Proposal for a Council Regulation (EC) applying a three-year scheme of generalized tariff preferences (1995 to 1997) in respect of certain industrial products originating in developing countries (94/C 333/06) COM(94) 337 final - 94/0209(ACC)

(Submitted by the Commission on 19 September 1994)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 113,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Parliament,

Having regard to the opinion of the Economic and Social Committee,

Whereas, in accordance with its offer made within the context of the United Nations Conference on Trade and Development (UNCTAD), the European Community opened generalized tariff preferences commencing in 1971 in respect, inter alia, of finished and semi-finished industrial products from developing countries; whereas the initial 10-year period of application of such preferences ended on 31 December 1980 and a second 10-year period ended on 31 December 1990, though the scheme has been kept in being unchanged until now;

Whereas the positive role played by this system in improving access for the developing countries to the markets of preference-giving countries is accepted and justifies its continued existence for a time, in step with other important measures including the multilateral liberalization of trade;

Whereas in communications to the Council dated 6 July 1990 and 1 June 1994 the Commission set out its recommendations for a further 10-year period of application of its scheme of generalized preferences;

Whereas preferential imports have grown substantially since the previous decade but the distribution of gains is still uneven despite the adoption of a policy of differentiation in the 1980s;

Whereas the Treaty on European Union has lent a fresh impetus to Community development policy as an aspect of the Union's foreign policy, with priority given to the sustainable economic and social development of the developing countries and their smooth and gradual integration into the world economy;

Whereas the Community scheme of generalized preferences should accordingly become more development-oriented, focusing on the countries which have most need of it, i.e. the poorest countries, and serving a broad-based concept of development which incorporates social progress and environmental concerns and has a basis in coherent economic strategy; whereas the scheme should be complementary to GATT instruments and should foster the integration of developing countries into the world economy and the multilateral trading system; whereas the giving of preferences should therefore be seen as a transitional measure, to be used at need and phased out when the need is considered no longer to exist;

Whereas the new offer aims at a level of liberalization which is neutral overall compared with the existing scheme as regards the impact of the preferential margin on the potential volume of preferential trade; whereas special incentive arrangements will constitute an element additional to the basic offer;

Whereas the new offer must also take account of certain sectors or products which are sensitive for Community industry; whereas sensitive sectors should be protected against import surges solely by a dual mechanism involving a modulation of preferential tariff margins coupled with an emergency safeguard clause; whereas this system will replace the machinery of fixed duty-free amounts and ceilings;

Whereas in order to improve access to the Community market and increase the actual take-up of preferences by moderately-developed or less-developed countries, a system of graduation should be used to transfer preferential margins gradually from advanced to less-developed countries;

Whereas graduation should be applied sensibly and gradually, by country and sector;

Whereas sector/country graduation combines a development criterion, expressed as a development index reflecting a country's per capita income and the level of its manufactured exports as compared with those of the Community, with a measurement of relative industrial specialization expressed as a specialization index based on the ratio of the beneficiary country's share of total Community imports in general to its share of total Community imports in a given sector; whereas combined application of these two criteria should make it possible to adjust the crude results of the specialization index, in terms of the sectors to be excluded, in line with the level of development;

Whereas the sector/country graduation system should be supplemented by a solidarity mechanism applicable in exceptional circumstances, when beneficiary countries whose exports of products covered by the generalized system of preferences (GSP) in a given sector exceed 25 % of all beneficiaries' exports of those products in that sector would be excluded from GSP entitlement for that sector irrespective of their level of development;

Whereas countries undertaking effective programmes to combat drug production and trafficking should, however, remain entitled to the more favourable arrangements granted them under the previous scheme; whereas the countries concerned, plus Venezuela, will therefore continue to enjoy duty-free access provided they continue their efforts to combat drugs;

Whereas provision should also be made for special types of assistance additional to the general preferential scheme aimed at supporting the introduction of forward-looking social or environmental policies in moderately-advanced developing countries;

Whereas beneficiary countries which so desire and which still do not have the means of meeting the costs should be encouraged to introduce effective policies for the protection of workers' rights, with particular regard to the right to organize and prohibition of child labour; whereas special arrangements should therefore be established for products manufactured in conditions conforming to standards laid down by the International Labour Organization (ILO) in countries whose legislation contains rules of similar scope and substance which are actually applied;

Whereas beneficiary countries should also be encouraged to undertake effective environmental protection policies, by means of incentives for products and production methods internationally approved as consistent with the objectives set out in international conventions on the environment and in Agenda 21; whereas to that end special incentive arrangements should initially be introduced for tropical wood products from forests which are sustainably managed in conformity with International Tropical Timber Organization (ITTO) standards;

Whereas the special incentive arrangements take the form of an additional preferential margin; whereas they would operate on the basis of a system of certification by beneficiary-country authorities that the goods conformed to the appropriate international standards, backed up by administrative cooperation methods similar to those used for the verification of origin;

Whereas in certain circumstances it might be appropriate to withdraw temporarily some or all of a country's preferential entitlement, for instance where that country's legislation provided for discrimination against the Community or it failed to apply the administrative cooperation methods on which the operation of the scheme is based; whereas this should also apply to any form of forced labour, exports of goods made by prison labour, inadequate controls on export or transit of drugs or money laundering, and failure to comply with obligations entered into in the Uruguay Round to meet agreed market-access objectives;

Whereas temporary withdrawal of entitlement would be the culmination of a procedure enabling all interested parties to make known their point of view;

Whereas it would be illogical to accord preferences in respect of products subject to anti-dumping or anti-subsidy measures, where such measures fail to reflect the impact of the preferential arrangements;

Whereas provision should be made for temporary withdrawal of preference where imports of a given product originating in a beneficiary country cause or threaten to cause serious damage to Community producers of the like or competing products;

Whereas detailed statistics should be compiled on imports under this Regulation and should be collected, processed and transmitted in accordance with Council Regulations (EEC) No 1736/75 (1) and (EEC) No 3367/87 (2);

Whereas matters relating to the application and management of the scheme should be referred for consideration to a Committee for the Management of Generalized Preferences,

HAS ADOPTED THIS REGULATION:

Article 1

1. A Community scheme of generalized tariff preferences is hereby established for the period 1 January 1995 to 31 December 1997, to apply in accordance with this Regulation. It comprises general arrangements (Title I) and special incentive arrangements (Title II).

2. This Regulation shall apply to products falling within Chapters 25 to 97 of the Common Customs Tariff listed in Annex I.

3. Access to the arrangements referred to in paragraph 1 shall be restricted to the countries and territories listed in Annex III.

4. In order to be admitted under one of the preferential arrangements established by this Regulation, products must comply with a definition of origin adopted in accordance with the procedure laid down in Article 249 of Council Regulation (EEC) No 2913/92 establishing the Community customs code (3).

TITLE I General arrangements

Article 2

1. The preferential duty applying to products listed in Part 1 of Annex I shall be 80 % of the Common Customs Tariff duty applicable to the product concerned, without prejudice to Article 5 of this Regulation.

2. The preferential duty applying to products listed in Part 2 of Annex I shall be 40 % of the Common Customs Tariff duty applicable to the product concerned, without prejudice to Article 5 of this Regulation.

3. Common Customs Tariff duties shall be suspended in their entirety on products listed in Part 3 of Annex I.

Article 3

1. Common Customs Tariff duties shall be suspended in their entirety on products covered by this scheme for the least developed countries listed in Annex IV.

2. They shall be suspended in their entirety for those countries listed in Annex V which are conducting a campaign to combat drugs, without prejudice to the procedure described in Article 18 (3).

Article 4

1. A system of graduation and a solidarity mechanism shall be set up.

2. The mechanisms described in paragraphs 3 and 4 shall apply to countries and sectors meeting the conditions set out in Part 2 of Annex II.

3. Without prejudice to Article 5, and subject to paragraphs 4, 5 and 6 below, the preferential margin obtained by applying Article 2 to imports of products originating in the countries and falling within the sectors listed in Part 1 of Annex II shall be reduced by 50 % on 1 January 1996 and abolished on 1 January 1997 for countries whose GNP per inhabitant is greater than US$ 6 000 for 1991 (according to World Bank data) and which are listed in Annex VII. It shall be reduced by 50 % on 1 January 1997 for countries not listed in Annex VII.

4. For the countries and sectors to which the solidarity mechanism is applied, the preferential margin resulting from the application of Article 2 shall be abolished on 1 January 1996.

5. At any rate, application of the system described in this Article may not result in granting to the countries concerned a level of preferential access which is more favourable than that applied in 1993. In 1996 preferences shall be limited to half the margin applied in 1995 for the countries listed in Annex VII.

6. Products coming under the ECSC Treaty shall remain excluded from the preferential arrangements in the case of countries which did not qualify in 1994.

TITLE II Special incentive arrangements

Article 5

Preferential duties shall apply in accordance with the following Articles under special incentive arrangements available for countries which submit a written request to that effect to the Commission in advance. The said arrangements shall apply from 1 January 1997.

Article 6

Article 5 shall apply to products originating in countries which have adopted and actually apply domestic legal provisions incorporating the content of the standards in International Labour Organization Conventions No 87 concerning freedom of association and protection of the right to organize, No 98 concerning the application of the principles of the right to organize and to bargain collectively, and No 138 concerning minimum age for admission to employment.

Article 7

Article 5 shall also apply to products listed in Annex VI manufactured from tropical wood and originating in countries which have adopted and actually apply domestic legal provisions incorporating the content of ITTO standards concerning sustainable forest management.

Article 8

1. The arrangements referred to in Article 5 shall take the form of an additional preference accorded exclusively to products accompanied by a certificate of origin Form A on which the authorities in the country of origin have entered a statement certifying that these products have been manufactured in conditions conforming to the standards referred to in Article 6 or Article 7.

2. The rules for verification of certificates of origin Form A laid down in Articles 78 to 97 of Commission Regulation (EEC) No 2454/93 (4) shall apply mutatis mutandis to the certification referred to in paragraph 1. However, without prejudice to the application of Article 249 of Regulation (EEC) No 2913/92, matters relating to application of the standards referred to in Articles 6 and 7 may be examined by the Committee referred to in Article 17.

3. The additional preference shall take the form of a reduction of the duty applicable, calculated in accordance with the following rules:

- for the sectors referred to in Article 4 the preferential duty applicable shall be set at 80 % of the Common Customs Tariff duty where the beneficiary country has given commitments under Article 6 or Article 7 and at 70 % where it has given commitments under both Articles together,

- for products referred to in Article 2 (1), the preferential duty shall be set at 60 % of the Common Customs Tariff duty where the beneficiary country has given commitments under Article 6 or Article 7 and at 50 % where it has given commitments under both Articles together,

- for products referred to in Article 2 (2), the preferential duty shall be set at 20 % of the Common Customs Tariff duty where the beneficiary country has given commitments under Article 6 or Article 7 and at 10 % where it has given commitments under both Articles together.

However, the additional preference under Article 6, in the sectors referred to in Article 4, shall not apply to the countries listed in Annex VII.

TITLE III Total or partial temporary withdrawal of the scheme of generalized preferences

Article 9

1. The arrangements provided for by this Regulation may at any time be temporarily withdrawn, wholly or partially, in the following circumstances:

- fraud or failure to provide administrative cooperation as required for the verification of certificates of origin Form A and the statements thereon, or existence of a situation preventing the proper implementation of such cooperation,

- unfair trading practices on the part of a beneficiary country, including discrimination against the Community and failure to comply with obligations under the Uruguay Round to meet agreed market-access objectives,

- practice of any form of forced labour as defined in the Geneva Conventions of 25 September 1926 and 7 September 1956 and ILO Conventions No 29 and No 105,

- export of goods made by prison labour,

- inadequate controls on export or transit of drugs (illicit substances or precursors), or money laundering.

2. Temporary withdrawal shall not be automatic but shall follow the procedural requirements of the following Articles.

Article 10

1. The circumstances referred to in Article 9 which might make it necessary to resort to temporary withdrawal of preferences shall be brought to the Commission's attention by the Member States, or by any natural or legal persons, or associations not endowed with legal personality, which can show an interest in such withdrawal. The Commission shall communicate the information immediately to all Member States.

2. Consultations may be initiated either at the request of a Member State or at the Commission's request. They shall take place within eight working days of receipt by the Commission of the information referred to in paragraph 1 and in any event shall be held before adoption of any Community measures withdrawing preferences.

3. The consultations shall take place in the Committee referred to in Article 17, which shall be convened by its chairman who shall, in addition, communicate all pertinent information to the Member States as soon as possible.

4. The consultations shall be concerned inter alia with analysis of the circumstances referred to in Article 9 and the measures to be taken.

Article 11

1. Where the Commission finds, following the consultations, that there is sufficient evidence to justify initiation of an investigation, it shall:

(a) announce the initiation of an investigation in the Official Journal of the European Communities; such announcement shall give a summary of the information received and state that all relevant information is to be communicated to the Commission, indicating the period within which interested parties may make known their views in writing;

(b) commence the investigation in cooperation with the Member States.

2. The Commission shall seek all information it deems to be necessary and shall, where it considers this appropriate, after consulting the Committee referred to in Article 17, verify the information with economic operators and the competent authorities of the beneficiary country concerned. For this purpose the Commission may dispatch its own experts to establish on the spot the truth of the allegations made by the person referred to in Article 10 (1). The Commission shall provide the competent authorities of the beneficiary country concerned every opportunity to cooperate as necessary in the conduct of these enquiries.

3. The Commission may also be assisted by officials of the Member State on whose territory verification might be sought, if the said Member State so requests.

4. The Commission may hear the interested parties. It shall hear them if they have, within the period prescribed in the notice published in the Official Journal of the European Communities, made a written request for a hearing showing that they are likely to be affected by the result of the investigation and that there are particular reasons why they should be heard orally.

5. Where information requested by the Commission is not provided within a reasonable period or the investigation is significantly impeded, findings may be made on the basis of the facts available.

Article 12

1. When the investigation is complete the Commission shall report the findings to the Committee referred to in Article 17.

2. If the Commission considers temporary withdrawal of preference to be unnecessary, it shall publish in the Official Journal of the European Communities, after consulting the Committee, a notice of termination of the investigation setting out its main conclusions.

3. If the Commission considers temporary withdrawal of preference to be necessary, it shall take the appropriate decision on the basis of Article 9. The temporary withdrawal shall last for one year and shall be renewed unless it can be shown that the facts which led to adoption of the measure no longer obtain. The temporary withdrawal measure shall be published in the Official Journal of the European Communities.

Article 13

Where products covered by the scheme are subject to anti-dumping or anti-subsidy duties under Council Regulationn (EEC) No 2423/88 (5) which have been calculated on the basis of the injury caused and according to the prices charged on the internal market, preference shall not be granted to those products from the countries concerned unless it can be shown that the said duties were based on a price reflecting the preferential tariff arrangements granted to the country concerned. The Commission shall publish a list of products and countries affected by such measures in the Official Journal of the European Communities.

Article 14

1. Where a product originating in one of the countries listed in Annex III is imported on terms which cause or threaten to cause serious difficulties to a Community producer of the like or directly competing products, Common Customs Tariff duties may be reintroduced on that product at any time at the request of a Member State or on the Commission's own initiative.

2. The Commission shall announce the opening of an investigation in the Official Journal of the European Communities. The announcement shall provide a summary of the information received and state that any useful information should be communicated to the Commission; it shall specify the time limit within which interested parties may make their views known in writing.

3. In examining the possible existence of serious difficulties the Commission shall take account inter alia of the factors listed in Annex VIII where the information is available.

4. The Commission shall take the decisions referred to above within 30 working days following consultation of the Committee set up by Article 17. A Member State may refer the Commission's decision to the Council within a week. The Council, acting by a qualified majority, shall have one month within which to adopt a different decision.

5. The beneficiary countries concerned shall be informed of such measures before the said measures become effective.

6. Nothing in paragraphs 1 to 3 shall affect the application of safeguard clauses adopted as part of the common agricultural policy pursuant to Article 43 of the Treaty or as part of the common commercial policy pursuant to Article 113 of the Treaty, or any other safeguard clauses which may be applied.

TITLE IV Common provisions

Article 15

1. Subject to paragraph 2, rates of preferential duty calculated in accordance with this Regulation shall be rounded up or down to the first decimal place.

2. Where the application of paragraph 1 results in a rate of preferential duty of 0,5 % or less, the preferential rate shall be considered a full exemption.

3. Changes to Annex I or Annex II made necessary by amendments to the combined nomenclature shall be adopted in accordance with the procedure laid down in Article 19.

Article 16

Within six weeks of the end of each quarter the Member States shall send the Statistical Office of the European Communities their statistical data on goods admitted for free circulation during that quarter under the tariff preferences provided for in this Regulation. The said data, supplied by reference to combined nomenclature codes and, where applicable, Taric codes, shall show values, quantities and any supplementary units required in accordance with the definitions in Regulations (EEC) No 1736/75 and (EEC) No 3367/87, broken down by country of origin.

Article 17

1. A Committee for the Management of Generalized Preferences, hereinafter referred to as 'the Committee`, is hereby set up. It shall consist of representatives of the Member States and shall be chaired by a representative of the Commission.

2. The Committee shall adopt its rules of procedure.

Article 18

1. The Committee may examine any matter relating to the application of this Regulation which is raised by its chairman either on his own initiative or at the request of a Member State's representative.

2. On the basis of an annual report from the Commission it shall examine the extent to which the principle of neutrality of the effects of this scheme has been observed and any steps being considered by the Commission in accordance with the procedure described in Article 19 to ensure proper observance thereof.

3. It shall also examine, on the basis of an annual report from the Commission, the progress made by the countries listed in Annex V in the fight against drugs and, if progress is insufficient, any measures which the Commission is considering taking in accordance with the procedure provided for in Article 19 and in consultation with the country concerned to suspend, wholly or partly, the application of Article 3.

Article 19

1. The Commission representative shall submit to the Committee a draft of the measures to be taken. The Committee shall deliver its opinion on the draft within a time limit which the chairman may lay down according to the urgency of the matter. The opinion shall be delivered by the majority laid down in Article 148 (2) of the Treaty. The chairman shall not vote.

2. (a) The Commission shall adopt the measures envisaged if they are in accordance with the opinion of the Committee, or if no opinion is delivered, the Commission shall, without delay, submit to the Council a proposal relating to the measures to be taken. The Council shall act by a qualified majority.

(b) If the measures envisaged are not in accordance with the opinion of the Committee, or if no opinion is delivered, the Commission shall, without delay, submit to the Council a proposal relating to the measures to be taken. The Council shall act by a qualified majority.

(c) If, within three months of the referral to the Council, the Council has not acted, the proposed measures shall be adopted by the Commission.

Article 20

This Regulation shall enter into force on 1 January 1995 and shall be applicable for three years.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

(1) OJ No L 183, 14. 7. 1975, p. 3.

(2) OJ No L 321, 11. 11. 1987, p. 3.

(3) OJ No L 253, 11. 10. 1993, p. 1.

(4) OJ No L 253, 11. 10. 1993, p. 1.

(5) OJ No L 209, 2. 8. 1988, p. 1.

ANNEX I

PRODUCTS SENSITIVITY CATEGORIES

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ANNEX II

PART 1

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PART 2

Identification of countries and sectors referred to in Article 4

I. Classification of beneficiary countries by development index

The development index represents each country's overall level of industrial development compared with that of the European Union. It is based on the following formula, which combines per capita income with the level of manufactured exports:

[log[(Yi/POPi)/(Yue/POPue)]+log[Xi/Xue]]

2

in which:

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Using this formula, an index of 0 means the beneficiary's level of industrial development is equal to that of the European Union. Figures for income and population are taken from World Bank statistics (World Development Report 1993) and those for manufactured exports from the UNCTAD Handbook of International Trade and Development Statistics 1992.

II. Classification of beneficiary countries by relative sectoral specialization index

A beneficiary country's specialization index is derived from the relationship between the proportion of imports in a determined sector coming from this country within the total amount of Community imports in this sector, on the one hand, and on the other amount, this country's share proportion of the total Community imports.

III. Combining the development and specialization indexes

The combination of these two indexes determines how Article 4 will be applied to each beneficiary country.

For countries with a development index greater than - 1, Article 4 will apply when the specialization index equals or exceeds 1.

For countries with a development index between - 1 and - 1,23, Article 4 will apply when the specialization index equals or exceeds 1,5.

For countries with a development index between - 1,23 and - 1,70, Article 4 will apply when the specialization index equals or exceeds 5.

For countries with a development index between - 1,70 and - 2, Article 4 will apply when the specialization index equals or exceeds 7.

Article 4 will not apply to countries with a development index of less than - 2.

IV. Solidarity measure

Article 4 also applies to countries whose exports to the Community of products covered by GSP in a determined sector exceed a quarter of the total exports from all beneficiary countries to the Community in that sector.

V. Exception to the solidarity measure

Article 4 does not apply to countries whose exports to the Community of products covered by GSP in a determined sector do not exceed 2 % of the total exports from all beneficiary countries to the Community in that sector.

ANNEX III

List of beneficiary countries and territories enjoying generalized tariff preferences (1)

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B. COUNTRIES AND TERRITORIES

dependent or administered, or for whose external relations Member States of the Community or third countries are wholly or partly responsible

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C. OTHER BENEFICIARIES

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(1) The code number preceding the name of each beneficiary country is that given 'Geonomenclature` (Regulation (EC) No . . ./94 (OJ No L . . ./94, p. . . .)).

ANNEX IV

List of least-developed developing countries

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ANNEX V

List of countries referred to in Article 3

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ANNEX VI

List of products referred to in Article 7

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ANNEX VII

List of countries with a per capita GNP of over US$ 6 000 in 1991

(based on data supplied by the World Bank)

Hong Kong

Singapore

South Korea

Saudi Arabia

Oman

Brunei

Qatar

United Arab Emirates

Kuwait

Bahrein

Libya

Nauru

ANNEX VIII

Factors to be taken into consideration for the purposes of Article 14 (3)

- Reduction in the market share of Community producers,

- reduction in their production,

- increase in their stocks,

- closure of their production capacity,

- bankruptcies,

- low profitability,

- low rate of capacity utilization,

- employment,

- trade,

- prices.