EUROPEAN COMMISSION Brussels, 3.3.2021 SWD(2021) 44 final COMMISSION STAFF WORKING DOCUMENT Accompanying the document Proposal for a Council Decision concerning the dock dues in the French outermost regions and amending Decision No 940/2014/EU {COM(2021) 95 final}



Contents 1.Introduction: Political and legal context 1.1.Introduction: Outermost regions 1.2.Specific measure for certain French outermost regions 2.Problem definition 2.1.Problem 1: Fragile economic growth 2.2.Problem 2: Additional costs for local industries 2.3.Problem 3: Certain shortcomings of the current regime 2.4.Problem 4: Constraints to the development of regional trade 2.5.How will the problems evolve? 3.Why should the EU act? 4.Objectives: What is to be achieved? 4.1.General objectives 4.2.Specific objectives 5.What are the available policy options? 5.1.What is the baseline from which options are assessed? 5.2.Description of the policy options 5.3.Options discarded at an early stage

6.What are the impacts of the policy options? 6.1.Methodology 6.2.Baseline 6.3.Option 1 - Termination of the outermost region specific support 6.4.Option 2 – Revision of criteria for the identification of eligible products and updates 6.5.Option 3 – Revision of the maximum permitted differential 6.6.Option 4 – Raising the turnover threshold of dock dues from EUR 300 000 to EUR 550 000 6.7.Option 5 – Revised monitoring arrangements 7.How do the options compare? 7.1.Effectiveness 7.2.Efficiency 7.3.Coherence 8.Preferred option 9.How will actual impacts be monitored and evaluated? Annex 1: Procedural information Annex 2: Stakeholder consultation Annex 3: Analytical methods Annex 4: Evaluation 1.Coherence 2.Relevance

3.Effectiveness 4.EU added value 5.Efficiency Annex 5: Further information on dock dues tax Glossary Term or acronym Meaning or definition CN Combined Nomenclature EMFF European Maritime and Fisheries Fund EPA Economic Partnership Agreement ESA Eastern and Southern Africa. Six countries of the ESA region (Comoros, Madagascar, Mauritius, the Seychelles, Zambia and Zimbabwe) concluded an interim Economic Partnership Agreement with the EU at the end of 2007 EU European Union GDP Gross domestic product GRP Gross regional product IEDOM Institut d’émission des départements d’outre-mer INSEE Institut national de la statistique et des études économiques ISSG Interservice Steering Group ORs Outermost regions POSEI Programme of options specifically relating to remoteness and insularity SMEs Small and medium-sized enterprises TFEU Treaty on the Functioning of the European Union VAT Value added tax WTO World Trade Organization



1.Introduction: Political and legal context 1.1.Introduction: Outermost regions Several regions of the European Union, known as the outermost regions (ORs), are located in areas that are remote from Europe. These are the French regions of Guadeloupe, French Guiana, Réunion, Martinique, Mayotte and Saint-Martin; the Azores and Madeira, which belong to Portugal; and the Spanish Canary Islands. These regions are an integral part of the EU and therefore need to comply with EU legislation. At the same time, and unlike the rest of the EU territory, they face permanent constraints related to their characteristics, in particular to remoteness, insularity, small size, difficult topography and climate, and economic dependence on a limited number of products. Figure 1: Geographical distribution of EU outermost regions Source: https://ec.europa.eu/regional_policy/en/policy/themes/outermost-regions The special situation of these regions is recognised under Article 349 of the Treaty on the Functioning of the EU (TFEU). This article allows for specific measures to be taken for these regions as it acknowledges that the permanent and combined constraints affect their economic and social situation and severely restrain their development. It permits such measures provided that they do not undermine the integrity and the coherence of the EU legal order, including the internal market and common policies. Such measures concern various policies, including taxation, support to create jobs, boosting competitiveness and preserving the environment. 1.2.Specific measure for certain French outermost regions This report concerns the existing indirect tax called dock dues (‘octroi de mer’), one of the oldest forms of French taxation, and the oldest in the French outermost regions. This tax is in force in the French outermost regions of Martinique, Guadeloupe, French Guiana, Réunion and Mayotte. The tax is not applicable in Saint-Martin due to its free port status. The tax applies to imports of products, irrespective of their origin, and to supplies of goods for consideration by persons engaged in production activities. In principle, it applies equally to locally produced products and to imported products.

The rates of dock dues are established by the regional councils (in Guadeloupe and Réunion), the single territorial collectivities (in French Guiana and Martinique) and the Departmental Council (in Mayotte). These competent authorities are established independently for each French outermost region. Revenue from dock dues is allocated, on the one hand, to the budgets of the territorial collectivities (communes, departments, regions and communities inside each concerned outermost region) and, on the other hand (and under certain conditions), to a regional fund for development and employment. It has become an essential financial resource for these territories, to which the tax yield is almost entirely allocated. Detailed information on dock dues is provided in Annex 5. Council Decision No 940/2014/EU of 17 December 2014 authorises France to apply, until 31 December 2020, exemptions or reductions to dock dues in respect of certain locally produced products. The Annex to the Decision contains the list of products to which the tax exemptions or reductions may be applied. Depending on the product, the difference between the taxation of products manufactured locally and that of other products may not exceed 10, 20 or 30 percentage points. The objectives of the existing Council Decision are to promote the socio-economic development of these outermost regions and to compensate for the higher production cost of local production in these French outermost regions. This decision allows France to offset the competitive disadvantages faced by the producers in these regions, without undermining the integrity and coherence of the EU legal order, including the internal market and common policies. As the regime is due to expire on 31 December 2020, a decision regarding its future is urgently needed. As French outermost regions have been significantly impacted by the ongoing COVID-19 pandemic, the French authorities were unable to finalise the list of products to which total exemptions or reductions of dock dues should apply and therefore requested an extension to the date of application of the existing Council Decision to 30 June 2021. Since there is a substantial risk of a legal vacuum and impact on producers in the French outermost regions if no proposal is adopted before 31 December 2020, the Commission proposed to extend the current Decision by a further 6 months. Thus, Council Decision (EU) 1793/2020/EU of 16 November 2020 extended the duration of Council Decision No 940/2014/EU for a further 6 months until 30 June 2021. The objective of this staff working document is to evaluate the current regime and analyse possible future options to take effect upon the expiry of the current measure in June 2021. This report is based on an external study by Economisti Associati (‘the study’) commissioned by the European Commission. 2.Problem definition The constraints noted in Article 349 TFEU result in several problems for local producers in the French ORs. The problems differ between the various outermost regions and averaging the impact masks the often significant differences between them. The following problem tree outlines the problems, the drivers and their consequences. Figure 2. Problem tree 2.1.Problem 1: Fragile economic growth The economies of these remote regions are significantly below the level of gross domestic product (GDP) per capita of mainland France. Across the ORs, GDP per capita in terms of purchasing power standards (PPS) is below the GDP per capita PPS in France. Unemployment, including youth unemployment, in all regions is worryingly higher than in mainland France and above the EU average. Moreover, long-term exclusion from the labour market is also a characteristic of these regions. According to the Institut national de la statistique et des études économiques (INSEE), approximately 30% and 39% of the population of Réunion and Martinique respectively lived below the poverty line in 2016. In Mayotte, this rate rises to 82% and one third of the population did not have access to running water. Table 1 below provides a summary of the key socio-economic indicators for each region and France. Table 1: Key socio-economic data (2018 ) and unemployment data (2017 ) Guadeloupe Martinique Réunion French Guiana Mayotte France Total GDP (EUR million) 10 250 9 508 20 331 4 499 2 661 2 353 090 GDP per capita (EUR) PPS 21 900 23 300 21 200 14 400 9 000 31 500 GDP per capita PPS compared to all France average 69.5% 74.0% 67.3% 45.7% 28.6% 100% Average annual GDP growth rate [2014-18 ] 3.0% 0.3% 3.3% 1.9% 3.2% 2.0% Unemployment rate 23.1% 17.7% 24.0% 19.1% 35.0% 8.8% Young people neither in employment nor in education and training (NEET rate) 20.7% 19.9% 27.8% 33.1% Not available 11.1% Human Development Index 2010 0.822 0.813 0.775 0.739 0.637 0.883 Import (EUR million) 2 939 2 159 5 051 1 530 572 Export (EUR million) 280 211 324 213 11 Number of tourists 1 166 000 1 047 000 574 000 202 000 61 800 Source: IEDOM, Eurostat, INSEE.

Those problems lead to strong social unrest that can paralyse these territories for weeks or even months at a time, for example the general strikes in French Guiana in 2017 and in Mayotte and Réunion in 2018. What are the drivers of the fragile economic growth? ·Dependence on a few products and on the public sector The French outermost regions share most of the features of small economies. In particular, like most small economies, the range of production is concentrated on a relatively narrow range of products with little diversification, meaning that the economy is highly exposed to sectoral or asymmetric shocks. The economies of the French outermost regions are dominated by the non-commercial service sector. This sector covers activities of public administration, health, education and social work, and typically accounts for between 80-85% of the total value added. Public services are a major component of this sector, which contributes from 33.2% in Martinique to 54.8% in Mayotte to the outermost regions’ economy, as compared to 22.4% in mainland France. Tourism is one of the engines of these economies. The tourism sector represents in Martinique and Guadeloupe on average 10% of their GDP and several tens of thousands of direct and indirect jobs (nearly 14 000 jobs in Réunion). The tourist industry in these territories generates directly about 5% of employment and indirectly about 10% (11.5% in Guadeloupe). The remaining industries pale in comparison to the service and tourism sectors. The secondary sectors represent between 10% (Mayotte) and 16% (French Guiana) of value added, with industrial and manufacturing activities ranging from 3% to 9% of the total. Finally, agriculture and fisheries, although the smallest sector in the outermost regions in terms of added value, contribute more than double to the outermost regions’ economy compared to the EU average: 3.8% of these regions’ added growth against 1.6% at EU level. Even with the gross value added of agriculture and fisheries being relatively small, they are important for the regional cultural identity, for the preservation of the landscape and tourism as well as for their employment intensity. Overall, the outermost regions have less developed industry (7.5% of value added compared to 14.3% on the French mainland) and a significantly greater reliance on public sector services than the French mainland. ·Persistent economic constraints Significant public support from France and the EU has helped develop infrastructure, provide services for the population, create jobs, invest in education and skills and increase businesses’ competitiveness. It also has helped enhance and diversify agricultural activities, preserve the environment and address climate change. Nevertheless, economic constraints remain linked to the permanent challenges these regions face, linked to their size, remoteness and insularity (insularity is not a characteristic of French Guiana). The evolution of the political, economic and social situation in the outermost regions in recent years – rising unemployment rates, especially alarming among young people, and, for some outermost regions, growing irregular migration and social crises – is a cause for concern. Local industries faces substantial international competition, in particular due to the practice of importing production surpluses and low-margin products from the EU and especially mainland France. Rather than storing certain food products (including milk, poultry, pork and beef) or selling them on the EU market at very low prices, some EU operators prefer to sell them in the outermost regions, where they are marketed at prices lower than those charged in mainland EU, even though they bear specific costs, in particular transport costs. These products compete unfairly with local producers. These imports of discounted products destabilise the local market and make it very challenging to create import-substituting production for most goods. Furthermore, amendments to EU import regimes have significant impacts. The EU has concluded numerous trade agreements with third countries, particularly over the past decade. These agreements are most often asymmetrical in favour of third countries, to the detriment of agricultural and agri-food production in the French outermost regions. This is reflected in the large trade deficit common to all the French outermost regions. The trade deficit is mainly due to the elevated imports, which represent between 24% and 31% of GDP. Figure 3. Exports, imports (including from ‘mainland’ EU) and trade balance as a percentage of GDP in 2017 Source: the study.

The demographic situation is highly variable and diverse for each region, and is a factor in the persistent economic challenges they face as a whole. Guadeloupe’s population growth is low at 0.2% and the region is getting older. Martinique’s population has, despite immigration, declined, with large numbers migrating to mainland France. In Mayotte and French Guiana, the population has grown significantly, with approximately 40% of the population aged 20 years or less in French Guiana and 44% of the population aged 15 years or less in Mayotte. While this is mainly due to positive demographic growth, these regions also experience significant irregular immigration. In French Guiana, 35% of the population does not have French nationality. Moreover, French Guiana is struggling to control significant migratory flows from Suriname, Brazil and Haiti. Similarly, 20 000 migrants from the Comoros Islands (about one tenth of the island’s population) arrive in Mayotte every year. The population of Réunion is also growing due to natural increases, with 34% of its population younger than 20 years old, while its population over 60 is also increasing. The persistent constraints facing these outermost regions also stem from external factors. The outermost regions are located in areas where countries have significant differences in their level of development. The outermost regions are directly exposed to the social and economic conditions, including low labour costs, that prevail in those countries. Education is another significant factor affecting their development. Guadeloupe, Réunion and Martinique all have high rates of early school dropout, while the condition of French Guiana’s infrastructure significantly hampers the establishment of an effective educational system. Illiteracy is a significant problem, one that contributes to the economic challenges. In 2018, 7% of the population in mainland France between the age of 16 and 65 years were illiterate. In comparison, 14% of the same age profile were illiterate in Martinique, with the figure rising to 22.6% in Réunion. This creates a mismatch between the skills and competencies sought by employers and those offered by job seekers. The distance between where the jobs are located and where people live creates a further mismatch, as transport difficulties are particularly prevalent, limiting the possibility for job seekers to commute to possible job locations. 2.2.Problem 2: Additional costs for local industries The rationale of the dock dues regime is to support local products by reducing the competitiveness gap, caused by additional production costs, between local products and products sourced from elsewhere. The latest assessment was completed in 2016 and estimated total additional costs in the French outermost regions to be EUR 4.51 billion, of which EUR 1.76 billion was attributable to sectors supported by dock dues (manufacturing and the primary sector). Furthermore, additional cost assessments (taking the form of ‘product fiches’) have been carried out regularly at individual product level to justify the differential treatment and set appropriate tax rates. From the analysis of these ‘product fiches’, it emerged that the bulk of additional costs – approximately 83% on average – is generated by four cost factors, apparent in all French ORs: the additional costs of inputs (including freight costs); oversized equipment (idle production capacity); lower productivity of labour; and the need for larger stocks. However, there is variability in the assessments that seems unrelated to regional specificities, but which is connected instead to methodological incongruences and the inevitable subjectivity of businesses’ own estimates. Despite these variations, the average estimate of additional costs is fairly consistent across the regions, amounting on average to 27% of turnover. The only exception is Mayotte, where the average additional costs amount to approximately 44% of turnover due to the more severe constraints and economic conditions of this region compared to the other regions. Table 2: Estimated additional costs as a percentage of turnover, by cost factor and by region Cost of inputs Stocks Equip-ment Maint. Staff costs Fin. costs Energy Others Total partial Total general EUR million Martinique 11.2% 0.0% 2.6% 0.8% 9.0% 1.0% 0.6% 1.9% 27.1% 27.9% 360.2 Guadeloupe 9.5% 3.0% 3.7% 2.0% 4.9% 1.1% 0.7% 1.3% 26.2% 23.8% 261.5 French Guiana 7.6% 12.3% 5.3% 4.4% 0.0% 0.5% 0.0% 6.9% 37.0% 28.7% 155.5 Mayotte 9.7% 3.7% 8.8% 1.4% 23.2% 0.0% 1.7% 2.5% 50.9% 44.0% 59.2 Réunion 9.6% 2.5% 6.3% 1.4% 3.7% 0.6% 1.3% 2.1% 27.5% 24.1% 613.4 Overall 9.5% 5.7% 4.7% 2.1% 6.5% 0.8% 0.7% 1.9% 31.8% 27.0% 1 449.8 Source: The study (based on a sample of 1 233 additional costs point estimates, and for the monetary estimates, value of local production as reported in the latest dock dues evaluation (Technopolis, 2018)) What are the drivers of additional costs for local industries? ·Permanent constraints – remoteness, insularity, size, difficult topography and volatility of climate The economies of the French outermost regions are affected by their remoteness and distance to the European continent and France, their main supply market. The French outermost regions are spread across the world and all are located over 7 500 km from Paris, with Réunion, the furthest, at almost 10 000 km from Paris. This has a negative impact on most sectors affecting mobility of factors (labour and capital), trade and in general, all forms of integration with the mainland EU . Remoteness is also synonymous with low spinoffs in terms of agglomeration economies, which reduces the added value of economic operators and productivity per worker. Their remoteness also affects transport costs towards mainland Europe, with air and sea connections limited by the lack of critical mass and exposed to fluctuations in oil prices. It also creates a heavy dependence of productive activity on the maritime and air transport sector. Moreover, the limited number of regular trade routes to the outermost regions results in sporadic supplies of goods. This requires additional services such as storage, packaging and distribution of goods, and onward transportation costs. This results in additional costs for local industries. The outermost regions are also isolated due to their insularity or due to the topography of the territory. Apart from French Guiana, 96% of which is covered by dense Amazon rainforest, the outermost regions are small oceanic islands. Accessibility issues affect these regions not only in their trade and exchanges with the EU, but also within their geographic areas and within the same archipelago.

Guadeloupe, Martinique, Mayotte and Réunion have a small surface area, which is of volcanic origin and affected by seismic activity. This results in very diverse relief from steep to flat, sometimes within the same region. This difficult topography explains the high population density in coastal areas of the outermost regions and the limited supply of suitable land. It results in higher prices for such land, which also negatively impacts industry costs. The climate of these regions varies from tropical (e.g. Guadeloupe, Martinique, Mayotte and Réunion) to equatorial (French Guiana). The tropical climate results in higher numbers of pests, which affect crop yields and impacts the costs of raw materials for local economic operators. The climate also poses a high natural and environmental risk for crops. The consequences of natural events such as floods, droughts, cyclones and tsunamis can be dramatic as due to the terrain most of the social and economic life is concentrated in the coastal areas, which are particularly exposed to extreme weather conditions. Cyclones Beijisa and Beguitta hit Réunion in 2013 and 2018 respectively, while hurricane Maria affected Guadeloupe and Martinique in 2017; the hurricane is estimated to have cost EUR 100 million in Guadeloupe due to the structural damage caused by high winds and excessive rainfall. Managing these risks (by complying with anti-cyclonic and environmental standards and higher insurance costs) negatively impacts industry costs. Furthermore, the high exposure of maritime freight to climate risks can result in disruptions in the supply chain, leading local economic operators to overstock products essential for production and to over-equip machine parts in the event of equipment breakdowns. ·Small scale of production The French outermost regions have small local markets, as a consequence of their structural and geographic features. Local demand is weak because of both the small population and the limited purchasing power, which is on average lower than in the EU (see Table 1 above for details). Moreover, the vast majority of local economic operators in the French outermost regions are SMEs. More specifically, 95% of them are micro-enterprises with an average number of employees of 2.1 units per economic operator. This substantial number of SMEs is a significant obstacle in terms of development: oThe small size of SMEs, with a consequent lack of financial and human resources, is a strong barrier to entering new markets. SMEs are more affected by regulations, standards, labels and administrative formalities than larger companies. For example, in the sector of business services, costs incurred by SMEs when complying with administrative formalities can reach EUR 10 000. oLimited innovation in many enterprises, especially in more traditional sectors such as manufacturing, makes SME products less competitive in external markets. oIn comparison to large enterprises, SMEs perform worse in terms of turnover and value added . In this context, it is difficult to increase production, operate large-scale operations and develop substantial internal markets. Local producers have limited capacities both to produce and to consume: they cannot achieve economies of scale, which are necessary to cover high transport costs or to compete against international competitors. The smaller scale production, together with difficult terrain, result in the underutilisation of machinery designed for higher volumes of production, which has a significant impact on the competitiveness of local producers. Moreover, the tropical climate and roughness of the terrain cause all machinery used to depreciate quicker. Waste management is a further factor affecting producers. There is limited landfill capacity and a lack of economies of scale for waste collection, treatment and/or recycling processes, in particular at the specific waste stream level (e.g. for organic waste). This can result in the need to export unusable waste at additional cost to be dealt with on the French mainland. As a result, many industrial sectors such as heavy industry are not represented in the French outermost regions. The range of production is concentrated on a relatively narrow range of products, meaning that the economy is highly exposed to sectoral or asymmetric shocks. 2.3.Problem 3: Certain shortcomings of the current regime One of the recurrent criticisms raised by economic operators (both importers and local producers) against this special tax regime is the lack of transparency in the policy process, leading to the application of tax differentials to certain categories of products, and to the quantification of such differential. In the current system, the French authorities and the EU authorities review, and approve or reject, individual product dossiers ‘one by one’ (currently amounting to some 1 130 dossiers), largely on the basis of petitioners’ data. Overall, the total administrative cost of dock dues for economic operators (including exemptions on inputs and reimbursements) is estimated to be approximately EUR 600 000 per year. At a broader level, some current policy arrangements appear to be overly complex or rigid, possibly causing unnecessary burdens for EU and national authorities. One such aspect is the impossibility to revise the list of products and the tax differentials extended to specific products without a legal amendment of the Council Decision. This hampers smooth adaptation of the regime to the evolving market and sectoral needs in the outermost regions and imposing an administrative burden on the authorities and the stakeholders involved. Finally, the current monitoring requirements involve significant efforts by competent authorities, but the lack of a proper, harmonised monitoring framework and the less than optimal timing of the monitoring reports affect their informative value and utility for the policy process.

What is affecting the smooth functioning of the regime? ·Unclear legislation (lack of transparency) The criteria used to identify eligible products are formulated in generic terms and are included only in the recitals of the current Decision, fuelling the perception of a lack of transparency and of an excess of subjectivity in the decision-making process at all levels. The Council Decision mentions three eligibility criteria: (1) the existence of local production; (2) the existence of significant import that could jeopardise local production; and (3) the existence of additional costs affecting the competitiveness of local products. Stakeholders noted that these criteria leave ample room for interpretation as regards the level of market share requested and the risk of ‘jeopardising local production’. ·Complex list of products referring to CN classification (4–10 digits) (lack of flexibility) The eligible products for reduction of, or exemption from, the tax are fixed for a seven-year period and are listed in the Annex to the Decision in three ‘lists’ characterised by different levels of the ‘maximum permitted tax differential’ using Combined Nomenclature codes (hereinafter ‘CN codes’). In some cases, the product is listed using 8–10 digit CN codes, which are very specific (see table below). In the Council Decision, the supported products are grouped. Table 3: Example of products which benefit from the regime related to the manufacture of food products and beverages in Martinique CN codes % applicable Description 0403 10 30 Yogurt 0706 10 00 10 Carrots 0710 20 Vegetables (uncooked or cooked by steaming or boiling in water), frozen 0714 10 Manioc, arrowroot, salep, Jerusalem artichokes, sweet potatoes and similar roots and tubers with high starch or inulin content, fresh, chilled, frozen or dried, whether or not sliced or in the form of pellets; sago pith 2204 21 30 Other wine; grape must with fermentation prevented or arrested by the addition of alcohol 1101 00 15 30 Wheat flour of common wheat and spelt Any adjustment to the lists requires a legal amendment of the Council Decision. This applies both to the inclusion of certain product categories on the lists and their removal from them, and to the moving of certain product categories from one list to another. The process must follow the special legislative procedure under Article 349 TFEU, involving a significant investment of time and resources by the national and EU administrations. The use of customs classification codes to identify local production in need of support is to facilitate the application of the tax to imported goods and, where relevant, to equivalent locally produced goods. However, the customs classification is not fit for the design, analysis and monitoring of sectoral development policies, which are instead typically defined on the basis of the economic activities classification (i.e. the NACE statistical classification). This leads to disparities and fragmentations in the tax treatment of the outputs of similar production processes carried out by the same entities but classified differently for customs purposes. Such disparities might prevent operators from engaging in the production of new products that fall in the same segment of their existing production but have a different and not supported CN code. Inversely, certain CN categories encompass a wide range of different products, of which only one or few are locally produced, while the tax remains applicable to the entire category. Furthermore, the legislation for CN codes is amended periodically and as a result specific products that were included originally in the Decision may unintentionally ‘fall’ off the list. Due to the use of 8–10 digit CN and TARIC codes respectively, new emerging local production activities that were not in place when the Decision was adopted are not covered. Changes in the level of compensation extended to certain industries to cope with changed conditions of competition (e.g. to cope with aggressive importation) cannot be addressed and removal of products no longer produced locally is not possible. ·Inefficiencies of the monitoring and impact evaluation system Council Decision No 940/2014/EU contains specific provisions requiring France to submit a report to the Commission on the implementation of the dock dues regime and its impacts on local economic activities. This ‘mid-term’ report is the basis of the Commission’s report to the Council. The monitoring and evaluation arrangements of the regime are very burdensome both for the economic actors and the administrations. Considering the number of products at stake and the level of details required in the ‘product fiches’, the efforts deployed to implement these arrangements have been significant. Furthermore, due to various limitations and constraints the results should be taken with caution. Moreover, the monitoring and evaluation arrangements are not always in line with the information needs as concerns timeliness, quantification and scope. The information provided did not give a complete picture of the economic and social impact on local production in the French outermost regions of the dock dues regime.

Overall, a picture emerges where approximations, uncertainties and theoretical assumptions are abundant. In most cases, these cannot be removed or substantial effort would be required just to obtain marginal improvements in the reliability of the assessment. 2.4.Problem 4: Constraints to the development of regional trade The development of trade in the geographical areas of these regions is constrained by various factors such as transport costs, language barriers, import tariffs, different consumer preferences and compliance with EU legislation raising complaints from CARIFORUM and Eastern and Southern African countries. Despite the EU trade agreements with neighbouring countries of the French outermost regions, (e.g. the Cotonou agreement with the African, Caribbean and Pacific Group of States), trade between the French outermost regions and regional partners remains limited. In the 2011-2018 period, French outermost regions imports from CARIFORUM followed a reverse U-shaped curve, from EUR 39.9 million in 2011 to EUR 45.5 million in 2018, but exceeded EUR 70 million in the 2012-2014 period. The import share from CARIFORUM is approximately 1% of the total, with some fluctuations over time (from an average 1.1% in 2011-2014, to 1.0% in 2016-2018). This amount is comparable to the overall intra-regional import pattern (2.7%). In the 2011-2018 period, imports from the Eastern and Southern African countries concerned amounted to EUR 60 million per year on average, with an increase of approximately EUR 20 million between in 2016-2018 as compared with 2011-2014. In relative terms, this corresponds to a marginal increase of 0.2 percentage points in the share of imports from Eastern and Southern Africa, from 1.1% to 1.3%. The import distribution is very skewed, with Mauritius accounting for nearly 70% of the total, followed by Madagascar (29%). The other countries jointly account for only 1% of the total. Thus, the importance of trade flows with French outermost regions varies significantly across Eastern and Southern African countries. Moreover, the foreign trade coverage ratio (i.e. the ratio between the value of exports and that of imports) between French outermost regions and their regional neighbours is small or very small, due to significant imbalances in trade flows. Table 4 – External trade of French outermost regions, total and regional (in EUR million) Guadeloupe Martinique French Guiana Réunion Mayotte 2013 2018 2013 2018 2013 2018 2013 2018 2013 2018 Total export 263 280 402 365 245 213 296 324 12 11 ACP Caribbean partners* / Indian Ocean region*** 2 9 6 10 68 2 47 37 3.4 3.1 % of total exports 0.8% 3.2% 1.5% 2.7% 27.8% 0.9% 15.9% 11.4% 28.6% 29.2% Non-ACP Caribbean partners** 1 8 4 5 0 0 % of total exports 0.4% 2.9% 1.0% 1.4% 0.0% 0.0% Total import 2 731 2 939 2 730 2 718 1 545 1 530 4 426 5 051 479 572 ACP Caribbean partners / Indian Ocean region 78 80 55 43 37 18 52 47 26.2 32.5 % of total imports 2.9% 2.7% 2.0% 1.6% 2.4% 1.2% 1.2% 0.9% 5.5% 5.7% Non-ACP Caribbean partners / Africa 138 62 47 44 15 19 168 133 % of total imports 5.1% 2.1% 1.7% 1.6% 1.0% 1.2% 3.8% 2.6% Source: The study. Notes: (*) ACP Caribbean partners include Antigua and Barbuda, Bahamas, Barbados, Belize, Cuba, Dominica, Dominican Republic, Grenada, Guyana, Haiti, Jamaica, Saint Lucia, Saint Kitts and Nevis, St. Vincent and the Grenadines, Suriname, Trinidad and Tobago; (**) Non-ACP Caribbean partners include the British and Dutch Overseas Territories and Countries of Anguilla, Aruba, British Virgin Islands, Cayman Islands, Montserrat, Turks and Caicos Islands, Netherlands Antilles; (***) Indian Ocean region includes Comoros, Madagascar, Mauritius and the Seychelles, as well as French ORs (Réunion and Mayotte). What are the drivers of the constraints to the development of regional trade? ·International competition Many neighbouring African, Caribbean and Pacific countries are unable to compete against cheaper products coming from the EU, US and Asia. For example, between 2009 and 2018, Caribbean countries’ exports to EU partners remained rather stable (+1.4%) whereas their imports from the EU increased by almost 34%. This resulted in a growing negative trade balance. ·Compliance with EU legislation Production costs and as a result prices in the French outermost regions are often significantly higher than those in their neighbouring countries. There are several reasons for this, including the fact that wages and social protection costs in the French outermost regions are significantly higher due to French legislation. According to INSEE, in 2015 the average annual net salary income of a worker in the French outermost regions ranged between EUR 15 200 and 16 600 (Mayotte excluded), which is a multiple of the amount paid in the non-EU neighbouring countries. Secondly, compliance with European social, safety and environment protection standards makes production activities in the ORs more expensive than in other countries. In many cases, manufacturing activities are generally subject to an authorisation procedure for environmental protection reasons, which reviews the environmental dangers of the installation prior to authorisation. For example, producers of aluminium doors and windows in Guadeloupe and Martinique must comply with the EU’s Construction Products Regulation (Regulation (EU) No 305/2011), which entails high compliance costs.

Stakeholders also note that national rules implementing the Union Customs Code are scattered across different documents, and application of the rules is vested with the national customs authorities, which can cause practical difficulties for African, Caribbean and Pacific countries and traders when they want to export goods to the EU and especially to French outermost regions. In particular, CARIFORUM countries express concerns regarding numerous and often changing technical EU regulations and sanitary and phytosanitary measures. ·Customs duties and non-tariff barriers Despite the Economic Partnership Agreement (EPA) in force, customs tariffs and import restrictions have remained on a number of products imported into the Caribbean region and Eastern and Southern African countries. Furthermore, several CARIFORUM countries have not implemented their tariff commitments, and they maintain export duties and quantitative restrictions. These commitments are among the basic elements of the agreement, and the failure to implement these neutralises its impact in the countries concerned and limits the benefits for exporters and importers in the French outermost regions. CARIFORUM countries also have significant transparency deficits regarding their tariffs. These barriers make it de facto impossible or very expensive to export there. There are also several other barriers that could discourage regional trade: (1) language barriers, cultural differences and, hence, different consumer preferences; (2) inadequate maritime logistics in the region and high shipping costs due to the limited volume of trade, which translate into relatively high costs for regional exports; and (3) fluctuations of the exchange rate. ·Dock dues The dock dues regime is explicitly aimed at mitigating the dependency of French outermost regions on external imports and the risk that local production and local jobs in these vulnerable remote regions of the EU could be jeopardised by free trade with third countries, including from regional neighbouring countries. For this reason, this special regime has been repeatedly criticised by CARIFORUM countries and by certain Eastern and Southern African countries (notably Mauritius) for constraining regional trade and for being in contradiction with the free trade principles underpinning the Economic Partnership Agreement with the EU. These stakeholders claim that the reduced rates applicable to products produced in the French outermost regions limits the growth of trade despite the close geographic proximity and similar cultural features. Increasing regional trade is a major challenge for both the French outermost regions and their neighbouring countries. The constraints facing these regions in developing and improving local trade are due to several factors, including increased competition and their obligation to comply with EU legislation – which creates a competitive disadvantage for the outermost regions vis-à-vis their neighbours. No policy option within the context of an amendment or termination of the dock dues regime will reduce the effects of globalisation or EU legislation compliance costs. Furthermore, from the perspective of international trade rules it would be extremely problematic to justify the application of differentiated dock dues treatment (including quota systems) to selected neighbouring countries and this may also spark WTO disputes. 2.5.How will the problems evolve? In the 2017 Communication ‘A stronger and renewed strategic partnership with the EU’s Outermost Regions’, the Commission noted that despite progress made over the years, these regions continue to face serious and permanent constraints. Furthermore, globalisation and climate change are amplifying these constraints. Diversification opportunities are limited due to the few resources at the disposal of these regions and the geographical and natural characteristics specific to their location and remoteness. Consequently, the economies of the outermost regions are fragile and any sustainable economic growth or desirable structural changes insecure. Economic crises are bound to affect the economies of the outermost regions to a greater extent than the mainland Europe – as demonstrated by the COVID-19 crisis – and recovery is slower. The Communication stresses the need to build on the assets of the outermost regions, identifying new sectors of growth to enable growth and job creation. While this approach is important to address the numerous threats and challenges for the outermost regions, the regions’ traditional activities are also vital to their development as any sustainable structural change to the economies of the outermost regions will take time to materialise. The costs faced by producers in the regions are higher in the outermost regions than in mainland France and are attributable to the factors identified in Article 349 TFEU. Overall, the dock dues regime has increased production levels and, as such, supported employment in the regions. As many of the underlying drivers such as remoteness, insularity or climate, are of permanent nature, they will always act to the disadvantage of those regions. There are no grounds to consider that they would diminish significantly in the near future as they are inherent to small insular and remote economies in general. On the contrary, with global trade growing increasingly competitive, the market share of local products has declined in recent years and the ‘gap’ faced by the outermost regions might become even more difficult to bridge over time. Numerous cases were reported of imported goods sold at a price (tax included) lower than the production cost of the same good locally made. Hence, the dock dues regime is generally viewed by enterprises as a tool to help mitigate the unequal competitiveness of local production rather than as a development tool. Transport infrastructures have been steadily built and in recent decades the outermost regions have experienced a mildly positive trend in the maritime and air transport of freight. However, accessibility issues will always affect the trade and exchanges of the outermost regions with the EU and within their geographic areas alike. What we can reasonably conclude from the nature of the costs is that they can fluctuate but will never disappear altogether. 3.Why should the EU act?

On the basis of Article 349 TFEU, the Council can adopt specific measures in favour of the EU outermost regions to adjust the application of the Treaties to those regions, including the common policies, because of the permanent constraints which affect the economic and social conditions of these regions. In its judgment of 15 December 2015 , the European Court of Justice clarifies the scope of the application of Article 349 TFEU on the basis of which the Council is entitled to adopt specific measures for the EU outermost regions. The EU has been building a strong partnership with the outermost regions over the years. In 2004, the Commission presented its first strategy for the regions, which was renewed in 2008, in 2012, when the strategy was aligned with Europe 2020 goals of sustainable growth, social development and creation of jobs, and in 2017, when the Commission strengthened and renewed its strategic partnership with these regions. Access to the EU single market is vital for the continued development of the outermost regions, as underlined in the 2017 Commission Communication ‘A stronger and renewed strategic partnership with the EU’s outermost region Maximising the potential of each outermost region can only benefit both the outermost regions and the EU as a whole. 4.Objectives: What is to be achieved? 4.1.General objectives The situation of the outermost regions is recognised in Article 349 TFEU, which envisages specific measures for these regions to take account of their structural, social and economic situation. Measures adopted must mitigate the constraints faced by the regions and promote regional development without undermining the integrity and the coherence of the EU legal order, including the internal market and common policies. 4.2.Specific objectives The specific objectives of Council Decision No 940/2014/EU are: ·ensure optimal/sufficient support to the local industry in the French outermost regions, making it more competitive; ·stimulate economic activity and competitiveness in the French outermost regions; ·ensure coherence, proportionality, simplification and flexibility of the support instrument so as to preserve the integrity and the coherence of the EU legal order while providing for economic and legal certainty for the local industry in the French outermost regions; ·safeguard undistorted competition in the internal market and international trade; ·generate a positive social and economic effect, relevant for the outermost regions’ regional development, competitiveness and tax revenues. 5.What are the available policy options? 5.1.What is the baseline from which options are assessed? For the purposes of this staff working document, there is a difference between ‘no action’ and the ‘status quo’. Given that Council Decision No 940/2014/EU authorising tax differential in dock dues expires on 30 June 2021, a ‘no action’ scenario would imply that the current system of tax differentials expires on 30 June 2021 with no other regime put in place. This is, however, not considered to be a realistic baseline scenario due to the structural and permanent nature of the constraints faced by the outermost regions and the long-term existence and recent extensions of the regime. As such, we assess the non-renewal of the regime as a ‘new policy option’, whereas the baseline option for this regime is defined as a ‘business as usual’ scenario, in which the derogation is renewed for a further 7 years, without any significant modification. The baseline assumes that the same maximum tax differential in dock dues continues after June 2021 for the locally manufactured products listed in the Annex to the current Decision. The updating of product lists will continue to require a legal amendment of the Decision. The baseline also reflects the fact that there is no legal contradiction between the Economic Partnership Agreement (EPA) agreed by the EU with CARIFORUM or Eastern and Southern African countries, as the EPA explicitly includes a provision safeguarding the maintenance of dock dues in the French outermost regions with no requirement to revise the current dock dues policy.

5.2.Description of the policy options Option 1 – Termination of the outermost regions specific support Under this policy option, the special regime for dock dues for the French outermost regions would not be renewed and would therefore expire on 30 June 2021. The tax differential in dock dues would disappear and all products, regardless of origin, would be subject to the same rate of dock dues. This option would mean no further specific relief would be provided after 30 June 2021 to the local producers in the French outermost regions to mitigate the additional costs they face. Option 2 – Revision of criteria for the identification of eligible products and updates The selection of the specific products benefiting from reduced dock dues is based on the criteria listed in Recital 5 of the current Decision. These criteria are the existence of: (1) local production; (2) significant imports which could jeopardise local production; and (3) additional costs affecting the competitiveness of local products. The specific eligible products supported by the dock dues regime are then listed in the Annex to the Decision based on a coding ranging from CN4 to TARIC10. Two policy options revising the identification of specific products are possible. The proposed changes are independent of each other, although some interconnections are evident. Option 2A: identification of eligible product at a higher classification level The proposed option envisages a shift in the method used to identify the products supported through the dock dues regime, namely from the current approach where each specific product is explicitly identified in the Decision (based on a coding ranging from CN4 to TARIC10) to a system where the Decision indicates only the eligible product categories (CN4), while specific products (CN8 or higher) would be included by national authorities in their legal and administrative frameworks. This option would allow amendments to the specific products within a product category without the need for an amendment of the Decision at EU level. Option 2B: adoption of verifiable eligibility criteria This option proposes to adopt clearer and verifiable criteria for the selection of products benefiting from dock dues support in the legal text of the Decision. The current criteria of ‘existence of a significant production’ would be replaced by setting a minimum market share threshold of 5%, while the criteria of ‘existence of a significant imports possibly jeopardising local production’ would be replaced by setting an upper market share threshold for imports of 10%. Possible derogations for special and duly justified cases would be possible. Option 3 – Revision of the maximum permitted tax differential Currently, the products supported through the dock dues regime are grouped in three distinct ‘lists’ in the Annex to the Decision, each having a different ‘maximum permitted differential ’. The ‘maximum permitted differential’ currently ranges from 10% (list A) to 20% (list B) and to 30% (list C). This ‘maximum permitted differential’ represents the upper ceiling and the competent authorities must ensure that the rate for specific products is equal to or less than the additional costs associated with the production of that product in the outermost regions. Two policy options are available to increase the flexibility for the competent authorities in this regard. In both cases, the regime would be renewed with a reduced number of lists, either one or two. While the option of one list with one maximum permitted differential could potentially increase the flexibility for the competent authorities, it could result in additional burdens and costs. For this reason, the option of one list with one maximum permitted differential will be discarded and this option will instead focus on renewing the regime with two distinct lists in the Annex to the Decision. The two different maximum permitted differentials would be 20% and 30%. Option 4 – Raising the turnover threshold of the dock dues from EUR 300 000 to EUR 550 000 Local economic operators with an annual turnover from relevant production activities not exceeding EUR 300 000 fall outside the scope of the dock dues regime. This provision was introduced in 2014 and replaced the previous regime for small economic operators, which allowed the French authorities to apply a tax differential of 5% to products not listed in the Decision or increase by 5% the tax differentials applied to products, for local producers with a turnover not exceeding EUR 550 000 per year.

The French authorities support this option, which will increase the turnover threshold to EUR 550 000. This means that eligible economic operators will not be subject to dock dues and will have no dock dues reporting obligations. Option 5 – Revised monitoring arrangements The proposed revision has the parallel objectives of: (1) reducing the burden of the unnecessary frequent re-assessment and renewal of the policy; and (2) enhancing the utility and effectiveness of monitoring and evaluation activities. As regards monitoring, the proposed revision consists of adopting a standardised structure for reporting based on a harmonised set of indicators common to all EU outermost regions benefiting from a special tax regime, and deemed sufficient to properly assess the impact of the regime. As part of this option, it is proposed that the assessment of additional costs borne by local economic operators should be undertaken at CN4-level product categories, instead of the current mix of CN4, CN6, CN8 or TARIC10 codes. Additionally, the timing of submission of the monitoring report could be moved back to the fifth year after the adoption of the policy, in order to ensure: (a) a greater availability of monitoring data; and (b) a closer alignment with the needs of the policy renewal process. The current monitoring system can be made more effective and informative by moving the timing of the mid-term report to Y+5 (where ‘Y’ stands for the first year of application of the Council Decision). In practice, for the period 2021-2027, the report would have to be submitted by the end of 2025 and spanning ideally the period 2019-2024. 5.3.Options discarded at an early stage Direct support to local production and market access Under this alternative, the existing regime would be replaced with another EU measure to the same, or similar, effect. This approach can be further specified considering two main aspects: (a) the fiscal or non-fiscal nature of the replacement measure; and (b) the type of funding envisaged. In fact, the current dock dues regime is a fiscal measure entailing no expenditure of EU funds. Replacing it with a different kind of measure is not a suitable option for two main reasons: -Replacing the current regime with a non-fiscal equivalent measure would de facto entail either extending the support through one of the existing EU schemes for the outermost regions, or creating a new scheme. This would mean finding additional EU resources for this purpose at a time when a number of EU funds and budgets are being reduced, and would also involve increasing the allocations and possibly creating ad hoc lines for the compensation of local production costs (to ensure the equivalence of the effects with the current regimes). This would have implications for EU-level policy design, the budget, and the specific programming and implementation of the aid. Responsibility for this change would fall outside of the remit of the DG TAXUD at the Commission and would involve other line departments. This option would add unnecessary costs and complexity to the regime, and would not be very feasible -Currently, the budget for the dock dues regime (in terms of foregone tax revenue) is estimated by the French authorities at EUR 475 million per year. At present, the measure is implemented at no cost for the EU budget as it consists of ‘non-collected’ taxes. Replacing it with an expenditure scheme of equivalent impact would therefore require additional monetary transfers of up to EUR 3.3 billion for the next EU programming period (2021-2027). This approach would evidently be very cost-inefficient. Based on the above considerations, this option is discarded. 6.What are the impacts of the policy options? 1. 2. 3. 4. 5. 6.

6.1.Methodology The impacts of the policy options have been assessed mainly on the basis of a study by the external contractor, Economisti Associati. The study was based on a combination of primary research, i.e. on (1) data gathered from all relevant stakeholders and independent research to triangulate findings; (2) a review of the existing literature and data; and (3) an economic and policy analysis. For the quantitative estimates, the impacts are measured as the deviation of the variable assessed from the baseline, at the conventional date of 2027. This is sufficiently distant to allow short-term effects to play out, with the exception of the emerging effects of COVID‑19. Full details on the methodology are provided in Annex 3. Effects of the COVID-19 pandemic on the projections underlying the assessment The baseline scenario and the impacts from the various options have been assessed on the basis of the study carried out in late 2019-early 2020. As such, the effects of the COVID-19 pandemic are not taken into account. While in the first case the projected baseline may not be affected to a large extent, in the second case, the baseline scenario may overstate growth. The impacts of the options, however, are calculated on the basis of long-term elasticities and should, as a result, be less affected than the baseline. 6.2.Baseline In this context, the ‘no change’ scenario consists in renewing the special regime without any significant modification. In this sense, this scenario corresponds to the baseline situation. The dock dues regime compensates only a portion of the estimated additional costs. On average, tax differentials address about half of additional costs, both in nominal terms and in monetary terms, i.e. measured in relation to the total tax charged on imports in EUR. With some exceptions, the tax differentials applied are fairly proportional to the additional costs declared for specific products. The results of the quantitative data analysis of the study suggest that in the absence of the dock dues support, the local production sectors’ performance would have been significantly worse. About 37% of the value of dock dues-supported products (approx. EUR 850 million) was theoretically enabled by the tax differential mechanism, with positive repercussions also on: (1) employment – where there has a positive increase of between 3% and 9% in the dock dues sectors since 2014 (against a decline between 2% and 18% in the non-dock dues industries); and (2) the number of active enterprises, which has grown by approx. 1.7% in the same period (against an overall decline of 2.8%) (see Table 5 below). On the other hand, there is no evidence of benefits for the total value of investments or for the diversification of production. Table 5 – Number of active firms in the manufacturing and mining sectors in French outermost regions (Mayotte excluded) 2014 2015 2016 2017 2018* Number of active firms (with at least one employee) Total manufacturing and mining 2 471 2 448 2 844 2 455 2 401 Dock dues industries 1 912 1 947 2 265 1 987 1 945 Dock dues industries (in %) 77% 80% 80% 81% 81% Firm size and employment in dock dues industries % of micro firms 74.7% 74.6% 77.3% 73.7% 71.6% % of small firms 23.0% 23.0% 20.8% 23.8% 25.8% % of medium-sized firms 2.1% 2.3% 1.8% 2.3% 2.3% % of large firms 0.2% 0.2% 0.1% 0.3% 0.3% Source: The study (base on INSEE data). Notes: * 2018 data are provisional. Finally, the dock dues regime shows an overall positive balance between costs and benefits, with the estimated value of local production enabled by the special regime being approximately 2.5 times greater than its ‘cost’ in terms of foregone tax revenue. Overall, the impact of the dock dues is seen in very different ways depending on the respondents to the survey of the study. Local producers are inevitably much keener to regard the importance of the dock dues as critical, while other respondents are much more sceptical. In particular, as summarised in Figure 4: ·over three quarters of local producers maintained that the dock dues had a major impact in boosting local production activities and supporting the creation and maintenance of employment in the French outermost regions. This share significantly declines among respondents active in sectors other than manufacturing, but still almost one third of these firms saw these impacts as moderate or major; ·respondents’ feedback is only marginally less positive on the scheme’s contribution to reducing the local economy’s reliance on imports and to increasing investments in local production activities. Over 70% of the local producers assessed the impacts in these two areas as ‘major’, while more than 30% of non-producers considered these impacts as minor, non-existent.

Figure 4 – Business perception of dock dues impacts on economic performance A) Dock dues impact on boosting local production activities (% of respondents) B) Dock dues impact on investments in local production activities (% of respondents) C) Dock dues contribution to the creation and maintenance of jobs (% of respondents) D) Dock dues support to reduce local economy’s reliance on imports (% of respondents) Source: Business survey of the study. Additional indications on the extent to which dock dues contributed to promoting local economic activities can be discerned by comparing the tax impact on price competitiveness with the firms’ recent economic performance. As shown by Figure 5 below, the strength of the dock dues’ impact on price competitiveness has a positive link with other aspects of the firms’ performance. This seems to be especially true in the case of production: a ‘very positive’ tax impact in terms of price competitiveness is associated with over two thirds of firms reporting a positive past trend. On the contrary, over 70% of the firms indicating a small price competitiveness impact recorded a steady or negative past performance. In the case of employment and market share, a similarly positive, albeit less strong, relationship is detected. As for profitability, such a link is only detected in the case of firms experiencing a ‘very positive’ price-competitiveness impact, while the majority of firms mentioning a positive impact recorded a negative performance. Figure 5 – Dock dues price-competitiveness impact and business performance Source: Business survey of the study. On the influence of dock dues on prices and the cost of living in French outermost regions, the study confirms the existence of significant price differences between French outermost regions and the French mainland, with gaps ranging between 7% and 12%, chiefly for food products, telecommunications, alcohol and tobacco products. According to the relevant literature, this gap is due to a combination of structural factors and fiscal policies, including dock dues. However, only a minor share of the estimated dock dues’ impact on household expenditure in French outermost regions can be attributed to dock dues-supported products. Rough estimates suggest that the additional tax levied on products subject to tax differentials does not exceed 1.5% of final consumption in those regions (but approximately 4% if only manufactured goods are considered). Table 6 – Incidence of the dock dues on final consumption, by tax component and region French Guiana Guadeloupe Martinique Réunion Total dock dues as % of final consumption 4.6% 3.7% 3.6% 2.5% manufactured goods 17.0% 12.9% 13.7% 9.8% External dock dues as % of final consumption 4.3% 3.6% 3.4% 2.5% manufactured goods 16.8% 12.7% 13.3% 9.5% Revenues from products subject to tax differentials, as % of final consumption 1.3% 0.7% 1.4% 0.8% manufactured goods 5.0% 2.7% 5.3% 3.2% Source: the study. 6.3.Option 1 - Termination of the outermost region specific support The ‘do nothing’ scenario entails not renewing the current EU Decision for dock dues after it expires on 30 June 2021 and not replacing it with other EU support mechanisms. This would lead to the removal of the tax differential system based on the origin of products, although not necessarily to the withdrawal of the dock dues as a ‘budgetary’ measure. The estimated impact of the measure is globally positive, so simply withdrawing it would predictably not lead to an improvement of the current situation, but rather to a worsening of it. First and foremost, removing the dock dues tax differentials would severely affect the competitiveness of local economic operators engaged in production activities – manufacturing activities above all, followed by enterprises in the agriculture and fisheries sectors. The overwhelming majority of the affected economic operators would be SMEs, and the most severe impact would be borne by economic operators with a turnover lower than EUR 300 000 (approximately 3 500 in number), who benefit the most from the current regime, by not paying the dock dues tax. It is estimated that the dock dues special regime compensates some 49% of local producers’ additional costs (EUR 1.45 billion, or 27% of the value of local production), which corresponds to some 13% of the sales values of dock dues products. This means local producers would need to absorb roughly EUR 1.45 billion of additional costs or increase their prices by 13% on average in order to remain competitive. Some local producers might be able to reduce their trade margins, but others – approximately 76% according to survey results – would no longer be able to compete and might eventually cease activities.

On the other hand, an increase in the prices of local products would evidently have repercussions on sales and the market share of local products, the magnitude of which depends on the characteristics of the demand for each specific product affected. Assuming – for analytical purposes – that the demand for local products would go down by an equivalent 13%, the average market share of local dock dues products would decline by 5.5 percentage points, corresponding to approximately EUR 297 million. Summing up, the impacts on local production activities of a removal of dock dues support would involve: a)a decline in sales for the majority of local economic operators and in profitability for those able to absorb the additional costs, which would no longer be compensated for by the dock dues regime; b)a reduced contribution of the industrial sector to the local outermost regions’ economy, and enhanced dependence on the tertiary sector; c)a parallel decrease in the number of industrial enterprises, in the level of mobilised investment, and in employment in productive sectors; d)an increased dependence on external supply, as local production would be substituted by imported goods. The above estimates are summarised in Table 7 below: Table 7 – Hypothetical impacts of the ‘do nothing’ scenario in French outermost regions TOT Additional costs (EUR) 1.450 million Additional costs (as a % of turnover) 27% Dock dues total compensation (EUR) 710 million Dock dues relative compensation (as a % of additional costs) 49% Impact of removal of dock dues compensation (in %) 13% Market share theoretically lost if additional costs are not absorbed (in % points) 5.5% Corresponding impact on local production sales (in EUR) 297 million Source: The study. The budgetary effects of this policy change are unpredictable as they depend on the actual policies deployed by competent authorities in response to the ‘do nothing’ scenario. In essence, if the removal of differentiated rates were to translate into an increase in internal rates to the same level of external dock dues rates, the collected tax revenues would clearly increase – and precisely by the current amount of the tax not collected because of exemptions (assuming demand is stable). Conversely, if the external rates are lowered to the level of the internal dock dues rate, a significant loss of tax revenue is expected, in the order of EUR 446 million i.e. 90% of the tax currently levied on the import of dock dues-supported products, approximately one third of the total dock dues receipts. The first approach is unrealistic, as it would lead to an increase in price levels that consumers would not be likely to accept. On the other hand, the second approach would deprive regional administrations of a significant share of their budget. In this scenario, the most efficient solution would be a ‘halfway’ solution i.e. (1) simultaneously decreasing external rates and increasing internal rates until the point of equilibrium that would offset any budgetary impact is reached; or (2) replacing the dock dues with another tax measure to the same effect. For the same reasons, the ‘do nothing’ scenario’s impact on price levels is difficult to predict, as it depends on the approach chosen by competent authorities to level internal and external dock dues rates. In the more realistic scenario where tax rates would be adjusted to equal the current burden, no aggregate effects would in principle be registered. However, considering the oligopolistic features of the outermost regions’ markets, the actual change in price levels would largely depend on the evolution of competition: if local producers remain able to compete on the market, a generalised reduction in price levels can be expected, but if local production disappears due to the removal of dock dues, it can be expected that after an initial decrease prices would go up in the medium term due to reduced competition. The results of regional trade data analysis highlight that the dock dues regime has a moderate impact on the value of French outermost regions’ imports from CARIFORUM and Eastern and Southern African countries. In fact, the expected increase of imports from CARIFORUM and Eastern and Southern African countries as a result of terminating the regime would be small (approximately EUR 2.2 million/year overall) compared to the benefits for other exporting countries and the possible damage for local production activities (up to nearly EUR 300 million): ·CARIFORUM (currently 3.7% on average), may boost imports by 3.3%, i.e. some EUR 1.5 million/year (based on current import value of EUR 45.5 million). ·Eastern and Southern African countries (currently 1.0% on average) may boost imports by 0.9%, i.e. some EUR 0.7 million/year (based on the current import value of EUR 79 million). Above all, as shown in tables 8 and 9, a hypothetical complete removal of the dock dues differentials would benefit primarily exporters from the EU and third countries other than CARIFORUM and Eastern and Southern African countries. Table 8 – Simulation of the effects of removing tax differentials from a sample of products (CARIFORUM) Imports from CARIFORUM (2018) Imports from all other origins (2018) Average dock dues differential applied to the product panel Coefficient of variation of imports associated with dock dues differentials Theoretical increase in imports from removal of dock dues differentials Baseline EUR 10.2 million EUR 113.7 million 10.3% -0.917 +9.9% Removal of dock dues differentials + EUR 1.0 million + EUR 11.3 million 0% ·Source: the study.

Table 9 – Simulation of the effects of removing dock dues differentials from a sample of products (Mauritius) Imports from ESA (2018) Imports from all other origins (2018) Average dock dues differential applied to the product panel Coefficient of variation of imports associated with dock dues differentials Theoretical increase in imports from removal of dock dues differentials Baseline EUR 12.7 million EUR 128.6 million 9.3% -0.917 +8.9% Removal of dock dues differentials + EUR 1.1 million + EUR 11.4 million 0% ·Source: the study. Terminating the regime would have limited effects on the regulatory burden for economic operators. The implementation arrangements are straightforward and do not impose particularly complex or burdensome procedures on stakeholders. However, SMEs (with a turnover of less than EUR 300 000) who are out of the scope of dock dues would be brought back into the scope of the tax, with a resulting increase in regulatory burden. This option would impact approximately 3 500 economic operators. These economic operators would have to submit quarterly tax declarations and undergo all the administrative activities connected to dock dues (identification of appropriate CN codes, calculation of the tax, management of deductions on inputs, preparation of declarations, etc.) The annual cost of these activities had been estimated at approximatively EUR 1 081 per economic operator, so the potential aggregated savings would amount to approximately EUR 3 783 500. Table 10 – Summary and rating of the expected impacts of option 1 Impact area Impact Subject Rating & magnitude Notes Governance & good administration None expected 0 Operating costs/ competitiveness of business Severe reduction of competitiveness of local products vis-à-vis imports All economic operators -2 Functioning of the market and competition Major changes in the market structure (increased import) and reduced competition All economic operators -2 Macroeconomic impacts Worsening of trade balance, and possible negative effects on employment, investments. MS authorities -1 Effects on consumer prices would depend on the policy adopted Regulatory costs & savings for public authorities None expected 0 Regulatory costs for economic operators Increase in regulatory costs for SMEs with turnover less than EUR 300 000 SMEs -1 Neutral for economic operators with turnover in excess of EUR 300 000 Budgetary effects Unpredictable, but potentially significant depending on OR decisions MS authorities -2/+2 From (+2) if internal rates are increased to the external rates to (-2) if external rates are decreased in line with internal rates Trade flows and international relation Removal of trade disputes with EPA neighbouring countries and small increase in trade from these countries EU authorities CARIFORUM and Eastern and Southern African countries +1 Legend: Rating scale: +2 major positive impact; +1 minor positive impact; 0 neutral impact; -1 minor negative impact; -2 major negative impact. 6.4.Option 2 – Revision of criteria for the identification of eligible products and updates -Option 2A: identification of beneficiary product at a higher classification level This option proposes that beneficiary product categories (CN4) are identified in the Decision and that the individual products (based on CN codes from 4 to 10) are included in the legal and administrative frameworks of the competent authorities in the outermost regions. One of the most tangible impact of this proposed option is the reduction of the regulatory burden for the French authorities and the Commission. This option could address the inflexibility of the regime by allowing amendments to specific products within the CN4 authorised categories, without the need for a legal amendment of the Council Decision. However, had the proposed option been in place, a legal amendment would still have been necessary for 39% of the products (28 products that belong to an entirely new CN4 category) added in 2019, as they would have not been included in authorised CN4 categories. Some reduction of the economic operators’ regulatory burden is also envisaged, but on a smaller scale. These benefits would not concern the justification required of new products, but they would concern more timely resolution of any issue deriving from the periodic revision of the HS/CN customs classification. For a rough understanding of the magnitude of benefits, it should be considered that half of the enterprises surveyed reported a change of CN code for at least one of the dock dues products in their portfolio, and for nearly 20% of respondents the time spent on identifying the correct coding is a source of ‘major burden’. For the products concerned, the advantage of greater flexibility is clear and direct: timelier adoption of the special regime, and therefore an enhanced impact on competitiveness and, possibly, growth. More specifically, compared to the current situation, new products could have access to different rates of dock dues before the next policy renewal (up to 7 years). Assuming local enterprises would schedule the launch of new production activities taking into consideration the entry in force of the special regime, the proposed option might reduce the time to market of new products by 2-3 years on average. The general functioning of the market would also benefit, in principle, from more timely and flexible updates of product lists. More specifically, facilitating the development of new production activities would contribute to diversification of the local economy; where this translates into greater market competition, an improvement in consumer welfare is assumed. However, the impact on the functioning of the market would be very modest since the support will be limited to products which belong to a eligible product categories (CN4), and thus to the supported sectors. The proposed option would regard only a small fraction of the supported products and with low-magnitude effects even if it can occasionally lead to non-negligible sectoral impact.

Moreover, based on the results of the retrospective evaluation, this option seems unlikely to lead to tangible macro-impacts, such as on the growth of industrial value added or employment. This option could result in an increase in legal uncertainty for all stakeholders. The specific individual products (CN8 products) will not be listed in the Annex to the Council Decision. Instead, individual products will be authorised by the local authorities within the permitted product categories (CN4) by applying the market share criterion and if necessary the cases of derogation. However, official data on the local production (from the customs) are not always available causing difficulties in determining with full accuracy the market share and decisions are open to interpretation especially regarding the case of derogation. Thus, the legal certainty of the eligibility of a product (CN8 product) would be reduced. This is in complete contrast to the current regime, where the beneficiary products are listed individually in the Annex to the Council Decision and the market share criterion is only assessed during the preparation of the list. This will have an impact on the supported sectors. In case of non-compliance with the market share criterion, the products would be no longer covered by the Council Decision, therefore also raising an issue concerning their compliance with any future State aid decision that would have to be adopted on the scheme for the future. Tax differentials in these cases would be illegal, and potentially incompatible aid and could be recovered from the beneficiaries. This issue is considered critical by the French authorities. Like option 1 (termination), the budgetary effects of this option are unpredictable as they depend on the final specific products subject to this regime, the respective value of imports of these products and the tax differentials applied. Past trends suggest that the competent authorities would increase the external rates for the specific products rather than decrease the internal rates and as a result the more likely impact is an increase in tax receipts. Assuming that the eligible product categories remain broadly in line with the current authorised products, no regional trade impacts are envisaged. Table 11 – Summary and rating of expected impacts of option 2A Impact area Impact Subject Rating & magnitude Notes Governance and good administration Improved alignment with needs, through enhanced subsidiarity in the policy update process but possible increase in disputes regarding individual products Increased legal uncertainty EU / MS authorities -2 Initially a negative impact in the absence of appropriate arrangements by the authorities to ensure legal certainty Operating costs/ competitiveness of business Improved support for emerging production activities, reducing time to market by approx. 2-3 years Beneficiary economic operators +1 Functioning of the market and competition Small improvement in the functioning of the market thanks to the possibility of quicker reaction to evolving conditions All economic operators +1 Assuming the frequency of changes remains low Macroeconomic impacts Positive impact, connected to the support in emerging sectors All economic operators 0/+1 possible benefits (+1) only in emerging sectors Regulatory costs and savings for public authorities Reduced burden for the legal amendment of the Decision regarding product lists (61%) (+1) Developing new arrangements to ensure legal certainty (-1) EU / MS authorities +1/-1 Regulatory costs and savings for economic operators Increased burden linked to classification uncertainties/code changes Increase in legal uncertainty and associated costs All economic operators -2 Supported individual products are not listed in the Council Decision and non-compliance with the eligibility criteria could lead to non-compliance with any future State aid decision and potentially to the recovery of the aid Budgetary effects Unpredictable; they depend on the policies chosen by MS authorities MS authorities +1/-1 Trade flows and international relation None expected 0 Legend: Rating scale: +2 major positive impact; +1 minor positive impact; 0 neutral impact; -1 minor negative impact; -2 major negative impact. -Option 2B: adoption of verifiable eligibility criteria This option proposes to adopt the existing criteria for the selection of products benefiting from dock dues support in the legal text of the Decision in line with the current criteria, which take into consideration inter alia the market share of the product. This criterion may be waived for products in a residual or largely dominant position on the local market by providing a proper justification for support. This option would respond to the demand for greater clarity and objectivity expressed by most opponents of dock dues. Concerning the impact on the competitiveness of local economic operators, the proposed option is in principle neutral, as it does not propose to modify the current scope of the special regime or the tax treatment of any particular products. The option would not have any different or additional effects from the baseline in this respect (outlined in Section 6.2 above). However, including the criteria in the legal text improves legal certainty and makes the justification of support more transparent and verifiable. This could lead to an improved assessment of the real needs of producers and a timelier detection and resolution of possible incongruences in the product lists. The ensuing benefits of removing products which do not meet the eligibility criteria from the list would again regard the general proper functioning of the market, but the impact on the competitiveness of local enterprises would be negligible, since the market share of the excluded products would be either not significant or so large that arguably no support for competitiveness is required. Products that do not meet the criteria, but still legitimately require the support of the octroi de mer regime could be granted from a derogation from the market share criteria with adequate justification. From a budgetary perspective, no impact is envisaged under this option. The adoption of well-calibrated and verifiable criteria would be beneficial for all stakeholders, as follows: ·Competent authorities. The proposed inclusion of the existing criteria in the legal text would help competent authorities cope with potential increased pressure from stakeholders, which might accompany the proposed greater implementation flexibility outlined in option 2A. ·Economic operators. The adoption of objectively verifiable criteria would respond to the need for transparency and accountability which emerged from field work interviews with stakeholders from both productive sectors (i.e. the beneficiaries of the regime) and trade sectors (i.e. the ‘taxpayers’). In this sense, this option would improve implementation of the policy, preventing/removing the application of the special regime to products that do not arguably meet the required conditions, and ultimately contributing to eliminating competition distortions and to the proper functioning of the market. This could also have a minor positive impact on trade relations with neighbouring countries as transparency improves.

The proposed option could result in some additional regulatory burdens for competent authorities, as follows: ·The adoption of the necessary administrative framework and/or rules of procedure to enact the reform, i.e. the fixing of market share thresholds, the procedure for market share assessment, the method and criteria for special cases. This would be a one-off burden at the time of the adoption of the revised approach and then again for periodic revisions. ·The verification of compliance with criteria any time a request for support for a new product is received – although this can be considered negligible in terms of additional burden since the handling of new requests already involves administrative work in the current system. ·The drafting of proper dossiers to justify ‘special cases’, i.e. production that does not meet the prescribed thresholds for market share but nonetheless deserves a special tax treatment for other reasons, which competent authorities must duly clarify and document. Also in this case, the additional burden is presumably limited as competent authorities must already justify in the current regime the introduction of new products in the lists and, at any rate, this effort would be largely offset by the reduced administrative burden made possible by the greater flexibility. Table 12 – Summary and rating of expected impacts of option 2B Impact area Impact Subject Rating and magnitude Notes Governance and good administration Enhanced transparency in the selection of supported products EU / MS authorities +1 Operating costs/ competitiveness of business Neutrality of effects on the current state of play should be ensured Beneficiary economic operators 0 Functioning of the market and competition Reduced complaints and disputes over unjustified disparities of treatment and unduly distortion All economic operators +1 Macroeconomics impacts None expected Regulatory costs and savings for public authorities Increased one-off burden, related to the required ad hoc justification for special cases Enhanced legal certainty MS authorities -1/0 Regulatory costs and savings for economic operators Enhanced transparency and greater legal certainty +1 Budgetary effects Neutral, by design (it does not enable changes which are already possible under the current system) MS authorities 0 Trade flows and international relations None expected 0 Legend: rating scale: +2 major positive impact; +1 minor positive impact; 0 neutral impact; -1 minor negative impact; -2 major negative impact. 6.5.Option 3 – Revision of the maximum permitted differential This option revises the existing regime by grouping the supported products into two distinct lists in the Annex to the Decision, rather than the current system of three lists. The two different maximum permitted differentials would be 20% and 30%; however, the competent authorities would have to continue to ensure that the rate for specific products is equal or less than the additional costs associated with the production. Therefore the budgetary impact of the proposed option would be neutral ‘by design’: the option does not include the objective of increasing tax differentials or of modifying the intensity of aid, but rather is intended to allow revisions to accurately reflect the additional costs up to the ceiling of the list – where needed – without a legal amendment of the Decision. In this sense, the amount of tax levied would not be affected and the budgetary and trade impacts are neutral. In fact, this option regards essentially procedural aspects, meaning that its fundamental impacts fall in the category of governance and good administration, and addresses the inflexibilities of the regime. This option reduces some of the regulatory burden for competent authorities. For the competitiveness of individual local production, the proposed option could be beneficial as it would enable timelier modification of the differential applied, i.e. without the restriction of periodic renewal or interim legal amendments. However, this concerns a limited number of products (i.e. those products currently on list A (10%) would now be included on a list with a maximum permitted differential of 20%) and an improved timeliness of 2-3 years compared to the present situation. Products on list B (30%) would be unaffected by this option. So, from a general market perspective and in aggregate terms (including macroeconomic aspects), the expected impacts would be barely noticeable. This option allows for more flexible management of the differential rates applied by the competent authorities, without creating legal uncertainty. Table 13 – Summary and rating of expected impacts of option 3 Impact area Impact Subject Rating and magnitude Notes Governance and good administration Improved alignment with changes in additional costs, with limited risk of increased pressure as differential rates must reflect additional costs EU / MS authorities +1 Operating costs/ competitiveness of economic operators More timely revision of support for specific products requiring higher differentials Beneficiary economic operators 0/+1 Greater magnitude (+1) for the few specific products concerned Functioning of the market and competition Improved functioning of the market due to the possibility to react quicker to evolving conditions for products on list A (20%) All economic operators +1 No impact for products on list B (30%) Macroeconomics impacts None expected 0 Regulatory costs and savings for public authorities Reduced burden as revisions within the maximum ceiling are possible without a legal amendment

Neutral impact if additional costs exceed the maximum ceiling as legal amendment still necessary MS authorities 0/+1 Regulatory costs & savings for economic operators None expected 0 Budgetary effects Neutral, by design (it does not enable changes which are already possible under the current system) MS authorities 0 Trade flows and international relations None expected 0 Legend: rating scale: +2 major positive impact; +1 minor positive impact; 0 neutral impact; -1 minor negative impact; -2 major negative impact. 6.6.Option 4 – Raising the turnover threshold of dock dues from EUR 300 000 to EUR 550 000

This option consists of increasing the turnover threshold for the exclusion of small firms from the application of the dock dues from the current threshold of EUR 300 000 to EUR 550 000. The main rationale behind this option is to extend the benefits of the exclusion to a greater number of small economic operators. Such benefits are of two main kinds: (1) reduction of the regulatory burden connected to the tax; and (2) reduction of the tax burden for SMEs: • Reduction of burden. Economic operators falling outside the scope of dock dues are not required to submit quarterly tax declarations and undergo all the administrative activities connected to dock dues. The annual cost of these activities had been estimated at EUR 1 081 per economic operator, and the number of economic operators possibly concerned by the reform is estimated to be between approximately 180 and 220, so the potential aggregated savings would amount to between approximately EUR 194 000 and EUR 240 000. The reduction in the number of firms that fall within the scope of the policy would also decrease the workload for the competent tax administrations. Based on the parameters estimated in the French impact assessment of 2015, total savings of the proposed option would be EUR 300 per firm/year totalling approximately EUR 66 000 (all French outermost regions under the dock dues regime included). • Reduction of the tax charge. Tax savings for concerned economic operators would amount to the internal dock dues rate currently applied on the delivery of local products, so the amount of savings would be greater in regions that apply a relatively high internal rate (such as French Guiana) and negligible where the internal dock dues rate is generally nil (e.g. Réunion). Based on the most recent estimates provided by French authorities, the reduction of tax charges would amount to approximately EUR 1.22 million – i.e. some EUR 5 500 per beneficiary economic operator. This figure also represents the estimated increase in foregone tax revenues that can be expected. This relatively small amount results from the fact that these economic operators already benefit from a tax reduction or exemption on the products they sell and cannot benefit from tax deductions for imported inputs (‘exonérations des intrants’). These benefits increase competitiveness of SMEs that face proportionally higher tax compliance costs than larger enterprises, as previously described in Section 2.2. This option has little impact on competition. Most concerned enterprises compete only marginally, if at all, with imported products. Indeed, 45% of the tax revenues and almost 30% of the enterprises concerned are concentrated in the electricity and bakery sectors. Electricity, which is produced mainly by small photovoltaic units, cannot be imported. It is the same for fresh bread and pastry goods that only compete with frozen goods. In addition to the monetary savings described above, the increase in the turnover threshold might also encourage economic operators currently outside of the dock dues regime to grow. As anecdotally reported by stakeholders during field interviews, certain operators currently restrain their activities in order to remain under the EUR 300 000 ceiling so that they can benefit from the simplified regime. How widespread and strong this constraint is cannot be verified precisely. The study estimated that possibly 6% of the economic operators currently under the EUR 300 000 threshold would move to the upper category. Nevertheless, the exclusion of economic operators from the dock dues’ scope of application means a significant loss of monitoring data, specifically on the value and volume of production, on the number of economic operators engaged in the production of dock dues goods and – ultimately – on the extent of the foregone revenue and the cost of the measure. There are 1 042 enterprises currently submitting dock dues tax declarations (2018), while for some 3 500 economic operators engaged in the production of dock dues goods no data have been collected since 2014, affecting the robustness of the market share data for the products. Raising the current threshold to EUR 550 000 would reduce the number of monitored firms by between 17% and 21%. However, it will not affect the quality of the product fiche used to calculate the additional costs since they derive from empirical information provided by the concerned local economic operators regardless of their turnover. Table 14 – Summary and rating of expected impacts of option 4 Impact area Impact Subject Rating and magnitude Notes Governance and good administration Expanded data gaps, for the monitoring of implementation and impact EU/ MS authorities -1 Operating costs/ competitiveness of economic operators Increased differential – de facto – for the concerned SMEs Beneficiary firms +1 More relevant in OR with non-zero internal rates Functioning of the market and competition None expected 0 Macroeconomic impacts Enhanced impact for concerned economic operators SMEs with turnover of less than EUR 500 000 +1 Regulatory costs and savings for public authorities Reduced burden, as number of economic operators within the scope of dock dues is reduced MS authorities +1 The estimated number of beneficiaries is limited Regulatory costs and savings for economic operators Reduced burden for tax declarations for the concerned economic operators Beneficiary firms +1 The estimated number of beneficiaries is limited Budgetary impact Marginal increase in the foregone revenues, but of limited magnitude MS authorities 0 Mitigated by a restricted access to deductions and reimbursements Trade flows and international relations None expected 0 Legend: rating scale: +2 major positive impact; +1 minor positive impact; 0 neutral impact; -1 minor negative impact; -2 major negative impact. 6.7.Option 5 – Revised monitoring arrangements The heterogeneous content of the interim implementation report submitted by the national competent authorities to the Commission creates difficulties for data analysis. For this reason, option 5 proposes to harmonise the structure and the indicators provided in those reports in order to: (a) enhance their consistency over time; (b) make comparisons across regions possible and reliable; and (c) prevent and address the information ‘gaps’ characterising some of the past reports. All these outcomes would contribute to a better design and administration of the policy, providing the competent EU and French authorities with more robust evidence of the effects of the special regime on the local socio-economic structure (including in the medium/long run). This would include dimensions poorly investigated so far due to insufficient data, such as the impacts on market structure, on trade flows, on price levels and other macroeconomic indicators. To ensure compliance, the harmonised structure and the indicators for the mid-term report should be annexed to the Council Decision. The benefits of the improved arrangements would go beyond institutional oversight. The mainstreaming of more robust and comprehensive impact evidence into the policy design can eventually improve its efficiency and help competent authorities correct possible distortions in the market, thus responding to concerns raised by various stakeholders and preventing the emergence of disputes. The ‘knowledge’ areas that might particularly benefit from the proposed overhaul of the system include: (a) the specific impact of the dock dues regime on sectoral value added (and employment); (b) the impact of the tax differentials on price levels; and (c) the assessment of the intensity of the aid, taking into account the other support measures. The costs of this proposed option are those imposed on the competent authorities for the collection and processing of data and the preparation and transmission of the revised mid-term report. However, as monitoring obligations already exist in the current framework, the actual burden would be limited to the additional information requirements introduced with the revision. More specifically, the additional burden would consist of two activities: ·one-time familiarisation with the harmonised structure and the indicators requested; ·recurrent collection and processing of data which are not currently included in the periodic monitoring reports. To minimise the additional burden, the proposed indicators have been selected considering the information already collected and reported by French authorities, or easily available, such as customs data. Modifications are introduced only where deemed important. No additional burden for enterprises is expected. All the in