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DOCUMENTS "COM"
COM(74)558
Vol.1974/0095

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COMMISSION OFTHEEUROPEANCOMMUNITIES
COM(74)558final
Brussels,25April1974
RECOMMENDATION
FORA
COUNCILDECISION
onthenegotiation ofanagreementonadraft
annextotheinternational Conventionforthe
simplification andharmonisation ofcustoms
procedures ontheprocedurefortheduty-free
replacement ofgoods
(submittedtotheCouncillaytheCommission)
COM(74)558final

Recommendation
fora
CouncilDecision
onthenegotiation cfanagreementon
adraftAnnextotheinternational
Conventionforthesimplification and
harmonisation ofcustomsprocedures on
theduty-freereplacement ofgoods.
EXPLANATORY NOTE
1.Introduction
1
1.1TheCustomsCooperationCouncil(C.C.C.)haspreparedadraftinternational
Conventionforthesimplification andharmonisation ofcustomsprocedures .
WithregardtotheCommunity,thisConventionhasbeenmadethesubject
ofaRecommendation foraCouncilDecision(doc.COM(73)46ofinalof
28March1973,R/977/73(COMER1^6)of12April1973,COM(73)1.24ofinal
of25July19731T72/74(COMER)(ECO)(JUR)of13February1974and
T/115/74(COMER)(ECO)(JUR)of5March1974).
TheConventionopensthepossibility ,fromthetimeofitssignature,
ofspecifyingtheanneaortheannexeswhichthecontractingparties
mayundertaketoapply(Article11(4)oftheConvention).
Further,forthepurposesofvotingwhenrequiredattheC.C.C.,each
annexistakenasconstitutingaseparateconvention(Article7°f
theConvention).
1.2ThePermanentTechnicalCommitteeoftheC.C.C.hasdecidedtowrite
intoitsprogrammeoffutureworkthedraftannexontheprocedurefor
exportationwithentitlementtofreshsuppliesofrav/materials(doc.
2o.l69oftheC.C.C.dated6December1973)•
TheSecretariat oftheC.C.C.hasinvitedMemberStatesaswellas
non-Members andinternational organisations concerned,tosubmitany
observations andsuggestionswhichtheymayhaveonthisdraft.

1.3IkeCommission examined this draft with representatives ofMember States
atameeting oftheadhocGroup oftheCommittee onInward Processing
with aview toarriving atacommon stand ,which was ,conveyed tothe
Secretariat oftheCustoms Cooperation Council (c.f .letter No1223
of28January 1974 )within thetime limit laid down .
1.4 working Group oftheC.C.C. hasexamined the said draft annex .The
revised text ofthedraft wasadopted atthePermanent Technical Committee 's
83rd/84th sessions (c.f .doc.2o.4oo ofC.C.C. dated 1March 1974 ).
This draft Annex ontheduty-free replacement ofgoods isannexed to
this explanatory note .Itisnowready fornegotiation attheproper
level inthe C.C.C. .
2.Piemain features ofthe draft Annex
Thedraft Annex isbased onthefollowing points :
2.1 Inmost countries ,national legislation contains provisions under which
goods used tomake products for export arenot required tobear duties
and taxes .
2.2.1116 drawback procedure (l)andtemporary admission forprocessing (2)
allow arefund of,orconditional relief from ,import duties andtaxes
tobegranted inrespect offoreign goods used toobtain exported products .
Ihthecase oftheprocedure ftrduty-free replacement ofgoods ,thetechnique
employed that ofexemption from import duties andtaxes .This exemption
isgranted forgoods equivalent inquality andquantity tothose which
were infree circulation andwere processed into products exported from
theCustoms territory .
2.3Application ofthis procedure maybemade subject tothecondition that the
importation ofgoods equivalent tothose incorporated intheproducts
previously exported isregarded bythecompetent authorities asbene­
ficial tothenational economy .
2.4Products manufactured from goods admitted free ofimport duties and
taxes under this procedure maybeputonthehome market . .
(1)doc .COM(73 )46ofinal of28March 1973 ?R977/73(COMER I56)of12April 1973
(2)doc .COM(73)830final of3°May1973

-3-
3»^P-gTlQ-^r^Cormnity actioninthr?negotiationofthedrafts
3.1Themaxncharacteristics cfthisdraftgiveitperforceabsaringona
Customsprocedurewhichrarjcsamongtheprincipalinstrumentsof
commercialpolicy.Consequently ,whenthisprocedureisthesubject
ofaninternational agreenant,itbecomesbothatariffandcommercial
agreementwhichispartofthecommoncommercialpolicy,byvirtueof
Article113oftheESCTreaty.ThenatureofArticles113and114ofthe
EECTreatyissuchthatonlytheCommunityhasthecompetencetonegotiate
andconcludetheseagreements.
3.2Article113paragraph3of"theEECTreatyprovidesthatifagreements
onwhichithasabearingneedtobenegotiatedwiththirdcountries,
theCommissionshallsubmititsrecommendations totheCouncilwhich
shallauthorisetheopeningofthenecessarynegotiations .
3.3IhcnegotiationofthedraftAnnexontheduty-fieereplacementofgoods
isnotacceptabletotheCommunity.Firstlythecustomsprocedurelaid
downinthisdraftgoesbeyondthescopeoftheCommunity'sinward
processprocedure(c.f.CouncilDirectivl^f4March19^9onthe
harmonisation ofprovisionslaiddownbylatyregulationoradministrative
actioninrespectofinwardprocessing(69/73/EEC).Indeedtheprocedure
ignoresthreeprincipleswhichtheCommissionconsidersnecessaryviz,
-exportedgoodsshouldbeproducedbytheholderoftheauthorisation !
-there-importation ofgoodsbytheauthorisedperson}
-authorisation shouldbelimitedtowell-founded need.
Thusitsscopebynomeanscorrespondstothatofpriorexportationin
theCouncilDirectivereferredtoabove.
Inadditionthereisinpracticeariskthattheabsenceofalinkbetween
theperson(naturalorlegal)whoontheonehandexportsandwhoprocesses
thenecessaryrawmaterialsintoproductsforexportationand,onthe
otherhandbetweentheexporterofthecompensating productsandthe
importeroftheduty-freegoodswouldleadtoasortof"bank"offoreign
goodsabletoprofitfromthisduty-freeprocedure.
./.
(l)O.J.TToL38of8March19&9tP°1

-4-
Theintroduction "defacto"ofsuchabatikwouldmoanakindof"cleaning 1,'
ofgeneralcounter-balancing ,betweenexportations andimportations
theprincipleconsequenceofwhichwouldbethatbecauseofthelatitude
theprocedurecouldprovide,tariffprotectionwouldbeunjustifiably
weakened-toaninassessable degree.Thisconsiderationisofmajorimportance
inindustrialised countries.
Itisaccordinglynecessarytoregisterageneralreserveinrespect
oftheAnnexfornegotiation .
4.Conclusion
TheCommissionrecommendsthattheCouncil,byvirtueofArticle113of
theEECTreaty,should,havingregardtoDirective(EEC)No69/73»authorise
ittonegotiatethedraftannextotheinternational Conventionforthe
simplification andharmonisabion ofCustomsproceduresinrespectofthe
procedurefortheduty-freereplacement ofgoods.
5»TimetableAr.nex(c.f.doc.SEC(73)4766ofloDecember1973)
IfTitleoftheProposal:
Recommendation foraCouncilDecisiononthenegotiationofanAgreement
onadraftAnnextotheinternational Conventionforthesimplification
andharmonisation ofcustomsprocedures ontheduty-freereplacement
ofgoods.
II.Istheretobeatimetable?
Yes
III.Whatisthetime-table ?
DateconsideredsuitablebytheCommission ;
TheCustomsCooperationCouncilhasalreadystartedworlt.
IV.Datereemiredfor:
A.OpinionoftheEuropeanParliament ; none
B.OpinionoftheEconomicandSocialCommittee:none
C.CouncilDecision:beforeloJune1974(C.C.C.meetingfromlots14
June1974)

Rcconmendat ion
for a
Council Decision
onthenegotiation ofanagreement onadraft
annex tothe international Convention for the
simplification andharmonisaiion ofcustoms
procedures ontheprocedure fortheduty-free
replacement ofgoods .
TOECOUNCIL DPTHEEUROPEANCOKrjNITIES ,
Having regard totheTreaty establishing theEuropean Economic Community ,
and inparticular Article 113thereof !
Having regard totheRecommendation oftheCommission ?
Whereas theconclusion ofanagreement ondraft annex totheInternational
Convention forthesimplification andharmonisation ofcustoms procedures
ontheprocedure fortheduty-free replacement ofgoods canefficiently
contribute tothedevelopment ofinternet ional trade ,andinparticular
international comm ercej
Whereas theaforesaid agreement hasabearing onthecommon customs legislation ,
inparticular inthematter oftheCommon Customs Tariff ;whereas itis
necessary tohave regard totheproper requirements ofaCustoms Urimj whereas
itisagreed that theCommunity shall participate inthenegotiation ofthis
agreement ;
HAS DECIDED :
Article 1
TheCommission isauthorised toconduct negotiations with theCustoms Co-operation
Council inorder toconclude anagreement onadraft annex totheinternational
Convention forthesimplification andharmonisation ofcustoms procedures on
theprocedure fortheduty-free replacement ofgoods .
TheCommission shall conduct these negotiations inconsultation with the
Special Committee ,asprovided forinArticle 113oftheTreaty ,which shall
assist the Commission inthat task .
Done atBrussels For the Council
The President

/ ^ Annex
. , 5
/_•••
E.8 -DRAFT ANNEX CONCERNING
THE DUTY-FREE REPLACEMENT OFGOODS
INTRODUCTION
Inmost countries' ,,national legislation contains provision
under which goo'ds used tomake products^for export arenot
required tobear duties andtaxes . '
'■i '
The .drawback procedure andtemporary admission for
processing allow arefund of ,orconditional relief from ,import
duties and taxes tobegranted inrespect offoreign goods used
toobtain exported products .- '
i' • .*•
In'thecase oftheprocedure ofduty-free replacement of
goods ,-the subject ofthepresent Annex ,the technique employed
istograr texemption from import duties and taxes forgoods
equivalent tothose which were infree circulation and were
processed jintoproducts exported from'theCustoms territory .
:However ,application ofthis procedure may bemade subject
tothecondition that the importation ofgoods equivalent to .
those incorporated intheproducts previously exported is
regarded bythecompetent authorities asbeneficial tothe
national economy . . • >■/..
Products manufactured from goods admitted free ofimport
duties and taxes under this procedure may beput onthe home .
market .Should they beexported ,theprocedure ofduty-free
replacement ofgoods could again become applicable .

./ Annex
I.
•I
DEFINITIONS '
■■ /
j'octhepurposesofthisAnnex:
(a)theterm"procedureofduty-freereplacement ofgoods"means
th^eCustomsprocedurewhichpermitstheimportation ,free
„ïofimportduties .ahdtaxes,ofgoodsidenticalindescription
* "V*
qualityandtechnicalcharacteristics withthosewhichwere
injfreecirculationandwhichwereprocessedintoproducts
previouslyexportedoutright;
(b)the/term"importdutiesandtaxes"meanstheCustomsduties
and/allotherduties,taxes,feesorotherchargeswhichare
collectedonorinconnexionwiththeimportationofgoods,
butnotincludingfeesandchargeswhicharelimitedin
amounttotheapproximate costofservicesrendered ;
(c)theterm"person"meansbothnaturalandlegalpersons,
unlessthecontextotherwiserequires.
PRINCIPLE
1.• ;. "Standard
Theprocedureofduty-freereplacement ofgoodsshallbe
governedbytheprovisionsofthisAnnex. ,-
FIELDOFAPPLICATION
2. ••Standard
Nationallegislation shallspecifythecircumstances in
whichthevprocedureofduty-freereplacement ofgoodsmaybe
grantedanckshalllaydowntherequirements whichmustbemet.

NotesAnnex
T!jec^-rcumstancesin'whichtheprocedureofduty-free
replacementofgoodsisallowedmaybesetoutingeneralterms
and/orindetail.
2.p
condit^Lc
incorp'or
thecorneregrantingoftJnisprocedure)'may.bemadesubjecttothe
cnthattheimportationofgoodsequivalenttothose
ratedjjntheproductspreviouslyexportedisregardedby
petentiauthorities asbeneficialtothenationaleconomy ,
3.T1-
establis
3.ebenefitoftheproceduremaybereserved .topersons
:hedintheCustomsterritory.
Standard
A^:importation ,goodsequivalenttothosewhichwerein
freecirculation andwhichwereincorporated intheproducts
previouslyexportedinordertoobtainduty-freereplacements
shallbeaffordedtotalexemptionfromimportdutiesandtaxes.
Suchexemptionshallnotapplytoany^importdutiesand/ortaxes
repaidorremittedontheexportation oftheproducts.
Notes
1»The!exemptionfromimportdutiesandtaxesmaybegranted
inrespectofrawmaterialsandsemi-manufactured productsas
wellastd>partsequivalenttothoseincorporated ,withoutfurther
manufacture ,intheproductsexported.^•
2.Goodssuchascatalystsandaccelerators orretardersof
chemicalreactionswhich,onbeingusedtoobtainproductsfor
exportation withentitlement toduty-freereplacement ofgoods,
disappearentirelyorpartiallyduringsuchusewithoutactually

Annex
being contained inthe products for export ,may betreated asgoods
used toobtain the said products and granted the same exemplion
from import duties and taxes •However ,this exemption does not
normally /extend tomere aids tomanufacture such aslubricants .
/
4.
ThRecommended Practvce
* y
Thjebenefit oftheprocedure ofduty-free replacement of
goods should not bewithheld solely onthe grounds that the
products are exported toaspecific country .
5. Standard
National legislation shall specify the categories of
persons who may receive anauthorization for the duty-free
replacement ofgoods .
Note
The holder ofanauthorization for the duty-free replacement
ofgoods may bethe exporter ,themanufacturer ortheowner of
the exported products .
I y
6. ' • ••Standard
The benefit oftheprocedure ofduty-free replacement of
goods shall begranted where itispossible todetermine the
presence ofthe goods intheexported products .
Note . . ■ '1 ■
Inorder todetermine the presence ofthe goods inthe
exported products the Customs authorities may carry out controlsV
during themanufacturing process ormay have recourse tothe
records kept bythe manufacturer ofthe exported products .

Annex
EXPORTATION OFPRODUCTS WITH ENTITLEMENT TODUTY-FREE REPIACEMENT
OFGOODS
(a)i2£'i)5Hii££_P£i2£_i2 theexportation oftheproducts
'• • Standard
■ • . y
National legislation shall specify thecircumstances in
j
whicji prior authority L2required forapplication .oftheprocedure
ofduty-free replacement ofgoods andtheauthorities empowered to
grant such authority . *
8» / Recommended Practice
|Persons whocarry onlarge-scale andcontinuous operations
involving theprocedure ofduty-free replacement ofgoods should
begranted ageneral authority covering such operations .
9.
ΤηStandard
edescription ,quality ,technical characteristics and
quantity !ofthevarious goods which were infree circulation and
were contained intheproducts exported with entitlement toduty-
free replacement ofgoods shall bedetermined bythe competent
authorities onthe basis ofthe actual conditions under which
those products were obtained .
10. .Recommended Prnctice
Indetermining thequantities ofthevarious goods contained
intheproducts forexportation with entitlement toduty-free
replacement ofgoods ,thecompetent authorities Should make
allowance forlosses andirrecoverable waste deriving from the
manufactunng process .
\

Annex
11. / Recommeridsd PrjC tico?
IWhere products tobeexported with entitlement toduty-free
replacement ofgoods have reasonably constant characteristics and
are obtained under clearly defined technical conditions ,the
competent authorities should establish standard quantity scales
I <"< *for ithe various goods contained inth^-exported products .
1,
i:
(b);Declaration forexportation with entitlement_to duty-free
!replacement ofgoods
12 . Standard
National legislation shall specify .the conditions under
which products forexportation with entitlement toduty-free
replacement ofgoods shall beproduced atthecompetent Customs
offict and aGoods declaration (outwards )shall belodged .
Note !
National legislation mayprovide that theGoods declaration
relating !totheexportation oftheproducts must contain the
........ Ir . ■ -iparticulars necessary toenable the Customs todetermine the
. ι ι·quantities ofthevarious goods forwhich exemption from import
•il < ■ ■".1, .. J"duties and taxes will beclaimed .
13. Kecommended Practice
Whore thecompetent authorities have notbeen able togive
aruling onanapplication toreplace goods cluty-frcie ,the
declarant should beauthcyjrized toexport theproducts concerned
without delay provided that theconditions prescribed aremet
andwithout prejudice tothefinal decision.' 'il" '1•.
V
|h ' J"-l I! ' •'
I)i . 'iM

14 .Annex
Recommended Practice
Thenational forms used fortheexportation ofproducts
with entitlement toduty-free replacement ofgoods should be
harmon zed with the Goods declaration (outwards ).
Verif ication^of ^pjjoducts^exportfed with entitlement to
^ldiyr£££S_£2Pl2E2!I !ent_2fgoods
15 . Recommended Practice
Attherequest ofthedeclarant ,andforreasons which
V
they deem valid ,theCustoms authorities should ,sofar as
possible ,allow products forexportation with entitlement to
duty-free replacement ofgoods tobeverified onprivate
.' !premise
bythes,theexpenses entailed bysuch verification being borne
declarant .
(d)Authori zed_des tinat ions ofproducts exported with entitlement
replacement ofgoods
16. •Recommended Practice
Provision should bemade topermit products forexportation
with entitlement toduty-free replacement ofgoods tobeplaced
infree ports orfree zones .
17. Recomiftended Prncfcicë
Provision should bemade topermit products forexportation
.with entitlement toduty-free replacement ofgoods tobeplaced
inaCustoms warehouse with aview tosubsequent exportation .

Annex
(e)Certification ofexportation with entitlement toduty-free
replacement ofgoods
18 . Standard
i._// . .^
Where products have been exported with' entitlement toduty-
free replacement ofgo /pds ,the Customs authorities shall issue to
!
the declarant adocument establishing his entitlement toimport ,
without |payment ofimport duties andtaxes ,goodsequivalent to
those wl^iich were infree circulation andwhich were contained
inthe products inquestion .
Note
The document issued tothe declarant may consist ofacopy ,
duly certified bythe Customs ,ofthe declaration forexportation
with entitlement toduty-free replacement ofgoods ,ormay be
made out onanappropriate form .
IMPORTATION OFGOODS
19. Standard
» ' ■ ■■ i>
National legislation shall specify theconditions under whit
goods which may beadmitted free ofimport duties and tc"ixes under
theduty-free replacement ofgoods procedure shall beproduced at
thecompetent Customs office and aGoods declaration shall be
lodged .
Note
National legislation may provide that the Goods declaration
must contain theparticulars necessary forauthorizing exemption
from import duties and taxes and that thedocument (s)issued by
the .Customs authorities must beproduced insupport ofthat
. I ; I , . I;declaration i

Am iex
20 .Standard
Thecompetent authorities shall 1.fixwith dueregard tothe
commercial circumstances thetimelimit fortheimportation of
goods which maybeadmitted free ofimport duties andtaxes .
21 .
P^ ' Standard
Provision shall bemade topermit goods which maybeadmitted
i
free ofjimport duties andtaxes tobeimported through aCustoms
office other than that through which theproducts were exported .
22. Standard
Provision shall bemade topermit goods which maybeadmitted
free ofimport duties andtaxes tobeimported inoneormore
consignments .
23 Standard
;Provision shall bemade topermit goods covered byseveral
documents establishing entitlement toimport replacement goods
duty-free tobe .imported inoneconsignment .
: Standard
Provision shall bemade topermit goods which maybe
admitted free ofimport duties andtaxes tobeimported from a
•country other than that towhich theproducts were exported .
r
25 Rccommendcd Pract.i.ce
provision should bemade topermit goods which maybe
admit tevdfree ofimport duties andtaxes tobeimported bya
person other than theexporter oftheproducts ,subject to
compliance with theconditions laid down bytheCustoms
authorities .

Annex
26. / Recojr .nicncìod Practice
/Atthe request ofthe declarant ,and for reasons deemed to
bev^lid ,theCustoms authorities should ,asfaraspossible ,
allow goods which may beadmitted free ofimport duties and
taxes tobeverified onprivate premises ,the expenses entailed
! λ >
bysuch verification being borne by th.e declarant .
27. Standard
National legislation shall specify the Customs treatment
applicable when products which have been exported under the
procedure for duty-free replacement ofgoods are re-imported .
!
I
!INFORMATION CONCERNING THE PROCEDURE OFDUTY-FREE REPLACEMENT
OFGOODS
28 . I Standard
The Customs authorities shall ensure that all relevant
information regarding theprocedure ofduty-free replacement
ofgoods isreadily available toany person interested .
C? •