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DOCUMENTS "COM"
COM(80)110
Vol.1980/0037

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COMMISSION OFTHEEUROPEAN COMMUNITIES
CORRIGENDUM COM(80)110final/2
Thisdocumentcancelsand
replacesdocumentC0M<80)110final „. Mof12thMarch1980. Brussels,26thMarch1980
APPLIESTOTHEENGLISHVERSIONONLY
COMMISSION COMMUNICATION TOTHECOUNCIL
CONCERNING TEXTILE PROBLEMS ASSOCIATED
WITHTHEQUESTION OFORIGINMARKINGS
■>
nJ^M
C0M(80)110final/2

Comrgi ssionCommunication totheCouncil concern ,!nqtextile problems
associate !with thequest .ionof <">r.j/:un m.trk.nvjs
INTRODUCTION -
Thequestion ofestabl isbing rules relating toorigin marking (!)forclothing
and©Uior tactile artic has:,r.isen ,..inpartjeular ,r.jr\recertain Member
.,;-i.it.es liavo eor«si « {;iiLrodt icing obligatory origin -macking ,(which uptonow
w.--rtoptions ))forcertai ngarments andother textile articles imported orsold
intheir territory .TheCommission has already pointed out that .,taking' account
oftheir impact onintra-Community trade ,these measures donotseem toitto
beinconformity with Articles 30etseq .oftheTreaty .Itcanonly fall tothe
Community topossibly take measures inthis area , ,.
TheCommission feels however that tomake itpossible toexpress anopinion
onsuch anoppor t>inity ,it .isnecewsar ytoenquire whether theproblems which are
behind .these measures ,theimportance ofwhich theCommission recoqnizes ,cannot
i<?resolved byother means which areplaced ,inamore global context .
Inthis light thepresent document contains acertain number ofconcrete
proposals intwoessential areas :"prevention offraud andeconomic outward
processing traffic .
Ontheone hand the alarming extent offrauds established since 1978 intextile
trade justifies that Oneenqn ires into theeffectiveness ofthearrangements ..
inuseuptothepresent in.this area andremedies itsdeficiencies . ;
Ontheother hand thedisparate character ofpolicies carried out forseveral
years inregard toeconomic ..outward proce ssing hadcreated distortions in
thestructure offoreign trade ofcertain Member States ,distortions which
areassuredly oneofthe bar ;creasons formeasures such asorigin marking .
Itistherefore necessary toexamine ,thepossibilities ofeliminating these
distortions byfollowing upefforts already undertaken inthis area for the
legal framing andharmonization oftheeconomic outward processing regime and
forthetransparency ofthis type oftrade .
Onthebasis ofanexamination ofthese twsproblems thefinal part ofthe
present communication attempts todraw certain conclusions a«Jregards the
origin marking .
I.Prevention offraud
Thesystem setupin1977 hinges upon thecontrol ofcertificatesot
declarations oforigin carried outbyCustoms authorities ofdifferent
Member States .Itwasconcluded from thefirst months ofapplication
that therequirement ofcertificates ordeclarations ,oforigin wasnot
sufficient initself toeffectively prevent fraud unless itwasaccompanied
bycomplimentary measures which' allowed detection ,curbing andorcourse ,
prevention ofabuses orirregularities andinparticular falsification
ofcertificates oforigin . •
(1)'Origin marking' refers totineaffixing inapermanent manner ofalabel
offabric orother material bytheproducer orimporter ,onthegarment
ortextile article and/oronthepacking thereof indicating thecountry
oforigin oftheproduct .This indication oforigin should not'be
confused with other indications ofatechnical orcommercial nature such
astrade mark .-;,trade names ,labels ofquality ,cleaning instructions
labels orother lathis provided forinregulations inforce (e.g. labels
ofronposi tion - •

Inthis context ,theCommission hasalready undertaken certain appropriate
action such astho reinforcement :of:arlimnistrnt-ive cooperation which hasbeen
proposed forcertain third countries .TTie'Commission however feels that itis
necessary tocomplete ;the :action already -undertaken inthis area bythefollowing
measures : ; •
1)TmDrovement ofcxchaag^s ofinformation onfraud between Member States and
between theni -and the ,Commission
Theprocedure forexchange ofinformation used uptonow hasworked well .
However ,its informal character and the ,absence ofalegal basis for the
exchange of .information hasmeant that this system hasnotbeen used t6its
full advantage .Certain Member States arestill hesitant about communicating
information requested usual ly.jfor legal reasons possibly relating tocommercial
orcustoms secrets .Even iftheinformal nature oftheexchanges hasmeant
that obstacles incertain cases have been overcome ,problems ofprinciple
remain andsituations vary from one Member State -toanother .
Experience hasdemonstrated that effective exchanges ofinformation is -the
condition sine qua non forthesuccessful prevention offraud .Ontheone
haind t^ierisk oframification offraudulent trade throughout theCommunity ,
necessitates that .Member States inform each other incoordination with
theCommission' ,ofthedetails ofcases discovered atanational level and
inparticular details regarding thenames oftheoperators inthird countries
and the fraudulent methods used .Ontheother hand ,inorder ,toallow the
Commission toassure itsr*sponsabi lities •vis-a-vis third countries ,it is
indispensable that the Corn .ission has ineach case atitsdisposal all the
details ofproof gathered byMember States which will allow ittofulfil
this role . ,
This iswhy theCommission proposes tocreate alegal basis forthese '
exchanges ofinformation which will ITU-'KO itobligatory andsystematic for
themore important cases and will specify their extent and nature .Itwill
provide inparticular that all thedocumentary information establishing
proof asregards details andpersons concerned ,should becommunicated
to*theCommission which will inturn present them intheappropriate context
tothesupplying third country . , .
2)Improvement ofmethods ofenquiry
Enquiries carried outuptonowbytheCommunity inthird countries have
produced satisfying results asregards establishing facts andproof .This
demonstrates that ~on-t.he-spotenouiries are thebest method ofachieving
results .However ,experience has also shown that ,themeans andattitudes
ofMember States arenot identical inthis regard .Todate ,only certain
Member States have carried outthis type ofenquiry .Itisnecessary
therefor ?that theCommunity assuch acquires themeans necessary forsuch
apolicy byplacing each Member State inthesame situation andgiving
them thesame chance ofachieving optimum results .Astheestablishing
ofmaterial proof offraudulent operations istheessential condition for .
Community action vis-a-visthird coJhtries ,itisnatural that infuture
this type ofenquiry should beharmoniz.ed . ~

-3-
Tomeet these objectives ,the Conrin.--.sion advocates thecreation ofa
Commu nity researchand .inves tigationgroup which would .operate under' the
qti.ida>">rn ofthecopyieU-nt Comndss Jon .■••rvice inthefollowing mariner :
each Member State would ,with theagreement oftheCommission ,designate
anofficial from it.-;own n.ittonal investigation service asapermanent
meifiber ofthj ;;qroup' (without ch-inqincj hisnational laostukj or .taukm );
every time anenquiry inathird country seems' necessary theCommission
would beable tocall upon members ofthis group (notnecessarily ofthe-
same nationality oftheMember State involved inthefraud case )who
would beentrusted along with arepresentative ofthecompetent service
oftheCommission with themission ofenquiry inthethird country in
thename ofthe -Community during the time necessary andwould have his
expense .?paid forbytheCommunity .
Thepeople incharge ofCommunity Missions vould ofcourse have made the
necessary contacts with theMember States concerned andwould have access ,
toinformation necessary fortheaccompl ishment oftheir task .-
Itwill furthermore benecessary (more than inthepast )tocall upon the
Commission 'sandMember States' representatives inthethird country
concerned forinformation tobegathered on-the-spot both during and
after theenquiry . -
Follow upnecessary tofrauds -
TheCommission considers that oneofthemost effective measures -against
frauds consists oftheretrospective deduction ofthequantities fraud­
ulently imported from thequantitative ,limits applicable inthetrue
country oforigin .Inthis regard itisnecessary that theCommission in
future takes every measure necessary through therequisite legal means to
ensure theretrospective deduction ofthe entire quantity ofthegoods
inrespect ofwhich fraudulent character hasbeen established asaresult
oftheenquiries .
Reinforcement ofadministrative cooperation toprevent fraud "inintra -
Comnrunity trade
Inthis context ,Commission decision of.20December 1979 hasbrought an
improvement andclarification inthesituation regarding control oforigin
Nevertheless ,further efforts arenecessary toprevent cases ,offraud
(while respecting theTreaty )which canonly harm thepreservation of
intra-Community free circulation intheendbyundermining theconfidence
which Customs admiriistrations ofMember States have ineach other .As
good administrative cooperation isthefirst condition forconfidence ,
theCommission feels that itisnecessary assoon asaserious suspicion
offraud appears for Member States tohave recourse inthe future (more
than inthepast )toan .administrative cooperation tocheck theorigin
ofcertain textile products in intxa-Community trade .

Μ»*·ιυ*«*Λΐ <ϋτ«τ:~
-4-
II.Economicoutwardprocessingtraffic
/ . ■ '
Economicoutwardprocessingtraffic:maybedefinedasaformofindustrial
cooijerati.cnwithcertainthirdcountrieswhichgivesCommunityindustries
theopportunitytoexportCommunityrawmaterials (mostlyfabric)aswell
as,possibly,the"know-how",withaviewtohavingfinishedproducts
madeupinaspecifiedthirdcountry (withmuchlowersalarycosts)and
reimportedafter .processing .Theoperationallowsthoseindustrieswhich
havepartoftheirproduce!oncarriedoutabroadtobenefitfromthelower
productioncostsexistingine*rt&inthirdcovantriesandthereforeto
balancetheirtotalcostprice(theprinciple -ofequaldistribution of
-costs)somakingtheir,overnilproductionmorecompetitive oninternal
.andexternalmarkets. -- •
Afirstproposalforharmonizing thecriteriaforapplyingthisregimewas
presentedbytheCommissiontotheCouncilin1979andisstillunder
discussion . •
However,tocompletelyrealizetheoverallobjectivesofalegalframework ,
harmonization andabove -alltransparency whichwillprovideforthe
eli.minat.ion "ofthepresentdistortionsinthe.economicoutwardprocessing
regime,itisnecessarytoenvisagetheextensionoftheprovisionsofthe
regulationwhichwillbeadoptedforMediterranean countries ,andinparticular ,.itsbasicprinciples (I)toail,outwardprocessingoperations ,carriedout
'withallthirdcountriesanuthatonetherebyfixesdefinitelythecriteria
whichwerenotentirelyharmoni;?edfortheMediterranean countries ,in
particularthesinglepercentageofoutwardprocessingoperationsinrelation
totheproductionoftheapplicants ._ . ,
Ofcourse,thisextensionshouldasamatterofprioritybecompletedfor
operationscarriedoutinthirdcountriesforwhichspecificquantitative
objectivesalreadyexist ,(atanationallevelatleast)i.e.eastern
blockcountriesandYorigoslavia . , •"
Forthesecountriesandtoinparticularattaintheobjectiveoftransparency
ofexternaltrade,theharmonization ofthebasiccriterionshouldnaturally
beaccompanied byaharmonization oftheconditionsunderwhichthequanti­
tativeregimesthemselvesareadministered andespeciallytheharmonization
ofquantitative limitsspecifically reservedforoutwardprocessing ,the
'apportionment oftheselimitsbyMFAcategories ,,thetransformation of
limitsexpressedinvalue;tolimitsexpressedinquantities andfinallythe
publication intheirentiretyofalllimitsfixedinthiscontext.,
Theproposedextensionshouldfurthermore gobeyondStatetradingcountries
andYougoslavia tocompleteatrueglobal,textileseconomicoutward
processingregimeapplicabletoalltradeofthistype.
(1)The3basicprinciplesoftheproposedregulationregardingMediterranean :
-theprincipleofonlyreservingth6regimeforthoseCommunityoperators
'carryingonanindustrial .activityintheCommunityandwhoseproducts
areidenticaltothosemadeundertheregimeinthethirdcountry.
-Theprinciplethattheapplicant'sCommunityproductionwillbekeptconstant
.inrelationtotheactivitycarriedoutabroadundertheregime.-The
applicationofthisprincipleisassuredbyfixingthemaximumpercentage
ofoutwardprocessing work.which'theapplicantmaycarryoutinproportion
tohisownproduction •within''theCommunity, '>
-Theprinciplethatseini-productsforexportationwithaviewtotransformation
oughttobeofConununityor<•;in.

III ..Origin marking
Asaconclusion tothepreceding reflections theCommission does not
consider that making origin marking obligatory inthepresent state of
affairs atthelevel oftheCommunity will give rise tosufficiently
noteworthy improvements inthesituation having regard totheobjectives
described earlier .Intheprevention offraud area ,theeffectiveness
oforigin marking asanadditional means ofprevention does notappear
tobesufficient toclearly justify thefurther constraints which will
result from itwhereas theconcrete proposals presented bytheCommission
arethereplies most liable toterminate thephenomenon intheend .
Furthermore the elimination ofdistortions inthe context ofeconomic
outward processing traffic should provide forthecontrol ofoneofthe
basic causes oftheproblem asaresult ofthetransparency ofthis trade .
Protection ofand information for the consumer remain ofcourse an-
objective ofprime importance .However inthis respect theCommission
hasdifficulty inbelieving that theconsumers have ageneral interest'
inorigin markings oftextile products .Ihis interest exists only for
certain products which vary according toconsumer habits andpublic
taste which differ from onesocial andgeographical context tothe
other .Consumer interest cannot therefore beregarded asconstituting
asufficient basis foranobligatory regulation inthis regard .
•After all ,theorigin doeS notappear tobetheonly criterion bywhich .
consumers judge thequality oftheproduct onoffer .Information such
astheorigin oftheraw .material ,theuseofaCommunity design or
model ,thefinishing ofaproduct under acontract forbalanced industrial
cooperation (TPP )mayalso beofinterest totheconsumer ,which would
make information relating only totheorigin ,incomplete .This is -a
further reason forleaving origin marking uptooperators concerned .
However ,itcannot bedenied that consumer interest dictates that they
should beprotected against possible fraudulent manipulation oforigin
markings »Itistherefore necessary that theeffective control ofan
origin marking canatpresent beleft uptotheoperators concerned .
This control cannot becarried outsat thefrontiers butshould continue
totake theform asinthepast ,ofaninternal economic check atthe
distribution .
X -
Inthesame context ,itisequally necessary todetermine precise and
harmonized rules fortheentire Community every time that aCommunity or
third country enterprise feels thenecessity totake theprecaution of
indicating origin onitsproducts andevery time heisobliged to,if
thetrade mark isliable tocause sane confusion astoorigin of .the
product . •
Theuniform rules andcriteria which should beused todetermine the ~
origin ofaproduct destined tobemarked ,should notdiffer from those
existing forcustoms control oforigin inorder toavoid anyrisk of
confusion .

J
-6-
Conclusion
Thepresentcommunication doesnotatthisstagecontainthelegalacts
whichwillbeproposedbytheCommissiontotheCouncilforadoptionso
astoimplementtheintentionsexpressedinthisdocument.Nevertheless
theCommissioncanalreadyindicatethatitwillshortlypresentproposals
fortextsinthisregard.Theseessentially concern:
-aproposalforaCouncilRegulationcompletingandmodifyingRegulation
(EEC)No516/78regardingproofoforiginforimportsoftextileproducts.
Theaimofthesetextswillbeforthesettingupofaformalprocedure
forexchangesofinformation onfraudbetweenMemberStatesandbetween
themandtheCommission ,aswellasforthecreationofaCommunity
researchandinvestigation group;
-aproposalforaCouncilRegulationextendingtheprovisionofthe
Regulationalreadyproposedconcerningtextileoutwardprocessing
operataon?carriedoutinMediterranean countries ,toalloutward
processingoperationscarriedoutinallthirdcountries ;
-aproposalforadirectivefixinguniformcriteriaapplicabletoorigin
markingwhenprivateoperatorsdecidetoavailofthispossibility .
//