EXPLANATORY MEMORANDUM

Context of the proposal

Grounds for and objectives of the proposal

The government of the Kingdom of Spain has made a request on behalf of the authorities of the Autonomous Community of the Canary Islands for a prolongation of the current regime providing for tariff suspensions on imports of certain industrial products. These measures are aimed at strengthening the competitiveness of the local economic operators and thus securing a more stable employment on these islands.

General context

The Canary Islands belong to the Outermost Regions of the European Union, for which special measures may be foreseen, pursuant to Article 349 of the Treaty on the Functioning of the European Union, in order to overcome the economic disadvantages these regions suffer due to their geographical situation.

Existing provisions in the area of the proposal

Similar provisions have been introduced by Council Regulation (EU) No 973/2010 of 25 October 2010 for the autonomous regions of the Republic of Portugal, Azores and Madeira.

Consistency with the other policies and objectives of the Union

This proposal is in line with Union policies, particularly in the field of international trade, competition, enterprise, development and external relations.

Consultation of interested parties and impact assessment

Consultation of interested parties

The members of the Commission's expert working group "Economic Tariff Questions" have been consulted and raised no economic objections against the suspensions proposed.

Collection and use of expertise

There was no need for external expertise.

Impact assessment

An impact assessment was not carried out due to the universal application of the measures proposed.

Legal elements of the proposal

Summary of the proposed action

The proposed suspension of the Common Customs Tariff duties allows the local economic operators in the Canary Islands to import a certain number of raw materials, parts, components and capital goods duty free. In order to avoid any misuse or change in traditional trade flows it is foreseen that products benefitting from duty suspension are subject to end use control.

Moreover, capital goods will have to be used by local companies on the islands for a period of at least two years before they could be sold freely to other companies located in other parts of the customs territory of the European Union.

Raw materials, parts and components will have to be used for industrial transformation and maintenance in the Canary Islands in order to benefit from the duty suspension.

Legal basis

Article 349 of the Treaty on the Functioning of the European Union.

Subsidiarity principle

The proposal falls under the exclusive competence of the Union. The subsidiarity principle therefore does not apply.

Proportionality principle

The proposal complies with the proportionality principle for the following reasons:

The form of action is regularly used as instrument to strengthen the competitiveness of the economic operators. The imposition of end use controls in accordance with the provisions of the Community Customs Code and its implementing provisions is an established procedure in this context and does not create significant supplementary administrative burdens to the regional and local authorities and economic operators.

Choice of instruments

Proposed instruments: Regulation.

The treaty does no allow any other means for the implementation of such measures.

Budgetary implication

The proposal has implications for the Union budget since the duty suspensions will lead to loss in revenue of the Union's own resources.

2011/0111 (CNS)

Proposal for a

COUNCIL REGULATION

temporarily suspending autonomous Common Customs Tariff duties on imports of certain industrial products into the Canary Islands

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 349 thereof,

Having regard to the proposal from the European Commission,

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

Having regard to the opinion of the European Parliament[1],

Having regard to the opinion of the European Economic and Social Committee[2],

Having regard to the opinion of the Committee of the Regions[3],

Acting in accordance with a special legislative procedure,

Whereas:

(1) According to Council Regulation (EC) No 704/2002 of 25 March 2002 temporarily suspending autonomous Common Customs Tariff duties on imports of certain industrial products and opening and providing for the administration of autonomous Community tariff quotas on imports of certain fishery products into the Canary Islands[4] the Common Customs Tariff duty suspension for certain capital goods for commercial or industrial use will expire on 31 December 2011.

(2) In September 2010 the government of Spain requested on behalf of the government of the Canary Islands, the prolongation of the autonomous suspension of the Common Customs Tariff duties for a number of products in accordance with Article 349 of the Treaty. The justification of their request was that in view of the remoteness of those islands, the economic operators suffer severe economic and commercial disadvantages which have negative effects on demographic trends, employment and social and economic developments.

(3) The Canary Islands industrial sector, together with construction, has been severely affected by the recent economic crisis. The slump in building depressed all the auxiliary industry that depends on it. Unfavourable financial conditions had a serious impact on many areas of business. In addition, the sharp rise in unemployment in Spain aggravated the slump in domestic demand, including demand for industrial products.

(4) The unemployment on the Canary Islands has been consistently exceeding the national average for Spain for the last ten years and, since 2009, the Autonomous Community has recorded the highest level throughout the country[5]. Moreover, more than half of the industrial production in the Canaries is consumed on the Islands, which is particularly serious since demand there has been hit harder.

(5) Therefore, with the aim of giving a long term perspective to investors and enabling economic operators to reach a level of industrial and commercial activities which stabilises the economic and social environment on the islands, it is appropriate to prolong in full the suspension of the Common Customs Tariff duties for certain goods as detailed in Annex II and Annex III of Regulation (EC) No 704/2002 for a period of 10 years.

(6) In addition, in the same context the Spanish authorities have requested the suspension of the common customs tariff duties for four new products with CN codes 3902 10 00, 3903 11 00, 3906 10 00 and 4805 00 00. This request was accepted as these suspensions would strengthen the economy of the Canary Islands.

(7) In order to ensure that only economic operators located on the territory of the Canary Islands benefit from these tariff measures, the suspensions should be made conditional on the end use of the products in accordance with Council Regulation (EEC) 2913/92 of 12 October 1992 establishing the Community Customs Code[6] and Commission Regulation (EEC) No 2454/93 of 2 July 1993 laying down provisions for the implementation of Council Regulation (EEC) No 2913/92 establishing the Community Customs Code[7].

(8) In case of a deflection of trade and in order to ensure uniform conditions for the implementation of this Regulation, implementing powers should be conferred on the Commission allowing the Commission to temporarily withdraw the suspension. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011 laying down the rules and general principles concerning mechanisms for control by Member States of the Commission's exercise of implementing powers[8].

(9) In order to ensure continuity with the measures set out in Regulation (EC) No 704/2002, it is necessary to apply the measures provided in this Regulation from 1 January 2012.

HAS ADOPTED THIS REGULATION:

Article 1

From 1 January 2012 to 31 December 2021 the Common Customs Tariff duties applicable to imports into the Canary Islands of capital goods for commercial or industrial use falling under the CN codes listed in Annex I as updated by any amendment to Council Regulation (EEC) No 2658/87 [9] shall be suspended in full.

Those goods shall be used in accordance with the relevant provisions of Regulation (EEC) 2913/92 and of Regulation (EEC) No 2454/93 for a period of at least 24 months after the release into free circulation by economic operators located in the Canary Islands.

Article 2

From 1 January 2012 to 31 December 2021 the Common Customs Tariff duties applicable to imports into the Canary Islands of raw materials, parts and components falling under the CN codes listed in Annex II as updated by any amendment to Regulation (EEC) No 2658/87, and used for industrial transformation or maintenance in the Canary Islands, shall be suspended in full.

Article 3

The suspension of duties referred to in Articles 1 and 2 shall be subject to end-use in accordance with Articles 21 and 82 of Regulation (EEC) No 2913/92 and to the controls provided for in Articles 291 to 300 of Regulation (EEC) No 2454/93.

Article 4

1. Where the Commission has reasons to believe that the suspensions laid down in this Regulation have led to a deflection of trade for a specific product it may adopt implementing acts, temporarily withdrawing the suspension for a period not longer than 12 months. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 5.

Import duties for products for which the suspension has been temporarily withdrawn shall be secured by a guarantee, and the release of the products concerned for free circulation in the Community of the Canary Islands shall be conditional upon the provision of such guarantee.

2. Within the 12 month period referred to in paragraph 1, a definitive decision should be taken whether to maintain or to withdraw the suspension. If the suspension is withdrawn the amounts of duties secured by guarantees shall be collected definitively.

3. If no definitive decision has been adopted within the 12 month period in accordance with paragraph 2, the securities shall be released.

Article 5

1. The Commission shall be assisted by the Customs Code Committee, established by Article 247a (1) of Regulation (EEC) No 2913/92. That committee shall be a committee within the meaning of Regulation (EU) No 182/2011[10].

2. Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.

Article 6

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

It shall apply from 1 January 2012.

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

Done at Brussels,

For the Council

The President

ANNEX I

Capital goods for commercial or industrial use falling within CN codes[11]:

4011 20 || 8450 20 || 8522 90 80 || 9006 53 80

4011 30 || 8450 90 || 8523 21 || 9006 59

4011 61 || 8469 00 91 || 8523 29 33 || 9007 19

4011 62 || 8472 10 || 8523 29 39 || 9007 20

4011 63 || 8472 30 || 8523 29 90 || 9008 20

4011 69 || 8472 90 10 || 8523 40 99 || 9008 30

4011 92 || 8472 90 70 || 8523 51 99 || 9008 40

4011 93 || 8473 10 19 || 8523 59 99 ||

4011 94 || 8473 40 18 || 8523 80 99 ||

4011 99 || 8501 10 10 || 8525 50 || 9010 10

5608 || 8501 10 91 || 8525 80 11 || 9010 50

6403 40 || 8501 10 93 || 8525 80 19 || 9011 10 90

6403 51 05 || 8501 10 99 || 8526 10 || 9011 20 90

6403 59 05 || 8501 20 || 8526 91 20 || 9011 80

6403 91 05 || 8501 31 || 8526 91 80 || 9011 90 90

6403 99 05 || 8501 32 || 8542 31 10 || 9012 10 90

8415 10 10 || 8501 33 || 8542 32 10 || 9012 90 90

8415 10 90 || 8501 34 || 8542 39 10 || 9030 10

8415 20 || 8501 40 20 || 8701 10 || 9030 20 91

8415 81 || 8501 40 80 || 8701 20 || 9030 31

8415 82 || 8501 51 || 8701 90 90 || 9030 33

8415 83 || 8501 52 20 || 8702 || 9106

8415 90 || 8501 52 30 || 8704 21 31 || 9107

8418 30 80 || 8501 52 90 || 8704 21 39 || 9207 10

8418 40 80 || 8501 53 50 || 8704 21 91 || 9207 90

8418 50 || 8501 53 81 || 8704 21 99 || 9506 91 90

8418 61 || 8501 53 94 || 8704 22 || 9507 10

8418 69 || 8501 53 99 || 8704 23 || 9507 20 90

8418 91 || 8501 61 20 || 8704 31 31 || 9507 30

8418 99 || 8501 61 80 || 8704 31 39 ||

8427 || 8501 62 || 8704 31 91 ||

8431 20 || 8501 63 || 8704 31 99 ||

8443 31 91 || || ||

8443 32 10 || 8501 64 || 8704 32 ||

8443 32 91 || || ||

8443 32 99 || 8518 40 30 || 8704 90 ||

8443 39 10 || || ||

8443 39 39 || 8518 90 || 8705 ||

8443 99 10 || 8519 20 || 9006 10 ||

8450 11 90 || 8519 81 51 || ||

8450 12 || 8521 10 95 || 9006 30 ||

8450 19 || 8522 90 49 || 9006 52 ||

ANNEX II

Raw materials, parts and components used for agricultural purposes, industrial transformation or maintenance falling within CN codes[12]:

3901 || 4810 22 10 || 5501 ||

3902 10 || 4810 22 90 || 5502 ||

3903 11 || 4810 29 || 5503 || 8706

3904 10 || 4810 31 || 5504 || 8707

3906 10 || 4810 32 || 5505 10 || 8708

4407 21 10 || 4810 92 || 5505 20 || 8714 11

4407 21 91 || 4810 99 10 || 5506 || 8714 19

4407 22 10 || 4810 99 90 || 5507 || 8714 91

4407 22 91 || 5108 || 5508 10 10 || 8714 92

4407 25 10 || 5110 || 5508 20 10 || 8714 93

4407 25 30 || 5111 11 || 5509 || 8714 94

4407 25 50 || 5111 19 10 || 5510 || 8714 95

4407 26 10 || 5111 19 90 || 5512 || 8714 96

4407 26 30 || 5111 20 || 5513 || 8714 99

4407 26 50 || 5111 30 || 5514 || 9002 90

4407 29 15 || 5111 90 10 || 5515 || 9006 91

4407 29 20 || 5111 90 91 || 5516 || 9007 91

4407 29 25 || 5111 90 93 || 6001 || 9007 92

4407 29 45 || 5111 90 99 || 6002 40 || 9008 90

4407 29 83 || 5112 11 || 6002 90 || 9010 90

4407 29 85 || 5112 19 || 6217 90 || 9104

4407 99 40 || 5112 20 || 6305 10 10 || 9108

4410 || 5112 30 || 6305 10 90 || 9109 11

4412 || 5112 90 || 6305 20 || 9109 19

|| 5205 || 6305 32 || 9109 90

|| 5208 || 6305 33 || 9110 11 10

|| 5209 || 6305 39 || 9110 11 90

|| 5210 || 6305 90 || 9110 12

|| 5212 || 6309 || 9110 19

|| 5401 10 12 || 6406 || 9110 90

|| 5401 10 14 || 7601 || 9111

|| 5401 20 10 || 8517 70 90 || 9112

4803 || 5402 || 8529 10 80 || 9114

4804 || 5403 || 8529 10 95 ||

4805 || 5404 11 || 8529 90 ||

4810 13 || 5404 90 || ||

4810 14 || 5407 || ||

4810 19 10 || 5408 || ||

LEGISLATIVE FINANCIAL STATEMENT FOR PROPOSALS HAVING A BUDGETARY IMPACT EXCLUSIVELY LIMITED TO THE REVENUE SIDE

1. NAME OF THE PROPOSAL:

Proposal for a Council Regulation temporarily suspending autonomous Common Customs Tariff duties on imports of certain industrial products into the Canary Islands.

2. BUDGET LINES:

Chapter and Article: Chap. 12 art. 120

Amount budgeted for the year 2011: € 16 653 700 000

3. FINANCIAL IMPACT

¨ Proposal has no financial implications

X Proposal has no financial impact on expenditure but has a financial impact on revenue – the effect is as follows:

(€ million to one decimal place)

|| ||

Budget line || Revenue[13] || period, starting dd/mm/aaaa || [Year 2012 –2021]

Article 120 || Impact on own resources || 01/01/2012 - 31/12/2021 || -2,2/year

4. ANTI-FRAUD MEASURES

Checks on the end-use of all the products covered by this Council Regulation will be carried out in accordance with Articles 291 to 300 of Commission Regulation (EEC) No 2454/93 laying down provisions for the implementation of the Community Customs Code.

5. OTHER REMARKS

To enable the economic operators to make long-term investment decisions the proposed suspensions should remain in force for 10 years.

It replaces the measures introduced by Council Regulation (EC) No 704/2002 which expires on 31.12.2011.

Estimated cost of this operation

On the basis of the information provided by the regional authorities, the impact on the loss of revenue resulting from this Regulation may therefore be estimated at MEUR 2,96 (gross amount, expenses incurred in collection included) x 0.75 = MEUR 2,22/year for the period 01.01.2012 - 31.12.2021.

The loss of revenue in Traditional Own Resources shall be compensated by Member States contributions based on the GNI.

[1] Opinion of … 2011 (not yet published in the Official Journal).

[2] OJ C , , p. .

[3] OJ C , , p. .

[4] OJ L 111, 26.4.2002, p. 1.

[5] Eurostat: Regional statistics - Unemployment rate, by NUTS 2 regions, 1999-2009

[6] OJ L 302, 19.10.1992, p.1

[7] OJ L 253, 11.10.1993, p.1

[8] OJ L 55, 28.2.2011, p. 13.

[9] OJ L 256, 7.9.1987, p.1.

[10] OJ L 55, 28.2.2011, p.13.

[11] As defined in Commission Regulation (EU) No 861/2010 of 5 October 2010 amending Annex I to Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ L 284, 29.10.2010, p.1).

[12] As defined in Commission Regulation (EU) No 861/2010 of 5 October 2010 amending Annex I to Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ L 284, 29.10.2010, p.1).

[13] Regarding traditional own resources (agricultural duties, sugar levies, customs duties) the amounts indicated must be net amounts, i.e. gross amounts after deduction of 25% of collection costs.