Draft DECISION OF THE EC-CYPRUS ASSOCIATION COUNCIL derogating from the provisions concerning the definition of the concept of originating products laid down in the Agreement establishing an association between the European Economic Community and the Republic of Cyprus

(presented by the Commission)

EXPLANATORY MEMORANDUM

According to the current rules of origin of the EEC-Cyprus Agreement, garments manufactured in Cyprus may only benefit from preferential treatment on import into the Community if they are made up from fabric woven in Cyprus or in the Community.

As practically no weaving takes place on the Island, Cyprus has been granted since the entry into force of the Association Agreement in 1973 a derogation for men's garments, allowing the use of imported fabric.

An equivalent derogation for women's garments and for men's shirts was granted in 1989 for a period of two years by Decision No. 1/89 of the EEC-Cyprus Association Council of 28 July 1989 [1] prolonged for four further periods of two years by Decision No. 1/91 of 19 December 1991 [2], Decision No.1/94 of 14 February 1994 [3], Decision No. 1/95 of 22 December 1995 [4] and Decision 1/97 of 24 July 1997 [5].

[1] OJ L 230 of 8.8.1989, p. 3.

[2] OJ L 372 of 31.12.1991, p. 37.

[3] OJ L 53 of 24.02.1994, p. 19.

[4] OJ L 326 of 30.12.1995, p. 63.

[5] OJ L 215 of 7.8.97, p.36.

Cyprus has requested a further prolongation of this derogation and a draft decision of the EC-Cyprus Association Council granting Cyprus the said derogation is submitted to the Council for approval.

The Commission is charged with the management of the quantitative limits fixed in the decision in question.

Draft

DECISION OF THE EC-CYPRUS ASSOCIATION COUNCIL

derogating from the provisions concerning the definition of the concept of originating products laid down in the Agreement establishing an association between the European Economic Community and the Republic of Cyprus

THE EC-CYPRUS ASSOCIATION COUNCIL

Having regard to the Agreement establishing an association between the European Economic Community and the Republic of Cyprus [6], signed at Brussels on 19 December 1972, hereinafter referred to as 'the Agreement',

[6] OJ L133 of 21.05.1973, p. 2.

Having regard to the Protocol concerning the definition of the concept of originating products and methods of administrative co-operation annexed to the Additional Protocol to 'the Agreement' [7], and in particular Article 25 thereof,

[7] OJ L339 of 28.12.1977, p. 2

Whereas

(1) It was agreed, in the joint Declaration by the Contracting Parties concerning the rules of origin, attached to the Final Act of the Protocol laying down the conditions and procedures for the implementation of the second stage of the Agreement establishing an association between the European Economic Community and the Republic of Cyprus and adapting certain provisions of the Agreement [8] , which was signed at Luxembourg on 19 October 1987 and entered into force on 1 January 1988, that the Community and the EC-Cyprus Association Council would, once the said Protocol had entered into force, take a decision on additional Cypriot requests for derogations from the rules of origin applicable to products under heading Nos. 6102 and 6103 of the Common Customs Tariff, introduced as from 1 January 1988 for Headings Nos. 6204, 6205 and 6206 of the Combined Nomenclature (CN);

[8] OJ L 393 of 31.12.1987, p. 2.

(2) A derogation from the relevant provisions concerning the definition of the concept of originating products for the goods in question was granted to Cyprus from 1989 until 1999;

(3) On 19 July 2000, Cyprus submitted a request for a prolongation of the derogation;

(4) The need for a derogation remains; it is consequently desirable to grant the derogation for a period of two years

HAS DECIDED AS FOLLOWS :

Article 1

By way of derogation from Article 3 (1) of the Protocol concerning the definition of the concept of originating products and methods of administrative co-operation, products listed in Annex I to this Decision and manufactured in Cyprus shall, within the limits of the quantities indicated and under the conditions set out below, be considered as originating products for the purposes of the Agreement.

Article 2

For the purposes of Article 1, products listed in Annex I shall be considered as originating in Cyprus provided that, as a result of working or processing carried out in Cyprus, the products obtained are classified under a tariff heading other than that covering each of the materials worked or processed.

Notwithstanding paragraph 1, the manufacture of garments from parts of garments falling within CN code 6217 90 00 shall not be considered as sufficient working or processing, unless the parts have been obtained in the Community from fabric cut to size and are covered by a supplier's declaration made out on an invoice or other accompanying document, of which a specimen is given in Annex III.

Article 3

Materials not originating in Cyprus or in the Community and used for the manufacture of the products referred to in Article 1 shall not be eligible for any form of drawback, exemption from customs duties or charges having equivalent effect to customs duties, with the exception of any amounts exceeding the corresponding duties of the Common Customs Tariff.

Article 4

The quantities referred to in Annex I shall be managed by the Commission, which shall take all administrative action it deems advisable for their efficient management.

Where an importer presents, in a Member State, a declaration of entry for free circulation, including an application for the benefit of this Decision, the Member State shall, if the declaration has been accepted by the customs authorities, notify the Commission of its wish to draw the amount corresponding to its requirements.

Applications to draw, showing the date of acceptance of declarations, shall be transmitted to the Commission without delay.

Withdrawals shall be granted by the Commission in order of date of acceptance of declarations of entry for free circulation by the Member States' customs authorities, provided that the available balance permits.

If a Member State fails to use a withdrawal it shall return it, as soon as possible, to the appropriate quota.

If requests exceed the available balance of a given quota, quantities shall be allocated on a pro rata basis. The Commission shall inform the Member States of withdrawal on the quotas.

Each Member State shall ensure that importers have continuous and equal access to the amounts available as long as the balance permits.

Article 5

The customs authorities of Cyprus shall take the necessary steps to carry out quantitative checks on exports of the products referred to in Article 1. To that end, all the certificates they issue pursuant to this Decision shall bear a reference to it. The competent authorities of Cyprus shall forward to the Commission every three months a statement of the quantities in respect of which movement certificates EUR.1 have been issued pursuant to this Decision and the serial numbers of those certificates. They shall also send the Commission monthly statements of Cypriot imports and exports of fabrics listed in Annex II.

Article 6

Movement certificates EUR 1 issued pursuant to this Decision shall be endorsed :

DEROGATION - DECISION No ...

DEDUCTION COMMUNITY QUOTA'

in the box marked 'remarks', in one of the languages in which the Agreement is drawn up.

Article 7

Cyprus and the Member States of the European Community shall take the measures necessary on their part to implement this Decision

This Decision shall enter into force on the day on which it is adopted.

This Decision shall apply for a period of two years, starting on the day of its adoption.

Done at

For the Association Council The President

ANNEX I LIST PROVIDED FOR IN ARTICLE 1 (products benefiting from the derogation)

>TABLE POSITION>

ANNEX II LIST PROVIDED FOR IN ARTICLE 5 (products subject to statistical notification)

CN code // Description

5407 5408 5512 to 5516 // Woven fabrics of synthetic or artificial filament yarn Woven fabrics of synthetic or artificial staple fibres

ANNEX III DECLARATION FOR PRODUCTS NOT HAVING PREFERENTIAL ORIGIN STATUS

>TABLE POSITION>

Note:

The text inside the box suitably completed in conformity with the footnotes below, constitutes a supplier's declaration. The footnotes do not have to be reproduced.

___________________________

(1) _ If only some of the goods listed in the invoice are concerned, they should be clearly indicated or marked and this mark entered on the declaration as follows: 'Listed on this invoice and marked ........., were produced...............................

--If a document other than the invoice or an Annex to the invoice is used, the name of the document concerned shall be mentioned instead of the word invoice.

(2) The Community or Member State.

(3) Description is to be given in all cases. The description must be adequate and should be sufficiently detailed to allow the tariff classification of the goods concerned to be determined.

(4) Customs values to be given only if required.

(5) Country of origin to be given only if required. The origin to be given must be a preferential origin, all other origins to be given as 'third' country.

(6) 'And have undergone the following processing in (the Community) (Member State) ...................' to be added with a description of the processing carried out if this information is required.

(7) Place and date.

(8) Name and function in company.

(9) Signature.

FINANCIAL STATEMENT Decision of the EC-Cyprus Association Council concerning certain textiles products

1. BUDGET HEADING INVOLVED

Chapter 12, Article 120 (zero-rated duty)

2. LEGAL BASIS

EEC-Cyprus Association Agreement signed on 19 December 1972 - Article 25 of the Protocol.

3. TITLE OF THE MEASURE

Decision of the EC-Cyprus Association Council derogating from the provisions concerning the definition of the concept of originating products laid down in the Agreement establishing an association between the European Economic Community and the Republic of Cyprus.

4. OBJECTIVE

Granting to Cyprus a derogation from the rules of origin for certain garments for a period of 2 years.

5. COST OF THE OPERATION

The average value, during the years 1998, 1999 and 2000 (until August) of the products covered by the derogation is 2,592,200 EURO. The minimum customs duty rate applicable to the products in question when originating in third countries is 12.8 % and in the framework of GSP is 10.8 %. Accordingly the annual loss to the Community budget is estimated between EURO 330,000 and EURO 280,000.

Information regarding existing or planned prevention and protection measures:

The management of quantitative control will be carried out by the Commission in accordance with the quota allocation procedure. All certificates issued by the Cypriot authorities pursuant to this decision shall bear a reference to it. The customs authorities of Cyprus shall carry out quantitative checks on the exports of the products and they shall forward to the Commission information on the EUR .1 movement certificates issued. The competent authorities of Cyprus shall send to the Commission statistics on the import and export of certain fabrics.

IMPACT STATEMENT IMPACT on competition AND employment IN the Community

Taking into account the quantities contained in the draft Decision, the proposal has no significant implications for competitiveness or employment in the Community.