Proposal for a COUNCIL DECISION concerning the conclusion of the Agreement between the European Community and the Swiss Confederation amending the Agreement between the European Economic Community and the Swiss Confederation of 22 July 1972 as regards the provisions applicable to processed agricultural products

(presented by the Commission)

EXPLANATORY MEMORANDUM

The Joint Declaration on further negotiations attached to the final acts of the Agreements between the European Community and its Member States and the Swiss Confederation, signed in Luxembourg on 21 June 1999 calls on the Community and Switzerland to undertake negotiations for the updating of Protocol No 2 to the Agreement between the European Economic Community and the Swiss Confederation of 22 July 1972.

The Council authorised the Commission to start negotiations. The negotiation directives attached to the Decision of the Council set out the following objectives:

(a) Update the Protocol No 2 to the Agreement between the European Economic Community and the Swiss Confederation of 22 July 1972, in accordance with the results of the Uruguay Round and to adapt its product coverage;

(b) Resolve outstanding problems affecting trade, all of them taking account of the existing trade arrangements for basic agricultural products

(c) Make permanent the transitional measures agreed with the Swiss authorities in connection with the implementation of the agreement reach in view to maintain the trade flow between the Swiss Confederation and the new member States after enlargement of the European Union as of 1st May 2004;

(d) Improve reciprocal market access for processed agricultural products

The Commission started the negotiations with Switzerland at the end of 2001 and concluded them on 25 June 2004 by the initialling of a draft for an Agreement amending the Agreement between the European Economic Community and the Swiss Confederation of 22 July 1972 (the Agreement) as regards the provisions applicable to processed agricultural products.

The Agreement will replace both the Annex I of the Agreement of 1972 by a new Annex I which is attached to this Agreement as Annex 1 and the Protocol No 2 of the Agreement of 1972 by a new Protocol No 2, which is attached to this Agreement as Annex 2.

The updated Protocol No 2 provides a definitive solution to the problems, which have emerged in recent years concerning the trade between the two parties in soft drinks of heading 2202. So far, these problems were dealt provisionally with the Agreement in the form of an exchange of letters of 17 March 2000.

According to the general orientation to follow a more market-oriented approach, reference prices are to be adapted periodically according to Article 5, paragraph 4 of the Protocol No 2.

2004/0206 (ACC)

Proposal for a COUNCIL DECISION concerning the conclusion of the Agreement between the European Community and the Swiss Confederation amending the Agreement between the European Economic Community and the Swiss Confederation of 22 July 1972 as regards the provisions applicable to processed agricultural products

THE COUNCIL OF THE EUROPEAN UNION

Having regard to the Treaty establishing the European Community, and in particular Article 133 in conjunction with Article 300 (2) and Article 300 (4) thereof,

Having regard to the proposal from the Commission [1],

[1] OJ C , , p. .

Whereas:

(1) The Council authorised the Commission to negotiate with the Swiss Confederation an Agreement between the European Community and the Swiss Confederation amending the Agreement between the European Economic Community and the Swiss Confederation of 22 July 1972 as regards the provisions applicable to processed agricultural products

(2) According to Council Decision ..../..../CE of ......2004, and subject to its conclusion at a later date, the Agreement was signed on behalf of the European Community on ....2004.

(3) The Agreement should be approved.

HAS DECIDED AS FOLLOWS:

Article 1

The Agreement between the European Community and the Swiss Confederation amending the Agreement between the European Economic Community and the Swiss Confederation of 22 July 1972 as regards the provisions applicable to processed agricultural products is hereby approved on behalf of the European Community.

The text of the Agreement is attached to this Decision.

Article 2

The position to be taken by the Community as regards decisions or recommendations of the Joint Committee that are based on Article 7 of Protocol No 2 to the Agreement between the European Economic Community and the Swiss Confederation of 22 July 1972 shall be laid down by the Commission.

Article 3

The President of the Council shall effect the notification provided for in Article 5 paragraph 1 of the Agreement on behalf of the European Community [2].

[2] the date of entry into force of the Agreement will be published in the Official Journal of the European Union by the General Secretariat of the Council.

Article 4

This Decision shall be published in the Official Journal of the European Union.

Done at Brussels,

For the Council

The President

AGREEMENT

between the European Community and the Swiss Confederation amending the Agreement between the European Economic Community and the Swiss Confederation of 22 July 1972 as regards the provisions applicable to processed agricultural products

THE EUROPEAN COMMUNITY, hereinafter referred to as "the Community", and

THE SWISS CONFEDERATION, hereinafter referred to as "Switzerland",

Hereinafter together referred to as "the Contracting Parties",

Having regard to the Agreement between the European Economic Community and the Swiss Confederation of 22 July 1972 and to the Joint Declaration on further negotiations attached to the final acts of the Agreements between the European Communities and their Member States and the Swiss Confederation, signed in Luxemburg on 21 June 1999,

Considering that Protocol No 2 to the Agreement between the European Economic Community and the Swiss Confederation of 22 July 1972 - hereinafter referred to as "the Agreement" - should be updated in accordance with the results of the Uruguay Round and be adapted as regards product coverage,

Considering that the trade flows between Switzerland and the new Member States should be maintained after enlargement of the European Union,

Desiring to improve reciprocal market access for processed agricultural products,

Having regard to the Agreement in the form of an Exchange of Letters between the European Community, of the one part, and the Swiss Confederation, of the other part, on Protocol No 2 to the Agreement between the European Economic Community and the Swiss Confederation, of 17 March 2000,

HAVE AGREED AS FOLLOWS:

Article 1

The Agreement is amended as follows:

1. Annex I of the Agreement is replaced by the new Annex I which is attached to this agreement as Annex 1.

2. Protocol No 2 of the Agreement is replaced by the new Protocol No 2, which is attached to this agreement as Annex 2.

Article 2

The following agreements are repealed with effect from the entry into force of this agreement:

- Agreement in form of an exchange of letters between the European Community, of the one part, and the Swiss Confederation, of the other part, on Protocol No 2 to the Agreement between the European Economic Community and the Swiss Confederation, of 17 March 2000;

- Exchange of letters between the European Commission and the Swiss Federal Administration on arrangements designed to improve transparency in the various price compensation measures applied by the European Community and Switzerland which affect trade in processed agricultural products covered by Protocol No 2, of 29 November 1988.

Article 3

The Annexes to this agreement, including Tables and Appendices to the Tables and the Appendix to the Protocol No 2, shall form an integral part thereof.

Article 4

1. This agreement shall apply, on the one hand, to the territories to which the Treaty establishing the European Communities applies upon the terms laid down in that Treaty and, on the other, to the territory of Switzerland.

2. This agreement shall also apply to the territory of the Principality of Liechtenstein as long as the customs union with Switzerland is maintained.

Article 5

1. This agreement will be approved by the Contracting Parties in accordance with their own procedures. It shall enter into force on the day following the day on which the Contracting Parties have notified each other of the completion of their respective internal procedures necessary to this end.

2. Pending the completion of the ratification procedures referred to in Paragraph 1, the Contracting Parties shall apply this agreement from the first day of the fourth month following the date of the signature, provided that the implementing measures as defined in Article 5, Paragraph 4 of Protocol No 2 are adopted at the same date.

Article 6

This agreement is drawn up in duplicate in the Czech, Danish, Dutch, English, Estonian, Finnish, French, German , Greek, Hungarian, Italian, Latvian, Lithuanian, Polish, Portuguese, Slovak, Slovene, Spanish and Swedish languages, each of which being equally authentic.

Done at ( ...) on ( ...)

For the European Community For the Swiss Confederation

Annex 1

ANNEX I

List of products referred to in Article 2(i) of the Agreement:

HS code // Description

3501 // Casein, caseinates and other casein derivatives; casein glues:

3501 10 // - Casein

Ex 3501 90 // - Other:

- Other than casein glues

3502 // Albumins (including concentrates of two or more whey proteins, containing by weight more than 80% whey proteins, calculated on the dry matter), albuminates and other albumin derivatives:

- Egg albumin:

3502 11 // -- Dried

3502 19 // -- Other

3502 20 // - Milk albumin, including concentrates of two or more whey proteins

Ex 3505 // Dextrins and other modified starches (for example, pregelatinized or esterified starches); glues based on starches, or on dextrins or other modified starches:

for feed purpose

3809 // Finishing agents, dye carriers to accelerate the dyeing or fixing or dyestuffes and other products and preparations (for example, dressings and mordants), of a kind used in the textile, paper, leather or like industries, not elsewhere specified or included:

Ex 3809 10 // - With a basis of amylaceous substances, for feed purpose

3823 // Industrial monocarboxylic fatty acids; acid oils from refining; industrial fatty alcohols:

- Industrial monocarboxylic fatty acids; acid oils from refining:

3823 11 // -- Stearic acid

3823 12 // -- Oleic acid

3823 19 // -- Other

3823 70 // - Industrial fatty alcohols"

Annex 2

PROTOCOL No 2

concerning certain processed agricultural products

Article 1

General Principles

1. The provisions of the Agreement shall apply to products listed in Tables I and II unless otherwise specified in this Protocol.

2. In particular, with respect to these products, the Contracting Parties may not levy customs duties on imports or charges having equivalent effect, including agricultural components, or grant export refunds or any refund, remission or non-payment, partial or complete, of customs duties or charges having an equivalent effect.

3. The provisions of this Protocol shall likewise apply to the Principality of Liechtenstein until the application of Protocol 3 to the Agreement on the European Economic Area to the Principality of Liechtenstein.

Article 2

Application of price compensation measures

1. In order to take account of differences in the cost of the agricultural raw materials used in the manufacture of the products specified in Table I, the Agreement does not preclude the application of price compensation measures to these products; that is the levying of agricultural components upon import and the granting of export refunds or the granting of refunds, remissions or non-payments, partial or complete of customs duties or charges having an equivalent effect.

2. If a Contracting Party applies internal measures, which reduce the price of raw materials to processing industries, these measures shall be taken into account in the calculation of the price compensation amounts.

Article 3

Price compensation measures on imports

1. Switzerland's basic amounts for the agricultural raw materials taken into consideration in calculating the agricultural components on imports shall neither exceed the difference between the Swiss domestic reference price and the Community's domestic reference price for the respective agricultural raw material nor the Swiss import duty actually applied for the agricultural raw material when imported as such.

2. The Swiss import regime for products specified in Table I is laid down in Table IV.

3. If the Swiss domestic reference price is lower than the Community's domestic reference price, the Community may introduce the price compensation measures as laid down in Article 2 that is the levying of agricultural components upon import, in accordance with Regulation (EC) 1460/96 and it successors.

Article 4

Price compensation measures on exports

1. The Swiss export refunds or refunds, remissions or non-payments, partial or complete, of customs duties or charges having an equivalent effect for exports to the Community for products listed in Table I shall not exceed the difference between the Swiss domestic reference price and the Community's domestic reference price for the agricultural raw materials used in the manufacture of these products multiplied with the quantities actually used. If the Swiss domestic reference price is equal or lower than the Community's domestic reference price, the Swiss export refund or refund, remission or non-payment, partial or complete, of customs duties or charges having an equivalent effect shall be zero.

2. If the Swiss domestic reference price is lower than the Community's domestic reference price, the Community may introduce the price compensation measures as laid down in Article 2 that is the granting of export refunds according to the Regulation (EC) 1520/2000 and its successors or the granting of refunds, remissions or non-payments, partial or complete of customs duties or charges having an equivalent effect.

3. For sugar used in the manufacture of products listed in Table I and Table II the Contracting Parties may not grant any export refunds or any refund, remission or non-payment, partial or complete, of customs duties or charges having an equivalent effect.

Article 5

Reference prices

1. The Community and Swiss domestic reference prices for agricultural raw materials mentioned in Articles 3 and 4 are listed in Table III.

2. The Contracting Parties shall periodically, at least once every year, provide to the Joint Committee the domestic reference prices of all raw materials for which price compensation measures are applied. The domestic reference prices, which are provided, shall reflect the actual price situation in the territory of the Contracting Party. They shall be the prices normally paid at the wholesale or the manufacturing stage by processing industries. If an agricultural raw material is available to the processing industry, or to a part of it, at a price lower than the one otherwise ruling on the domestic market, the domestic reference prices provided shall be adjusted accordingly.

3. The Joint Committee shall fix the domestic reference prices and the price differences, for agricultural raw materials listed in Table III on the basis of the information provided by the services of the Commission and the Swiss Federal Administration. If necessary for the preservation of the relative preferential margins, the basic amounts of the agricultural raw materials listed in Table IV shall be adapted.

4. The Joint Committee shall review the domestic prices for agricultural raw materials mentioned in Articles 3 and 4 that are listed in Table III prior to the application of this Protocol.

Article 6

Special provision on administrative co-operation

Special provisions on administrative cooperation are laid down in the Appendix to this Protocol.

Article 7

Amendments

The Joint Committee may decide to amend the Tables, the Appendices to the Tables and the Appendix attached to this Protocol.

TABLE I

Products subject to price compensation measures

>TABLE POSITION>

TABLE II

Free-trade products

>TABLE POSITION>

TABLE III

EC and Swiss domestic reference prices (4)

>TABLE POSITION>

(1) For products benefiting from the aid for butter granted under Commission Regulation (EC) No 2571/97 of 15 December 1997 on the sale of butter at reduced prices and the granting of aid for cream, butter and concentrated butter for use in the manufacture of pastry products, ice-cream and other foodstuffs.

(2) Derived from the prices for liquid birds' eggs, not in shell multiplied with factor 0.85.

(3) Prices for vegetable fats (for the baking and food industry) with 100% fat content.

(4) The EC and Swiss domestic reference prices for agricultural raw materials mentioned in Articles 3 and 4 that are listed in Table III are based on data of 1st January 2002. They shall be reviewed by the Joint Committee prior to the application of this Protocol.

TABLE IV

Swiss Import Regime

a) The customs duty for the products listed in the Appendix to this Table is an agricultural component calculated on the basis of the net weight. The standard recipes are specified in the Appendix.

b) For products listed in the Appendix the following basic amounts for agricultural raw materials are taken into account for the calculation of the agricultural components:

>TABLE POSITION>

c) The customs duty for the products listed in the table below is zero.

Swiss tariff heading // Comments

1901.9099 //

1904.9020 //

1905.9040 //

2103.2000 //

ex 2103.9000 // Other than mango chutney, liquid

2104.1000 //

2106.9010 //

2106.9024 //

2106.9029 //

2106.9030 //

2106.9040 //

2106.9099 //

2208.9099 //

d) As from the application of this Protocol the customs duties for the products listed in the table below are reduced to zero in three equal yearly steps.

>TABLE POSITION>

e) The tariff headings set out in this Table refer to those applicable in Switzerland on 1 January 2002. Notwithstanding Article 12bis of the Agreement, the terms of this Table will not be affected by any changes that may be made in the tariff nomenclature.

Appendix to Table IV

Swiss Standards recipes

The standard recipes referred to in Table IV, paragraph a (Swiss Import Regime) used in the calculation of the agricultural components are specified in the table below.

>TABLE POSITION>

Appendix to Protocol No 2

Provisions on administrative co-operation

1. The Contracting Parties agree that administrative co-operation is essential for the implementation and the control of the preferential treatment granted under this Protocol and underline their commitment to combat irregularities and fraud in customs and related matters.

2. Where a Contracting Party has made a finding, on the basis of objective information, of a failure to provide administrative co-operation and/or of irregularities or fraud under this Protocol, the Contracting Party concerned may temporarily suspend the relevant preferential treatment of the product(s) concerned in accordance with this Annex.

3. For the purpose of this Appendix a failure to provide administrative co-operation shall mean, interalia:

a) a repeated failure to respect the obligations to verify the originating status of the product(s) concerned;

b) a repeated refusal or undue delay in carrying out and/or communicating the results of subsequent verification of the proof of origin;

c) a repeated refusal or undue delay in obtaining authorisation to conduct administrative co-operation missions to verify the authenticity of documents or accuracy of information relevant to the granting of the preferential treatment in question.

For the purpose of this Appendix a finding of irregularities or fraud may be made, inter alia, where there is a rapid increase, without satisfactory explanation, in imports of goods exceeding the usual level of production and export capacity of the other Contracting Party that is linked to objective information concerning irregularities or fraud.

4. The application of a temporary suspension shall be subject to the following conditions:

a) The Contracting Party which has made a finding, on the basis of objective information, of a failure to provide administrative co-operation and/or of irregularities or fraud in customs and related matters shall without undue delay notify the Joint Committee of its finding together with the objective information and enter into consultations within the Joint Committee, on the basis of all relevant information and objective findings, with a view to reaching a solution acceptable to both Contracting Parties .

b) Where the Contracting Parties have entered into consultations within the Joint Committee as above and have failed to agree on an acceptable solution within 3 months following the notification, the Contracting Party concerned may temporarily suspend the relevant preferential treatment of the product(s) concerned. A temporary suspension shall be notified to the Joint Committee without undue delay.

c) Temporary suspensions under this Appendix shall be limited to that necessary to protect the financial interests of the Contracting Party concerned. They shall not exceed a period of six months, which may be renewed. Temporary suspensions shall be notified immediately after their adoption to the Joint Committee. They shall be subject to periodic consultations within the Joint Committee in particular with a view to their termination as soon as the conditions for their application are no longer given.

5. At the same time as the notification to the Joint Committee under paragraph 4a) of this Appendix, the Contracting Party concerned should publish a notice to importers in its Official Journal. The notice to importers should indicate for the product concerned that there is a finding, on the basis of objective information, of a failure to provide administrative co-operation and/or of irregularities or fraud.

>TABLE POSITION>