COMMUNICATION FROM THE COMMISSION TO THE COUNCIL - Goods not covered by Annex I to the Treaty - Specific measures and inward processing

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL

Goods not covered by Annex I to the Treaty - Specific measures and inward processing

Certain goods not covered by Annex I to the Treaty (called non Annex I goods (NAI)) are eligible for the export refunds provided for by the Common Agricultural Policy because of the agricultural raw materials (sugar, dairy products, cereals, eggs) used to make them. These export refunds are designed to compensate the food-processing industry for the high cost of these raw materials in the European Union compared with the world market. These are mainly products of secondary processing such as confectionery, biscuits, drinks, etc. The purpose of this communication is to propose a global approach to the Council to cover both our international undertakings and the budgetary decisions taken by the European Council at the Berlin summit.

I. The present situation and the changes

I-1. In the Agreement concluded following the Uruguay Round multilateral trade negotiations, the European Union undertook to limit the annual amount of refunds which may be granted for certain agricultural products exported in the form of goods not covered by Annex I to the Treaty.

The amount authorised for refunds, under WTO undertakings, is limited to EUR 475 million for the budget year 2000 and to EUR 415 million for the budget year 2001.

However, for the budget year 2000, because of the carryover (the total balance of the amounts not used during the four previous years) the limit of EUR 475 million will not be effective.

On the other hand, the Berlin Council decided to put a ceiling, as from the budget year 2000, on spending under the EAGGF guarantee section.

Thus, for the budget year 2000 the ceiling for spending under the EAGGF guarantee section is EUR 41 738 million (of which EUR 37 352 million for conventional EAGGF guarantee section spending), which is well below the guideline for the year in question (EUR 46 549 million: see Annex 1).

Consequently, in its letter of amendment to the preliminary draft budget for the year 2000 the Commission puts requirements at EUR 560 million for export refunds on goods not covered by Annex I to the Treaty.

I-2. Some measures have already been introduced to enable the European Union to comply with its WTO undertakings: the transmission of figures at a faster pace and, more recently, the introduction of a system of certificates. However, these measures cannot solve the problems caused by the increase in spending for the year 2000 compared with the ceiling.

The average amount of refunds in the last few years was EUR 560 million, as shown in the table in Annex 2.

Forecasts for the budget year 1999 show spending of about EUR 570 million; the current forecasts for the year 2000 are about EUR 578 million (due to the general increase in refund levels compared with 1999). In addition, this figure does not take account of a possible upturn in the Russian market and/or the Asian market.

It is therefore necessary to introduce measures to ensure that, in the long term, spending on refunds for goods not covered by Annex I to the Treaty is at the level of WTO undertakings, i.e. EUR 415 million, rather than EUR 560 to 600 million without the measure. Thus, savings of about EUR 145 to 185 million must be maid.

It is important, however, that these measures do not impede the development of Community food processing industry exports.

II. The aim

European regulations applicable to goods not covered by Annex I to the Treaty set out to ensure that food processing industries are in a situation of sustainable, fair competition compared with third countries. This will make it possible to safeguard and boost the production of added value and employment in the European Union and, ultimately, to develop the markets for Community agricultural products.

III. The specific measures proposed

In view of the constraints referred to in point I, it is essential to adjust the existing instruments and to supplement them by means of new measures to achieve the above-mentioned aim, while avoiding placing any additional undue burden on the framework in which economic operators perform.

III-1. - Changes to the lists of goods not covered by Annex I to the Treaty which are eligible for refunds

It is proposed reducing the number of goods not covered by Annex I to the Treaty which are eligible for export refunds or the rates of these refunds as follows:

a) - Goods also qualifying for production refunds

The price of sugar or cereals in certain goods is brought to world price levels by the provision of refunds. These are paid regardless of the destination of the goods in question (Community market or for export).

Since they have received production refunds, these goods are eligible, if they are exported, to a supplement

Also, in the case of exports operators have the choice of asking for the production refund and the supplement or the complete refund.

The measure is designed to put an end to or restrict this alternative and to retain the production refund while eliminating the supplement where appropriate.

Examples : modified starches, chemical and pharmaceutical products which qualify for production refunds because of the sugar or cereal which has to be incorporated for production.

b) - Goods less sensitive to the price of agricultural raw materials

The goods not covered by Annex I to the Treaty which are considered to be likely to be imported because of the agricultural raw materials used in them and which are subject to an agricultural component on importation are listed in Table 1 to Regulation (EC) No 3448/93. Any other goods are therefore considered less sensitive to the prices of any agricultural products incorporated. Furthermore, the total elimination of import duty is planned for some of these goods.

The measure is designed to delete some of these goods from the list of those eligible for refunds, although keeping in mind possible access to agricultural raw materials at world prices and any disturbances already noted on the Community market due to imports from third countries..

These goods are listed in Annex 2 for each type of agricultural product..

c) - Goods made from agricultural products which do not qualify for refunds when exported in the unprocessed state

Where an incorporated processed product covered by Annex I is not eligible for a refund, the refund for the finished product should be abolished to ensure consistency between Community measures for export support and to avoid any transfers of production from one product category to another category whose characteristics are similar.

Examples: Incorporation of yoghurt

d) - Reduction of levels of refunds.

The measure is designed to reduce the levels of refunds for certain goods unlikely to be affected or not covered by the annexes referred to in point b above.

Example: spirits

III-2. Inward processing arrangements

These measures will make for a total saving of around EUR 85 million, i.e. less than the savings to be made in future of around EUR 145 to 185 million. Consequently, they will not, in the medium- to long-term, cover the gap between the needs forecast by the Community food processing industry and the funding capacity of the European Union, especially if exports increase, as is to be hoped. It is therefore necessary to supplement them by facilitating access, throughout the European Union, for incorporated agricultural products to the inward processing arrangements (while continuing to allow their present use), i.e. to consider that the economic conditions are in place for a certain, predefined quantity which can be reviewed in particular in the light of international demand and changes in the budgetary and regulatory framework.

IV. Secondary measures

Regulation (EC) No 1702/99 introduced a system of certificates intended to guarantee compliance with commitments given. These certificates can be used as a means of notifying the WTO, as is presently the case with agricultural products exported in the unprocessed state.

V. Implementation

The above measures have the effect, among other things, of deleting headings in the annexes relating to goods not covered by Annex I to the Treaty of each base regulation (milk, sugar, cereals, rice and eggs).

The Commission is entitled to amend the annexes to these regulations except for the one concerning the milk sector (R (EC) No 1255/99). In the interests of consistency, therefore, this Council regulation should be amended in order to allow the Commission to amend the annex relating to goods not covered by Annex I to the Treaty.

Also, Council Regulation (EC) No 3448/93 (the basic regulation for goods not covered by Annex I), which lays down the trade arrangements applicable to certain goods resulting from the processing of agricultural products, must incorporate the measures relating to inward processing arrangements (point III-2) and the measure referred to in point IV (use of certificates for WTO notifications)..

It is also planned to amend:

- the Annexes relating to goods not covered by Annex I to the Treaty in the base regulations for the various sectors concerned in order to incorporate the measures referred to in point III-1.

- Commission Regulation (EEC) No 2454/93, which lays down provisions for the implementation of Council Regulation (EEC) No 2913/92 establishing the Community Customs Code, in order to incorporate a regulatory link with the additional facility referred to in point III-2.

- Commission Regulation (EC) No 1222/94 of 30 May 1994 laying down common detailed rules for the application of the system of granting export refunds on certain agricultural products exported in the form of goods not covered by Annex II to the Treaty, and the criteria for fixing the amount of such refunds, in order to incorporate the measure referred to in point III-1 (a).

ANNEX 1

Budget year 2000 : Appropriation requirements from the EAGGF Guarantee Section

Million Euro

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(1) Expenditure or appropriations covered by EAGGF Guarantee in 1999 but subdivide according to the nomenclature proposed for 2000.

(2) Including appropriations entered in B0 - 40 (reserve and provision).

(3) SAPARD expenditure is also to be financed within the guideline (529 Mio Euro).

ANNEX 2

Refunds for goods not covered by Annex I - (Chap. B1-30)

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ANNEX 3

Table 1

Goods excluded from the list involving incorporated cereals (point III-1-b).

CN Code // Description

Ex 1302 // Vegetable saps and extracts; pectic substances, pectinates and pectates; agar-agar and other mucilages and thickeners, whether or not modified, derived from vegetable products:

1302 31 00 // -Agar-agar

1302 32 // - - other mucilages and thickeners, whether or not modified, derived from vegetable products:

1302 39 00 // - - other

Ex 1518 00 // Animal or vegetable fats and oils and their fractions, boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in vacuum or in inert gas or otherwise chemically modified, excluding those of heading No 1516; inedible mixtures or preparations or animal or vegetable fats or oils or of fractions of different fats or oils of this Chapter, not elsewhere specified or included:

1518 00 10 // Linoxyn

1702 90 10 // Chemically pure maltose

Ex 1901 // Malt extract; food preparations of flour, meal, starch or malt extract, not containing cocoa or containing less than 40 % by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included; food preparations of goods of heading Nos 0401 to 0404, not containing cocoa or containing less than 5 % by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included:

- other :

- - other :

1901 90 91 // - - - containing no milk fats, sucrose, isoglucose, glucose or starch or containing less than 1,5 % milk fat, 5 % sucrose (including invert sugar) or isoglucose, 5 % glucose or starch, excluding food preparations in powder form of goods of heading Nos 0401 to 0404

Ex 2008 // Fruits, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included :

- Nuts, ground-nuts and other seeds, whether or not mixed together :

// -- Ground-nuts:

2008 11 10 // ---Peanut butter

2008 91 00 // -- Palm hearts

Ex 2101 // Extracts, essences and concentrates, of coffee, tea or maté, and preparations with a basis of these products; roasted chicory, extracts, essences or concentrates:

// - Extracts, essences and concentrates of coffee and preparations with a basis of these extracts, essences or concentrates or with a basis of coffee :

2101 11 // - - Extracts, essences and concentrates

// - - Preparations with a basis of extracts, essences or concentrates or with a basis of coffee:

2101 12 92 // - - - Preparations with a basis of extracts, essences or concentrates of coffee

// - Extracts, essences and concentrates of tea or maté, and preparations with a basis of these extracts, essences or concentrates or with a basis of tea or maté:

2101 20 20 // - - Extracts, essences and concentrates

2101 20 92 // - - Preparations :

- - with a basis of extracts, essences or concentrates of tea or maté:

Ex 2102 // Yeasts (active or inactive); other single-cell micro-organisms, dead (but not including vaccines of heading No 3002); prepared baking powders:

// - Inactive yeasts; other single-cell micro-organisms, dead :

2102 20 11 and 2102 20 19 // - - Inactive yeasts

Ex 2104 // Sauces and preparations therefor; mixed condiments and mixed seasonings; mustard flour and meal and prepared mustard:

2103 10 00 // - Soya sauce

2103 20 00 // - Tomato ketchup and other tomato sauces

2103 90 // - other

// Soups and broths and preparations therefor; homogenised composite food preparations:

2104 10 00 // - Soups and broths and preparations therefor

2105 00 // Ice cream and other edible ice, whether or not containing cocoa

// Food preparations not elsewhere specified or included :

2106 10 // - Protein concentrates and textured protein substances

// - other:

// - - other :

2106 90 92 // - - - containing no milk fats, sucrose, isoglucose, glucose or starch or containing less than 1,5 % milk fat, 5 % sucrose or isoglucose, 5 % glucose or starch

2203 00 // Malt beers

Ex 2520 // Gypsum; anhydrite; plasters, whether or not coloured, with or without small quantities of accelerators or retarders:

2520 20 // - Plasters

Ex 2839 // Silicates; commercial alkali metal silicates:

2839 90 00 // - other

Chapter 29 // Organic chemicals:

Chapter 30 // Pharmaceutical products

Ex 3307 // Pre-shave, shaving or after-shave preparations, personal deodorants, bath preparations, depilatories and other perfumery, cosmetic or toilet preparations, not elsewhere specified or included; prepared room deodorisers, whether or not perfumed or having disinfectant properties:

- Preparations for perfuming or deodorising rooms, including odoriferous preparations used during religious rites:

3307 49 00 // -- other than Agarbatti'; and other odoriferous preparations which operate by burning

3307 90 00 // - other

Ex 3401 // Soap; organic surface-active products and preparations for use as soap, in the form of bars, cakes, moulded pieces or shapes, whether or not containing soap; paper, wadding, felt and nonwovens, impregnated, coated or covered with soap or detergent:

3401 19 00 // - other

3402 // Organic surface-active agents (other than soap); surface-active preparations, washing preparations (including auxiliary washing preparations) and cleaning preparations, whether or not containing soap, other than those of heading No 3401

Ex 3403 // Lubricating preparations (including cutting-oil preparations, bolt or nut release preparations, anti-rust or anti-corrosion preparations and mould release preparations, based on lubricants) and preparations of a kind used for the oil or grease treatment of textile materials, leather, furskins or other materials, but excluding preparations containing, as basic constituents, 70 % or more by weight of petroleum oils or of oils obtained from bituminous minerals:

// - Containing petroleum oils or oils obtained from bituminous minerals :

3403 11 00 // -- Preparations for the treatment of textile materials, leather, furskins or other materials

// -- other:

3403 19 10 // - - - Containing 70 % or more by weight of petroleum oils or of oils obtained from bituminous minerals but not as the basic constituent

3405 // Polishes and creams, for footwear, furniture, floors, coachwork, glass or metal, scouring pastes and powders and similar preparations (whether or not in the form of paper, wadding, felt, nonwovens, cellular plastics or cellular rubber, impregnated, coated or covered with such preparations), excluding waxes of heading No 3404

3407 00 00 // Modelling pastes, including those put up for children's amusement; preparations known as `dental wax' or as `dental impression compounds', put up in sets, in packings for retail sale or in plates, horseshoe shapes, sticks or similar forms; other preparations for use in dentistry, with a basis of plaster

Ex Chapter 35 // Albuminoidal substances; modified starches; glues; enzymes, except those of headings 3505 10 10, 3505 10 90 and 3505 20

Chapter 38 // Miscellaneous chemical products except those of headings 3809 10 et n°3824 60

Chapter 39 // Plastics and articles thereof

Ex 4813 // Cigarette paper, whether or not cut to size or in the form of booklets or tubes:

// - other:

4813 90 90 // - - other

4818 10 // - Toilet paper

Ex 4823 // Other paper, paperboard, cellulose wadding and webs of cellulose fibres, cut to size or shape; other articles of paper pulp, paper, paperboard, cellulose wadding or webs of cellulose fibres:

4823 11 and

4823 19 00 // - Gummed or adhesive paper, in strips or rolls

4823 20 00 // - Filter paper and paperboard

4823 51 and 4823 59 // - Other paper and paperboard, of a kind used for writing, printing or other graphic purposes

4823 90 50 and 4823 90 90 // - - - - other

ANNEX 3

Table 2

Goods excluded from the list involving incorporated rice (point III-1-b).

CN Code // Description

Ex 1901 // Malt extract; food preparations of flour, meal, starch or malt extract, not containing cocoa or containing less than 40 % by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included; food preparations of goods of heading Nos 0401 to 0404, not containing cocoa or containing less than 5 % by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included:

- other :

- - other :

1901 90 91 // - - - containing no milk fats, sucrose, isoglucose, glucose or starch or containing less than 1,5 % milk fat, 5 % sucrose (including invert sugar) or isoglucose, 5 % glucose or starch, excluding food preparations in powder form of goods of heading Nos 0401 to 0404

Ex 2008 // Fruits, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included :

- Nuts, ground-nuts and other seeds, whether or not mixed together :

// -- Ground-nuts:

2008 11 10 // ---Peanut butter

Ex 2101 // Extracts, essences and concentrates, of coffee, tea or maté, and preparations with a basis of these products; roasted chicory, extracts, essences or concentrates:

// - - Preparations with a basis of extracts, essences or concentrates or with a basis of coffee:

2101 12 92 // - - - Preparations with a basis of extracts, essences or concentrates of coffee

// - Extracts, essences and concentrates of tea or maté, and preparations with a basis of these extracts, essences or concentrates or with a basis of tea or maté:

2101 20 20 // - - Extracts, essences and concentrates

2101 20 92 // - - Preparations :

- - with a basis of extracts, essences or concentrates of tea or maté:

2106 // Food preparations not elsewhere specified or included :

2106 10 // - Protein concentrates and textured protein substances

2106 90 92 // - - - containing no milk fats, sucrose, isoglucose, glucose or starch or containing less than 1,5 % milk fat, 5 % sucrose or isoglucose, 5 % glucose or starch

ANNEX 3

Table 3

Goods excluded from the list involving incorporated milk products (point III-1-b).

CN Code // Description

Ex 17 02 // Lactose and lactose syrup:

17 02 11 00 // -- Containing by weight 99 % or more lactose, expressed as anhydrous lactose, calculated on the dry matter

Ex 1901 // Malt extract; food preparations of flour, meal, starch or malt extract, not containing cocoa or containing less than 40 % by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included; food preparations of goods of heading Nos 0401 to 0404, not containing cocoa or containing less than 5 % by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included:

1901 90 91 // - - - containing no milk fats, sucrose, isoglucose, glucose or starch or containing less than 1,5 % milk fat, 5 % sucrose (including invert sugar) or isoglucose, 5 % glucose or starch, excluding food preparations in powder form of goods of heading Nos 0401 to 0404

Ex 2008 // Fruits, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included :

- Nuts, ground-nuts and other seeds, whether or not mixed together :

2008 11 // -- Ground-nuts:

2008 11 10 // ---Peanut butter

Ex 2106 // Food preparations not elsewhere specified or included :

2106 10 // - Protein concentrates and textured protein substances

2106 90 // - other:

// - - other :

2106 90 92 // - - - containing no milk fats, sucrose, isoglucose, glucose or starch or containing less than 1,5 % milk fat, 5 % sucrose or isoglucose, 5 % glucose or starch

ANNEX 3

Table 4

Goods excluded from the list involving incorporated sugar (point III-1-b).

CN Code // Description

Ex 1302 // Vegetable saps and extracts; pectic substances, pectinates and pectates; agar-agar and other mucilages and thickeners, whether or not modified, derived from vegetable products:

1302 31 00 // -Agar-agar

1302 32 // - - other mucilages and thickeners, whether or not modified, derived from vegetable products:

1302 32 10 // - - - Of locust beans or locust bean seeds

1302 32 90 // - - - Of guar seeds

1302 39 00 // - - other

1702 90 10 // Chemically pure maltose

Ex 1901 // Malt extract; food preparations of flour, meal, starch or malt extract, not containing cocoa or containing less than 40 % by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included; food preparations of goods of heading Nos 0401 to 0404, not containing cocoa or containing less than 5 % by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included:

1901 90 91 // - - - containing no milk fats, sucrose, isoglucose, glucose or starch or containing less than 1,5 % milk fat, 5 % sucrose (including invert sugar) or isoglucose, 5 % glucose or starch, excluding food preparations in powder form of goods of heading Nos 0401 to 0404

2008 // Fruits, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included :

// - Nuts, ground-nuts and other seeds, whether or not mixed together :

2008 11 // -- Ground-nuts:

2008 11 10 // ---Peanut butter

2101 // Extracts, essences and concentrates, of coffee, tea or maté, and preparations with a basis of these products; roasted chicory, extracts, essences or concentrates:

// - Extracts, essences and concentrates of coffee and preparations with a basis of these extracts, essences or concentrates or with a basis of coffee :

2101 11 // - - Extracts, essences and concentrates

// - - Preparations with a basis of extracts, essences or concentrates or with a basis of coffee:

2101 12 92 // - - - Preparations with a basis of extracts, essences or concentrates of coffee

// - Extracts, essences and concentrates of tea or maté, and preparations with a basis of these extracts, essences or concentrates or with a basis of tea or maté:

2101 20 20 // - - Extracts, essences and concentrates

2101 20 92 // - - Preparations :

- - with a basis of extracts, essences or concentrates of tea or maté:

// - Roasted chicory and other roasted coffee substitutes, and extracts, essences and concentrates thereof :

- - Roasted chicory and other roasted coffee substitutes:

2101 30 11 // - - - Roasted chicory

// - - Extracts, essences and concentrates of roasted chicory and other roasted coffee substitutes:

2101 30 91 // - - Of roasted chicory

2102 20 // - Inactive yeasts; other single-cell micro-organisms, dead :

- - Inactive yeasts

2102 20 11 // - - - In tablet, cube or similar form, or in immediate packings of a net content not exceeding 1 kg

2102 20 19 // - - - other

ex 2103 // Sauces and preparations therefor; mixed condiments and mixed seasonings; mustard flour and meal and prepared mustard:

2103 10 00 // - Soya sauce

2103 20 00 // - Tomato ketchup and other tomato sauces

2103 90 // - other

Ex 2106 // Food preparations not elsewhere specified or included :

2106 10 // - Protein concentrates and textured protein substances

2106 90 // - other:

// - - other :

2106 90 92 // - - - containing no milk fats, sucrose, isoglucose, glucose or starch or containing less than 1,5 % milk fat, 5 % sucrose or isoglucose, 5 % glucose or starch

Ex 2520 // Gypsum; anhydrite; plasters, whether or not coloured, with or without small quantities of accelerators or retarders:

2520 20 // - Plasters

Ex 2839 // Silicates; commercial alkali metal silicates:

2839 90 00 // - other

Chapter 29 // Organic chemicals

Chapter 30 // Pharmaceutical products

3203 00 90 // - Colouring matter of animal origin and preparations based thereon

Ex 3204 // Synthetic organic colouring matter and preparations based thereon as specified in note 3 to this chapter

3302 // Mixtures of odoriferous substances and mixtures (including alcoholic solutions) with a basis of one or more of these substances, of a kind used as raw materials in industry; other preparations based on odoriferous substances, of a kind used for the manufacture of beverages:

3302 10 // - Of a kind used in the food or drink industries:

-- Of a kind used in the drink industries:

--- Preparations containing all flavouring agents characterising a beverage:

---- other (Of an actual alcoholic strength by volume equal to or less than 0.5 %):

3302 10 21 // ----- Containing no milkfats, sucrose, isoglucose, glucose or starch or containing, by weight, less than 1,5 % milkfat, 5 % sucrose or isoglucose, 5 % glucose or starch

Ex Chapter 35 // Albuminoidal substances; modified starches; glues; enzymes, except those of headings 3505 10 10, 3505 10 90 and 3505 20

Chapter 38 // Miscellaneous chemical products

// - all products except those of heading 3824 60

Chapter 39 // Plastics and articles thereof:

3901 to 3914 // - primary form

ex 6809 // Articles of plaster or of compositions based on plaster (boards, sheets, panels, tiles and similar articles)

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