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COM (83) 401 
 
 
Vol. 1983/0151 
  
 
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Conformém ent au règlement (CEE, Euratom) n° 354/83 du Conseil du 1er février 1983 
concernant l'ouverture au public des archives historiques de la Communauté économique 
européenne et de la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983, 
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classifiés présents dans ce dossier ont été déclassifiés conformément à l'article 5 dudit 
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In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983 
concerning the opening to the public of the historical archives of the European Economic 
Community and the European Atomic Energy Communit y (OJ L 43, 15.2.1983, p. 1), as 
amended by Regulation (EC, Euratom) No 1700/2003 of 22 September 2003 (OJ L 243, 
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file have been declassified in conformity with Article 5 of the aforementioned regulation. 
In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom  1. 
Februar 1983 über die Freigabe der historischen Archive der Europäischen 
Wirtschaftsgemeinschaft und der Europäischen Atomgem einschaft (ABI. L 43 vom  15.2.1983, 
S. 1), geändert durch die Verordnung (EG, Euratom) Nr. 1700/2003 vom 22. Septem ber 2003 
(ABI. L 243 vom 27.9.2003, S. 1), ist diese Datei der Öffentlichkeit zugänglich. Soweit 
erforderlich, wurden die Verschlusssachen in dieser Datei in Übereinstimmung mit Artikel 5 
der genannten Verordnung freigegeben. 
COMMISSION  
OF THE
EUROPEAN COMMUNITIES
SecretariatCOM(8j) '4 0 1 final 
Brussels, 30 June 1983
FOR OFFICIAL USE ONLY
NEGOTIATIONS ON THE ACCESSION OF SPAIN  
TO THE COMMUNITY
CEUTA AND MELILLA
(Communication from the Commission to the Council)
(Communication from the Commission to the Council)
CDM(83) *401 final

C O N T E N T S
PagesI N T R O D U C T I O N  —2 —
A . G E N E R A L  C O N S I D E R A T I O N S  < |
I. T h e  situation of Ceuta and Melilla < 1
II. T h e  special econom ic and fiscal arrangements currently 3
in force
B . S P E C IF IC  C O N S I D E R A T I O N S  A _ o
I. Derogations requested b y  Spain for C euta and Melilla 6-8
1. T h e  customs territory of the C o m m u n ity
2. T a x
3. T h e  c o m m o n  agricultural policy
4. T h e  c o m m o n  fisheries policy
5. T h e  Com m unity's o w n  resources8
1 3
1 4
1 5
1 6
II. Specific Spanish request for application of regional policy 1 7  
:. S P A IN 'S  R E S E R V A T I O N  R E G A R D I N G  T H E  S T A B IL I T Y  O F  T H E  A R R A N G E M E N T S  1 9
A N N E X  I  
A N N E X  II: A rt
A N N E X  III: ArtiArticle 227(2) of the E E C  Treaty
cle 1  of Regulation ( E E C )  N o  1496/68 
cle 2 8  of the 1 9 7 2  A ct of Accession
A N N E X  IV : A rt
Article 227(5)(a) of the E E C  Treaty and 
cle 1 9 8 -  of the E uratom  Treaty
A N N E X  V :  1980 figures for trade between C euta and Melilla and
the C o m m u n ity
A N N E X  V I: 1979 figures for trade between C euta and Melilla
and mainland Spain/Balearics
A N N E X  VII: 1 9 8 1  Ceuta and Melilla trade figures

Contents (cont'd)
A N N E X  VIII: Arrangements applying to trade between Ceuta and
Melilla o n  the one hand and mainland Spain and the 
Balearics o n  the other
A N N E X  IX : Industrial activity in Ceuta and Melilla

I N T R O D U C T I O N
1. Throughout the accession negotiations Spain has reserved the 
right to present a  statement o n  the arrangements to be w orked out 
for Ceuta and Melilla, and the C o m m u n ity  for its part has also 
reserved its position.
1A t the 25th meeting at D eputy level, o n  2 5  M a rc h  1 983 , Spain spelled 
out its requests, w hich include:
(i) excluding Ceuta and Melilla from  the Com m unity's custom s 
territory
(ii) not applying V A T  legislation t . o  the territories
(iii) not applying C A P  rules
(iv) not applying the fisheries policy
(v) em pow ering Spain to bring to an  end unilaterally any or 
all of the derogations w hich m a y  be granted to it.
W ith  the exception of those requests for derogations, Spain has 
raised n o  objections to the adoption and application of the 
acquis com m unautai re in the territories as from  accession, and in fact 
explicitly asked that the territories should be able to benefit from  
the regional policy.
This Com m unication sets out the Commission's appraisal of Spain's 
requests and its specific proposals, except o n  agriculture and fisheries, 
o n  w hich it is awaiting further information. T h e  C om m ission therefore 
reserves the right to supplement this C om m unication accordingly as soon 
as possible.
C O N F-E /24/83.

A . G E N E R A L  C O N S I D E R A T I O N S
I. T H E  S IT U A T I O N  O F  C E U T A  A N D  M E L I L L A
1. Ceuta and Melilla are an  integral part of Spain. T h e  vast 
majority of their population is Spanish. C euta (C iidiz province) 
belonged to Portugal after 1 4 1 5  but has been Spanish since 1640, 
and Melilla (M alaga province) has been Spanish since 1497.
2. " A s  far as their situation is concerned, both tow ns cover a
2 2small area (18 k m  in the case of C euta and 1 3  k m  in that of Melilla). 
This small space, however, is occupied b y  relatively large built-up 
areas (75 000 inhabitants in the case of C euta and 6 0  000 in that of 
Melilla). T h e  shortage of land, accentuated b y  the occupation of a  
large part of the usable surface b y  built-up areas, m ean s that there 
are n o  economically significant agricultural resources. This is 
com pounded b y  a  lack of water and sources of energy which, together 
with the lack of ra w  materials, the high costs of transport and
1w e a k  local dem and, produces a  lo w  level of industrial development" .
3. "T he geographical and natural conditions w hich give Ceuta and 
Melilla an island character, together with the effects of applying 
special econom ic and tax arrangements, have led to a  concentration 
of both towns' resources in the tertiary sector, an almost total 
dependence o n  the outside, and consum er price levels w hich are 
maintained chiefly through tax-free imports and as a  result of 
a  tax burden w hich is m u c h  lighter than that in the rest of 
Spanish territory.
C0NF-E/24/83.
I

Trade, the m ain service activity in C euta and Melilla, Largely
concerns retail sales: apart from  the provision of internal suppli
the provisioning of ships is important in both cases, particularly
in Ceuta, and the sale of bazaar articles is even m o re basic;
leaving aside its direct benefits, the latter activity results in a
considerable influx of tourists, mainly from  the Peninsula, and
this represents one of the driving forces behind econom ic life in 
1the tw o  towns" .
4. Ceuta and Melilla are currently covered b y  the special econom ic 
and tax arrangements described in the following section.
C O N F-E /24/83.

II. T H E  S P E C IA L  E C O N O M I C  A N D  T A X  A R R A N G E M E N T S  C U R R E N T L Y  I N  F O R C E
T h e  special arrangements are described in detail o n  pages 2  to 5  of 
Spain's statement of 2 5  M arch.
1. T h e  L a w  of 2 2  D ecem ber 1 9 5 5  lays the foundations of the econom ic 
and financial arrangements to apply to the territories of C euta and 
Melilla.
This basic la w  is supplemented b y  provisions governing customs, 
fiscal and commercial arrangements.
2. C ustom s and trade provisions:  note the following:
(a) Import tariff arrangements
" N o  customs duties or any other duty o n  the import or export of 
goods ^except for certain ships and ships' spare parts7 are levied."
H ow ever, "it w a s decided, pending the creation of other sources-of
1finance, to retain the import tax o n  the entry of certain categories 
of goods, regardless of their origin, at rates of u p  to 10% "
(of their value).
(b) Quantitative restrictions
"T he entry, exit, transit and trans-shipment of goods, in accordance 
with the law s in force CareJ  free, w hich implies that the relevant 
authorities shall authorize im port requests without limit or 
restrictions, regardless of the trade arrangements applicable to 
such products".
K n o w n  as the arbitrio.

(c)- 4  -
Trade with mainland Spain and the Balearic Islands
"Imports into the Peninsula /i.e. mainland Spain/ and the Balearic Islands 
of natural products w hich originate in the free territories, w hich 
have been manufactured in those territories with Spanish ra w  materials 
or w hich have been naturalized through the paym ent of customs duties 
are exem pt from  customs duties." Products obtained from  foreign ra w  
materials w hich have not been naturalized are subject to special 
arrangements w hereby customs duties o n  products manufactured in C euta 
or Melilla from  ra w  materials or semi-manufactures of foreign origin 
are calculated only o n  the basis of such proportion of the ra w  
materials or semi-manufactures exceeding 10%  of the fob value of the 
product^.
(d) M onopoli es
T h e  territories "are not subject to the m onopoly o n  petroleum _ _ and
this
 has influenced the development of the port of Ceuta as a  bunkering 
stop.
2H ow ever, the free territories are subject to the tobacco m onopoly" .
(e) Inward processing traffic and free zones
"T he fact that there is n o  custom s tariff in the free territories 
m ean s that so far it has not been necessary to have free zones or to 
resort to inward processing traffic arrangements."
3. A s  regards taxation., note that:
"T he basic la w  of 22 D ecem ber 1 9 5 5  extended to C euta and Melilla the 
Spanish tax system, albeit with special provisions involving tax 
reduction (of the order of 5 0 %  in m a n y  cases) and exemptions from  
a  fair num ber of taxes."
T h e  general tax on the trade of undertakings "is very limited as it 
affects only w o rk  done to order, rents and services."
F o r further particulars see A n n e x  VIII.
B u t in the territories the m onopoly is held b y  T A C E M S A  rather than 
T A B A C A L E R A .

- 5  -
T h e  tax o n  Luxuries "applies only to the consumption of manufactured 
tobacco. In the near future it will b e replaced b y  the special tax 
o n  tobacco manufacture (state excise duty) in accordance with the 
draft la w  submitted b y  the Spanish G overnm ent to the Cortes."

B . S P E C IF IC  C O N S I D E R A T I O N S
I. D E R O G A T I O N S  R E Q U E S T E D  B Y  S P A I N  F O R  C E U T A  A N D  M E L I L L A  
1. T h e  custom s territory of the C o m m u n ity
(a) In its statement o n  2 5  M a rc h  (page 7), Spain specified that:
"2. T h e  Spanish delegation also considers that Ceuta and Melilla should 
not b e covered b y  Article 1  of Council Regulation (E E C ) 1496/68 of 
2 7  Septem ber 1968. T h e  sa m e  arrangements w ould apply, mutatis mutandis,  
to products covered b y  the E C S C  Treaty."
(b) A s  Ceuta and Melilla are not at the m o m e n t part of Spanish custom s 
territory, and Regulation ( E E C )  N o  1496/68 o n  the custom s territory
of the C o m m u n ity  does allow for special historic situations affecting
the customs territory of the M e m b e r States (e.g. the exclusion of
1Heligoland) , it w ould se em  that the C o m m u n ity  should declare itself 
willing in principle to agree to Spain's request; however, thought 
will need to b e given to the precise arrangements for and consequences 
of exclusion from  the custom s territory.
T h e  point is that exclusion from  the custom s territory does not am ount
to a  grant of "free zone" status (w hich is subject to speciaLCommunity
2rules) but to quite a  separate situation .
It will therefore be necessary to consider:
- the arrangements to be applied within the custom s territory of the 
C o m m u n ity  in respect of C euta and Melilla (see point (c));
- the arrangements to apply within C euta and Melilla in respect of 
the customs territory of the C o m m u n ity  (point (d));
- the arrangements to b e applied within C euta and Melilla in respect 
of non-m em ber countries (point (c)).
S ee A n n e x  II,
Excluding Ceuta and Melilla from  the custom s territory of the C o m m u n ity  
will not m e a n  that they belong to the custom s territory of a  non-m em ber 
country (as is the case with Busingen, w hich is G e rm a n  territory but 
incorporated within Sw iss custom s territory).

- 9  -
(c) Arrangements to b e applied within the customs territory of the 
C o m m u n ity  in respect of C euta and M e  LilLa :  in its statement of 2 5  M a rc h  
Spain stated (page 7):
"4. T h e  arrangements will have to ensure free access for products
originating in C euta and Melilla w hich are sent to the rest of the
1C o m m u n ity  and exported to third countries." 
and :
"5. Existing arrangements for products sent from  Ceuta and Melilla
to the rest of Spanish territory will continue to apply o n  accession, in
so far as they are m o re favourable than those described in this statement."
(i) It is the Commission's view  that a  territory w here the E E C  Treaty 
is applicable, even one outside the custom s territory of the 
C om m unity, should get the benefit of the Treaty ground rules o n  
the m o v em en t of goods.
H ow ever, such a  right should clearly apply only in respect of 
goods originating in such a  territory; the lack of an y  C o m m u n ity  
customs "m oat" vis-à-vis non-m em ber countries m ean s that products 
cannot be "in free circulation" within the m eaning of Articles 9  -
and 1 0  of the Treaty.
(ii) A s  for the econom ic im pact of opening u p  the c o m m o n  market to
products originating in C euta or Melilla, it m ust b e rem em bered
2that the territories' industrial output is very small .
T h e  phrase "and exported to third countries" appears to m e a n  that the 
quantitative export restrictions for w hich the c o m m o n  com m ercial policy 
provides should not apply
S ee A n n e x  I X  for further details.

-  IU -
A  third of Ceuta's imports and half of Melilla's c o m e  from  the rest 
of Spain. T h e  m ain source of imports from  elsewhere is Japan, 
closely followed b y  the C om m unity, accounting for s o m e  2 6 -2 7 %  
of the total (see A nnexes V , V I  and VII). T h e  territories' exports 
consist almost entirely of the revictualling and refuelling of 
foreign ships; m ost of the remainder goes to Spain, and exports 
to the C o m m u n ity  m a k e  u p  only a  tiny fraction of the total 
(see A nnexes V , V I  and VII).
(iii) A s  regards arrangements for imports into the C o m m u n ity  from  C euta 
and Melilla, a  possible solution w ould therefore b e exemption 
from  customs duties.
(iv) This formula, based o n  application of the origin rules, w ould m e a n  
scrapping s o m e  of the rules w hich currently govern imports of 
products from  Ceuta and Melilla into mainland Spain or the 
Ealearics. In the Commission's view, giving u p  the present special 
rules and applying an  exemption purely o n  the basis of the origin 
rules w ould be m ore advantageous in practice than the current 
Spanish arrangements.
That still leaves the origin rules for exports from  C euta and Melilla
to be w orked out. W hatever origin rules are laid d o w n  for trade betw een
the C o m m u n ity  o n  the one hand, and C euta and Melilla o n  the other,
1will in any case have to operate both w a y s .
T h e  C om m ission has asked the Spanish authorities for particulars of 
the origin rules currently applying to products obtained in C euta 
and Melilla, and will send them  to the Council as soon as possible, 
with any com m ents or proposals w hich m a y  be called for.

In any case, it w ould in the Commission's view  be preferable to adopt 
the approach just outlined, rather than introducing special arrangements 
for imports into the Spanish mainland and the Balearics.
S u ch  arrangements w ould also raise the question of whether products 
imported into Spain w ould be regarded as being in free circulation 
in the event of their being sent o n  to one of the present M e m b e r States.
Accordingly, the Commission's view  is that if the approach outlined 
above w ere adopted, Spain's request that its present arrangements 
for Ceuta and Melilla should rem ain in force after accession, "in so far 
as they are m o re favourable" than such an  approach, w ould have n o  
justification.
(d) Arrangements to apply within C euta and Melilla in respect of
the customs territory of the C o m m u n ity : a  num ber of points should b e m ad e.
(i) In so far as the arrangements for imports into C euta and Melilla 
include customs duties or charges having equivalent effect, or 
quantitative restrictions or measures having equivalent effect, 
m ight such barriers b e applied to imports from  other parts of 
the C o m m u n ity ?
In any case, the arrangements should not allow m o re favourable 
treatment for Spain (mainland and Balearics) than for the other 
M e m b e r States, and therefore, in the Commission's view  there 
should be special arrangements providing for the sa m e  treatment 
for all imports from  the enlarged C om m u n ity .

In addition, taking into account the above proposals for C euta 
and Melilla, C o m m u n ity  products should have free access to the 
tw o  territories. This m ean s that custom s duties (o n  certain 
ships and ships' spares) and the import tax m ust be abolished.
These arrangements should b e limited to products originating
in the C om m unity; the origin rules should be the sa m e  as those
laid d o w n  for the tw o  territories' exports (see page 10, point (c)(iii))
(ii) T h e  C o m m u n ity  m ust also take note of Spain's statement that:
"6.  T h e  benefits that result from  an  adjustment to the tobacco
1m onoply will apply to Ceuta and Melilla."
T h e  C om m ission takes this clause as m eaning that the tobacco 
m onoply in Ceuta and Melilla willbe brought into line w ith 
Article 3 7  of the Treaty, so that products from  other M e m b e r States 
are not discriminated against and products originating in the 
tw o  territories can benefit from  adjustments to the m onopolies 
in the other M e m b e r States.
(e) T h e  arrangements to b e applied b y  C euta and Melilla in respect of 
non-m em ber countries: assuming the territories rem ain outside the 
C o m m u n ity  customs territory, the C C T  will not apply.
In its M a rc h  statement^ Spain also said, speaking of the c o m m o n  
com m ercial policy:
"1. T h e  Spanish delegation considers that the Accession Treaty should 
include a  provision to the effect that the acts of C o m m u n ity
institutions _ _ pursuant to Part Three, Title II, Chapter 3  of the
Tr
eaty of R o m e  _ _ w ould not apply to C euta and Melilla."
'C
O N F-E/24/83, page 8. 
lO N F -E / 24/83, pages 6 and 7.

- 1 3  -
(i) A ssum ing Ceuta and Melilla rem ain outside the custom s territory 
of the C om m unity, it w ould indeed se em  consistent to provide 
that restrictive c o m m o n  com m ercial policy measures, whether 
autonom ous or contractual, including those relating to custom s 
duties and quantitative restrictions, should not apply to the 
territories (see point (c)).
(ii) C o m m o n  commercial policy measures banning obstacles such as
customs duties or charges having equivalent effect, quantitative
restrictions or measures having equivalent effect, or discriminatory
1internal tax rules, o n  the other hand, ought in principle to 
apply to the territories.
This is particularly so in the case of the C om m unity's contractual 
commitments, unless any particular agreement stipulates otherwise.
(iii) This approach w ould emphasize that the territories did belong to 
the C om m unity, and w ould rem o v e any grounds for a  possible G A T T  
objection to "preference" for products originating in C euta 
and Melilla entering the custom s territory of the C o m m u n ity .
2. T a x
In its M a rc h  statement (page 6), Spain said:
"1. T h e  Spanish delegation considers that the Accession Treaty should 
include a  provision to the effect that the acts of C o m m u n ity  institutions
with regard to . . . . . . . . .  the approximation of the law s of M e m b e r States
wi
th regard to Value A d d e d  T a x  w ould not apply to Ceuta and Melilla."
It w ould be necessary to decide w hat to d o  about the custom s duties 
in Ceuta and Melilla o n  certain ships and ships' spare parts, an d  
the import tax.

-  I H -
(a) In view  of the tw o  territories' special situation and the limited 
scale of econom ic activities there, Spain's request w ould appear acceptable.
This m ean s that for the purposes of C o m m u n ity  V A T  legislation C euta 
and Melilla w ould have to be regarded as non-m em ber countries; 
imports from  Ceuta and Melilla into parts of the C o m m u n ity  
(including Spain) w here V A T  is in force w ould be liable for V A T  at 
the rate applying in the particular territory concerned, while exports 
to Ceuta and Melilla from  C o m m u n ity  territories (including Spain) w here 
V A T  applies w ould be exem pt from  that tax.
(b) N ote that waiving the application of V A T  in C euta and Melilla w ould 
not involve any derogation from  other provisions of C o m m u n ity  tax law , 
in particular Articles 9 5  et seq.  of the E E C  Treaty.
T h e  tax system within Ceuta and Melilla, therefore, w ould have to b e 
compatible with the non-discrimination rule.
3. C o m m o n  agricultural policy
In its M a rc h  statement (page 6-7) Spain says:
"1. T h e  Spanish delegation considers that the Accession Treaty should 
include a  provision to the effect that the acts of C o m m u n ity  institutions 
with regard to the products in A n n e x  II to the Treaty of R o m e  and the 
products governed, w h e n  imported into the C om m unity, b y  specific regulations
resulting from  the implementation of the c o m m o n  agricultural policy _ _
w o
uld not apply to Ceuta and Melilla." .

(a) Before giving an opinion o n  this point, the C om m ission feels it 
needs further information and statistics, particularly as regards an y  
agricultural production and processing activities, including agri-food.
In any case, it will be necessary to ensure that whatever special 
arrangements m a y  be agreed for Ceuta and Melilla are not conducive 
to trade deflection.
T h e  C om m ission m ust accordingly reserve its appraisal of this Spanish 
request and w ould ask the Council in turn to reserve the Com m unity's 
position until the information sought is to hand.
(b) Similar considerations apply to products governed w h e n  imported
into the C o m m u n ity  b y  specific regulations resulting from  the implementation
1of the c o m m o n  agricultural, policy .
4. C o m m o n  fisheries policy
(a) A s  A n n e x  II to the E E C  Treaty covers fisheries products, then, 
assuming that the C A P  does not apply to Ceuta and Melilla, w ould the 
c o m m o n  fisheries policy not apply either, or should a  different approach 
be taken in this sector?
T h e  C om m ission does not have all the information it needs to give an  
informed opinion o n  this point or to formulate proposals in response 
to Spain's request. It has asked the Spanish authorities for further 
particulars, and reserves the right to give an opiniononthe request 
as soon as possible.
Currently, products com ing under Regulations (E E C ) N o s  3033/80 and 
3035/80 or Regulations (E E C ) N o  2730/75 (glucose and lactose) and 
N o  2783/75 (lactalbumin and ovalbumin).

- 1 6  -
F ro m  a  purely general standpoint, however, and without prejudice to the 
position it will be adopting as soon as possible, trie C om m ission w ould 
draw  the Council's attention at this stage to the fact that fishing in 
the waters of these Spanish territories is important both for continental 
and local fishermen and for the eco n o m y  of the region as a  whole; for 
s o m e  fishermen, it is also a  supplement to their activities in Atlantic 
waters.
Also, the territories have a  fish-processing industry - canning, in 
particular.
(b ) F o r the catches of ships flying the Spanish flag and based in 
Ceuta or Melilla, it m ight be necessary to consider rules other than those 
laid d o w n  b y  Regulation (E E C ) N o  139/79, w hich takes n o  account of the 
port w here a  M e m b e r State ship is based; this m eans that unless a  
derogation is allowed, fish caught b y  a  Spanish ship based in Ceuta or 
Melilla and any products obtained o n  board from  the catch w ould have 
the status of C o m m u n ity  produce.
5. T h e  Com m unity's o w n  resources
T h e  C om m ission reserves its position o n  this subject at the sa m e  time 
as it submits its proposals supplementary to this C om m unication o n  the 
agriculture and fisheries parts of the Melilla dossier.

- 1 7  -
II. S P E C IF IC  S P A N I S H  R E Q U E S T  F O R  A P P L I C A T I O N  O F  R E G I O N A L  P O L I C Y '
T h e  Treaties and secondary Legislation 
are applicable to Ceuta and Melilla as from  accession. Accordingly, 
subject to the possible derogations discussed in Section B.II., and 
whatever other derogations or transitional measures are agreed o n  
for the w hole of Spanish territory in other chapters of the negotiation, 
all C o m m u n ity  policies including the regional policy will apply to 
Ceuta and Melilla as from  accession. A s  from  accession, in other words, 
the tw o  territories will be subject to all the obligations and eligible 
for all the benefits for w hich such policies provide.
H ow ever, the Spanish delegation felt impelled specifically to request 
that the regional policy should apply to Ceuta and Melilla, in the 
following terms (CO N F-E/24/83, point IV . 7, page 8):
"7. T h e  Spanish delegation emphasizes the need to ensure that b y  
applying the Com m unity's regional policy adequate levels of development 
and social welfare are achieved in the territories covered b y  this 
statement. In particular, the application of that policy m ust strengthen 
the infrastructure of those territories in order to ensure the o p tim um  
creation of opportunities in the industrial and service sectors an d  
m ust also provide for the adoption of specific measures to further the 
industrial development of Ceuta and Melilla."
T h e  C o m m u n ity  should take note of the Spanish Government's intention 
to see that Ceuta and Melilla benefit from  the European Regional F u n d .
In this connection, it should recall its statements o n  the regional 
policy chapter, in particular the statement of 2 0  M arch  1980, w hich 
pointed out that: "T he regions and areas for w hich F u n d  assistance
m a y  b e given for ^.infrastructure investments and investments in industrial, 
handicraft or service activities? are limited to those aided areas

- 1 8  -
established b y  M e m b e r States in applying their systems of regional 
aid and in w hich State aids are granted w hich qualify for F u n d  
assistance. In granting assistance from  the Fund, priority will be given 
to investments located in national priority areas, account being 
taken of the principles w hereby C o m m u n ity  regional aid is coordinated.
T h e  C o m m u n ity  points out that it will be for the Com m ission, after 
Spain has acceded, to assess o n  the basis of Articles 92 et seq. of 
the E E C  Treaty whether the demarcation of such areas for regional aid 
can be justified on social and econom ic grounds and whether the aid 
is compatible with the c o m m o n  market."
«

- 1 9  -
C . S P A IN 'S  R E S E R V A T I O N  R E G A R D I N G  T H E  S T A B IL IT Y  O F  T H E  A R R A N G E M E N T S
O n  page 7  of its 2 5  M a rc h  statement Spain, in connection with the 
various requests for derogations (see Section B . I) entered a  
"reservation" :
"3. H ow ever, o n  a  proposal from  the institutions representing 
Ceuta and Melilla, the Spanish Governm ent, in a  statement lodged at 
least three years after the application of the transitional measures 
has ceased, m a y  signal an  end to the application of so m e  or all of the 
preceding provisions, in w hich case the relevant acts of the C o m m u n ity  
institutions will apply to C euta and Melilla with effect from  the 
first day of the second m onth after the statement is lodged."
This request, based o n  the provisions for the Faroes in Article 25,
2 6  and 2 7  of the 1 972 A c t of Accession (referring to Article 7 9  of the 
E C S C  Treaty, Article 2 2 7  of the E E C  Treaty and Article 1 9 8  of the 
Euratom  Treaty) - see A n n e x  I V  - w ould not appear to be justified.
(a) In the first place, in the case of the Faroe Islands it w a s  the 
three Treaties w hich w ere being applied, not simply arrangements for 
derogations; again, the time limit w a s three years after accession and 
not, as in Spain's request, three years after the end of the transitional 
measures.
(b) Exclusion from  the customs territory of the C om m u n ity  will b e the 
result of the wording of Regulation (E E C ) N o  1496/68, as am ended b y  the 
A c t of Accession, and as with the earlier A cts of Accession, there will 
be a  provision to the effect that:
Actually, the original Spanish text of the statement read
"_ _ el Gobierno espanol _ _ podra notificar, por una declaracion
de
positada a  m a s  tardar très anos despues del final de la aplicacion 
de las medidas transitorias ...". T h e  w ords "a m a s  tardar très anos 
despues del final" m e a n  "at the latest, three years after the end", 
whereas the French version reads "trois ans au m oins après la fin" 
and the English translation, based upon it, "at least three years 
after the end".

-  20  -
"Provisions of this A ct the purpose or effect of w hich is to repeal
or am e n d  acts adopted b y  the institutions of the Communities,
otherwise than as a  transitional measure, shall have the sa m e  status
in la w  as the provisions w hich they repeal or am en d  and shall b e subject
1to the sa m e rules as those provisions".
2Therefore, if necessary the C o m m u n ity  m a y  include Ceuta and Melilla 
within its customs territory without am ending the A ct of Accession.
A s  regards whatever other derogations Spain m a y  be accorded, provisions 
will have to be m a d e  for adjusting the arrangements in the light of 
requirements w hich m a y  subsequently b ecom e apparent. T h e  A c t of Accession
will therefore have to include a  provision similar to Article 2 8  of the
3 41 972 A c t of Accession or Article 227(2) of the E E C  Treaty , but without
limit of time, w hereby the Council acting unanimously o n  a  proposal
from  the C om m ission m a y  decide o n  any am endm ents to the arrangements.
(c) G iven these possibilities, and in view  of the Com m unity's m ajor 
interest in a  stable situation, it w ould be undesirable to allow the 
n e w  M e m b e r State alone to modify the situation established b y  the 
A ct of Accession.
A s  regards safeguarding the interests and constitutional rights of the 
tw o territories, it is u p  to Spanish la w  to find suitable internal 
solutions.
Article 8 of the 1 972 A c t of Accession and Article 8 of the 
,1 9 7 9  A ct of Accession.
A s  Regulation (E E C ) N o  1496/68 is based o n  Article 2 3 5  of the 
E E C  Treaty, its am endm ent requires a  decision b y  the Council acting 
unanimously o n  a  proposal from  the C om m ission and after consulting 
the European Parliament.
S ee A n n e x  III.
S ee A n n e x  I.

A N N E X  I
Article 227(2) of the E E C  Treaty
"W ith regard to Algeria and the French overseas departments, the 
general and particular provisions of this Treaty relating to:
- the free m o v em en t of goods;
- agriculture, save for Article 40(4);
- the liberalization of services;
- the rules o n  competition;
- the protective measures provided for in Articles 108, 1 0 9  and 226;
- the institutions,
shall apply as soon as this Treaty enters into force.
T h e  conditions under w hich the other provisions of this Treaty are to 
apply shall be determined, within tw o years of the entry into force of 
this Treaty, b y  decisions of the Council, acting unanimously o n  a  
proposal from  the C om m ission.
T h e  institutions of the C o m m u n ity  will, within the fram ew ork of the 
procedures provided for in this Treaty, in particular Article 226, take 
care that the econom ic and social development of these areas is m a d e  
possible."

A N N E X  II
Article 1  of Council Regulation (E E C ) N o  1 496 of 2 7  September 1 9 6 8
( O J  N o  L  238, 28.9.1968, p. 1 ) as am ended b y  the 1972 A ct of Accession
( O J  N o  L  73, 27.3.1972, p. 1 4 ) and the 1979 A ct of Accession
( O J  N o  L  291, 19.11.1979, p. 1 7 )
"T he customs territory of the C o m m u n ity  shall comprise the following
territories:
- the territory of the K in g d o m  of Belgium,
- the territory of the K in g d o m  of D enm ark, except the Faroe Islands,
- the G e rm a n  territories to w hich the Treaty establishing the E uropean 
E conom ic C o m m u n ity  applies, except the Island of Heligoland and the 
territory of Biisingen (Treaty of 2 3  N o v em b er 1964 between the Federal 
Republic of G erm an y  and the Sw iss Confederation),
- the territory of the Hellenic Republic,
- the territory of the French Republic, except overseas territories,
- the territory of Ireland,
- the territory of the Italian Republic, except the c o m m u n e s of Livigno 
and C am pione d'ltalia and the national waters of L ake L ugano w hich are 
between the bank and the political frontier of the area between 
Ponte Tresa and Porto Ceresio,
- the territory of the G rand D u c h y  of L uxem bourg,
- the territory of the K in g d o m  of the Netherlands in Europe,
- the territory of the United K in g d o m  of Great Britain and Northern
Ireland and of the Channel Islands and the Isle of M an."

A N N E X  III
Article 2 8  of the 1 9 7 2  A ct of Accession
"Acts of the institutions of the C o m m u n ity  relating to the products 
in A n n e x  II to the E E C  Treaty and the products subject, o n  importation 
into the C om m unity, to specific rules as a  result of the implementation 
of the c o m m o n  agricultural policy, as well as the acts o n  the 
harmonization of legislation of M e m b e r States concerning turnover 
taxes, shall not apply to Gibraltar unless the Council, acting 
unanimously on a  proposal from  the Com m ission, provides otherwise."

ANNEX IV
Article 227(5)(a) of the E E C  Treaty and subparagraph (a) of Article 1 9 8  
of the Euratom  Treaty
"This Treaty shall not apply to the Faroe Islands. T h e  G overnm ent of 
the K in g d o m  of D e n m a rk  m ay, however, give notice, by a  declaration 
deposited b y  3 1  D ecem ber 1 9 7 5  at the latest with the G overnm ent of the 
Italian Republic, w hich shall transmit a  certified copy thereof to each 
of the G overnm ents of the other M e m b e r States, that this Treaty shall 
apply to those Islands. In that event, this Treaty shall apply to 
those Islands from  the first day of the second m onth following the 
deposit of the declaration."

CEUTA AND MELILLA/COMMUNITY TRADE - 1980 ANNEX V
(in millions of pesetas)
Sect ion ProductsImports Exports
*Ceuta M eli lla Ceuta Melilla
I Live animals; animal products 629.6 274.3 - 22.2
II Vegetable products 12.3 20.0 0.3 -
I I I Fats and oils 6.9 2.3.- -
IV Prepared foodstuffs; beverages; 
tobacco 718.9 397.5 1  -  9-
V Mineral products 574.6 13.3 150. 4-
VI Products of the chemical industries 82.1 35.6 12.3 -
VII Artificial resins and plastic materials; rubber 13.0 14.6- -
V III P a w  hides and skins, leather, furskins and 
articles thereof 1.1 0.2 - 15.8
IX W o o d  and articles of w o o d 1.3 0.1 - -
X Paper and paperboard and articles thereof 2,5 10.2- -
XI Textiles and textile articles 85.4 37.7 - -
XII Footwear, headgear, umbrellas; feathers, 
artificial flowers 36.0 18.0
X III ,  Articles of stone; glassware 60.9 46.5-0.7
*IV Pearls, precious metals, imitation 
jewellery 5.4 4,8
X V B ase metals and articles thereof 58.8 179.8 - -
XVI
XVII  
XVIIM achinery and mechanical appliances; 
electrical equipment; parts thereof 
Transport equipment 
Optical instruments and apparatus249.2
335.1
161.2175.7 
326.5
168.8- -
XIX A r m s  and am m unition 1.2 2.5- -
X X Miscellaneous ,  62.4 14.6 - -
T O T A L 3.097.9 1.743.0 164.9 38.7

TRADE BETWEEN CEUTA AND M E L IL L A  AND M AIN LAN D  S P A IN  AND B A LE A R IC S  —  1 9 7 9  ANNEX VI
(in millions of pesetas)
Section. ProductImports E xports
Ceuta Melilla Ceuta Melilla
I Live animals; animal products 626.9 548.2 37.7 55.4
u. Vegetable products 105.5 469.1 - -
Ill Fats and oils 103.7 89.0 - -
IV Prepared foodstuffs; beverages; tobacco 1.082.1 999.4 71.9 169.5
V Mineral products 1.782.0 517.3 27.4 -
VI Products of the chemical industries 819.7 588.7 - -
VII Artificial resins and plastic materials; rubber 163.1 112.0 - -
VIII R a w  hides and skins. Leather, furskins and 
articles thereof 88.3 34.0 - 49.9
IX W o o d  and articles of w o o d 41.2 35.6 - -
X Paper and paperboard and articles thereof 101.3 87.2 - -
XI Textiles and textile articles 1.397,9 1.097.2 10.8 -
XII Footwear, headgear, umbrellas; feathers, 
artifical flowers 302.6 307.5 - -
•  XIII Articles of stone; glassware 278.5 258,2 - -
XIV Pearls, precious metals, imitation jewellery|- - —
XV B ase metals and articles thereof I 390.5 324.9 - -
XVI
XVIIM achinery and mechanical appliances; electrical 
equipment; parts thereof 
Transport equipm ent635.7 
457 6555.5
465.6 98.276.5
145.9
XVII Optical instruments and apparatus 60.4 39.4 - —
XIX A r m s  and am m unition * - - - —
XX*
Miscellaneous 332.8 289.8 -
TOTAL 8.856.9 6.840.8 264.5 515.0

ANNEX VII
8+ L
m
fE
11C E U T A  A N D  M E L IL L A :  1 9 8 1  T R A D E  F I G U R E S
(in million pesetas)
Imports
Ceuta
1 180 
8 3  
937 
654 
440 
746 
2 5  
1 1 9  
2M eli lla
2 9 1
5 1
2 5 8
4 6 5
9 7
3 4 4
4 1
102
3Exports
Ceuta
5.4Melil la
2 3
9
OTAL E E C 4  1 8 6 27.6 1  6 5 2 26.1 5.4 0.2 3 2 2.7
COUNTRIES
If wh i  c  h:
a
lipan 
a
log K o n g
f c r o c c o1 0  986
806 
4  4 2 7  
1  027 
666 
3.872.4 4  670
3 5  
2  094 
4 9 4  
1  0 1 3  
9 773,9 37.6 0,9
1 81 4 5
5 512.2
OTAL 1 5  1 7 2 100 6 3 2 2 100 3  859 1 1 0 0 1  1 9 2 100
O f  w h ic h  Ptas 3  8 1 6 m  w as for the refuelling and revictualling of foreign ships.2
O f  w h ic h  Ptas 1  0 1 5 m  w a s for the refuelling and revictualling of foreign ships.

U pdated 2 8  M a y  1 9 8 2 Preliminary Provisions: Sixth
S I X T H  P R O V I S IO N
T R A D E  W I T H  T H E  C A N A R Y  I S L A N D S  A N D  S P A N I S H  F R E E  P O R T S  I N  N O R T H  A F R I C A  
( A F R I C A N  T E R R IT O R IE S )
1. T h e  importation into mainland Spain and the Balearic Islands 
O ' goods originating in or com ing from  the Canary Islands and 
African territories shall be governed b y  the rules set out in this 
Order and b y  the individual rules relating thereto contained in 
the custom s regulations.
2.Following presentation proof of origin in accordance with 
the procedure laid d o w n  in the customs regulations:
A . Unprocessed products originating in the Canary Islands and 
African territories shall not be subject to customs duties.
B . Products processed o n  those islands and territories from  ra w  
materials w hich are exclusively Spanish or have acquired national 
status as a  result of paym ent of the corresponding duties and 
charges levied o n  imports into mainland Spain and the Balearic Islands,, 
shall be exem pt from  customs duties.
C . Products processed o n  the C anary Islands or African territories 
from  foreign ra w  materials or semi-manufactures shall b e exem pt 
from  customs duties w here the total customs value of those ra w  
materials or semi-manufactures, in the ports of those islands
and territories,, does not exceed ten per cent of the fob value of 
the product resulting from  processing in the port of loading 
for shipment to other parts of the national territory(*).
D .  Other products processed o n  the C anary Islands and African 
territories from  ra w  materials w hich are entirely or partially foreign 
shall,, o n  importation into mainland Spain or the Balearic Islands,.
b e subject to the duties corresponding to the foreign ra w  materials 
used in manufacture over and above the ten per cent exem pted 
from  duty as laid d o w n  in the preceding subparagraph(*).
E . W h e re in the sa m e processing operations or in the sa m e  treatment 
of the ra w  materials tw o  or m o re types of goods are produced,,
the duties to w hich each of these types of goods will b e subject 
o n  importation into mainland Spain and the Balearic islands shall 
be those resulting from  breaking d o w n  the total s u m  of the duties,, 
calculated as laid d o w n  in the preceding subparagraph, into am ounts 
proportional to the customs value of the goods producedC*).
F . T h e  ra w  materials originating in the customs territory of 
mainland Spain and the Balearic Islands and obtained b y  recourse 
to one of the categories of processing arrangements shall be 
subject to paym ent to the Treasury of the duties and charges w hich 
it did not collect as a  result of the use in the production of 
those ra w  materials of one of the categories of arrangements 
referred to above, but only in respect of that part of the foreign 
com ponents of the ra w  materials w hich exceeds in value ten per cent 
of the fob value of the goods produced, in the port of loading
for shipment to other parts of the national territoryC*).
"In accordance with the provisions relating to the system of regulatory 
duties laid d o w n  b y  D ecree 611/1963 of 2 8  M arch 1963, foreign goods 
com ing under this system, including those re-dispatched to mainland 
Spain and the Balearic Islands and com ing from  the C anary Islands 
and African territories, shall be subject to paym ent of those duties, 
as a  result of which, for products w hich have been processed o n

- G -17 - contd
A s  an exception to the restriction o n benefits accorded to foreign 
or national materials laid d o w n  in subparagraphs C  to F  inclusive 
of paragraph 2  of Preliminary Provision N o  6 of the Tariff, and 
in order to encourage the rapid industrial development of the 
C anary Islands and the African territories, for goods produced 
b y  n e w  factories or extensions to existing factories authorized 
before 1  January 1 984 and commissioned before 1  January 1986 , 
the quantity laid d o w n  in the abovementioned Sixth Provision for 
the purposes of exemption from  duties shall be set at a  m a x im u m  ' 
of thirty per cent.
W h e re advisable for reasons of equity, provided that the procedures 
laid d o w n  in the following paragraph have been observed, the 
G overnm ent m a y  extend the benefits laid d o w n  in the preceding 
paragraph to goods produced b y  factories w hich exist at present.
In cases of exceptional social and econom ic importance in view  
of the large num ber of jobs w hich the planned factory will create 
for Spanish nationals, following proceedings initiated b y  the 
Ministry of Industry or the Ministry of Agriculture, depending 
o n  the nature of the industrial activity, and a  report from  the 
Ministry of Finance, the Government, acting o n  a  proposal from  
the Ministry of Trade, m a y  raise the percentage laid d o w n  in 
the first paragraph to a  m a x im u m  of fifty per cent for 
factories w hich also m eet the conditions governing establishment 
and commissioning laid d o w n  in the first paragraph.
T h e Ministry of Industry or the Ministry of Agriculture, as 
appropriate, shall com m unicate to the Directorates-General for 
Customs, C ustom s Policy and Importation the factories 
commissioned before 1  January 1 9 8 1 ^  o n  the C anary Islands and 
African territories so that they m a y  receive the special 
benefits applicable to them . (Royal Decree 702/77;
B O E  of 2 0  April.)
R oyal Decree 402/79 ( B O E  8 M arch  1979) am ends the final dates 
laid d o w n  in R oyal Decree 702/77. Further extended b y  
R oyal Decree 1 ,0 8 4 /8 2  ( B O E  2 8  M a y  1982).

- G -18 -
the abovementioned islands and territories from  foreign ra w  
materials w hich c a m e  under the system referred to o n  importation 
into mainland Spain and the Balearic Islands, the quantity qualifying 
for exemption, calculated as laid d o w n  in subparagraph C  of 
paragraph 2  of the n e w  Sixth Provision of the Tariff, shall b e 
reduced to a  quantity identical to the am ount of the regulatory 
duties levied at the time of customs clearance o n the importation 
of the said ra w  materials used in processing (Article 5  of 
Decree 1833/1968) .
"For the purposes of subparagraph C  of paragraph 2  of the n e w  Sixth 
Provision of the Tariff, in so far as the present arrangements 
governing the importation of sugar, wheat and rye into mainland 
Spain and the Balearic Islands still apply, for products processed 
o n  the C anary Islands and African territories from  the abovementioned 
goods of foreign origin, the standard basis of assessment w hich 
will be used for calculating the duties w hich m ust b e paid o n  the 
ra w  materials o n  importation into mainland Spain and the 
Balearic Islands shall be that laid d o w n  as the definitive am ount 
in the C ustom s Tariff, n o  account being taken of the reduced 
transitional duties laid d o w n  b y  Decree 181/1962 of 2 5  January 1 9 6 2  
for certain goods while they rem ain under state-trading arrangements.
Notwithstanding the provisions of the preceding paragraph, w here 
sugar, w heat and rye, albeit of foreign origin, have been supplied 
b y  the Comisaria General de Abastecimientos y  Transportes 
(General Supply and Transport Board) or b y  the Servicio Nacional 
de Cereales (National Cereals Board), depending o n  the prices 
established for the market of mainland Spain and the 
Balearic Islands, such products shall be considered as having 
acquired national status for the purposes of subparagraphs B )  
and C )  of paragraph 2  of the n e w  Sixth Provision of the Tariff" 
(Article 6 of Decree 1833/1968)^.
" A s long as the customs regulations d o  not include appropriate 
rules for applying paragraph 2  of the Sixth Provision of the 
Tariff, in its am ended form, manufacturers established o n  the 
C anary Islands or African territories w h o  wish to avail themselves 
of the tariff benefits granted under the said paragraph shall 
be required to present to the Directorate-General for C ustom s the 
proof w hich that Centre considers necessary for determining the 
origin, quantity, quality and value of the ra w  materials used in 
the processing of goods. This Directorate-General shall adopt, in 
accordance with the Tariff and other supplementary provisions, the 
measures it considers appropriate for guaranteeing due paym ent of 
the corresponding tariff duties, in accordance with paragraph 2 of 
the Sixth Provision and Articles 5  and 6 of this Decree, and shall 
also determine the form  in w hich the origin of the goods from  the 
Canary Islands and African territories will have to be proved."
(Art. 8 of Decree 1833/1968)

w  “ conta
3. Products originating in the African provinces shall not 
lose the benefits accruing from  their origin for the purposes 
of importation into mainland Spain and the Balearic Islands
w h e n  they c o m e  from  the C anary Islands or the African territories.
4. Foreign goods imported into mainland Spain and the 
Balearic Islands and com ing from  the Canary Islands and African 
territories and provinces shall be subject to duties calculated 
o n  the basis of their origin,, the provisions of the other 
Supplementary Provisions of the Tariff being applicable.
5. Furniture and used effects shall b a  admitted duty-free with the 
exception of m otor vehicles subject to registration, and the 
engines thereof if presented separately, belonging to Spanish 
nationals residing o n  the C anary Islands or African territories, 
w uen they transfer their place of residence to mainland
Spain or the Balearic Islands, following completion of the 
formalities and fulfilment of the requirements L aid d o w n  in 
the customs regulations.
6.  G o o d s w hich originate in mainland Spain and the Balearic Islands 
and foreign goods w hich had acquired national status as a
result of the paym ent of customs duties and w hich are imported 
into the C anary Islands and African territories shall not b e 
subject to paym ent of tariff duties o n  being re-dispatched for 
whatever reason to mainland Spain and the Balearic Islands, 
but if they are to qualify for this benefit the following 
conditions m ust be fulfilled:
(a) the goods m ust be identifiable.
(b) duties and charges not collected b y  the Treasury w h e n  the 
national goods w ere produced under cover of processing 
arrangements m ust be paid to the Treasury.
W h e re identification proves impossible, goods re-dispatched 
to mainland Spain and the Balearic Islands shall be considered to 
be foreign goods for the purposes of applying the rules of the Tariff, 
except w here Provision N o  5  has been involved.
«
7. G o o d s originating in the C anary Islands and African territories 
and not qualifying for the benefits laid d o w n  in this Sixth 
Provision m a y  be imported into mainland Spain and the Balearic Islands 
following paym ent of the m ost favourable tariff duties 
corresponding to goods of foreign origin, and Provision 4  shall 
apply to such goods in respect of the cases and under the conditions 
laid d o w n  therein.
Reference in these Articles to subparagraph C  is based o n  the structure 
of paragraph 2  before its am endm ent b y  R oyal Decree 702/77, as it is 
has n o w  been divided u p  into subparagraphs C )  to F).

ANNEX IX
INDUSTRIAL ACTIVITY IN CEUTA AND MELILLA
There is not much industrial activity in Ceuta or Melilla; the  
industrial sector employs only 7% of the working population in Ceuta  
and 11% in Melilla. An expansion of industrial activity is prevented  
basically by:
1. lack of space, water, energy resources and raw materials;
2. high transport costs and weak local demand;
3. inadequacies in the commercial and tax advantages offered under  
the 1955 basic law;
4. the Spanish mainland's protectionist attitude to certain products  
such as sugar cane distillates;
5. the fluctuations of the Moroccan "tourist" market, which varies  
according to how permissive a stand the Moroccan Government takes  
on imports by travellers.
Meli lia
The last industrial census recorded 143 businesses, 85% of them employing  
fewer than 10 people and accounting for 52% of the labour force in this  
sector.i
Canneries (the only three firms with more than 50 employees) and the  
manufacture of fish meal are the most important branch of industry.
Other comparatively important sectors are energy distribution, the  
manufacture of soft drinks, and pharmaceuticals.

-  2 -
Ceuta
The last industrial census recorded 122 businesses in Ceuta, employing  
1 139 people, broken down as follows:
Fi rms Employees
Energy and water (excluding electricity) 4 137
Extractive industry; working of non-energy  
minerals; by-products of the chemical
industry 17 146
Metalworking; precision engineering 15 78
Other manufacturing industries 86 778
122 1 139
The food industry (bakery, soft drinks, brewing, fish canning and  
chocolate) and the tobacco industry are the major employers. Other  
fairly important sectors are woodworking and garment-making.