Proposal for a COUNCIL DECISION on the signing, on behalf of the European Community, of an Agreement in the form of a Memorandum of Understanding between the European Community and the Federative Republic of Brazil on arrangements in the area of market access for textile and clothing products, and authorising its provisional application

(presented by the Commission)

EXPLANATORY MEMORANDUM

In accordance with the Council negotiating directives of 9 November 2000, the Commission has negotiated a Memorandum of Understanding concerning market access in the textiles and clothing sector with Brazil, which has been initialled on 8 August 2002.

The agreement provides for the following:

* Brazil commits not to exceed the maximum levels of tariffs at the rates shown in Annex 1 for the whole textile and clothing sector (maximum 14 % for yarns, 16-18 % for fabrics, and 20 % for clothing). An additional tax of 1,5 % is also expected to be eliminated upon its expiry planned for the end of 2002 (provisions in an additional agreed minute allow for re-stating of quota on category 2A or 9, in case of non-compliance by Brazil on 1 June 2003 at the latest).

* The European Community will suspend the application of the quantitative restrictions currently in force for categories 1, 2, 2A, 3, 4, 6, 9, 20, 22 and 39, following Brazil's confirmation, by means of adopted and published legislation made available by Brazil to the Community, that the provisions of sub-paragraph 1 of paragraph 2 have been implemented by Brazil. Those categories will be covered by a double checking system (surveillance). Moreover, the EU will closely co-operate with Brazil to ensure authenticity of origin of its exports to Brazil, through re-inforced administrative co-operation.

* Both Parties retain the right to suspend the application of its commitments on Paragraphs 2 and 5 should the other Party fail to fulfil its obligations. The European Community retains the right to reapply the quota regime at the level applicable for the year in question in the event that Brazil fails to fulfil any of the obligations contained in Paragraphs 2 (tariffs standstill) and 5 (non-tariff barriers) of this Agreement. Brazil retains the right to suspend its commitments should the European Community reapply quotas in a manner inconsistent with its obligations under this agreement or fail to fulfil any of the obligations contained in Paragraph 5. The Parties agree to consult with each other before exercising this right.

* Both Parties undertake not to introduce or apply any non-tariff barriers for trade in the textile and clothing sector. This will address in particular a problem concerning customs valuation in Brazil raised by EU industry.

* Both Parties also agreed to a best endeavours clause to seek, in the context of the EU-Mercosur negotiations, an early elimination of the customs duties applied to textile and clothing products, either upon entry into force or at the latest in the first stage of the industrial tariff dismantling schedule.

The agreement provides for periodic consultations and for consultations on request on any of its provisions.

The Council is invited to approve this proposal for a Council Decision on the signing, on behalf of the European Community, of a Memorandum of Understanding on Market Access in textile products between the European Community and the Federative Republic of Brazil and authorising its provisional application pending the formal conclusion of that Agreement.

2002/0235 (ACC)

Proposal for a COUNCIL DECISION on the signing, on behalf of the European Community, of an Agreement in the form of a Memorandum of Understanding between the European Community and the Federative Republic of Brazil on arrangements in the area of market access for textile and clothing products, and authorising its provisional application

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 133 thereof, in conjunction with the first and second subparagraph of Article 300 (2) thereof,

Having regard to the proposal from the Commission [1],

[1] OJ C ...

Whereas:

(1) The Commission has negotiated on behalf of the Community a bilateral Agreement in the form of a Memorandum of Understanding on trade in textile products with Brazil;

(2) The Agreement in the form of a Memorandum of Understanding was initialled on 8 August 2002;

(3) The Agreement in form of a Memorandum of Understanding should be signed on behalf of the Community;

(4) In order to allow its benefits to accrue to both Parties immediately following the relevant notifications, it is appropriate to apply this Agreement on a provisional basis as from 16 October 2002 pending completion of the relevant procedures for its formal conclusion, subject to reciprocity.

HAS DECIDED AS FOLLOWS:

Article 1

Subject to its possible conclusion at a later date the President of the Council is hereby authorised to designate the persons empowered to sign, on behalf of the European Community, the Agreement in the form of a Memorandum of Understanding on trade in textile products with Brazil.

The text of the Agreement is annexed to this Decision.

Article 2

Subject to reciprocity, the Agreement in the form of a Memorandum of Understanding shall be applied on a provisional basis from 16 October 2002 pending the completion of the procedures for its formal conclusion

Article 3

1. The Commission, in accordance with the procedure referred to in Article 17 of Council Regulation 3030/93 on common rules for imports of certain textile products from third countries [2] may modify the application of the double-checking regime for certain products, after consultations with Brazil under Paragraph 6 of the Memorandum of Understanding.

[2] OJ No L 275, 8.11.1993, as last amended by Council Regulation (EC) no 391/2001 (OJ No L 58, 28.2.2001, p. 3) and by Commission Regulation (EC) No 27/2002 (OJ No L 9, 11.1.2002, p. 1.)

2. The Commission shall re-apply the quota regime in the event of the failure on the part of Brazil to fulfil the obligations covered by Paragraphs 2 and 5 of the Memorandum of Understanding in accordance with the procedure referred to in Article 17 of Council Regulation 3030/93 on common rules for imports of certain textile products from third countries.

Done at Brussels,

For the Council

The President

ANNEX

MEMORANDUM OF UNDERSTANDING

between the European Community and the Federative Republic of Brazil

on arrangements in the area of market access

for textile and clothing products

initialled in Brasilia on 8 August 2002

2.2 The European Community will suspend the application of the quantitative restrictions currently in force in respect of imports of textile and clothing products from Brazil, affecting product categories 1, 2, 2A, 3, 4, 6, 6C, 9, 20, 22 and 39.

2.3 The Parties will exchange the necessary documents proving the implementation of their commitments.

4. Without prejudice to Paragraph 3 and of the administrative co-operation as foreseen in the bilateral textile agreement initialled on 12 September 1986 and its subsequent amendments, and with the purpose of exchanging information on trade in textiles and clothing in view of combating fraud, the Parties agree the following:

(a) The products set out in Paragraph 2.2 will be subject to the procedures foreseen in the double-checking system set out in Articles 18 to 24 of Annex III to Council Regulation 3030/93. The double checking system will be introduced by the European Community as soon as the latter has suspended the quotas in accordance with paragraph 2. The Parties agree to keep the products set out in Paragraph 2.2 subject to the double-checking system under review and may propose changes to it following consultations pursuant to Paragraph 6. The European Community agrees that the products subject to the procedures foreseen in the above mentioned double-checking system will not, as a consequence of this system, suffer any trade restriction.

(b) The European Union shall closely co-operate with Brazil to ensure the originating status of the textiles and clothing products covered by this Agreement.

These procedures are subject to the provisions contained in Annex 2.

5. The Parties agree to refrain from adopting any non-tariff measures that could hinder trade in textile and clothing products, of the kind indicated in the Agreed Minute. In this context the Parties agree that quantitative limits will not be introduced on the products referred to in Paragraph 2 except in the event the European Community exercises the right to reapply the quota regime pursuant to Paragraph 3.

6. The Parties agree that the balance of the present agreement, forming a package of mutual concessions freely extended between the Parties, depends on the full and faithful implementation of all the terms of this Memorandum of Understanding. As a result the Parties agree to consult periodically in order to ensure the proper implementation of this Memorandum of Understanding. In addition, the Parties agree to promptly consult following the request of either Party concerning any aspect of this Memorandum of Understanding.

In the event that one Party seeks to exercise the right contained in Paragraph 3, it will provide the other with details of any alleged failure in writing. Consultations with a view to remedying the failure in question will be held within 60 days of such a written request unless the Parties agree otherwise. In the event the Parties cannot agree on appropriate remedial action within 60 days from the start of the consultations, the first Party will have the right to proceed under Paragraph 3.

7. The Parties agree to co-operate fully in respect of obligations inherent to the WTO or any of its Bodies.

8. The Parties agree that this Memorandum of Understanding is without prejudice to the possibility of seeking mutual concessions concerning market access from other trading partners in the sector.

9. The Parties agree that this Memorandum of Understanding is without prejudice to their rights to invoke the WTO Dispute Settlement Understanding.

10. All Agreed Minutes and Declarations annexed to this Memorandum of Understanding shall form an integral part of it.

11. The Parties agree that this Agreement in the form of a Memorandum of Understanding shall enter into force on the first day of the month following the day on which the Parties have notified each other that the internal procedures necessary to this end have been completed. In the meantime, it shall be applied provisionally on conditions of reciprocity.

Annex 2

In order to avoid circumvention of import regulations applied by the Federative Republic of Brazil and the European Community:

1. In accordance with Paragraph 4 of the MoU, the European Community will subject to a double-checking system the categories previously under quotas, i.e. Categories 1, 2, 2A, 3, 4, 6, 6C, 9, 20, 22 and 39. In accordance with such a system, as provided for in Articles 18 to 24 of Annex III to Council Regulation 3030/93, the licensing offices of the European Community shall issue import licences automatically without restriction, within five days from the presentation of an export licence, and free of charge. Both Parties can enter into an administrative arrangement providing for the transmission of data concerning export licenses in an electronic form replacing the granting of export licences in a paper form.

2. The European Community will closely co-operate with Brazil to ensure the authenticity of the origin of exports from the European Union of textiles and clothing products covered by this agreement, and in particular the following:

CN [3] EU // CN EU

[3] The products covered by this list are determined by the corresponding product description of Annex I to Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ L 279, 23.10.2001, p. 1).

540231 00 // 55169200

// 58041090

// 580421

54023200 // 581092

// 581099

54023300 // 60

54024100 // 610343

54024200 // 61062000

54025200 // 610690

54061000 // 611011

// 611012

// 611019

5407 // 611030

// 611090

5408 // 611130

55013000 // 61121200

55032000 // 6203

55033000 // 6204

550932 // 6205

551311 // 6206

55141300 // 62082200

5515 // 62111100

55161200 // 621133

55161300 // 621143

55161400 // 630510

55162200 // 63080000

Such co-operation will be carried out in accordance with the provisions of Title V of Protocol A in the Agreement between the EC and Brazil on trade in textile products of 12 September 1986.

Agreed Minute (referred to in Paragraph 5 of the MoU)

In the context of the Agreement in the form of a Memorandum of Understanding on trade in textile and clothing products between the European Community and the Federative Republic of Brazil initialled in Brasilia on 8 August 2002 and more particularly with reference to Paragraph 5 thereof the Parties recorded their understanding that non-tariff barriers related to all forms of hindrance to trade in the sector are not to be applied by any of the Parties. Bearing in mind their WTO commitments (rights and obligations), the Parties agree these non-tariff barriers include but are not limited to matters such as:

* any additional customs duties on the import or sale of products of EU or Brazilian origin in excess of those set out in the Agreement, or any fees and charges in connection with importation or exportation in excess of the approximate cost of services rendered [4];

[4] The Parties understand that the AFRMM is not covered by this provision.

* any taxes which are higher than any such taxes imposed on the production or sale of equivalent domestic goods;

* technical regulations or standards, or conformity assessment or certification rules, procedures or practices going beyond the purposes for which they are required;

* any indicative values resulting in effective application of minimum prices or arbitrary and fictitious prices or any customs valuation rules, procedures or practices giving rise to barriers to trade;

* rules, procedures or practices for pre-shipment inspection that are discriminatory, non-transparent, excessively lengthy or burdensome, and the imposition of customs controls for the clearance of goods to shipments that have already been subject of pre-shipment inspection;

* excessively burdensome, costly or arbitrary rules, procedures or practices concerning the certification of the origin of products or requiring direct shipment of goods from the country of origin to the country of destination;

* any non-automatic, discretionary or other licensing requirements, rules, procedures or practices imposing disproportionate burdens or having restrictive effects on imports. In particular application for automatic licenses submitted in an appropriate and complete form should be approved immediately on receipt, to the extent administratively feasible, but within a maximum of 10 working days;

* requirements or practices concerning marking, labelling, the description of composition of the product or the description of the manufacturing of products which, either in their formulation or in their application, are in any form discriminatory as compared with domestic products and non more trade restrictive than necessary to fulfil a legitimate objective [5];

[5] The European Community agrees that eco-labelling requirements in the textile sector will not be applied as an additional hindrance to imports from Brazil.

* unduly long customs clearance delays or excessively burdensome, non-transparent or costly customs procedures, including inspection requirements, which have an unnecessary restrictive effect on imports;

* subsidies causing injury to the textiles and clothing industry of the other Party.

In order to facilitate legitimate trade, notwithstanding the need of effective control, the Parties undertake to:

* co-operate and exchange information on all issues concerning customs legislation and procedures, and in particular to deal promptly with problems faced by operators arising from measures covered by this agreement;

* provide effective, non-discriminatory and prompt procedures enabling the right of appeal against customs and other agency administrative actions, ruling and decisions affecting import or export of goods;

* establish an appropriate consultation mechanism between customs administrations and traders on customs regulations and procedures;

* publish, as far as possible through electronic means, and publicise new legislation and general procedures related to customs, as well as any modification, no later than the entry into force of any such legislation and procedures;

* co-operate with a view to reaching a common approach to issues relating to customs valuation, in particular the elaboration of a "code of good practices" in relation to working methods and operational aspects, the use of indicative or reference indices, appropriate documentation to certify the accuracy of the customs value and the use of securities. The Parties agree to open negotiations on the "code of good practices" at the entry into force of the present Memorandum of Understanding and to conclude them as soon as possible.

Additional agreed minute

The European Community notes the commitment by the Government of Brazil to make its best endeavours so that the additional tax of 1,5 % applied on imports of goods into Brazil and initially expiring on 31 December 2002 will not be applied beyond that date for the products listed in Annex I of the Memorandum of Understanding. The European Community considers that the discontinuation of this tax for the products listed in Annex I of the Memorandum of Understanding from 31 December 2002 is part of the balance of concessions of the agreement. If, however, this additional tax of 1.5 % is extended for the products listed in Annex I of the Memorandum of Understanding, the European Community agrees to grant a maximum period of three months, beginning 1 January 2003, for its expiration. Should such tax be extended beyond that date, the European Community and the Federative Republic of Brazil agree that the European Community can reintroduce the quota for either category 2A or for category 9 at the levels corresponding to their bilateral understanding notified under the present Agreement on Textiles and Clothing (ATC). Before reintroducing this quota, the European Community will notify Brazil of its intention of doing so. Brazil and the European Community agree to hold consultations prior to the reintroduction of such quota within 60 days of the request of either Party. In the event the Parties cannot agree on appropriate remedial action within 60 days from the request the consultations, the European Community will have the right to re-introduce the quota as from 1 June 2003 on.

Declaration

In the context of the Agreement in the form of a Memorandum of Understanding on trade in textile and clothing products between the European Community and the Federative Republic of Brazil and the Agreed Minute thereto initialled in Brasilia on 8 August 2002, and more particularly with reference to the possible reintroduction of quotas in the event of a failure by Brazil to fulfil the obligations referred to in Paragraphs 2 and 5 in the same way as Brazil retains the right to suspend the application of its commitments on Paragraphs 2 and 5, should the European Community reapply quotas in a manner inconsistent with its obligations under this agreement or fail to fulfil any of the obligations contained in Paragraph 5, the Parties declare that the commitments taken concerning non-tariff barriers are bilateral commitments entered into between the parties independently of any multilateral commitments also applicable to the Parties. In consequence the Parties agree that the application of these provisions is of a purely bilateral nature. The Parties further agree that these bilateral commitments are not intended to go beyond or place them under higher standards or obligations than the level of commitments they have entered into in a multilateral context. This agreement is without prejudice to the rights and obligations of the Parties under multilateral agreements to which both are Parties.

With respect to existing taxes, fees or charges applied by any of the two Parties not covered by the Agreed Minute, it is understood they are subject to WTO rules.

"Side Letter"

With reference to the Memorandum of Understanding between the Federative Republic of Brazil and the European Union of 8 August 2002 and as part of the result of these negotiations, it is agreed that both Parties will seek an early elimination, either upon entry into force or at the latest in stage 1 of the industrial tariff dismantling schedule, of customs duties applied to all products listed in Annex I of the Memorandum of Understanding under the EU-Mercosur FTA.

>TABLE POSITION>

The description of the products is deemed to be indicative only.

The scope of the arrangements provided for in this Regulation is, for the purposes of this Annex, determined by the scope of the codes as they exist at the time of the adoption of the latest amendment of this Regulation.