COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 06.11.1995 
COM(95) 524 final 
Proposal for a 
COUNCIL REGULATION (EC) 
establishing favourable tariff treatment for imports of 
certain goods into the free zones of Madeira and the Azores 
by reason of their end use 
(presented by the Commission) 

EXPLANATORY MEMORANDUM 
1 In a letter from its Permanent Representative's Office dated 7 February 1994, the Portuguese 
government requested a reduction in the customs duties levied on raw materials released for free 
circulation in Madeira for processing in the free zone. 
Among the arguments marshalled in support of its request, the Portuguese government underlined 
the economic and social situation of the archipelago: it believes that a diversification of production 
could help boost Madeira's industrial development. 
2. By Decision 91/315/EEC of 26 June 1991, the Council set up a programme of options specific to 
Madeira and the Azores (POSEIMA). Two of this programme's measures are customs measures. 
The first, of general scope, provides that processing activities in the free zones of the outermost 
regions are not subject to the economic conditions attached to the inward processing procedure. 
The second is the temporary suspension of customs duties levied on capital goods for the free zones 
of Madeira and the Azores. 
3. The Commission departments have studied Portugal's request in respect of the Azores as well as 
Madeira since the two archipelagos have similar social and economic features. 
They found that POSEIMA's objectives had not been fully achieved and that supplementary 
Community action would be desirable. Of these objectives, procurement of raw materials is one of 
the most important in that it is a prerequisite for any diversification and upgrading of local 
production. There arc many obstacles to supplies at present, one of them being the remoteness of 
the archipelagos. 
For these reasons Portugal's request should be acceded to, and a measure adopted to give 
favourable tariff treatment for the raw materials referred to above. 
4. The draft Regulation merely creates a general framework for according favourable tariff treatment. 
The actual rules arc those laid down by the Customs Code and its implementing provisions, in 
particular the provisions concerning release for free circulation of goods accorded favourable tariff 
treatment by reason of their end use. 
The draft Regulation also authorizes the Commission to examine requests presented by the 
Portuguese authorities and to establish lists of goods eligible for favourable tariff treatment and the 
tariff reductions applicable to the goods in question. Other implementing provisions will also be 
adopted by the Commission, which will be assisted by the Customs Code Committee, working 
according to its rules of procedures, and by the management committees. 
This is the purpose of the attached proposal. 
Attached: Proposal for a Council Regulation. 
L 
Proposal for a Council Regulation (EC) No /95 
of 
establishing favourable tariff treatment for imports of 
certain goods into the free zones of Madeira and the Azores 
by reason of their end use 
THE COUNCIL OF THE EUROPEAN UNION 
Having regard to the Treaty establishing the European Community, and in particular Article 28 thereof, 
Having regard to the proposal from the Commission1, 
Whereas Council Decision 91/315/EEC set up a programme of options specific to Madeira and the Azores 
(POSEIMA)2; whereas the programme recognizes in its preamble that the free zones of the Azores and 
Madeira are essential for the development of the two archipelagos and to this end lays down specific 
measures to stimulate activity there; 
Whereas Declaration 26 on the outermost regions of the Community, annexed to the Treaty on European 
Union, advocates specific measures for the economic and social development of those regions as long as 
there is an objective need to take such measures; 
Whereas the situation of the productive sectors in these archipelagos, as described in the Commission's 
report on the implementation of POSEIMA in 1992-93, calls for additional customs measures; 
Whereas the Portuguese government by a letter dated 7 February 1994 requested a reduction in customs 
duties on raw materials for processing in the free zone of Madeira and subsequently released for free 
circulation in the territory of the Community in the form of compensating products; 
Whereas the free zones of Madeira and the Azores are a key component of the economic and social 
development strategy of the two regions; whereas increasing activity in the free zones will have significant 
repercussions on the development of these archipelagos by diversifying production and creating jobs; 
Whereas, in view of the economic and geographical similarities between Madeira and the Azores, measure 
should be proposed for the free zones of both archipelagos; 
Whereas Madeira and the Azores are among the least-developed regions of the Community, their per capita 
GNP being less than half the Community average and their trade balance in deep deficit because of, among 
other things, the scarcity of exportable products; whereas their products, for these reasons, encounter 
serious difficulties in reaching the Community market; whereas this handicap cannot be surmounted without 
diversifying and upgrading production; 
I 
2 Oil, TO, 2*.*-*99>. RI* 
Whereas supplying the archipelagos with raw materials is likely to stimulate sustainable processing 
activities and so satisfy requirements; whereas, in order to facilitate the marketing of the products of such 
processing activities, provision should be made for favourable tariff treatment of imports into Madeira and 
the Azores of raw materials for processing; whereas, however, to avoid injury to the Community producers 
concerned, the granting of such tariff treatment should be subject to specific conditions, namely that 
processing takes place in the free zones and that it constitutes a substantial processing of the goods; 
Whereas, admission of the goods with entitlement to the said tariff treatment should be granted in 
accordance with the Community provisions on end use; whereas, moreover, the Community rules on the 
origin of goods arc appropriate for determining the amount of processing required; whereas they lay down 
that goods may not be consumed or used in free zones; 
Whereas favourable tariff treatment will be granted on a temporary basis linked to the economic lift-off of 
the free zones of Madeira and the Azores; whereas the relief should nevertheless be available over a period 
long enough to enable economic operators to plan their activities and make adequate investment; whereas 
this objective could be achieved if the measure in question is applicable for a minimum often years, 
Whereas the granting of favourable tariff treatment should be considered product by product on the basis of 
requests made by the Portuguese authorities; whereas the Commission, assisted by the Committee referred 
to in Article 247 of Regulation (EEC) No 2913/92 of 12 October 19923, should examine these requests and 
ensure that favourable tariff treatment is not granted to the detriment of other sectors of activity in the 
archipelagos, 
HAS ADOPTED THIS REGULATION 
Article 1 
1. The customs duties applicable to goods released for free circulation in the free zones of Madeira and 
the Azores may be reduced by up to 100% on condition that: 
the goods arc to be processed at least to the extent required by Article 24 of Council Regulation 
(EEC) No 2913/92 and by Articles 35 to 46 of Commission Regulation (EEC) No 2454/93;4 
the processing is wholly carried out in the geographical confines of the free zones of Madeira and 
the Azores. 
2. Excluded from the field of application of this ruling are the agricultural products in the sense of Article 
38 of the Treaty and the products not contained in Annex II obtained from agricultural products or 
those that incorporate such products. This exclusion does not include the products of the fishing sector 
except those which benefit from the Community system of compensation for surcharges generated for 
remoter regions as provided for in Council decision n° 91/315/CEE instituting the POSEIMA 
programme. 
3 OJ L 302, 19.10.1992, p. 1. 
4 OJL253, 11.10.1993, p. 1. 
k 
3. Goods shall be eligible for favourable tariff treatment in accordance with Articles 291 to 304 of 
Regulation (EEC) No 2454/93. However, the authorizations required for application of such tariff 
treatment shall be accorded only to persons established in the Community. 
Article 2 
The list of goods eligible under this Regulation and the reduced rates of the customs duties shall be 
established by the Commission in accordance with the procedure provided for in Article 3(2), on the basis of 
requests made by the Portuguese authorities. 
The other implementing provisions for this Regulation shall be adopted by the same procedure. 
Article 3 
1. The Commission shall be assisted by the Customs Code Committee set up under Article 247 of 
Regulation (EEC) No 2913/92. 
2. The representative of the Commission shall submit to the Committee a draft of the measure to be 
adopted. The Committee shall deliver its opinion on the draft within a time-limit which the chairman 
may lay down according to the urgency of the matter. In the case of decisions that the Council is 
required to adopt on a proposal from the Commission, the opinion shall be delivered by a majority of 
votes, in accordance with Article 148 (2) of the Treaty. The votes of representatives of the Member 
States on the Committee shall be weighted in the manner set out in that article. The chairman shall not 
vote. 
The Commission shall adopt measures which apply immediately. However, if these measures are not 
in accordance with the opinion of the Committee, they shall forthwith be communicated by the 
Commission to the Council. In that event the Commission shall defer application of the measures 
which it has adopted for three months from the date of notification. 
The Council, acting by a qualified majority, may take a different decision within the period laid down 
above. 
3. The Committee may examine any matter concerning the implementation of this Regulation which is 
raised by its chairman on his own initiative or at the request of a Member State. 
Article 4 
Goods released for free circulation with the tariff treatment provided for in this Regulation shall remain 
under customs surveillance in accordance with Article 82 of Refutation (EEC) No 2913/92. 
Ç" 
Article 5 
The competent Portuguese authorities shall notify the Commission before 30 January each year of the 
volume of imports admitted in the previous year with the tariff treatment provided for in this Regulation. 
Article 6 
Should the volume or price of imports admitted with the tariff treatment provided for in this Regulation be 
such as to cause or threaten to cause injury to Community producers of like or directly competing products, 
the relevant duties shall be reimposed in full or in part on the products in question, in accordance with the 
procedure provided for in the second paragraph of Article 3. Such measures may also be taken where there 
is serious injury or the threat of serious injury to a single region of the Community. 
Article 7 
The tariff treatment provided for in this Regulation shall be applicable until 31 December 2005. 
After consultations with the competent Portuguese authorities, the Commission shall, in the course of the 
year 2000, study the effects of this measure on the economies of the two archipelagos. On the basis of its 
findings, it shall, if necessary, present suitable proposals to the Council for the remaining period. 
Article 8 
This Regulation shall enter into force on the third day following that of its publication in the Official 
Journal of the European Communities. 
This Regulation shall be binding in its entirety and directly applicable in all Member States. 
Done at Brussels, 
For the Council 
The President 
c 
FINANCIAL STATEMENT 
I Budget heading concerned: Chapter 12, Article 120 
2. Legal basisArticle 28 of the Treaty 
3. Title of the measure: Proposal for a Council Regulation establishing favourable tariff treatment 
for imports of certain goods into the free zones of Madeira and the Azores by reason of their end 
use 
4. Objective: Ensure favourable conditions for the procurement of a number of raw materials for 
release for free circulation in the free zones of Madeira and the Azores for the purpose of 
processing them there 
5. Method of calculation 
CN codes: 3921.90; 3923.21 ; 3926.20 
4805.60; 4811.29; 4821.90 
5208.31; 5209.31; 5209.39; 5407.52; 5408.31 
9006.90; 9617.19 
s •. • i • 
Duties to be levied: exempt 
CCT duties: various 
6. The 1993 data on inward processing operations in the Madeira free zone by enterprises working 
suggest an annual loss of revenue of ECU 42 415. Note that the arrangements provkie for the 
exemption of such goods from customs duties. 

ISSN 0254-1475 
COM(95) 524 final 
DOCUMENTS 
EN 02 
Catalogue number : CB-CO-95-568-EN-C 
ISBN 92-77-95385-3 
Office for Official Publication» of the European Communities 
L-2985 Luxembourg