COMMISSION RECOMMENDATION of 22 December 1969 to the French Republic on the adjustment of the State monopoly of a commercial character in explosives (Only the French text is authentic) (70/127/EEC)

I

1. The French Government, by letter of 14 February 1959, informed the Commission of the European Economic Community that explosives are in France subject to a State monopoly of a commercial character within the meaning of Article 37 of the EEC Treaty.

Under that provision Member States are required progressively to adjust State monopolies of a commercial character so as to ensure that, when the transitional period has ended, no discrimination regarding the conditions under which goods are procured and marketed exists between nationals of Member States.

However, it should be noted in the first place that the obligation to adjust the monopoly laid down in Article 37 may be limited in some degree by Article 223 (1) (b) according to which : "any Member State may take such measures as it considers necessary for the protection of the essential interests of its security which are connected with the production of or trade in arms, munitions and war material ; such measures shall not adversely affect the conditions of competition in the common market regarding products which are not intended for specifically military purposes".

Since explosives are not included in that list, Article 37 applies to them.

2. On 29 July 1966 the Commission recommended the French Government: - to ensure that permits for the importation from other Member States of products not appearing in the list adopted by the Council on 15 April 1958, should be granted to individuals without delay within a quota to be fixed on the basis of the principles laid down in Article 33 of the Treaty:

- to increase that quota each year in accordance with the principles laid down in that Article and with a view ultimately to abolishing all import restrictions;

- to fix selling prices so that, apart from customs duties, the same margin between delivery price and selling price should be applied in respect of products imported from the other Member States as in respect of domestic products for which the delivery price is the same.

3. On 7 August 1967 the French Government, in reply to that Commission Recommendation, stated for which of the products subject to the explosives monopoly it proposed, from 1 January 1968, to grant import permits. either without quantitative restrictions or within quotas while reserving to themselves the right, if national regulations in force in other Member States, and security regulations in particular, should have harmful effects in France, to draw the appropriate conclusions in regard to the adjustments proposed.

On 6 February 1968 the French Government informed the Commission that it considered it needed an opportunity to establish and assess the effects of the measures of adjustment announced on 7 August 1967 before making any new adjustments to the monopoly in explosives. The French Government was therein referring to the question of imports of military explosives which could also be put to civilian uses.

4. With regard to most kinds of explosives intended for civilian purposes as well as explosives which, although in general intended for specifically military purposes, are also in certain industries used for civilian purposes, the objectives of Article 37 have not yet been attained.

In fact, a study of the French Government's reply of 23 May 1969 to a request from the Commission shows that, with regard to the obligation to make the adjustments provided for in Article 37, the question of imports of military explosives for which there exist civilian uses has not yet been satisfactorily resolved. Moreover, the import quotas granted since 1 January 1968 for certain of the products subject to the monopoly, have not increased in a manner which will result in the total liberalization of imports by 31 December 1969. The French Government has confined itself to deciding that imports of these products in 1969 may amount to at least 10 % by quantity of national production. It is true that the French Government has recently accepted the principle of a major adjustment to the monopoly. However, the Commission does not dispose of any information enabling it to assess the proposed measures in relation to the obligations under the EEC Treaty.

5. The Commission considers that, since the end of the transitional period is approaching, measures should now be adopted, as laid down in Article 37, to bring to an end all discrimination between nationals of Member States regarding the conditions under which goods are procured and marketed.

Article 37, which comes under the Title relating to the free movement of goods and, more particularly, under the Chapter concerning the elimination of quantitative restrictions between Member States, aims at achieving by the end of the transitional period in respect of products subject to a State monopoly of a commercial character (or a like system) the same result as that achieved for other products by the application of Articles 30 to 34, that is to say the free movement of goods.

However a different procedure was provided in order to achieve that result in the sectors covered by State monopolies. Their progressive adjustment was provided for partly in order to take account of the fact that in the view of the Member States concerned the products subject to a monopoly presented special problems and partly so that the elimination of quantitative restrictions and of measures having an equivalent effect in those sectors should not be without practical result. There were indeed grounds for fearing that the liberalization of trade in respect of the products subject to a monopoly could not take place if the monopolies, by virtue of their exclusive right to import, export and market certain products, were to remain free to decide to what extent and under what conditions products from other Member States could be allowed on the domestic market (or, conversely, to what extent domestic products could be exported to other Member States).

It is for that reason that Article 37 contains the provision designed "to ensure that when the transitional period has ended no discrimination regarding the conditions under which goods are procured and marketed exists between nationals of Member States".

It should be stressed that the ending of discrimination resulting directly from provisions applicable to products subject to a monopoly is not the only requirement laid down in Article 37 ; that objective could be attained, in the absence of an article governing State monopolies, by means of other provisions of the Treaty, in particular those prohibiting charges having an equivalent effect to customs duties and measures having an equivalent effect to quantitative restrictions. It follows from what has been said above in relation to the special characteristics of State monopolies and of the restrictions to which they can give rise that the objective of the "adjustment", i.e. of ensuring that "no discrimination exists", is to eliminate the possibility that the particular powers vested in the monopolies in respect of the importing and domestic marketing, or the exporting, of certain products might at the end of the transitional period still give rise to discrimination.

Since these are the objectives laid down in Article 37, it is incumbent upon France to adjust the monopoly in explosives before the end of the transitional period in order that the objectives may be attained. On the other hand, it is for the Commission, in addition to its general duty to ensure that the Treaty is implemented, to make recommendations in accordance with Article 37 (6) as to the manner in which the adjustment provided for in that Article shall be carried out.

With regard to the monopoly in explosives, the Commission observes that the increase in the import quotas granted for certain products has not been followed by a total liberalization of imports from other Member States and that no import openings exist for military explosives which could also be put to civilian uses.

For these reasons, the Commission considers that the best solution for achieving the objective laid down in Article 37, because there is no doubt that it will be effective, is to abolish the exclusive right of the "Service des Poudres to import and market explosives, in so far as that right concerns trade between Member States.

II

On these grounds the Commission recommends the French Republic, with regard to explosives not listed in the Council Decision of 15 April 1958 pursuant to Article 223 (2) of the EEC Treaty and subject to the provisions concerning public security and the protection of human life contained in Article 36 of the EEC Treaty, to take the following measures, in accordance with Article 37 of the Treaty: 1. To allow explosives to be imported from Member States without any restriction. To that end all formalities necessary for the introduction of these products on to the French market must be such as can be carried out directly by the buyers or persons appointed by them so that the latter may immediately dispose of the products without the intervention of the Service des Poudres.

2. To allow all operations necessary for the marketing of explosives from other Member States to be freely carried out on the French market. To that end, in particular: - to allow suppliers from other Member States to set up their own wholesale or retail trade network in France and to hold stocks there;

- to allow suppliers from other Member States to advertise their products freely:

- to allow prices for products from other Member States to be freely agreed between sellers and buy ers at the different stages of marketing.

Done at Brussels, 22 December 1969.

For the Commission

The President

Jean REY