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COM(81)61
Vol.1981/0018

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(81)61final
Brussels,17thMarch1981
PROPOSAL FORACOUNCILREGULATION (EEC)
establishing economicoutwardprocessing arrangements applicable
tocertaintextileandclothingproductsreimportedintotheCom­
munityafterworkingorprocessing incertainthirdcountries
(presented bytheCommission totheCouncil)
\-/
COM(81)61final

EXPLANATORY NOTE
Outward processing ,i.e. thetemporary exportation ofmaterials (inthis case •
from theCommunity )forprocessing inathird country ,isatype oftrade
which continues togrow inimportance ,notleast inthetextile andclothing
sector .
-According tothestatistical data available atpresent (inrespect of
1979 )therelative importance oftextile outward processing inrelation
tototal imports oftextile products andclothing maybecalculated as
follows : ' '
MFAproducts Total imp .1979
(tonnes )■OPT imports 1979
(tonnes )%imp .OPT/Total imp .
Group I 835.527 13,206 1.6
Group II 280,116 . 26,048 9.3
Group III 404 /705 676 -0.2 ; ,
Group IV 75,133 10,981 14.6
Group V '101,766 664 0.7
Total 1697 247 .51575 3.1
Thesignificance ofthese figures should beviewed inthelight ofthe
following corrective factors :
-theincidence ofoutward processing traffic varies considerably from one
geographical zone toanother .Atpresent itisconcentrated essentially
ontheState-trading countries zone andtheMediterranean zone although
notinsignificant flows exist andcontinue toappear vis-a-viscertain
Asian suppliers ; '
-OPTalso varies considerably from oneproduct toanother .Forexanple ,
intheBenelux ,OPTinsuits andcoordinate suits (Categories 16and
75)represents 50%oftotal imports and39%ofproduction .-InGermany .
OPTinthesame products represents 27%ofimports and14%ofproduction
(around thesame proportion exists forCategory 16 (dresses )). In
France ,OPTinsuits andcoordinate suits represents 39.6% ofimports
and5.3% ofproduction .

TheCommunity hasadmitted theprinciple that products imported after outward
processing should betreated differently from other imports .Council Directive
76/119/EECof18December 1975 harmonizes provisions laid down bylaw ,regulation
oradministrative action inrespect ofoutward processing (1).This directive ,
which confines itself tothetariff aspect ofthematter ,provides fortotal or
partial relief from import duties provided that certain conditions arefulfilled .
Itisclear that insofar astheobjective ofrules foroutward processing trade
istoenable aspecial treatment tobegranted tothis kind oftrade within
theframework ofcommercial policy theconditions applied must benecessarily
different .
Thepresent proposal seeks therefore toestablish common rules foroutward
processing oftextile andclothing products ,which maybeused whenever the
Community decides toapply special commercial policy measures toimports
resulting from outward processing .Such measures have already been adopted
with respect tothepreferential countries ofthe -Mediterranean basin
(including Portugal )aswell asinthearrangements applied tocertain
state -trading countries .
However ,outward processing traffic will also constitute animportant
part offuture import regimes which will beagreed ordecided upon
vis-a-visother third countries particularly following therenegotiation
ofMFAbilateral Agreements .
Ifamore favourable treatment istobegranted tocertain imports when they
result from outward processing itisanecessary corollary that thebenefit
ofthearrangements must accrue toCommunity industry ,which bears theburden
.ofimports .Thebenefit derived from thearrangements byCommunity producers
(1)CJNo.L24of30.1.1976 ,p.58

-3-
whomanufacture part oftheir output inthird countries where costs arelower
isthat they mayreduce their average costs andthus become more competitive .
However ,thebenefit ofsuch arrangements must beaccompanied byacertain
number ofconditions .
inthis regard .Article 2oftheproposal lays down certain fundamental prin­
ciples .First ,thearrangements established bytheregulation aregranted
only topersons whomake ,intheCommunity ,products atthesame stage of
manufacture asthose forwhich anauthorization foroutward processing is
sought .Secondly ,inorder toensure that outward processing operations do
notlead toanactual transfer ofproduction ,theadded value resulting *
from themanufacture byanysingle operator ofoutward processed products
inallthird countries islimited toafixed proportion (which maynot
exceed 30% )oftheadded value resulting from his orher output ofsimilar
articles intheCommunity .Theenvisaged figure of30%represents not so
much anunalterable proposal asabasis fordiscussion which iscapable of
evolving totake account ,ontheonehand ,ofthestate ofaffairs already
existing and ,ontheother „ofdecisions tobetaken infuture onthe frame­
work ofcommercial policy .
There is ,furthermore ,aprovision reauiring that thegoods temporarily
exported roust normally beofCommunity origin .Finally ,Article 2limits
theextent oftheoperations which maybeperformed outside theCommunity .
Attention should also bedrawn toArticle 4,paragraph 4ofwhich permits
the authorities ofthe Member States tomake authorization ofthearrange­
ments conditional onthemaintenance ofaparticular level ofemployment
bytheapplicant .
Inreturn fortheconstraints which theproposed regulation imposes on
operators using outward processing arrangements ,Article 7provides that
once thearrangement hasbeen duty authorized ,operators have aguarantee
that they mayimport their products .This provision will endthesituation
ofuncertainty which atpresent exists forfirms practising outward processing
within theframework ofordinary import quotas whocannot always know whether
itwill bepossible tore-import their products .

„4-
During thedebate which hastaken place atCouncil level ontheproposal
pitforward bytheCommission inFebruary 1979 foraregulation establishing
economic outward processing arrangements applicable tocertain third countries
enjoying preferential treatment ,anumber ofpoints ofsubstance have been
admitted which take account ofthespecial circumstances attaching tothe
arrangements forvoluntary restraint ofexports -from these countries tothe
Community ,These specific elements roust bepreserved .
Tothis end ,theproposal regarding these countries must bekept ,notleast
ofallbecause itremains extremely urgent toestablish Community rules for
these countries ,since thearrangements already inforce provide foroutward -
processing trade tobetreated inaspecial way .
Itshould benoted ,finally ,that asthis proposal isaregulating
framework destined tocover notonly existing outward processing trade
flows but also newordeveloping trade flows ,itdoes notspecify in
detail inview ofthediversity ofpossible situations ,theparticular
measures which will benecessary toapply theregime vis-a-viscertain
third countries soastomaintain existing trade flows .
However ,Article 1(4 )allows asitsobjective theinsertion ofsuch
particular measures inthepresent orfuture import regimes applicable
tothese countries .These particular measures should provide for :
-"adhoc"measures which will allow operators notfulfilling the
conditions ofthenewregime (inparticular traders andthose
industrialists exceeding the30%percentage )tocontinue tobenefit
from OPT inrespect ofthequantities accorded tothem within the
framework ofexisting OPT ,before theentry into force ofthenew
regime ;
_"adhoc"measures toensure that countries with which specific OPT
measures donotexist atpresent ,donothave their present possibilities
forimporting into theCommunity reduced asaresult ofintroducing
quotas reserved specifically forOPT .

proposai
for a
COUNCIL REGULATION (EEC )
establishing economic outward processing arrangements applicable tocertain
textile andclothing products reimported into theCommunity after working or
processing incertain third countries
THE COUNCIL OFTHE EUROPEAN COMMUNITIES ,
Having regard totheTreaty establishing theEuropean Economic Community ,and
inparticular Article 113thereof ,
Having regard totheproposal from theCommission ,
Whereas the arrangements forimportations into theCommunity inthetextile
and clothing sector from certain third countries include specific measures
applicable toproducts resulting from outward processing operations ;
Whereas intheabsence ofCommunity rules setting outtheconditions which
must befulfilled byproducts intended tobenefit from thesaid specific
measures ,these conditions are atpresent governed byvarying provisions
peculiar tocertain Member States oreven non-existant inother Member States ;
Whereas itis,inconsequence ,necessary toestablish Community arrangements ,
uniformly applicable inalltheMember States andreplacing theexisting
national arrangements ;
Whereas Council Directive 76/119/EEContheharmonization ofprovisions laid
down bylav/,regulation oradministrative action inrespect ofoutward processing
(1)provides forthegranting ,subject tocertain conditions ,ofamore favour­
able tariff treatment toproducts reimported after processing outside the
Community ;whereas this Directive does not ,however ,establish rules forout­
ward processing trade from thepoint ofview ofcommercial policy ;
(1)COTNoL24of30.1.1976 ,p.58

-2-
Whereas the policy' followed bytheCommunity isintended inparticular to
enable thetextile andclothing industry toadapt totheconditions of
international competition ;whereas these outward processing arrangements
roust fitinwith efforts toincrease thecompetitiveness ofCommunity industry
andmust therefore notonly bereserved tothat industry but also begranted
only toundertakings which make intheCommunity products atthesane stage
'ofmanufacture asthose which areintended tobereimported after outward
,processing ; ■ '_ •
Whereas the added value ofproducts reimported into theCommunity byeach
manufacturer should notexceed amaximum percentage ,fixed atCommunity level ,
oftheadded value resulting from hisorheroutput ofproducts atthesame
stage ofprocessing intheCommunity ;
Whereas itmust beprovided that thegoods temporarily exported under these
arrangements must beofCommunity origin ;
Whereas thebenefit ofthis regime ,which implies aguarantee that
products maybereimported following outward processing operations ,
must beaccorded within theframework ofspecific measures ofcommercial
policy reserved foroutward processing traffic .
: i.... .
Whereas itisnecessary toensure theuniform application ofthenewarrange­
ments and ,tothat end ,toestablish aCommunity procedure fortheir adminis­
tration ;
HAS ADOPTED THIS REGULATION :

Article 1
1.ThisRegulation laysdown theconditions governing trieimplementation of
economic outward processing arrangements fortextile products andclothing
listed inChapters 50to62oftheCommon Customs Tariff .
2.Economic outward processing arrangements "(hereinafter referred toas
"thearrangements ")within themeaning ofthis Regulation meai.s the
arrangements which allow thetemporary exportation ofgoods outside the
customs tarritory oftheCommunity forsubsequent reimportation ascom­
pensating products intheformofoneofthetextile orclothing products
referred toinparagraph 1after processing inathird country with
respect towhich specific measures ofcommercial policy havebeen adopted
inrespect ofoutward processing traffic .
3.For thepurposes ofthis Regulation :
(a)"compensating products "means products resulting from theuseof
goods which have undergone theprocessing operations referred to
inArticle 2(2 )(d);
(b)"goods "means goods exported from thecustoms territory ofthe
Community toundergo these processing operations .
4.This Regulation shall apply without prejudice tothespecial provisions
laid down for theimplementation ofarrangements for importations from
certain third countries ,particularly totake account oftheparticular
characteristics ofexisting trade flows with those countries .
Article 2
1.Thebenefit ofthearrangements provided for inthis Regulation shall
beaccorded only tonatural orlegal persons established within the
Community .

Anypersons applying tobenefit tinder thearrangements inaccordance with
paragraph 1must also fulfil thefollowing conditions :
I
(a)that person must manufacture forhisownaccount ,inhisorherfactory ,
situated intheCommunity ,products atthesame stage ofmanufacture
asthecompensating products inrespect ofwhich theapplication for
theoutward processing arrangements ismade ;
(b)that person mayhave manufactured bymeans ofoutward processing ,
inallthird countries ,compensating products uptothelevel of
apercentage of30%oftheannual added value represented bythesame
products orproducts atthesame stage ofmanufacture which heorshe
makes intheCommunity .
Indetermining thesaid annual added value ,account maybetaken of
cases where hehasthesame products orproducts atthesame stage of
manufacture manufactured intheCommunity from materials hehashimself
supplied orfrom hisownmodels .
This percentage maybedifferent forthose applicants whose factory
issituated inaMember State other than theoneinwhich application
ismade .
(c)Thegoods which that person exports temporarily forprocessing
operations must beinfree circulation within themeaning ofArticle
9(2 )oftheTreaty andofCommunity origin within themeaning ofthe
relevant Community rules ; derogations from theprovisions ofthis
subparagraph maybegranted bytheMember States' authorities only
inrespect ofgoods Community production ofwhich isinsufficient .
Such derogations maynotbegranted inrespect ofmore than 10%of
thetotal value ofthegoods inrespect ofwhich thebenefit ofthe
arrangements hasbeen granted intheMember State concerned .

-5-
TheMember States shall communicate quarterly ,within theCommittee
referred toinArticle 12,themain aspects ofthederogations thus
granted ,viz .thenature ,origin andquantities ofthegoods in
question originating outside theCommunity .
However ,goods consisting oftrimmings andaccessories which donot
fall within Chapters 50to 62oftheCCTmaybeofnon-Community
origin .
(d)Theprocessing operations tobecarried out inthird countries must
notbemore extensive than those stipulated foreach product inthe
Annex .Theprocessing operations tobecarried outmay ,however ,
beless extensive than those stipulated foreach product inthe
•Annex .
article 3
1.Thecompetent authorities oftheMember States into which thecompensating
products are tobereimported shall accord thebenefit ofthearrangements
upon request tothose persons who
meet theconditions laid down inthis Regulation ,byissuing aprior
authorization tothem .
2.Theapplicant shall submit tothecompetent authorities thecontract
concluded with theundertaking responsible forcarrying out theprocessing
operations forhisaccount inthethird country ,oranyevidence considered
bythesaid authorities tobeequivalent thereto .

Article 4
1.Prior authorization shall begranted only where itispossible forthe
conpetent authorities toidentify temporarily exported goods inthe
reinported compensating products .
2.Iheconpetent authorities mayrefuse entitlement under thescheme to
persons whodonotprovide allthenecessary guarantees toenable them
toexercise effective control over theprovisions ofArticle 2.
3.Theprior authorization shall laydown theconditions under which the
outward processing operation istotake place ;these shall include :
-thequantities ofgoods tobeexported andofproducts tobe
*reimported ,calculated byreference totherate ofyield fixed
inthelight ofthetechnical data relating totheprocessing
operation oroperations tobecarried out ,ifthese have been
established ,or,ifnot ,thedata available in "theCommunity for
operations ofthesame kind ; \
-thearrangements for identifying thetemporarily exported goods
inthecompensating products
-thetime limit forreimportation depending upon thetime necessary
tocarry outtheoutward processing operation oroperations .
Where circumstances sojustify ,theelements oftheprior authorization
referred toabove maybefixed globally forthesame applicant forone
year .
4.Theconpetent authorities maymake thegranting ofprior authorizations
conditional upon themaintenance ofagiven level ofemployment inthe
applicant 'sfactory orfactories .

-7-
5.Where thecompensating products differ substantially inkind orinpurpose
from theproducts customarily manufactured bytheapplicant intheCommunity ,
thecompetent authorities mayrefuse togrant theprior authorization if
they consider that thereimportation ofthese products might putseriously
atrisk the industrial activities ofother manufacturers ofthe same products
within theCommunity .
Article 5
Theprior authorization issued bythecompetent authorities shall besubmitted
tothecustoms office concerned atthetime oftemporary exportation for the
purposes ofaccomplishing thecustoms formalities .
Article 6
Member States shall provide theCommission with statistical information relating
toprior authorizations issued each month before the10th ofthefollomng month .
IftheCommission sorequests ,theMember States shall notify itofanyrefusal'
ofprior authorization together with thereasons ,relative totheconditions
inthis Regulation ,whysuch authorization waswithheld .
Article 7
1.Without prejudice tothefollowing paragraphs ,andprovided theconditions
laid down intheauthorization arecomplied with and theother customs
formalities normally required atthetime ofinportation areobserved ,
thereimportation ofthecompensating products maynotberefused bythe
Member State that issued theprior authorization forthose products .
2.Such products may .notbereimported into aMember State other than that
inwhich theprior authorization was issued .

-8-
3.When thecompensating products arereimported into theCommunity theperson
declaring them shall submit tothecompetent authorities ,without prejudice to
anyother Community regulations governing trade with thethird country con­
cerned ,theprior authorization together with proof that theoutward
processing operation hasinfact been performed inthethird country
stated intheprior authorization .
Article 8
Thecompetent authorities oftheMember State concerned shall decide whether
and inwhat circumstances they may :
-grant anextension ofthetime limit forreimportation originally fixed ;
-allow theproducts tobereimported inseveral consignments ;where this
isdone ,anote shall bemade ,ontheprior authorization aseach consign­
ment arrives . '
Thecompetent authorities oftheMember State concerned may also allow the
reimportation ofthecompensating products even ifnot alltheoutward
processing operations provided forintheprior authorization have been
carried out .
Λ ♦
Article 9
____ _
When ownership ofgoods temporarily exported under theoutward processing
arrangements istransferred ,thecompetent authorities shall allow the
arrangements tocontinue provided that thetransferee fulfils theconditions of
this regulation inrespect oftheoperation inquestion .
Article 10
Member States shall communicate tothe Commission statistical information
relating toallreimportations carried .outontheir territory under these
arrangements .TheCommission shall communicate this information tothe
Member States .
•«•/m••

-9-
Article 11
Thearrangements provided for inthis Regulation shall replace allother
economic outward processing arrangements currently applied bytheMember
States inrespect oftheproducts referred toinArticle 1ofthis Regulation .
Council Directive 76/119/EEC (1)ontheharmonization ofprovisions
laid down bylaw ,regulation oradministrative action inrespect ofoutward
processing ,aswell asmeasures taken foritsapplication ,shall notbe
affected .
Article 12
IheCommittee forCustoms Processing Arrangements established byArticle 26
ofDirective 69/73/EEC (2)mayexamine anymatter concerning theimplementation
ofthis Regulation raised byitsChairman either onhisown initiative orat
therequest oftherepresentative ofaMember State .
Theprovisions required fortheimplementation ofthis Regulation shall be
adopted inaccordance with theprocedure laid down inArticle 28(2 )and (3)
ofDirective 69/73/EEC .
Article 13
This Regulation shall enter into force on
This Regulation shall bebinding initsentirety anddirectly applicable in
all Member States .
Done atBrussels , For theCouncil
The President
(1)QJNo.L24of30.1.1976 ,p.58
(2)OJNo.L58of8.3.1969 ,p.1

List ofANNEX
maximum processing levels referred toinArticle 2(2 )(d).
COMPENSATING PRODUCTS BYCATEGORIES ^ MAXIMUM PROCESSING LEVEL
Cateqories Operation
4,5,6,7,8,10,11,12,13,14A,.Processing from woven orknitted
14B,15A,15B,16,17,18,21,24,fabrics .
25,26,27,28,29,30A,30B,31,•
69,70,71,72,73,74,75,76,77,
78,79,80,81,82,83,85,86,87,
91.
(1)Categories refer tothose listed inAnnex IofCouncil Regulation
(EEC )No.3059/78of21December 1978 (OJNoL365of27.12.1978 ).