as a case of divergent opinions on the classification of products arises. Pending agreement on the appropriate classification and in order to avoid disruption to trade, the products in question shall be imported on the basis of the classification indicated by the competent Community authorities at the point of entry, in conformity with the provisions of these administrative arrangements.

Article 9

Circumvention

1. Hong Kong and the Community agree to cooperate fully in preventing the circumvention of these administrative arrangements by transhipment, re-routing of whatever other means.

2. The Community and Hong Kong note the well established and close cooperation which exists between the two parties in preventing and dealing with problems relating to the contravention through circumvention of the provisions of previous Agreements between the Community and Hong Kong, and, in particular, the mutually satisfactory solutions which have been reached on equivalent debiting of the corresponding quantitative limits.

3. The two parties reaffirm their willingness to strengthen this cooperation in all its aspects having regard to the administrative and technical procedures in force in the Community and Hong Kong for the implementation of these administrative arrangements.

4. Hong Kong confirms that its export control system permits the prompt debiting of circumvented amounts to the appropriate quantitative limits established under Article 2 of the ATC and previous Agreements.

5. Where information available to the Community as a result of the investigation carried out in accordance with the procedures set out in Protocol A constitutes evidence that products of Hong Kong origin subject to quantitative limits established under Article 2 of the ATC have been transhipped, re-routed or otherwise imported into the Community in circumvention of these administrative arrangements, the Community may request the opening of consultations in accordance with the procedures described in Article 12 (1) of these administrative arrangements, with a view to reaching agreement on an equivalent adjustment of the corresponding quantitative limits.

6. Should the parties be unable in the course of the consultations to reach a satisfactory solution within the period specified in Article 12 (1) of these administrative arrangements, the Community shall have the right, where clear evidence of circumvention has been provided, to deduct from the quantitative limits amounts equivalent to the products of Hong Kong origin.

7. Deduction of the relevant quantitative limits shall, as a general rule, be implemented in the following manner:

— where the evidence provided clearly establishes that the provisions of these administrative arrangements have been circumvented, Hong Kong shall, at the request of the Community, debit the circumvented amounts to the appropriate quantitative limits for the year in which the circumvention took place or for subsequent years, the timing and apportioning of such debiting being decided in consultation with the Community, to ensure that, where appropriate, such debiting may be satisfactorily implemented.

8. Should the consultation period provided for in Article 12 (1) of these administrative arrangements be sufficient to complete the examination of the evidence adduced the parties may agree to extend that period.

Article 10

Regional concentration

1. The quantitative limits established under Article 2 of the ATC on imports into the Community of textile products of Hong Kong origin will not be broken down by the Community into regional shares.

2. Notwithstanding the above, for imperative technical or administrative reasons or to find a solution to economic problems resulting from regional concentration of imports, or in order to combat circumvention and fraud of the provisions of these administrative arrangements, the Community will establish for a limited period of time a specific management system in conformity with the principles of the internal market. Should the Community have recourse to this provision, the textile products covered by the corresponding export licences can only be put into free circulation in the region(s) of the Community indicated in those licences. Similarly, the products covered by the import licences can only be put into free circulation in the region(s) of the Community indicated in those licences. This provision was invoked by the Community as from 1 January 1993.

3. 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.

4. Hong Kong shall monitor its exports of products under restraint 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, and in accordance with Article 12 (1) of these administrative arrangements. Hong Kong, from the date of request for and pending the consultations, will not issue export licences that would further aggravate the problem.

5. However, if the parties are unable to reach a satisfactory solution during the consultations, Hong Kong will, if so requested by the Community, respect temporary export limits for one or more regions of the Community. In such a case, these limits shall not preclude the importation into the region(s) concerned of products which were shipped from Hong Kong on the basis of export licences obtained before the date of formal notification to Hong Kong by the Community about the introduction of the above limits. The Community shall inform Hong Kong of the technical and administrative measures that need to be introduced by both parties so that implementation is in conformity with principles of the internal market.

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

7. Hong Kong shall endeavour not to deprive certain regions of the Community which have traditionally had relatively small shares of Community quotas of imports of products serving as inputs for their processing industry. The Community and Hong Kong shall hold consultations, should the need arise, in order to avert any problems which might occur in this respect.

Article 11

Non-discrimination in allocation of export and import licences

Hong Kong and the Community undertake to refrain from discrimination in the allocation of export licences and import documents respectively.

Article 12

Consultations

1. Save where it is otherwise provided for in these administrative arrangements, the special consultation procedures referred to in these administrative arrangements shall be governed by the following rules:

— any request for consultations shall be notified in writing to the other party, together with a statement setting out the reasons and circumstances which, in the opinion of the requesting party, justify the submission of such a request,

— the Parties shall enter into consultations within 15 days, at the latest, of notification of the request, with a view to reaching agreement or a mutually acceptable conclusion within a further 15 days at the latest.

2. If necessary, at the request of either of the parties consultations shall be held on any problems arising from the application of these administrative arrangements. Any consultations held under this Article shall be approached by both parties in a spirit of cooperation and with a desire to reconcile the difference between them.