Proposal for a COUNCIL DECISION On the conclusion of an Interim Agreement on trade and trade related matters between the European Community, of the one part, and the Republic of Lebanon, of the other part

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. The attached proposals constitute the legal instruments for the signature and conclusion of an Interim Agreement between the European Community, of the one part, and the Republic of Lebanon, of the other part:

(i) Proposal for a Council Decision for the signature of the Agreement;

(ii) Proposal for a Council Decision for the conclusion of the Agreement.

2. Lebanon's relations with the European Community are presently covered by the Co-operation Agreement signed in Brussels on 3 May 1977 (entered into force 1st November 1978), as modified by subsequent protocols. The Council adopted its negotiating directives and the Commission formally launched the negotiations for an Association Agreement in 1995. Progress was slow, with five rounds of negotiations held in five years. The pace of negotiations intensified in October 2000 after the election of a new Government in Lebanon, culminating in the tenth and final formal round in June 2001, followed by a series of technical discussions, leading to conclusion of the negotiations in December 2001. The text was initialled by the Commission and by the Government of Lebanon in Brussels on 10 January 2002.

3. Pending ratification by all Parliaments of the Association Agreement, the Commission is proposing to conclude an Interim Agreement to allow the trade and trade-related contents of the Association Agreement to enter into force upon signature. The conclusion of the Interim Agreement is conditional on the signature of the Association Agreement, which is planned to take place in Valencia on 22 April 2002. In order to save time and have the Interim Agreement in force as soon as possible, the two procedures have been launched in parallel.

4. The Interim Agreement partly replaces trade and trade-related provisions of the Co-operation Agreement of 1977. It will allow for the start of the twelve year transitional period upon entry into force. The Interim Agreement will be replaced by the Association Agreement upon completion of the Parliamentary ratification procedure and its entry into force. Progress on the transitional period achieved under the Interim Agreement will be transferred to the Association Agreement.

5. The Interim Agreement will provide for:

- the progressive establishment of a free-trade area between the European Community and Lebanon over a maximum period of twelve years, in conformity with the rules of the WTO;

- for industrial products, the preferential regime accorded to Lebanon exports to the Community under the Co-operation Agreement is reconfirmed. Reciprocally, Lebanon will liberalise its import regime for Community products so that tariffs are reduced to zero by the end of the twelve year transition period after entry into force of the Agreement;

- for processed agricultural products, specific reciprocal concessions are foreseen;

- agricultural products from Lebanon to the Community will be liberalised, except for a list of sensitive products for which specific concessions are granted. Products from the Community will enter Lebanon on a concessional basis. New reciprocal tariff concessions will be examined by both sides five years after entry into force of the Agreement;

- provisions on competition and intellectual property protection.

6. The Commission, having proceeded to the initialling of the proposed Interim Agreement, requests the Council to approve the results of the negotiations, and to engage the procedures aimed at the conclusion of this Agreement on the basis of the attached proposal.

7. In line with the above, the Commission requests the Council to conclude the Interim Agreement on behalf of the EC.

2002/0097 (ACC)

Proposal for a COUNCIL DECISION On the conclusion of an Interim Agreement on trade and trade related matters between the European Community, of the one part, and the Republic of Lebanon, of the other part

THE COUNCIL OF THE EUROPEAN UNION,

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

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

[1] OJ ...

Whereas:

(1) Pending the entry into force of the Euro-Mediterranean Association Agreement between the European Community and their Member States, of the one part, and the Republic of Lebanon, of the other part, signed on behalf of the European Community, in [Valencia] on [22 April] 2002, it is necessary to approve the Interim Agreement on trade and trade-related measures between the European Community and the Republic of Lebanon;

(2) The Interim Agreement will replace relevant parts of the Co-operation Agreement between the European Economic Community and the Republic of Lebanon [2] and the Agreement between the Member States of the European Coal and Steel Community and Lebanon, [3] signed in Brussels on 3 May 1977,

[2] OJ ...

[3] OJ ...

(3) This Agreement should therefore be approved on behalf of the European Community;

HAS DECIDED AS FOLLOWS :

Article 1

1. The Interim Agreement between the European Community, of the one part, and the Republic of Lebanon, of the other part, the annexes and protocols to the Agreement, as well as the joint declarations and the declarations of the European Community included in the final act, are approved on behalf of the European Community.

2. The texts mentioned in paragraph 1 form part of this Decision.

Article 2

The President of the Council is authorised to designate the person(s) empowered to proceed, on behalf of the European Community, to deposit the act of notification foreseen in article 41(1) of the Agreement.

Done at Brussels,

For the Council

The President

INTERIM AGREEMENT

on trade and trade-related matters between the European Community of the one part,

and the Republic of Lebanon, of the other part

THE EUROPEAN COMMUNITY,

Hereinafter referred to as the 'Community'

Of the one part, and

THE REPUBLIC OF LEBANON,

Of the other part,

Whereas the Euro-Mediterranean Agreement establishing an association between the European Community and its Member States, of the one part, and the Republic of Lebanon, of the other part, was signed at [Valencia] on [22 April] 2002;

Whereas the Euro-Mediterranean Agreement is intended to strengthen and widen relations between the Community and its Member States and Lebanon established by the existing Co-operation Agreement of 1977;

Whereas it is in the mutual interest of the Parties to implement as speedily as possible, by means of an Interim Agreement, the provisions of the Association Agreement on trade and trade-related matters;

Whereas it is necessary to ensure that, pending the entry into force of the Association Agreement and the establishment of the Association Council, the Co-operation Council set up by the existing Co-operation Agreement of 1977 exercise the powers assigned by the Association Agreement to the Association Council, which are necessary in order to implement the Interim Agreement,

HAVE DECIDED to conclude this Agreement and to this end have designated as their plenipotentiaries:

THE EUROPEAN COMMUNITY

- [Presidency to designate the representative]

- Christopher Patten, Member of the Commission of European Communities

LEBANON

- [to be designated]

WHO, having exchanged their full powers, found in good and due form,

HAVE AGREED AS FOLLOWS:

TITLE I

GENERAL PRINCIPLES

Article 1 (AA2)

Relations between the Parties, as well as all the provisions of the Agreement itself, shall be based on respect of democratic principles and fundamental human rights as set out in the Universal Declaration on Human Rights, which guides their internal and international policy and constitutes an essential element of this Agreement.

TITLE II

FREE MOVEMENT OF GOODS

Article 2 (AA6)

The Community and Lebanon shall gradually establish a free trade area over a transitional period not exceeding twelve years from the entry into force of the present Agreement according to the modalities set out in this Title and in conformity with the provisions of the General Agreement on Tariffs and Trade of 1994 and of the other multilateral agreements on trade in goods annexed to the Agreement establishing the World Trade Organisation (WTO), hereinafter referred to as the GATT.

CHAPTER 1

INDUSTRIAL PRODUCTS

Article 3 (AA7)

The provisions of this Chapter shall apply to products originating in the Community and Lebanon falling within Chapters 25 to 97 of the Combined Nomenclature and of the Lebanese Customs tariff with the exception of the products listed in Annex 1.

Article 4 (AA8)

Imports into the Community of products originating in Lebanon shall be allowed free of customs duties and of any other charge having equivalent effect.

Article 5 (AA9)

1. Customs duties and charges having equivalent effect applicable on import into Lebanon of products originating in the Community shall be progressively abolished in accordance with the following schedule:

- five years after the date of entry into force of this Agreement each duty and charge shall be reduced to 88% of the basic rate;

- six years after the date of entry into force of this Agreement each duty and charge shall be reduced to 76% of the basic rate;

- seven years after the date of entry into force of this Agreement each duty and charge shall be reduced to 64% of the basic rate;

- eight years after the date of entry into force of this Agreement each duty and charge shall be reduced to 52% of the basic rate;

- nine years after the date of entry into force of this Agreement each duty and charge shall be reduced to 40% of the basic rate;

- ten years after the date of entry into force of this Agreement each duty and charge shall be reduced to 28% of the basic rate;

- eleven years after the date of entry into force of this Agreement each duty and charge shall be reduced to 16% of the basic rate;

- twelve years after the date of entry into force of this Agreement the remaining duties and charges shall be abolished.

2. In the event of serious difficulties for a given product, the schedule applicable under paragraph 1 above may be reviewed by the Co-operation Council by common accord on the understanding that the schedule for which the review has been requested may not be extended in respect of the product concerned beyond the maximum transitional period of twelve years. If the Co-operation Council has not taken a decision within thirty days of an application by Lebanon to review the schedule, Lebanon may suspend the schedule provisionally for a period which may not exceed one year.

3. For each product concerned, the basic duty to be gradually reduced as provided in paragraph 1 shall be the rates referred to in Article 15.

Article 6 (AA10)

The provisions concerning the abolition of customs duties on imports shall also apply to customs duties of a fiscal nature.

Article 7 (AA11)

1. Exceptional measures of limited duration which derogate from the provisions of Article 4 may be taken by Lebanon in the form of an increase or reintroduction of customs duties.

2. These measures may only concern new and infant industries, or sectors undergoing restructuring or facing serious difficulties, particularly where these difficulties entail major social problems.

3. Customs duties on imports into Lebanon of products originating in the Community that are introduced by such exceptional measures may not exceed 25% ad valorem and shall maintain an element of preference for products originating in the Community. The total value of imports of the products which are subject to these measures may not exceed 20% of the yearly average of total imports of industrial products from the Community during the last three years for which statistics are available.

4. These measures shall be applied for a period not exceeding five years unless a longer duration is authorised by the Co-operation Council. They shall cease to apply at the latest on the expiry of the maximum transitional period of twelve years.

5. No such measures can be introduced in respect of a product if more than three years have elapsed since the elimination of all duties and quantitative restrictions or charges or measures having equivalent effect concerning that product.

6. Lebanon shall inform the Co-operation Council of any exceptional measures it intends to adopt and, at the request of the Community, consultations shall be held on the measures and sectors concerned before they are implemented. When adopting such measures Lebanon shall provide the Co-operation Council with a schedule for the elimination of the customs duties introduced under this Article. This schedule shall provide for a phasing-out of these duties in equal annual instalments starting no later than the end of the second year following their introduction. The Co-operation Council may decide on a different schedule.

7. By way of derogation from provisions of paragraph 4, the Co-operation Council may exceptionally, to take account of the difficulties involved in setting up new industries, endorse the measures already taken by Lebanon pursuant to paragraph 1 for a maximum period of three years beyond the twelve year transitional period.

CHAPTER 2

AGRICULTURAL, FISHERIES AND PROCESSED AGRICULTURAL PRODUCTS

Article 8 (AA12)

The provisions of this Chapter shall apply to products originating in the Community and Lebanon falling within Chapters 1 to 24 of the Combined Nomenclature and of the Lebanese Customs tariff and to the products listed in Annex 1.

Article 9 (AA13)

The Community and Lebanon shall progressively establish a greater liberalisation of their trade in agricultural, fisheries and processed agricultural products, of interest to both parties.

Article 10 (AA14)

1. Agricultural products originating in Lebanon listed in Protocol 1 on importation into the Community shall be subject to the arrangement set out in that Protocol.

2. Agricultural products originating in the Community listed in Protocol 2 on importation into Lebanon shall be subject to the arrangement set out in that Protocol.

3. Trade in processed agricultural products falling under this chapter shall be subject to the arrangements set out in Protocol 3.

Article 11 (AA15)

1. Five years after the entry into force of this Agreement, the Community and Lebanon shall assess the situation in order to determine measures to be applied by the Community and Lebanon one year following the revision of the Agreement, in accordance with the objective set out in Article 9.

2. Without prejudice to the provisions of paragraph 1 and taking account of the volume of trade in agricultural, fisheries and processed agricultural products between the two Parties and the particular sensitivity of such products, the Community and Lebanon shall examine on a regular basis in the Co-operation Council, product by product and on an orderly and reciprocal basis, the possibility of granting each other further concessions.

Article 12 (AA16)

1. In the event of specific rules being introduced as a result of the implementation of its agricultural policy or of any alteration of the current rules or in the event of any alteration or extension of the provisions relating to the implementation of its agricultural policy, the Party concerned may amend the arrangements resulting from the Agreement in respect of the products concerned.

2. The Party carrying out such modification shall inform the Co-operation Council thereof. At the request of the other Party, the Co-operation Council shall meet to take due account of the interest of the other Party.

3. If the Community or Lebanon, in applying paragraph 1, modifies the arrangements made by this Agreement for agricultural products, they shall accord imports originating in the other Party an advantage comparable to that provided for in this Agreement.

4. Any modification of the arrangements made by this Agreement shall be the subject, at the request of the other Party, of consultations within the Co-operation Council.

Article 13 (AA17)

1. Both Parties agree to co-operate to reduce the potential for fraud in the application of the trade provisions of this Agreement.

2. Notwithstanding other provisions of this Agreement, where one Party finds that there is sufficient evidence of fraud such as a significant increase in trade products by one party to the other party, beyond the level reflecting economic conditions such as normal production and export capacities, or failure to provide administrative co-operation as required for the verification of evidence of origin by the other Party, both Parties shall enter into consultations immediately to find an appropriate solution. Pending such a solution, the Party concerned may take the appropriate measures it deems necessary. In the selection of the measure priority must be given to those which least disturb the functioning of the arrangements established in this Agreement.

CHAPTER 3

COMMON PROVISIONS

Article 14 (AA18)

1. No new customs duties on imports or exports or charges having equivalent effect shall be introduced in trade between the Community and Lebanon, nor shall those already applied upon entry into force of this Agreement be increased unless this Agreement provides otherwise.

2. No new quantitative restriction on imports or measure having equivalent effect shall be introduced in trade between the Community and Lebanon.

3. Quantitative restrictions on imports and measures having equivalent effect in trade between Lebanon and the Community shall be abolished upon the entry into force of this Agreement.

4. Neither the Community nor Lebanon shall apply to exports between themselves either customs duties or charges having equivalent effect, or quantitative restrictions or measures of equivalent effect.

Article 15 (AA19)

1. For each product the basic rate to which the successive reductions laid down in paragraph 1 of Article 5 are to be applied shall be that actually applied vis-à-vis the Community on the day of conclusion of the negotiations.

2. In the event of the accession of Lebanon to the WTO, the applicable rates for imports between the Parties shall be the WTO bound rate or lower effectively applied rate enforced as of the date of the accession. If, after the accession to the WTO, a tariff reduction is applied on an erga omnes basis, the reduced rate shall apply.

3. The provision laid down in paragraph 2 is of application for any tariff reduction applied after the day of conclusion of the negotiations on an erga omnes basis.

4. The Parties shall communicate to each other their respective applied rates on the day of conclusion of the negotiations.

Article 16 (AA20)

Products originating in Lebanon shall not enjoy more favourable treatment when imported into the Community than that applied by Member States among themselves.

Article 17 (AA21)

1. The Parties shall refrain from any measure or practice of an internal fiscal nature establishing, whether directly or indirectly, discrimination between the products of one Party and like products originating in the territory of the other Party.

2. Products exported to the territory of one of the Parties may not benefit from repayment of indirect internal taxation in excess of the amount of indirect taxation imposed on them either directly or indirectly.

Article 18 (AA22)

1. This Agreement shall not preclude the maintenance or establishment of customs unions, free trade areas or arrangements for frontier trade except in so far as they alter the trade arrangements provided for in this Agreement.

2. Consultations between the Parties shall take place within the Co-operation Council concerning agreements establishing such customs unions or free trade areas and, where requested, on other major issues related to their respective trade policies with third countries. In particular, in the event of a third country acceding to the Community, such consultations shall take place so as to ensure that account can be taken of the mutual interests of the Community and Lebanon.

Article 19 (AA23)

If one of the Parties finds that dumping is taking place in trade with the other Party in line with prevailing international rules as defined in Article VI of the General Agreement on Tariffs and Trade (GATT) 1994 and related internal legislation, it may take appropriate measures against this practice in accordance with the WTO Agreement on the implementation of Article VI of the GATT 1994 and related internal legislation.

Article 20 (AA24)

1. Without prejudice to Article 27, the WTO Agreement on Subsidies and Countervailing Measures shall apply between the Parties.

2. Until the necessary rules referred to in Article 27 paragraph 2 are adopted, if either Party finds that subsidy is taking place in trade with the other Party in line with prevailing international rules as defined in Articles VI and XVI of the General Agreement on Tariffs and Trade (GATT) 1994 and related internal legislation, it may invoke appropriate measures against this practice in accordance with those rules as defined by the WTO Agreement on Subsidies and Countervailing Measures and related internal legislation.

Article 21 (AA25)

1. The provisions of the Article XIX of the GATT 1994 and the WTO Agreement on Safeguards and related internal legislation are applicable between the Parties.

2. Before applying safeguard measures as defined by international rules, the Party intending to apply such measures shall supply the Co-operation Council with all relevant information required for a thorough examination of the situation with a view to seeking a solution acceptable to the Parties.

In order to find such a solution the Parties shall immediately hold consultations within the Co-operation Council. If, as a result of the consultations, the Parties do not reach an agreement within thirty days of the initiation of the consultations on a solution to avoid the application of the safeguard measures, the Party intending to apply safeguard measures may apply the provisions of the Article XIX of the GATT 1994 and the WTO Agreement on Safeguards.

3. In the selection of safeguard measures pursuant to this article, the Parties shall give priority to those, which cause least disturbance to the achievement of the objectives of this agreement.

4. Safeguard measures shall be notified immediately to the Co-operation Council and shall be the subject of periodic consultations within the Co-operation Council, particularly with a view to their abolition as soon as circumstances permit.

Article 22 (AA26)

1. Where compliance with the provisions of Article 14 paragraph 4 leads to:

(i) re-export to a third country against which the exporting Party maintains, for the product concerned, quantitative export restrictions, export duties or measures or charges having equivalent effect, or

(ii) a serious shortage, or threat thereof, of a product essential to the exporting Party,

and where the situations referred to above give rise, or are likely to give rise, to major difficulties for the exporting Party, that Party may take appropriate measures under the conditions and in accordance with the procedures laid down in paragraph 2.

2. The difficulties arising from the situations referred to in paragraph 1 shall be submitted for examination to the Co-operation Council. The Co-operation Council may take any decision needed to put an end to the difficulties. If it has not taken such a decision within thirty days of the matter being referred to it, the exporting party may apply appropriate measures on the exportation of the product concerned. The measures shall be non-discriminatory and shall be eliminated when conditions no longer justify their maintenance.

Article 23 (AA27)

Nothing in this Agreement shall preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality, public policy or public security; of the protection of health and life of humans, animals or plants; of the protection of national treasures of artistic, historic or archaeological value; of the protection of intellectual, industrial and commercial property; of rules relating to gold and silver and conservation of exhaustible natural resources. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between the Parties.

Article 24 (AA28)

The concept of "originating products" for the application of the provisions of the present Title and the methods of administrative co-operation relating thereto are laid down in Protocol 4.

Article 25 (AA29)

The Combined Nomenclature of goods shall be applied to the classification of goods for imports into the Community. The Lebanese customs tariff shall be applied to the classification of goods for imports into Lebanon.

Article 26 (AA34)

Where one or several Member States of the Community or Lebanon face or risk facing serious difficulties concerning balance of payments, the Community or Lebanon respectively may, in conformity with the conditions laid down within the framework of the GATT and Articles VIII and XIV of the Statutes of the International Monetary Fund, take restrictive measures with regard to current payments if such measures are strictly necessary. The Community or Lebanon, as appropriate, shall inform the other Party immediately thereof and shall provide as soon as possible a timetable for the removal of such measures.

TITLE III

TRADE-RELATED PROVISIONS

CHAPTER 1

COMPETITION

Article 27 (AA35)

1. The following are incompatible with the proper functioning of the Agreement, in so far as they may affect trade between the Community and Lebanon:

(i) all agreements between undertakings, decisions by associations of undertakings and concerted practices between undertakings which have as their object or effect the prevention, restriction or distortion of competition, as defined by their respective legislation;

(ii) abuse by one or more undertakings of a dominant position in the territories of the Community or Lebanon as a whole or in a substantial part thereof, as defined by their respective legislation.

2. The Parties will enforce their respective competition legislation and shall exchange information taking into account the limitations imposed by the requirements of confidentiality. The necessary rules for co-operation in order to implement paragraph 1 shall be adopted by the Co-operation Council within five years of entry into force of the Agreement.

3. If the Community or Lebanon considers that a particular practice is incompatible with the terms of the first paragraph of this Article, and if such practice causes or threatens to cause serious prejudice to the other Party, it may take appropriate measures after consultation within the Co-operation Council or after thirty working days following referral for such consultation.

Article 28 (AA36)

The Member States and Lebanon shall progressively adjust, without prejudice to their commitments respectively taken or to be taken under the GATT, any State monopolies of a commercial character, so as to ensure that, by the end of the fifth year following the entry into force of this Agreement, no discrimination regarding the conditions under which goods are procured and marketed exists between nationals of the Member States and of Lebanon. The Co-operation Council will be informed about the measures adopted to implement this objective.

Article 29 (AA37)

With regard to public enterprises and enterprises to which special or exclusive rights have been granted, the Co-operation Council shall ensure that as from the fifth year following the date of entry into force of this Agreement there is neither enacted nor maintained any measure distorting trade between the Community and Lebanon to an extent contrary to the Parties' interests. This provision should not obstruct the performance in law or in fact of the particular tasks assigned to these enterprises.

CHAPTER 2

INTELLECTUAL, INDUSTRIAL AND COMMERCIAL PROPERTY

Article 30 (AA38)

1. Pursuant to the provisions of this Article and of Annex 2, the Parties shall ensure adequate and effective protection of intellectual, industrial and commercial property rights in conformity with the highest international standards, including effective means of enforcing such rights.

2. The implementation of this Article and of Annex 2 shall be regularly reviewed by the Parties. If problems in the area of intellectual property protection affecting trading conditions occur, urgent consultations shall be undertaken, at the request of either Party, with a view to reaching mutually satisfactory solutions.

CHAPTER 3

Customs Co-operation

Article 31 (AA56)

1. The Parties shall develop customs co-operation to ensure that the provisions on trade are observed. For this purpose they shall establish a dialogue on customs matters.

2. Co-operation shall focus on the simplification of controls and procedures concerning the customs clearance of goods, and shall take the form of exchange of information among experts and vocational training.

3. Mutual assistance between administrative authorities in customs matters shall take place in accordance with the provisions of Protocol 5.

TITLE IV

INSTITUTIONAL, GENERAL AND FINAL PROVISIONS

Article 32

The Co-operation Council set up by the Agreement between the European Economic Community and the Republic of Lebanon signed on 3 May 1977 shall perform duties assigned to it until the Association Council and the Association Committee provided for in Articles 74 and 77 respectively of the Association Agreement are established.

Article 33 (AA75)

1. The Co-operation Council shall consist of the members of the Council of the European Union and members of the Commission of the European Communities, on the one hand, and of members of the Government of Lebanon, on the other.

2. Members of the Co-operation Council may arrange to be represented, in accordance with the provisions laid down in its rules of procedure.

3. The Co-operation Council shall establish its rules of procedure.

4. The Co-operation Council shall be chaired in turn by a member of the Council of the European Union and a member of the Government of Lebanon in accordance with the provisions laid down in its rules of procedure.

Article 34 (AA82)

1. Each of the Parties may refer to the Co-operation Council any dispute relating to the application or interpretation of this Agreement.

2. The Co-operation Council may settle the dispute by means of a decision.

3. Each Party shall be bound to take the measures involved in carrying out the decision referred to in paragraph 2.

4. In the event of it not being possible to settle the dispute in accordance with paragraph 2 of this Article, either Party may notify the other of the appointment of an arbitrator; the other Party must then appoint a second arbitrator within two months. For the application of this procedure, the Community and the Member States shall be deemed to be one Party to the dispute.

5. The Co-operation Council shall appoint a third arbitrator. The arbitrators' decisions shall be taken by majority vote. Each party to the dispute must take the steps required to implement the decision of the arbitrators.

Article 35 (AA83)

Nothing in this Agreement shall prevent a Party from taking any measures:

(a) which it considers necessary to prevent the disclosure of information contrary to its essential security interests;

(b) which relate to the production of, or trade in, arms, munitions or war materials or to research, development or production indispensable for defence purposes, provided that such measures do not impair the conditions of competition in respect of products not intended for specifically military purposes;

(c) which it considers essential to its own security in the event of serious internal disturbances affecting the maintenance of law and order, in time of war or serious international tension constituting threat of war or in order to carry out obligations it has accepted for the purpose of maintaining peace and international security.

Article 36 (AA84)

1. In the fields covered by this Agreement and without prejudice to any special provisions contained therein:

- the arrangements applied by Lebanon in respect of the Community shall not give rise to any discrimination between the Member States, their nationals, companies or firms;

- the arrangements applied by the Community in respect of Lebanon shall not give rise to any discrimination between Lebanese nationals, companies or firms.

2. The provisions of paragraph 1 shall be without prejudice to the right of the Parties to apply the relevant provisions of their fiscal legislation to taxpayers who are not in identical situations as regards their place of residence.

Article 37 (AA86)

1. The Parties shall take any general or specific measures required to fulfil their obligations under the Agreement. They shall see to it that the objectives set out in the Agreement are attained.

2. If either Party considers that the other Party has failed to fulfil an obligation under the Agreement, it may take appropriate measures. Before so doing, except in cases of special urgency, it shall supply the Co-operation Council with all the relevant information required for a thorough examination of the situation with a view to seeking a solution acceptable to the Parties.

3. In the selection of the appropriate measures referred to in paragraph 2, priority must be given to those which least disturb the functioning of the Agreement. The Parties also agree that these measures shall be taken in accordance with international law and shall be proportional to the violation.

These measures shall be notified immediately to the Co-operation Council and shall be the subject of consultations within the Co-operation Council if the other Party so requests.

Article 38 (AA87)

Annexes 1 and 2 and Protocols 1 to 5 inclusive shall form an integral part of the Agreement.

Article 39 (AA89)

This Agreement shall be applicable until the entry into force of the Association Agreement signed on [22 April] 2002.

Either Party may denounce this Agreement by notifying the other Party. The Agreement shall cease to apply six months after the date of such notification.

Article 40 (AA90)

This Agreement shall apply, on the one hand, to the territories in which the Treaty establishing the European Community is applied and under the conditions laid down in that Treaty and, on the other, to the territory of Lebanon.

Article 41 (AA91)

This Agreement is drawn up in duplicate in the Arabic, Danish, Dutch, English, Finnish, French, German, Greek, Italian, Portuguese, Spanish, and Swedish languages, each of these texts being equally authentic. It shall be deposited with the General Secretariat of the Council of the European Union.

Article 42 (AA92)

1. The Agreement shall be approved by the Parties in accordance with their own procedures. This Agreement shall enter into force on the first day of the second month following the date on which the Parties notify each other that the procedures referred to in the first paragraph have been completed.

2. Upon its entry into force, this Agreement shall replace Articles 8 to 28, 30 to 34, 36(1), 37, 40 to 44, 46 to 49 of the Co-operation Agreement between the European Economic Community and the Republic of Lebanon, including its Protocol 2, and Annexes A, B and C, and the Agreement between the Member States of the European Coal and Steel Community and Lebanon, signed in Brussels on 3 May 1977.

JOINT DECLARATIONS

Joint Declaration on Article 9 (AA14)

Both Parties agree to negotiate with a view to granting each other concessions in the trade of fish and fishery products on the basis of reciprocity and mutual interest, with the objective of reaching agreement on the details no later than two years after the signature of this Agreement.Joint declaration relating to Article 23 (AA27)

The Parties confirm their intention to prohibit the export of toxic waste and the European Community confirms its intention to assist Lebanon in seeking solutions to the problems posed by such waste.

Joint declaration relating to Article 24 (AA28)

In order to take account of the time-scale necessary for setting up the free trade areas between Lebanon and the other Mediterranean countries, the Community undertakes to give favourable consideration to requests presented to it for anticipated application of the diagonal cumulation with those countries.

Joint declaration relating to Article 27 (AA35)

The implementation of co-operation mentioned in Article 27 paragraph 2 is conditional upon the entry into force of a Lebanese competition law and of the taking up of the duties of the authority responsible for its application.

Joint declaration relating to Article 30 (AA38)

The Parties agree that for the purpose of the Agreement, intellectual, industrial and commercial property includes in particular copyright, including the copyright in computer programmes, and neighbouring rights, the rights relating to databases, the rights relating to patents, industrial designs, geographical indications, including designations of origin, trademarks and service marks, topographies of integrated circuits, as well as protection against unfair competition as referred to in Article 10 Bis of the Paris Convention for the Protection of Industrial Property and protection of undisclosed information on know-how.

The provisions of Article 30 shall not be interpreted in a manner to oblige either Party to accede to international conventions other than those referred to in Annex 2.

The Community will grant technical assistance to the Lebanese Republic in its endeavour to comply with its obligations under Article 30.

Joint declaration relating to Article 37 (AA86)

(a) The Parties agree, for the purpose of the correct interpretation and practical application of this Agreement, that the term "cases of special urgency" in Article 37 means a case of the material breach of the Agreement by one of the Parties. A material breach of the Agreement consists in:

- repudiation of the Agreement not sanctioned by the general rules of international law;

- violation of the essential element of the Agreement, namely its Article 1.

(b) The Parties agree that the "appropriate measures" referred to in Article 37 are measures taken in accordance with international law. If a Party takes a measure in a case of special urgency as provided for under Article 37, the other Party may avail itself of the procedure relating to settlement of disputes.

DECLARATIONS BY THE EUROPEAN COMMUNITY

Declaration by the European Community on Turkey

The Community recalls that according to the Customs Union in force between the Community and Turkey, this country has the obligation, in relation to countries which are not members of the Community, to align itself on the Common Customs Tariff and, progressively, with the preferential customs regime of the Community, taking the necessary measures and negotiating agreements on mutually advantageous basis with the countries concerned. Consequently, the Community invites Lebanon to enter into negotiations with Turkey as soon as possible.

Declaration by the European Community relating to Article 27 (AA35)

The European Community declares that, in the context of the interpretation of Article 27(1), it will assess any practice contrary to that Article on the basis of the criteria resulting from the rules contained in Articles 81 and 82 of the Treaty establishing the European Community, including secondary legislation.

LIST OF ANNEXES AND PROTOCOLS

ANNEX 1 List of agricultural and processed agricultural products falling under HS chapters 25 to 97 referred to in articles 2 and 7

ANNEX 2 Concerning intellectual property

PROTOCOL 1 Concerning arrangements applicable to import into the Community of agricultural products originating in Lebanon

PROTOCOL 2 Concerning arrangements applicable to import into Lebanon of agricultural products originating in the Community

PROTOCOL 3 Arrangements concerning processed agricultural products

PROTOCOL 4 Concerning the definition of the concept "originating products" and methods of administrative co-operation

PROTOCOL 5 On mutual customs assistance between administrative authorities

ANNEX 1

List of agricultural and processed agricultural products falling under HS chapters 25-97 of the HS REFERRED to in ARTICLES 2 AND 7

HS Code 2905.43 (mannitol)

HS Code 2905.44 (sorbitol)

HS Code 2905.45 (glycerol)

HS Heading 33.01 (essential oils)

HS Code 3302.10 (odoriferous substances)

HS Headings 35.01 to 35.05 (albuminoidal substances, modifies starches,glues)

HS Code 3809.10 (finishing agents)

HS Heading 38.23 (industrial fatty acids, acid from oil refining,

industrial fatty alcohols).

HS Code 3824.60 (sorbitol n.e.p.)

HS Headings 41.01 to 41.03 (hides and skins)

HS Heading 43.01 (raw furskins)

HS Headings 50.01 to 50.03 (raw silk and silk waste)

HS Headings 51.01 to 51.03 (wool and animal hair)

HS Headings 52.01 to 52.03 (raw cotton, waste and cotton carded or combed)

HS Heading 53.01 (raw flax)

HS Heading 53.02 (raw hemp)

ANNEX 2

(referred to in article 30)

INTELLECTUAL, INDUSTRIAL AND COMMERCIAL PROPERTY

1. By the end of the fifth year after the entry into force of the Agreement, Lebanon shall ratify the revisions to the following multilateral conventions on intellectual property, to which Member States and Lebanon are parties or which are de facto applied by member states:

- Paris Convention for the protection of industrial property (Stockholm Act 1967 and amended in 1979);

- Berne Convention for the Protection of Literary and Artistic Works (revised at Paris in 1971 and amended in 1979);

- Nice Agreement concerning the International Classification of Goods and Services for the purposes of the Registration of Marks (Geneva 1977, amended in 1979).

2. By the end of the fifth year after the entry into force of the Agreement, Lebanon shall accede to the following multilateral conventions to which member states are parties or which are de facto applied by member states:

- Patent co-operation Treaty (Washington, 1970, amended in 1979 and modified in 1984);

- Budapest Treaty on the International Recognition of the deposit of Micro-organisms for the Purposes of Patent Procedure ( 1977, modified in 1980);

- Protocol to the Madrid Agreement concerning the international registration of marks (Madrid 1989);

- Trademark Law Treaty (Geneva, 1994);

- International Convention for the Protection of New Varieties of Plants (UPOV) (Geneva Act of 1991);

- Agreement on Trade-related Aspects of Intellectual Property, Annex 1C to the Agreement establishing the World Trade Organisation (TRIPs, Marrakesh 1994).

PROTOCOLS 1 TO 5 ARE SEPARATE

(identical to Protocols 1 to 5 of the Association Agreement)

LIST OF ANNEXES AND PROTOCOLS

Protocol I

List of products referred to in Article 14

1. Imports into the Community of the following products originating in the Republic of Lebanon shall be subject to the conditions set out below

2. Imports into the Community of those agricultural products originating in the Republic of Lebanon other than those listed in this Protocol shall be allowed free of customs duty

3. For the first year of application, the volumes of tariff quotas shall be calculated as a pro rata of the basic volumes, taking into account the part of the period elapsed before the date of entry into force of this agreement

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(1) Notwithstanding the rules for the implementation 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 preferential scheme being determined, within the context of this Annex, by the coverage of the CN-code. Where ex CN codes are indicated, the preferential

scheme is to be determined by application of the CN code and description taken together.

(2) The reduction only applies to the ad valorem part of the duty

(3) Entry under this subheading is subject to conditions laid down in the relevant Community provisions (see Articles 1 to 13 of Commission Regulation (EEC) No 565/2002 (OJ L 86, 3.04.2002, p. 11) and subsequent amendments)

(4) Entry under this subheading is subject to conditions laid down in the relevant Community provisions (see Articles 291 to 300 of Commission Regulation (EEC) No 2454/93 (OJ L 253, 11.10.1993, p. 71) and subsequent amendments)

(5) The concession applies to imports of untreated olive oil, wholly obtained in Lebanon and transported direct from Lebanon to the Community.

Protocol 2

List of products referred to in Article 14

1. Imports into the Republic of Lebanon of the following products originating in the Community shall be subject to the conditions set out below.

2. The reduction rates in column (B) of the customs duty in (A) shall neither apply to the minimum duties nor to the excise duties in (C).

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(1) Notwithstanding the rules for the implementation of the Lebanese Customs Nomenclature, the wording of the description of the products is to be considered as having no more than an indicative value, the preferential scheme being determined, within the context of this Annex, by the coverage of the Lebanese customs code. Where ex codes are indicated, the preferential scheme is to be determined by application of the code and description taken together.

Protocol 3

on trade between Lebanon and the Community in processed agricultural products

Article 1

Imports into the Community of processed agricultural products originating in Lebanon shall be subject to the customs duties and charges having equivalent effects mentioned in Annex 1 of this Protocol.

Article 2

1) Imports into Lebanon of processed agricultural products originating in the Community shall be subject to the customs duties and charges having equivalent effect as mentioned in Annex 2 of this Protocol.

2) The tariff dismantling schedule applying in accordance to paragraph 1 shall be that referred to in article 5 1 of the Agreement, unless otherwise specified in Annex 2 of this Protocol.

Article 3

The reductions of customs duties mentioned in Annexes 1 and 2 shall apply to the basic duties referred to in Article 15 of the Agreement.

Article 4

1. Customs duties applied pursuant to Article 1 and 2 may be reduced where in trade between the Community and Lebanon, the duties applied to the basic products are reduced, or where such reductions are the result of mutual concessions relating to processed agricultural products.

2. As regards the duties applied by the Community, the reductions provided for under the first paragraph will be calculated on the part of the duty designated as the agricultural component which shall correspond to the agricultural products actually used in the manufacture of the processed agricultural products in question and deduced from the duties applied to these basic agricultural products.

3. The reduction referred to in paragraph 1, the list of products concerned and, where appropriate, the tariff quotas within which the reduction applies shall be established by the Association Council.

Article 5

The European Community and Lebanon shall inform each other of the administrative arrangements adopted for the products covered by this Protocol.

These arrangements should ensure equal treatment for all interested parties and should be as simple and flexible as possible.

Protocol 3

Annex 1 - EU Scheme

Notwithstanding the rules for the interpretation of the Combined Nomenclature, the wording for the description of the products is to be considered as having no more than indicative value, the preferential scheme being determined, within the context of this Protocol, by the coverage of the CN codes as they exist at the time of adoption of the current act . Where ex CN codes are indicated, the preferential scheme is to be determined by application of the CN code and corresponding description together

List 1

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EU Scheme

List 2

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EU Scheme

List 3

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Protocol 3 ANNEX 2 - Lebanese Scheme

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(1) Notwithstanding the rules for the implementation of the Lebanese customs Nomenclature, the wording of the description of the products is to be considered as having no more than an indicative value, the preferential scheme being determined, within the context of this Annex, by the coverage of the Lebanese customs code. Where ex codes are indicated, the preferential scheme is to be determined by application of the code and description taken together.

(2) The reduction in column B of the customs duty in A shall neither apply to the minimum duty nor to the excise duty in C.

PROTOCOL 4

CONCERNING THE DEFINITION OF THE CONCEPT OF "ORIGINATING PRODUCTS" AND METHODS OF ADMINISTRATIVE COOPERATION

TABLE OF CONTENTS

TITLE I GENERAL PROVISIONS

- Article 1 Definitions

TITLE II DEFINITION OF THE CONCEPT OF "ORIGINATING PRODUCTS"

- Article 2 General requirements

- Article 3 Bilateral cumulation of origin

- Article 4 Diagonal cumulation of origin

- Article 5 Wholly obtained products

- Article 6 Sufficiently worked or processed products

- Article 7 Insufficient working or processing operations

- Article 8 Unit of qualification

- Article 9 Accessories, spare parts and tools

- Article 10 Sets

- Article 11 Neutral elements

TITLE III TERRITORIAL REQUIREMENTS

- Article 12 Principle of territoriality

- Article 13 Direct transport

- Article 14 Exhibitions

TITLE IV DRAWBACK OR EXEMPTION

- Article 15 Prohibition of drawback of, or exemption from, customs duties (amended)

TITLE V PROOF OF ORIGIN

- Article 16 General requirements

- Article 17 Procedure for the issue of a movement certificate EUR.1

- Article 18 Movement certificates EUR.1 issued retrospectively

- Article 19 Issue of a duplicate movement certificate EUR.1

- Article 20 Issue of movement certificates EUR.1 on the basis of a proof of origin issued or made out previously

- Article 21 Conditions for making out an invoice declaration

- Article 22 Approved exporter

- Article 23 Validity of proof of origin

- Article 24 Submission of proof of origin

- Article 25 Importation by instalments

- Article 26 Exemptions from proof of origin

-Article 27 Supporting documents

- Article 28 Preservation of proof of origin and supporting documents

- Article 29 Discrepancies and formal errors

- Article 30 Amounts expressed in Euro

TITLE VI ARRANGEMENTS FOR ADMINISTRATIVE COOPERATION

- Article 31 Mutual assistance

- Article 32 Verification of proofs of origin

- Article 33 Dispute settlement

- Article 34 Penalties

- Article 35 Free zones

TITLE VII CEUTA AND MELILLA

- Article 36 Application of the Protocol

- Article 37 Special conditions

TITLE VIII FINAL PROVISIONS

- Article 38 Amendments to the Protocol

- Article 39 Implementation of the Protocol

- Article 40 Goods in transit or storage

ANNEXES

ANNEX I: Introductory notes to the list in Annex II

ANNEX II: List of working or processing required to be carried out on non-originating materials in order that the products manufactured can obtain originating status.

ANNEX IIa: List of working or processing required to be carried out on non-originating materials in order that the products manufactured referred to in Article 6(2) can obtain originating status.

ANNEX III : List of products originating in Turkey to which the provisions of Article 4 do not apply, listed in the order of HS Chapters and Headings

ANNEX IV: Movement certificate EUR.1 and application for a movement certificate EUR.1

ANNEX V: Invoice declaration

ANNEX VI: Joint declarations

TITLE I

GENERAL PROVISIONS

Article 1 Definitions

For the purposes of this Protocol:

(a) "manufacture" means any kind of working or processing including assembly or specific operations;

(b) "material" means any ingredient, raw material, component or part, etc., used in the manufacture of the product;

(c) "product" means the product being manufactured, even if it is intended for later use in another manufacturing operation;

(d) "goods" means both materials and products;

(e) "customs value" means the value as determined in accordance with the 1994 Agreement on implementation of Article VII of the General Agreement on Tariffs and Trade (WTO Agreement on customs valuation);

(f) "ex-works price" means the price paid for the product ex works to the manufacturer in the Community or Lebanon in whose undertaking the last working or processing is carried out, provided the price includes the value of all the materials used, minus any internal taxes which are, or may be, repaid when the product obtained is exported;

(g) "value of materials" means the customs value at the time of importation of the non-originating materials used, or, if this is not known and cannot be ascertained, the first ascertainable price paid for the materials in the Community or Lebanon;

(h) "value of originating materials" means the value of such materials as defined in subparagraph (g) applied mutatis mutandis;

(i) "added value" shall be taken to be the ex-works price minus the customs value of each of the products incorporated which did not originate in the country in which those products were obtained;

(j) "chapters" and "headings" mean the chapters and the headings (four-digit codes) used in the nomenclature which makes up the Harmonized Commodity Description and Coding System, referred to in this Protocol as "the Harmonized System" or "HS";

(k) "classified" refers to the classification of a product or material under a particular heading;

(l) "consignment" means products which are either sent simultaneously from one exporter to one consignee or covered by a single transport document covering their shipment from the exporter to the consignee or, in the absence of such a document, by a single invoice;

(m) "territories" includes territorial waters.

TITLE II

DEFINITION OF THE CONCEPT OF "ORIGINATING PRODUCTS"

Article 2 General requirements

1. For the purpose of implementing this Agreement, the following products shall be considered as originating in the Community:

(a) products wholly obtained in the Community within the meaning of Article 5 of this Protocol;

(b) products obtained in the Community incorporating materials which have not been wholly obtained there, provided that such materials have undergone sufficient working or processing in the Community within the meaning of Article 6 of this Protocol;

2. For the purpose of implementing this Agreement, the following products shall be considered as originating in Lebanon:

(a) products wholly obtained in Lebanon within the meaning of Article 5 of this Protocol;

(b) products obtained in Lebanon incorporating materials which have not been wholly obtained there, provided that such materials have undergone sufficient working or processing in Lebanon within the meaning of Article 6 of this Protocol.

Article 3 Bilateral cumulation of origin

1. Materials originating in the Community shall be considered as materials originating in Lebanon when incorporated into a product obtained there. It shall not be necessary that such materials have undergone sufficient working or processing, provided they have undergone working or processing going beyond that referred to in Article 7(1) of this Protocol.

2. Materials originating in Lebanon shall be considered as materials originating in the Community when incorporated into a product obtained there. It shall not be necessary that such materials have undergone sufficient working or processing, provided they have undergone working or processing going beyond that referred to in Article 7(1) of this Protocol.

Article 4 Diagonal cumulation of origin

1. Subject to the provisions of paragraphs 2 and 3, materials originating in any of the countries which are signatory to a European-Mediterranean Association Agreement,, within the meaning of the Agreements between the Community and Lebanon and these countries shall be considered as originating in the Community or Lebanon when incorporated into a product obtained there. It shall not be necessary that such materials have undergone sufficient working or processing.

This paragraph shall not apply to materials originating in Turkey which are mentioned in the list at Annex III to this Protocol."

2. Products which have acquired originating status by virtue of paragraph 1 shall only continue to be considered as products originating in the Community or Lebanon when the value added there exceeds the value of the materials used originating in any one of the other countries referred to in paragraph 1. If this is not so, the products concerned shall be considered as originating in the country referred to in paragraph 1 which accounts for the highest value of originating materials used. In the allocation of origin, no account shall be taken of materials originating in the other countries referred to in paragraph 1 which have undergone sufficient working or processing in the Community or Lebanon.

3. The cumulation provided for in this Article may only be applied where the materials used have acquired the status of originating products by an application of rules of origin identical to the rules in this Protocol. The Community and Lebanon shall provide each other, through the European Commission with details of agreements and their corresponding rules of origin which have been concluded with the other countries referred to in paragraph 1.

4. Once the requirements laid down in paragraph 3 have been fulfilled, and a date for the entry into force of these provisions has been agreed, each party shall fulfill its own notification and information obligations.

Article 5 Wholly obtained products

1. The following shall be considered as wholly obtained in the Community or Lebanon:

(a) mineral products extracted from their soil or from their seabed;

(b) vegetable products harvested there;

(c) live animals born and raised there;

(d) products from live animals raised there;

(e) products obtained by hunting or fishing conducted there;

(f) products of sea fishing and other products taken from the sea outside the territorial waters of the Community or Lebanon by their vessels;

(g) products made aboard their factory ships exclusively from products referred to in subparagraph (f);

(h) used articles collected there fit only for the recovery of raw materials, including used tyres fit only for retreading or for use as waste;

(i) waste and scrap resulting from manufacturing operations conducted there;

(j) products extracted from marine soil or subsoil outside their territorial waters provided that they have sole rights to work that soil or subsoil;

(k) goods produced there exclusively from the products specified in subparagraphs (a) to (j).

2. The terms "their vessels" and "their factory ships" in paragraph 1(f) and (g) shall apply only to vessels and factory ships:

(a) which are registered or recorded in an EC Member State or in Lebanon;

(b) which sail under the flag of an EC Member State or of Lebanon;

(c) which are owned to an extent of at least 50 per cent by nationals of EC Member States or of Lebanon, or by a company with its head office in one of these States, of which the manager or managers, Chairman of the Board of Directors or the Supervisory Board, and the majority of the members of such boards are nationals of EC Member States or of Lebanon and of which, in addition, in the case of partnerships or limited companies, at least half the capital belongs to those States or to public bodies or nationals of the said States;

(d) of which the master and officers are nationals of EC Member States or of Lebanon; and

(e) of which at least 75 per cent of the crew are nationals of EC Member States or of Lebanon.

Article 6 Sufficiently worked or processed products

1. For the purposes of Article 2, products which are not wholly obtained are considered to be sufficiently worked or processed when the conditions set out in the list in Annex II are fulfilled.

The conditions referred to above indicate, for all products covered by this Agreement, the working or processing which must be carried out on non-originating materials used in manufacturing and apply only in relation to such materials. Accordingly, it follows that if a product, which has acquired originating status by fulfilling the conditions set out in the list is used in the manufacture of another product, the conditions applicable to the product in which it is incorporated do not apply to it, and no account shall be taken of the non-originating materials which may have been used in its manufacture.

2. Notwithstanding paragraph 1, the products which are not wholly obtained and listed in Annex II(a) are considered to be sufficiently worked or processed when the conditions set out in the list in Annex II(a) are fulfilled.

The provision of this paragraph shall apply for three years following the entry into force of the Agreement.

3. Notwithstanding paragraph 1 and 2, non-originating materials which, according to the conditions set out in the list, should not be used in the manufacture of a product may nevertheless be used, provided that:

(a) their total value does not exceed 10 per cent of the ex-works price of the product;

(b) any of the percentages given in the list for the maximum value of non-originating materials are not exceeded through the application of this paragraph.

This paragraph shall not apply to products falling within Chapters 50 to 63 of the Harmonized System.

4. Paragraphs 1, 2 and 3 shall apply except as provided in Article 7.

Article 7 Insufficient working or processing operations

1. Without prejudice to paragraph 2, the following operations shall be considered as insufficient working or processing to confer the status of originating products, whether or not the requirements of Article 6 are satisfied:

(a) operations to ensure the preservation of products in good condition during transport and storage (ventilation, spreading out, drying, chilling, placing in salt, sulphur dioxide or other aqueous solutions, removal of damaged parts, and like operations);

(b) simple operations consisting of removal of dust, sifting or screening, sorting, classifying, matching (including the making-up of sets of articles), washing, painting, cutting up;

(c) (i) changes of packaging and breaking up and assembly of packages;

(ii) simple placing in bottles, flasks, bags, cases, boxes, fixing on cards or boards, etc., and all other simple packaging operations;

(d) affixing marks, labels and other like distinguishing signs on products or their packaging;

(e) simple mixing of products, whether or not of different kinds, where one or more components of the mixtures do not meet the conditions laid down in this Protocol to enable them to be considered as originating in the Community or Lebanon;

(f) simple assembly of parts to constitute a complete product;

(g) a combination of two or more operations specified in subparagraphs (a) to (f);

(h) slaughter of animals.

2. All the operations carried out in either the Community or Lebanon on a given product shall be considered together when determining whether the working or processing undergone by that product is to be regarded as insufficient within the meaning of paragraph 1.

Article 8 Unit of qualification

1. The unit of qualification for the application of the provisions of this Protocol shall be the particular product which is considered as the basic unit when determining classification using the nomenclature of the Harmonized System.

Accordingly, it follows that:

(a) when a product composed of a group or assembly of articles is classified under the terms of the Harmonized System in a single heading, the whole constitutes the unit of qualification;

(b) when a consignment consists of a number of identical products classified under the same heading of the Harmonized System, each product must be taken individually when applying the provisions of this Protocol.

2. Where, under General Rule 5 of the Harmonized System, packaging is included with the product for classification purposes, it shall be included for the purposes of determining origin.

Article 9 Accessories, spare parts and tools

Accessories, spare parts and tools dispatched with a piece of equipment, machine, apparatus or vehicle, which are part of the normal equipment and included in the price thereof or which are not separately invoiced, shall be regarded as one with the piece of equipment, machine, apparatus or vehicle in question.

Article 10 Sets

Sets, as defined in General Rule 3 of the Harmonized System, shall be regarded as originating when all component products are originating. Nevertheless, when a set is composed of originating and non-originating products, the set as a whole shall be regarded as originating, provided that the value of the non-originating products does not exceed 15 per cent of the ex-works price of the set.

Article 11 Neutral elements

In order to determine whether a product originates, it shall not be necessary to determine the origin of the following which might be used in its manufacture:

(a) energy and fuel;

(b) plant and equipment;

(c) machines and tools;

(d) goods which do not enter and which are not intended to enter into the final composition of the product.

TITLE III

TERRITORIAL REQUIREMENTS

Article 12 Principle of territoriality

1. The conditions set out in Title II relative to the acquisition of originating status must be fulfilled without interruption in the Community or Lebanon, except as provided for in Article 4.

2. If originating goods exported from the Community or Lebanon to another country are returned, except insofar as provided for in Article 4 they must be considered as non-originating, unless it can be demonstrated to the satisfaction of the customs authorities that:

(a) the goods returned are the same goods as those exported; and

(b) they have not undergone any operation beyond that necessary to preserve them in good condition while in that country or while being exported.

Article 13 Direct transport

1. The preferential treatment provided for under the Agreement applies only to products, satisfying the requirements of this Protocol, which are transported directly between the Community and Lebanon or through the territories of the other countries referred to in Article 4. However, products constituting one single consignment may be transported through other territories with, should the occasion arise, trans-shipment or temporary warehousing in such territories, provided that they remain under the surveillance of the customs authorities in the country of transit or warehousing and do not undergo operations other than unloading, reloading or any operation designed to preserve them in good condition.

Originating products may be transported by pipeline across territory other than that of the Community or Lebanon.

2. Evidence that the conditions set out in paragraph 1 have been fulfilled shall be supplied to the customs authorities of the importing country by the production of:

(a) a single transport document covering the passage from the exporting country through the country of transit; or

(b) a certificate issued by the customs authorities of the country of transit:

(i) giving an exact description of the products;

(ii) stating the dates of unloading and reloading of the products and, where applicable, the names of the ships, or the other means of transport used; and

(iii) certifying the conditions under which the products remained in the transit country; or

(c) failing these, any substantiating documents.

Article 14 Exhibitions

1. Originating products, sent for exhibition in a country other than those referred to in Article 4 and sold after the exhibition for importation in the Community or Lebanon shall benefit on importation from the provisions of the Agreement provided it is shown to the satisfaction of the customs authorities that:

(a) an exporter has consigned these products from the Community or Lebanon to the country in which the exhibition is held and has exhibited them there;

(b) the products have been sold or otherwise disposed of by that exporter to a person in the Community or Lebanon;

(c) the products have been consigned during the exhibition or immediately thereafter in the state in which they were sent for exhibition; and

(d) the products have not, since they were consigned for exhibition, been used for any purpose other than demonstration at the exhibition.

2. A proof of origin must be issued or made out in accordance with the provisions of Title V and submitted to the customs authorities of the importing country in the normal manner. The name and address of the exhibition must be indicated thereon. Where necessary, additional documentary evidence of the conditions under which they have been exhibited may be required.

3. Paragraph 1 shall apply to any trade, industrial, agricultural or crafts exhibition, fair or similar public show or display which is not organized for private purposes in shops or business premises with a view to the sale of foreign products, and during which the products remain under customs control.

TITLE IV

DRAWBACK OR EXEMPTION

Article 15 Prohibition of drawback of, or exemption from, customs duties

1. Non-originating materials used in the manufacture of products originating in the Community, in Lebanon or in one of the other countries referred to in Article 4 for which a proof of origin is issued or made out in accordance with the provisions of Title V shall not be subject in the Community or Lebanon to drawback of, or exemption from, customs duties of whatever kind.

2. The prohibition in paragraph 1 shall apply to any arrangement for refund, remission or non-payment, partial or complete, of customs duties or charges having an equivalent effect, applicable in the Community or Lebanon to materials used in the manufacture, where such refund, remission or non-payment applies, expressly or in effect, when products obtained from the said materials are exported and not when they are retained for home use there.

3. The exporter of products covered by a proof of origin shall be prepared to submit at any time, upon request from the customs authorities, all appropriate documents proving that no drawback has been obtained in respect of the non-originating materials used in the manufacture of the products concerned and that all customs duties or charges having equivalent effect applicable to such materials have actually been paid.

4. The provisions of paragraphs 1 to 3 shall also apply in respect of packaging within the meaning of Article 8(2), accessories, spare parts and tools within the meaning of Article 9 and products in a set within the meaning of Article 10 when such items are non-originating.

5. The provisions of paragraphs 1 to 4 shall apply only in respect of materials which are of the kind to which the Agreement applies. Furthermore, they shall not preclude the application of an export refund system for agricultural products, applicable upon export in accordance with the provisions of the Agreement.

6. The provisions of this article shall not apply for six years following the entry into force of the Agreement.

7. After the entry into force of the provisions of this Article and notwithstanding paragraph 1, Lebanon may apply arrangements for drawback of, or exemption from, customs duties or charges having an equivalent effect, applicable to materials used in the manufacture of originating products, subject to the following provisions:

(a) a 5 per cent rate of customs charge shall be retained in respect of products falling within Chapters 25 to 49 and 64 to 97 of the Harmonised System, or such lower rate as in force in Lebanon;

(b) a 10 per cent rate of customs charge shall be retained in respect of products falling within Chapters 50 to 63 of the Harmonized System, or such lower rate as in force in Lebanon.

Before the end of the transitional period referred to in Article 6 of the Agreement, the provisions of this paragraph will be reviewed.

TITLE V

PROOF OF ORIGIN

Article 16 General requirements

1. Products originating in the Community shall, on importation into Lebanon and products originating in Lebanon shall, on importation into the Community benefit from this Agreement upon submission of either:

(a) a movement certificate EUR.1, a specimen of which appears in Annex IV; or

(b) in the cases specified in Article 21(1), a declaration, the text of which appears in Annex V, given by the exporter on an invoice, a delivery note or any other commercial document which describes the products concerned in sufficient detail to enable them to be identified (hereinafter referred to as the "invoice declaration").

2. Notwithstanding paragraph 1, originating products within the meaning of this Protocol shall, in the cases specified in Article 26, benefit from this Agreement without it being necessary to submit any of the documents referred to above.

Article 17 Procedure for the issue of a movement certificate EUR.1

1. A movement certificate EUR.1 shall be issued by the customs authorities of the exporting country on application having been made in writing by the exporter or, under the exporter's responsibility, by his authorized representative.

2. For this purpose, the exporter or his authorized representative shall fill out both the movement certificate EUR.1 and the application form, specimens of which appear in Annex IV. These forms shall be completed in one of the languages in which this Agreement is drawn up and in accordance with the provisions of the domestic law of the exporting country. If they are handwritten, they shall be completed in ink in printed characters. The description of the products must be given in the box reserved for this purpose without leaving any blank lines. Where the box is not completely filled, a horizontal line must be drawn below the last line of the description, the empty space being crossed through.

3. The exporter applying for the issue of a movement certificate EUR.1 shall be prepared to submit at any time, at the request of the customs authorities of the exporting country where the movement certificate EUR.1 is issued, all appropriate documents proving the originating status of the products concerned as well as the fulfilment of the other requirements of this Protocol.

4. A movement certificate EUR.1 shall be issued by the customs authorities of an EC Member State or Lebanon if the products concerned can be considered as products originating in the Community, Lebanon or in one of the other countries referred to in Article 4 and fulfil the other requirements of this Protocol.

5. The issuing customs authorities shall take any steps necessary to verify the originating status of the products and the fulfilment of the other requirements of this Protocol. For this purpose, they shall have the right to call for any evidence and to carry out any inspection of the exporter's accounts or any other check considered appropriate. The issuing customs authorities shall also ensure that the forms referred to in paragraph 2 are duly completed. In particular, they shall check whether the space reserved for the description of the products has been completed in such a manner as to exclude all possibility of fraudulent additions.

6. The date of issue of the movement certificate EUR.1 shall be indicated in Box 11 of the certificate.

7. A movement certificate EUR.1 shall be issued by the customs authorities and made available to the exporter as soon as actual exportation has been effected or ensured.

Article 18 Movement certificates EUR.1 issued retrospectively

1. Notwithstanding Article 17(7), a movement certificate EUR.1 may exceptionally be issued after exportation of the products to which it relates if:

(a) it was not issued at the time of exportation because of errors or involuntary omissions or special circumstances; or

(b) it is demonstrated to the satisfaction of the customs authorities that a movement certificate EUR.1 was issued but was not accepted at importation for technical reasons.

2. For the implementation of paragraph 1, the exporter must indicate in his application the place and date of exportation of the products to which the movement certificate EUR.1 relates, and state the reasons for his request.

3. The customs authorities may issue a movement certificate EUR.1 retrospectively only after verifying that the information supplied in the exporter's application agrees with that in the corresponding file.

4. Movement certificates EUR.1 issued retrospectively must be endorsed with one of the following phrases:

"NACHTRÄGLICH AUSGESTELLT", "DELIVRE A POSTERIORI",

"RILASCIATO A POSTERIORI", "AFGEGEVEN A POSTERIORI",

"ISSUED RETROSPECTIVELY", "UDSTEDT EFTERFØLGENDE",

"ÅÊÄÏÈÅÍ ÅÊ ÔÙÍ ÕÓÔÅÑÙÍ", "EXPEDIDO A POSTERIORI",

"EMITIDO A POSTERIORI", "ANNETTU JÄLKIKÄTEEN",

"UTFÄRDAT I EFTERHAND", "......... ".

5. The endorsement referred to in paragraph 4 shall be inserted in the "Remarks" box of the movement certificate EUR.1.

Article 19 Issue of a duplicate movement certificate EUR.1

1. In the event of theft, loss or destruction of a movement certificate EUR.1, the exporter may apply to the customs authorities which issued it for a duplicate made out on the basis of the export documents in their possession.

2. The duplicate issued in this way must be endorsed with one of the following words:

"DUPLIKAT", "DUPLICATA", "DUPLICATO", "DUPLICAAT", "DUPLICATE", "ÁÍÔÉÃÑÁÖÏ", "DUPLICADO", "SEGUNDA VIA", "KAKSOISKAPPALE", "....".

3. The endorsement referred to in paragraph 2 shall be inserted in the "Remarks" box of the duplicate movement certificate EUR.1.

4. The duplicate, which must bear the date of issue of the original movement certificate EUR.1, shall take effect as from that date.

Article 20 Issue of movement certificates EUR.1 on the basis of a proof of origin issued or made out previously

When originating products are placed under the control of a customs office in the Community or Lebanon, it shall be possible to replace the original proof of origin by one or more movement certificates EUR.1 for the purpose of sending all or some of these products elsewhere within the Community or Lebanon. The replacement movement certificate(s) EUR.1 shall be issued by the customs office under whose control the products are placed.

Article 21 Conditions for making out an invoice declaration

1. An invoice declaration as referred to in Article 16(1)(b) may be made out:

(a) by an approved exporter within the meaning of Article 22, or

(b) by any exporter for any consignment consisting of one or more packages containing originating products whose total value does not exceed Euro 6 000.

2. An invoice declaration may be made out if the products concerned can be considered as products originating in the Community, Lebanon or in one of the other countries referred to in Article 4 and fulfil the other requirements of this Protocol.

3. The exporter making out an invoice declaration shall be prepared to submit at any time, at the request of the customs authorities of the exporting country, all appropriate documents proving the originating status of the products concerned as well as the fulfilment of the other requirements of this Protocol.

4. An invoice declaration shall be made out by the exporter by typing, stamping or printing on the invoice, the delivery note or another commercial document, the declaration, the text of which appears in Annex V, using one of the linguistic versions set out in that Annex and in accordance with the provisions of the domestic law of the exporting country. If the declaration is handwritten, it shall be written in ink in printed characters.

5. Invoice declarations shall bear the original signature of the exporter in manuscript. However, an approved exporter within the meaning of Article 22 shall not be required to sign such declarations provided that he gives the customs authorities of the exporting country a written undertaking that he accepts full responsibility for any invoice declaration which identifies him as if it had been signed in manuscript by him.

6. An invoice declaration may be made out by the exporter when the products to which it relates are exported, or after exportation on condition that it is presented in the importing country no longer than two years after the importation of the products to which it relates.

Article 22 Approved exporter

1. The customs authorities of the exporting country may authorize any exporter who makes frequent shipments of products under this Agreement to make out invoice declarations irrespective of the value of the products concerned. An exporter seeking such authorization must offer to the satisfaction of the customs authorities all guarantees necessary to verify the originating status of the products as well as the fulfilment of the other requirements of this Protocol.

2. The customs authorities may grant the status of approved exporter subject to any conditions which they consider appropriate.

3. The customs authorities shall grant to the approved exporter a customs authorization number which shall appear on the invoice declaration.

4. The customs authorities shall monitor the use of the authorization by the approved exporter.

5. The customs authorities may withdraw the authorization at any time. They shall do so where the approved exporter no longer offers the guarantees referred to in paragraph 1, does not fulfil the conditions referred to in paragraph 2 or otherwise makes an incorrect use of the authorization.

Article 23 Validity of proof of origin

1. A proof of origin shall be valid for four months from the date of issue in the exporting country, and must be submitted within the said period to the customs authorities of the importing country.

2. Proofs of origin which are submitted to the customs authorities of the importing country after the final date for presentation specified in paragraph 1 may be accepted for the purpose of applying preferential treatment, where the failure to submit these documents by the final date set is due to exceptional circumstances.

3. In other cases of belated presentation, the customs authorities of the importing country may accept the proofs of origin where the products have been submitted before the said final date.

Article 24 Submission of proof of origin

Proofs of origin shall be submitted to the customs authorities of the importing country in accordance with the procedures applicable in that country. The said authorities may require a translation of a proof of origin and may also require the import declaration to be accompanied by a statement from the importer to the effect that the products meet the conditions required for the implementation of the Agreement.

Article 25 Importation by instalments

Where, at the request of the importer and on the conditions laid down by the customs authorities of the importing country, dismantled or non-assembled products within the meaning of General Rule 2(a) of the Harmonized System falling within Sections XVI and XVII or heading Nos 7308 and 9406 of the Harmonized System are imported by instalments, a single proof of origin for such products shall be submitted to the customs authorities upon importation of the first instalment.

Article 26 Exemptions from proof of origin

1. Products sent as small packages from private persons to private persons or forming part of travellers' personal luggage shall be admitted as originating products without requiring the submission of a proof of origin, provided that such products are not imported by way of trade and have been declared as meeting the requirements of this Protocol and where there is no doubt as to the veracity of such a declaration. In the case of products sent by post, this declaration can be made on the customs declaration CN22/CN23 or on a sheet of paper annexed to that document.

2. Imports which are occasional and consist solely of products for the personal use of the recipients or travellers or their families shall not be considered as imports by way of trade if it is evident from the nature and quantity of the products that no commercial purpose is in view.

3. Furthermore, the total value of these products shall not exceed Euro 500 in the case of small packages or Euro 1 200 in the case of products forming part of travellers' personal luggage.

Article 27 Supporting documents

The documents referred to in Articles 17(3) and 21(3) used for the purpose of proving that products covered by a movement certificate EUR.1 or an invoice declaration can be considered as products originating in the Community, Lebanon or in one of the other countries referred to in Article 4 and fulfil the other requirements of this Protocol may consist inter alia of the following:

(a) direct evidence of the processes carried out by the exporter or supplier to obtain the goods concerned, contained for example in his accounts or internal bookkeeping;

(b) documents proving the originating status of materials used, issued or made out in the Community or Lebanon where these documents are used in accordance with domestic law;

(c) documents proving the working or processing of materials in the Community or Lebanon, issued or made out in the Community or Lebanon, where these documents are used in accordance with domestic law;

(d) movement certificates EUR.1 or invoice declarations proving the originating status of materials used, issued or made out in the Community or Lebanon in accordance with this Protocol, or in one of the other countries referred to in Article 4, in accordance with rules of origin which are identical to the rules in this Protocol.

Article 28 Preservation of proof of origin and supporting documents

1. The exporter applying for the issue of a movement certificate EUR.1 shall keep for at least three years the documents referred to in Article 17(3).

2. The exporter making out an invoice declaration shall keep for at least three years a copy of this invoice declaration as well as the documents referred to in Article 21(3).

3. The customs authorities of the exporting country issuing a movement certificate EUR.1 shall keep for at least three years the application form referred to in Article 17(2).

4. The customs authorities of the importing country shall keep for at least three years the movement certificates EUR.1 and the invoice declarations submitted to them.

Article 29 Discrepancies and formal errors

1. The discovery of slight discrepancies between the statements made in the proof of origin and those made in the documents submitted to the customs office for the purpose of carrying out the formalities for importing the products shall not ipso facto render the proof of origin null and void if it is duly established that this document does correspond to the products submitted.

2. Obvious formal errors such as typing errors on a proof of origin should not cause this document to be rejected if these errors are not such as to create doubts concerning the correctness of the statements made in this document.

Article 30 Amounts expressed in Euro

1. Amounts in the national currency of the exporting country equivalent to the amounts expressed in Euro shall be fixed by the exporting country and communicated to the importing countries through the European Commission.

2. When the amounts exceed the corresponding amounts fixed by the importing country, the latter shall accept them if the products are invoiced in the currency of the exporting country. When the products are invoiced in the currency of EC Member State or another country referred to in Article 4, the importing country shall recognize the amount notified by the country concerned.

3. The amounts to be used in any given national currency shall be the equivalent in that national currency of the amounts expressed in Euro as at the first working day in October 1999.

4. The amounts expressed in Euro and their equivalents in the national currencies of EC Member States and Lebanon shall be reviewed by the Association Committee at the request of the Community or Lebanon. When carrying out this review, the Association Committee shall ensure that there will be no decrease in the amounts to be used in national currency and shall furthermore consider the desirability of preserving the effects of the limits concerned in real terms. For this purpose, it may decide to modify the amounts expressed in Euro.

TITLE VI

ARRANGEMENTS FOR ADMINISTRATIVE COOPERATION

Article 31 Mutual assistance

1. The customs authorities of the EC Member States and of Lebanon shall provide each other, through the European Commission, with specimen impressions of stamps used in their customs offices for the issue of movement certificates EUR.1 and with the addresses of the customs authorities responsible for verifying those certificates and invoice declarations.

2. In order to ensure the proper application of this Protocol, the Community and Lebanon shall assist each other, through the competent customs administrations, in checking the authenticity of the movement certificates EUR.1 or the invoice declarations and the correctness of the information given in these documents.

Article 32 Verification of proofs of origin

1. Subsequent verifications of proofs of origin shall be carried out at random or whenever the customs authorities of the importing country have reasonable doubts as to the authenticity of such documents, the originating status of the products concerned or the fulfilment of the other requirements of this Protocol.

2. For the purposes of implementing the provisions of paragraph 1, the customs authorities of the importing country shall return the movement certificate EUR.1 and the invoice, if it has been submitted, the invoice declaration, or a copy of these documents, to the customs authorities of the exporting country giving, where appropriate, the reasons for the enquiry. Any documents and information obtained suggesting that the information given on the proof or origin is incorrect shall be forwarded in support of the request for verification.

3. The verification shall be carried out by the customs authorities of the exporting country. For this purpose, they shall have the right to call for any evidence and to carry out any inspection of the exporter's accounts or any other check considered appropriate.

4. If the customs authorities of the importing country decide to suspend the granting of preferential treatment to the products concerned while awaiting the results of the verification, release of the products shall be offered to the importer subject to any precautionary measures judged necessary.

5. The customs authorities requesting the verification shall be informed of the results of this verification as soon as possible. These results must indicate clearly whether the documents are authentic and whether the products concerned can be considered as products originating in the Community, Lebanon or one of the other countries referred to in Article 4 and fulfil the other requirements of this Protocol.

6. If in cases of reasonable doubt there is no reply within ten months of the date of the verification request or if the reply does not contain sufficient information to determine the authenticity of the document in question or the real origin of the products, the requesting customs authorities shall, except in exceptional circumstances, refuse entitlement to the preferences.

Article 33 Dispute settlement

Where disputes arise in relation to the verification procedures of Article 32 which cannot be settled between the customs authorities requesting a verification and the customs authorities responsible for carrying out this verification or where they raise a question as to the interpretation of this Protocol, they shall be submitted to the Association Committee.

In all cases the settlement of disputes between the importer and the customs authorities of the importing country shall be under the legislation of the said country.

Article 34 Penalties

Penalties shall be imposed on any person who draws up, or causes to be drawn up, a document which contains incorrect information for the purpose of obtaining a preferential treatment for products.

Article 35 Free zones

1. The Community and Lebanon shall take all necessary steps to ensure that products traded under cover of a proof of origin which in the course of transport use a free zone situated in their territory, are not substituted by other goods and do not undergo handling other than normal operations designed to prevent their deterioration.

2. By means of an exemption to the provisions contained in paragraph 1, when products originating in the Community or Lebanon are imported into a free zone under cover of a proof of origin and undergo treatment or processing, the authorities concerned shall issue a new EUR.1 certificate at the exporter's request, if the treatment or processing undergone is in conformity with the provisions of this Protocol.

TITLE VII

CEUTA AND MELILLA

Article 36 Application of the Protocol

1. The term "Community" used in Article 2 does not cover Ceuta and Melilla.

2. Products originating in Lebanon, when imported into Ceuta or Melilla, shall enjoy in all respects the same customs regime as that which is applied to products originating in the customs territory of the Community under Protocol 2 of the Act of Accession of the Kingdom of Spain and the Portuguese Republic to the European Communities. Lebanon shall grant to imports of products covered by the Agreement and originating in Ceuta and Melilla the same customs regime as that which is granted to products imported from and originating in the Community.

3. For the purpose of the application of paragraph 2 concerning products originating in Ceuta and Melilla, this Protocol shall apply mutatis mutandis subject to the special conditions set out in Article 37.

Article 37 Special conditions

1. Providing they have been transported directly in accordance with the provisions of Article 13, the following shall be considered as:

(1) products originating in Ceuta and Melilla:

(a) products wholly obtained in Ceuta and Melilla;

(b) products obtained in Ceuta and Melilla in the manufacture of which products other than those referred to in (a) are used, provided that:

(i) the said products have undergone sufficient working or processing within the meaning of Article 6 of this Protocol; or that

(ii) those products are originating in Lebanon or the Community within the meaning of this Protocol, provided that they have been submitted to working or processing which goes beyond the insufficient working or processing referred to in Article 7(1).

(2) products originating in Lebanon:

(a) products wholly obtained in Lebanon;

(b) products obtained in Lebanon, in the manufacture of which products other than those referred to in (a) are used, provided that:

(i) the said products have undergone sufficient working or processing within the meaning of Article 6 of this Protocol; or that

(ii) those products are originating in Ceuta and Melilla or the Community within the meaning of this Protocol, provided that they have been submitted to working or processing which goes beyond the insufficient working or processing referred to in Article 7(1).

2. Ceuta and Melilla shall be considered as a single territory.

3. The exporter or his authorized representative shall enter "Lebanon" and "Ceuta and Melilla" in Box 2 of movement certificates EUR.1 or on invoice declarations. In addition, in the case of products originating in Ceuta and Melilla, this shall be indicated in Box 4 of movement certificates EUR.1 or on invoice declarations.

4. The Spanish customs authorities shall be responsible for the application of this Protocol in Ceuta and Melilla.

TITLE VIII

FINAL PROVISIONS

Article 38 Amendments to the Protocol

The Association Council may decide to amend the provisions of this Protocol.

Article 39 Implementation of the Protocol

The Community and Lebanon shall each take the steps necessary to implement this Protocol.

Article 40 Goods in transit or storage

The provisions of the Agreement may be applied to goods which comply with the provisions of this Protocol and which on the date of entry into force of the Agreement are either in transit or are in the Community or in Lebanon, in temporary storage, in bonded warehouses or in free zones, subject to the submission to the customs authorities of the importing State, within four months of that date, of a certificate EUR.1 issued retrospectively by the competent authorities of the exporting State together with the documents showin that the goods have been transported directly.

ANNEX I

Introductory notes to the list in Annex II

Note 1:

The list sets out the conditions required for all products to be considered as sufficiently worked or processed within the meaning of Article 6 of the Protocol.

Note 2:

2.1. The first two columns in the list describe the product obtained. The first column gives the heading number or chapter number used in the Harmonized System and the second column gives the description of goods used in that system for that heading or chapter. For each entry in the first two columns, a rule is specified in column 3 or 4. Where, in some cases, the entry in the first column is preceded by an "ex", this signifies that the rules in column 3 or 4 apply only to the part of that heading as described in column 2.

2.2. Where several heading numbers are grouped together in column 1 or a chapter number is given and the description of products in column 2 is therefore given in general terms, the adjacent rules in column 3 or 4 apply to all products which, under the Harmonized System, are classified in headings of the chapter or in any of the headings grouped together in column 1.

2.3. Where there are different rules in the list applying to different products within a heading, each indent contains the description of that part of the heading covered by the adjacent rules in column 3 or 4.

2.4. Where, for an entry in the first two columns, a rule is specified in both columns 3 and 4, the exporter may opt, as an alternative, to apply either the rule set out in column 3 or that set out in column 4. If no origin rule is given in column 4, the rule set out in column 3 is to be applied.

Note 3:

3.1. The provisions of Article 6 of the Protocol, concerning products having acquired originating status which are used in the manufacture of other products, shall apply, regardless of whether this status has been acquired inside the factory where these products are used or in another factory in the Community or in Lebanon.

Example:

An engine of heading 8407, for which the rule states that the value of the non-originating materials which may be incorporated may not exceed 40 % of the ex-works price, is made from "other alloy steel roughly shaped by forging" of heading ex 7224.

If this forging has been forged in the Community from a non-originating ingot, it has already acquired originating status by virtue of the rule for heading ex 7224 in the list. The forging can then count as originating in the value-calculation for the engine, regardless of whether it was produced in the same factory