EXPLANATORY MEMORANDUM

1. CONTEXT OF THE PROPOSAL

Regulation (EU) No 374/2014 on the reduction or elimination of customs duties on goods originating in Ukraine was to apply until Title IV of the Association Agreement enters into force or is applied provisionally. It was intended that Regulation (EU) No 374/2014 would cease to apply on 1 November 2014 at the latest.

In the Joint Ministerial Statement on the Implementation of the EU-Ukraine AA/DCFTA of 12 September 2014 following the tri-lateral consultations between the European Union, the Russian Federation and Ukraine, the EU side agreed to propose as part of a comprehensive peace process in Ukraine, to EU Member States to delay until 31 December 2015 the provisional application of the DCFTA while continuing autonomous trade measures of the EU to the benefit of Ukraine during this period. Consequently, in order to support the political and economic stability of Ukraine, the European Commission would propose the extension of the application of Regulation (EU) No 374/2014 on the reduction or elimination of customs duties on goods originating in Ukraine until 31 December 2015.

Article 2 of the Association Agreement with Ukraine provides that the respect for democratic principles, human rights and fundamental freedoms and respect for the principle of the rule of law, promotion of respect for the principles of sovereignty and territorial integrity, inviolability of borders and independence, as well as countering the proliferation of weapons of mass destruction, related materials and their means of delivery constitute essential elements of that Agreement. The autonomous preferences provided for under Regulation (EU) No 374/2014 are subject to the respect of these same principles by Ukraine. Volumes/duties granted by the EU under the ATMs regulation in 2014 shall continue to apply for 2015.

2. RESULTS OF CONSULTATIONS WITH INTERESTED PARTIES AND IMPACT ASSESSMENT

Not applicable.

3. LEGAL ELEMENTS OF THE PROPOSAL

The legal basis for the proposal is Article 207(2) of the Treaty on the Functioning of the European Union.

4. BUDGETARY IMPLICATION

The European Union will see a loss of customs revenue corresponding to EUR 487 million (gross) annually. However, those figures are estimates, having regard to the political and economic situation of Ukraine and can change.

2014/0279 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

amending Regulation (EU) No 374/2014 on the reduction or elimination of customs duties on goods originating in Ukraine

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 207(2) thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national Parliaments,

Acting in accordance with the ordinary legislative procedure,

Whereas:

(1) Ukraine is a priority partner country within the European Neighbourhood Policy (ENP) and the Eastern Partnership. The European Union has been seeking an increasingly close relationship with Ukraine in view of Ukraine's political association and economic integration with the European Union. In this respect, the European Union and Ukraine negotiated in 2007-2011 an Association Agreement, including a Deep and Comprehensive Free Trade Area (DCFTA), which was signed by both parties on 27 June 2014. Under the provisions of the DCFTA, the European Union and Ukraine are to establish a free trade area over a transitional period of a maximum of 10 years starting from the entry into force of the Association Agreement, in accordance with Article XXIV of the General Agreement on Tariffs and Trade 1994.

(2) In light of the unprecedented security, political and economic challenges faced by Ukraine, and in order to support its economy, it was decided to anticipate the implementation of the Schedule of concessions set out in Annex I-A to the Association Agreement between the EU and Ukraine by means of the autonomous trade preferences provided for under Regulation (EU) No 374/2014. In view of the challenges Ukraine still faces, the application of Regulation (EU) No 374/2014 shall be extended until 31 December 2015. For the purpose of predictability, the customs duties and access to tariff quotas should following the extension remain the same as for 2014.

(3) Article 2 of the Association Agreement with Ukraine provides that the respect for democratic principles, human rights and fundamental freedoms and respect for the principle of the rule of law, promotion of respect for the principles of sovereignty and territorial integrity, inviolability of borders and independence, as well as countering the proliferation of weapons of mass destruction, related materials and their means of delivery constitute essential elements of that Agreement. The autonomous preferences provided for under Regulation (EU) No 374/2014 shall also be subject to the respect of these same principles by Ukraine. In order to align Regulation (EU) No 374/2014 with Union practice and other EU trade policy instruments, it is appropriate to introduce the possibility to temporarily suspend the preferences in case of failure to respect the fundamental principles of human rights, democracy and the rule of law by Ukraine.

(4) In view of the urgency of the matter, it is important to apply an exception to the eight-week period referred to in Article 4 of Protocol No 1 on the role of national Parliaments in the European Union, annexed to the Treaty on European Union and to the Treaty on the Functioning of the European Union,

HAVE ADOPTED THIS REGULATION:

Article 1

Regulation (EU) No 374/2014 is amended as follows:

(1) Article 1 is replaced by the following:

"Article 1

Preferential arrangements

Customs duties on goods originating in Ukraine shall be reduced or eliminated in accordance with Annex I. Where reference in that Annex is made to staging categories, the basic rate of duties for 2014 and 2015 shall be eliminated in case of staging category 0 and shall be reduced by 25 % in case of staging category 3, by 16,7 % in case of staging category 5 and by 12,5 % for staging category 7.";

(2) In Article 2, the following point (e) is added:

"(e) the respect for democratic principles, human rights and fundamental freedoms and respect for the principle of rule of law provided for in Article 2 of the Association Agreement with Ukraine.";

(3) In Article 7, the second paragraph is replaced by the following:

"It shall apply until 31 December 2015.

(4) Annexes II and III are replaced by the text set out in Annexes I and II respectively to this Regulation.

Article 2

This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Union.

It shall apply as of 2 November 2014.

Done at Brussels,

For the European Parliament For the Council

The President The President

ANNEX I

"ANNEX II

Notwithstanding the rules for the interpretation of the Combined Nomenclature, the wording of the description of the products is to be considered as having no more than an indicative value, the scope of the preferential scheme being determined, within the context of this Annex, by CN codes as they exist at the time of adoption of this Regulation.

Order No || CN code || Description of goods || Quantity for the quota period running from entry into force of this Regulation until 31.12.2014 (in tonnes net weight unless otherwise specified) || Quantity for the quota period running from 1.01.2015 until 31.12.2015 (in tonnes net weight unless otherwise specified)

09.3050 || 0204 22 50 0204 22 90 0204 23 0204 42 30 0204 42 50 0204 42 90 0204 43 10 0204 43 90 || Sheep legs, other cuts with bone in (excluding carcasses and half carcasses, short forequarters and chines and/or best ends), fresh or chilled Boneless meat of sheep, fresh or chilled Frozen cuts of sheep, with bone in (excluding carcasses and half-carcasses, and short forequarters) Frozen meat of lamb, boneless frozen meat of sheep, boneless || 1 500 || 1 500

09.3051 || 0409 || Natural honey || 5 000 || 5 000

Order No || CN code || Description of goods || Quantity for the quota period running from entry into force of this Regulation until 31.12.2014 (in tonnes net weight unless otherwise specified) || Quantity for the quota period running from 1.01.2015 until 31.12.2015 (in tonnes net weight unless otherwise specified)

09.3052 || 1701 12 1701 91 1701 99 1702 20 10 1702 90 30 1702 90 50 1702 90 71 1702 90 75 1702 90 79 1702 90 80 1702 90 95 || Raw beet sugar not containing added flavouring or colouring matter Other sugar than raw sugar Maple sugar in solid form, containing added flavouring or colouring matter Isoglucose in solid form, containing in the dry state 50|% by weight of fructose Maltodextrine in solid form and maltodextrine syrup, containing in the dry state 50|% by weight of fructose Caramel Inulin syrup Other sugars, including invert sugar and other sugar and sugar syrup blends containing in the dry state 50|% by weight of fructose || 20 070 || 20 070

09.3053 || 1702 30 1702 40 1702 60 || Glucose and glucose syrup, not containing fructose or containing in the dry state less than 50|% by weight of fructose, excluding invert sugar Other fructose and fructose syrup, containing in the dry state more than 50|% by weight of fructose, excluding invert sugar || 10 000 || 10 000

09.3054 || 2106 90 30 2106 90 55 2106 90 59 || Flavoured or coloured isoglucose syrups Flavoured or coloured glucose syrup and maltodextrine syrup Flavoured or coloured sugar syrups (excl. isoglucose, lactose, glucose and maltodextrine syrups) || 2 000 || 2 000

Order No || CN code || Description of goods || Quantity for the quota period running from entry into force of this Regulation until 31.12.2014 (in tonnes net weight unless otherwise specified) || Quantity for the quota period running from 1.01.2015 until 31.12.2015 (in tonnes net weight unless otherwise specified)

09.3055 || Ex 1103 19 20 1103 19 90 1103 20 90 1104 19 10 1104 19 50 1104 19 61 1104 19 69 1104 29 1104 30 || Barley groats Groats and meals of cereals (excl. wheat, rye, oats, maize, rice and barley) Cereal pellets (excl. wheat, rye, oats, maize, rice and barley) Rolled or flaked wheat grains Rolled or flaked maize grains Rolled barley grains Flaked barley grains Worked grains (for example, hulled, pearled, sliced or kibbled), other than of oats, of rye or of maize Germ of cereals, whole, rolled, flaked or ground || 6 300 || 6 300

09.3056 || 1107 1109 || Malt, whether or not roasted Wheat gluten, whether or not dried || 7 000 || 7 000

09.3057 || 1108 11 1108 12 1108 13 || Wheat starch Maize starch Potato starch || 10 000 || 10 000

09.3058 || 3505 10 10 3505 10 90 3505 20 30 3505 20 50 3505 20 90 || Dextrins and other modified starches (excl. starches, esterified or etherified) Glues containing, by weight, 25% or more of starches or dextrins or other modified starches || 1 000 || 1 000

Order No || CN code || Description of goods || Quantity for the quota period running from entry into force of this Regulation until 31.12.2014 (in tonnes net weight unless otherwise specified) || Quantity for the quota period running from 1.01.2015 until 31.12.2015 (in tonnes net weight unless otherwise specified)

09.3059 || 2302 10 2302 30 2302 40 10 2302 40 90 2303 10 11 || Bran, sharps and other residues, whether or not in the form of pellets, derived from the sifting, milling or other working of cereals (excl. those of rice) Residues from the manufacture of starch from maize (excluding concentrated steeping liquors), of a protein content, calculated on the dry product exceeding 40% by weight || 16 000 || 16 000

09.3060 || 0711 51 2003 10 || Mushrooms of the genus Agaricus provisionally preserved (for example, by sulphur dioxide gas, in brine, in sulphur water or in other preservative solutions), but unsuitable in that state for immediate consumption Mushrooms of the genus Agaricus, prepared or preserved otherwise than by vinegar or acetic acid || 500 || 500

09.3061 || 0711 51 || Mushrooms of the genus Agaricus provisionally preserved (for example, by sulphur dioxide gas, in brine, in sulphur water or in other preservative solutions), but unsuitable in that state for immediate consumption || 500 || 500

09.3062 || 2002 || Tomatoes prepared or preserved otherwise than by vinegar or acetic acid || 10 000 || 10 000

Order No || CN code || Description of goods || Quantity for the quota period running from entry into force of this Regulation until 31.12.2014 (in tonnes net weight unless otherwise specified) || Quantity for the quota period running from 1.01.2015 until 31.12.2015 (in tonnes net weight unless otherwise specified)

09.3063 || 2009 61 90 2009 69 11 2009 69 71 2009 69 79 2009 69 90 2009 71 2009 79 || Grape juice (including grape must), of a Brix value not exceeding 30, of a value exceeding 18 EUR per 100 kg net weight Grape juice (including grape must), of a Brix value exceeding 67, of a value not exceeding 22 EUR per 100 kg net weight Grape juice (including grape must), of a Brix value exceeding 30 but not exceeding 67, of a value not exceeding 18 EUR per 100 kg net weight Apple juice || 10 000 || 10 000

09.3064 || 0403 10 51 0403 10 53 0403 10 59 0403 10 91 0403 10 93 0403 10 99 0403 90 71 0403 90 73 0403 90 79 0403 90 91 0403 90 93 0403 90 99 || Butter milk, curdled milk and cream, yogurt, kephir and other fermented or acidified milk and cream, concentrated or not, flavoured or containing added fruit, nuts or cocoa || 2 000 || 2 000

09.3065 || 0405 20 10 0405 20 30 || Dairy spreads of a fat content, by weight, of 39% or more but not exceeding 75% || 250 || 250

09.3066 || 0710 40 0711 90 30 2001 90 30 2004 90 10 2005 80 || Sweetcorn || 1 500 || 1 500

Order No || CN code || Description of goods || Quantity for the quota period running from entry into force of this Regulation until 31.12.2014 (in tonnes net weight unless otherwise specified) || Quantity for the quota period running from 1.01.2015 until 31.12.2015 (in tonnes net weight unless otherwise specified)

09.3067 || 1702 50 1702 90 10 Ex 1704 90 99 1806 10 30 1806 10 90 Ex 1806 20 95 Ex 1901 90 99 2101 12 98 2101 20 98 3302 10 29 || Chemically pure fructose Chemically pure maltose Other sugar confectionery, not containing cocoa, containing 70% or more by weight of sucrose Cocoa powder, containing 65% or more by weight of sucrose or isoglucose expressed as sucrose Other preparations in blocks, slabs or bars weighing more than 2 kg or in liquid, paste, powder, granular or other bulk in containers or immediate packings, of a content exceeding 2 kg, containing less than 18% by weight of cocoa butter and 70% or more by weight of sucrose Other food preparations of flour, groats, meal, starch or malt extract, not containing cocoa or containing less than 40% of cocoa calculated on a totally defatted basis, containing 70% or more by weight of sucrose Preparations with a basis of coffee, tea or mate Mixtures of odoriferous substances and mixtures with a basis of one or more of these substances, of a kind used in the drink industries, containing all flavouring agents characterising a beverage, of an actual alcoholic strength by volume not exceeding 0,5% || 2 000 || 2 000

Order No || CN code || Description of goods || Quantity for the quota period running from entry into force of this Regulation until 31.12.2014 (in tonnes net weight unless otherwise specified) || Quantity for the quota period running from 1.01.2015 until 31.12.2015 (in tonnes net weight unless otherwise specified)

09.3068 || 1903 1904 30 || Tapioca and substitutes therefor prepared from starch, in the form of flakes, grains, pearls, siftings or similar forms Bulgur wheat || 2 000 || 2 000

09.3069 || 1806 20 70 2106 10 80 2202 90 99 || Chocolate milk crumb Other protein concentrates and textured protein substances Non-alcoholic beverages other than waters, containing 2% or more by weight of fat obtained from the products of headings 0401 to 0404 || 300 || 300

09.3070 || 2106 90 98 || Other food preparations not elsewhere specified or included || 2 000 || 2 000

09.3071 || 2207 10 2208 90 91 2208 90 99 2207 20 || Undenatured ethyl alcohol Ethyl alcohol and other spirits, denatured, of any strength || 27 000 || 27 000

09.3072 || 2402 10 2402 20 90 || Cigars, cheroots and cigarillos, containing tobacco Cigarettes containing tobacco, not containing cloves || 2 500 || 2 500

Order No || CN code || Description of goods || Quantity for the quota period running from entry into force of this Regulation until 31.12.2014 (in tonnes net weight unless otherwise specified) || Quantity for the quota period running from 1.01.2015 until 31.12.2015 (in tonnes net weight unless otherwise specified)

09.3073 || 2905 43 2905 44 3824 60 || Mannitol D-glucitol (sorbitol) Sorbitol other than that of subheading 2905 44 || 100 || 100

09.3074 || 3809 10 10 3809 10 30 3809 10 50 3809 10 90 || Finishing agents, dye carriers to accelerate the dyeing or fixing of dyestuffs and other products and preparations (for example, dressings and mordants), of a kind used in the textile, paper, leather or like industries, not elsewhere specified or included, with a basis of amylaceous substances || 2 000 || 2 000

09.3075 || 0703 20 || Garlic, fresh or chilled || 500 || 500

09.3076 || 1004 || Oats || 4 000 || 4 000

"

ANNEX II

"ANNEX III

Tariff rate quotas for specific agricultural products referred to in Article 3(3)

Product || Tariff classification || Quantity for the quota period running from entry into force of this Regulation until 31.12.2014 || Quantity for the quota period running from 1.01.2015 until 31.12.2015

Beef meat || 0201.10.(00) 0201.20.(20-30-50-90) 0201.30.(00) 0202.10.(00) 0202.20.(10-30-50-90) 0202.30.(10-50-90) || 12 000 tonnes/year expressed in net weight || 12 000 tonnes/year expressed in net weight

Pork meat || 0203.11.(10) 0203.12.(11-19) 0203.19.(11-13-15-55-59) 0203.21.(10) 0203.22.(11-19) 0203.29.(11-13-15-55-59) || 20 000 tonnes/year expressed in net weight + 20 000 tonnes/year expressed in net weight (for the CN codes 0203.11.(10) 0203.12.(19) 0203.19.(11-15-59) 0203.21.(10) 0203.22.(19) 0203.29.(11-15-59)) || 20 000 tonnes/year expressed in net weight + 20 000 tonnes/year expressed in net weight (for the CN codes 0203.11.(10) 0203.12.(19) 0203.19.(11-15-59) 0203.21.(10) 0203.22.(19) 0203.29.(11-15-59))

Poultry meat and poultry meat preparations || 0207.11.(30-90) 0207.12.(10-90) 0207.13.(10-20-30-50-60-99) 0207.14.(10-20-30-50-60-99) 0207.24.(10-90) 0207.25.(10-90) 0207.26.(10-20-30-50-60-70-80-99) 0207.27.(10-20-30-50-60-70-80-99) 0207.32.(15-19-51-59-90) 0207.33.(11-19-59-90) 0207.35.(11-15-21-23-25-31-41-51-53-61-63-71-79-99) 0207.36.(11-15-21-23-31-41-51-53-61-63-79-90) 0210.99.(39) 1602.31.(11-19-30-90) 1602.32.(11-19-30-90) 1602.39.(21) || 16 000 tonnes/year expressed in net weight + 20 000 tonnes/year expressed in net weight (for the CN code 0207.12.(10-90)) || 16 000 tonnes/year expressed in net weight + 20 000 tonnes/year expressed in net weight (for the CN code 0207.12.(10-90))

Milk, cream, condensed milk and yogurts || 0401.10.(10-90) 0401.20.(11-19-91-99) 0401.30.(11-19-31-39-91-99) 0402.91.(10-30-51-59-91-99) 0402.99.(10-31-39-91-99) 0403.10.(11-13-19-31-33-39) 0403.90.(51-53-59-61-63-69) || 8 000 tonnes/year expressed in net weight || 8 000 tonnes/year expressed in net weight

Milk powder || 0402.10.(11-19-91-99) 0402.21.(11-17-19-91-99) 0402.29.(11-15-19-91-99) 0403.90.(11-13-19-31-33-39) 0404.90.(21-23-29-81-83-89) || 1 500 tonnes/year expressed in net weight || 1 500 tonnes/year expressed in net weight

Butter and dairy spreads || 0405.10.(11-19-30-50-90) 0405.20.(90) 0405.90.(10-90) || 1 500 tonnes/year expressed in net weight || 1 500 tonnes/year expressed in net weight

Eggs and albumins || 0407.00.(30) 0408.11.(80) 0408.19.(81-89) 0408.91.(80) 0408.99.(80) 3502.11.(90) 3502.19.(90) 3502.20.(91-99) || 1 500 tonnes/year expressed in shell-egg equivalent + 3 000 tonnes/year expressed in net weight (for the CN code 0407.00.(30)) || 1 500 tonnes/year expressed in shell-egg equivalent + 3 000 tonnes/year expressed in net weight (for the CN code 0407.00.(30))

Common wheat, flours, and pellets || 1001.90.(99) 1101.00.(15-90) 1102.90.(90) 1103.11.(90) 1103.20.(60) || 950 000 tonnes/year || 950 000 tonnes/year

Barley, flour and pellets || 1003.00.(90) 1102.90.(10) 1103.20.(20) || 250 000 tonnes/year || 250 000 tonnes/year

Maize, flour and pellets || 1005.90.(00) 1102.20.(10-90) 1103.13.(10-90) 1103.20.(40) 1104.23.(10-30-90-99) || 400 000 tonnes/year || 400 000 tonnes/year

"