Proposal for a COUNCIL DECISION concerning the dock dues in the French overseas departments and extending the period of validity of Decision 89/688/EEC

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. Article 2(3) of Council Decision 89/688/EEC of 22 December 1989 concerning the dock dues in the French overseas departments [1] states that in view of the specific constraints on the overseas departments, partial or total exemptions from dock dues may be authorised for local production activities for a period of not more than ten years from the date of the introduction of the charge. This period should have expired on 31 December 2002 as the system was introduced on 1 January 1993 under Law No 92-676 of 17 July 1992, [2] which transposed Council Decision 89/688/EEC of 22 December 1989 into French legislation.

[1] OJ L 399, 30.12.1989, p. 46.

[2] French Official Journal, 19.07.2002, p. 9697.

2. Under Article 3 of Council Decision 89/688/EEC, on 24 November 1999 the Commission sent a report to the Council, assessing the Community system of dock dues since its entry into force. It concludes that the four French overseas departments are in a much more fragile economic and social situation compared with the rest of [3]the European Union by virtue of being outermost regions. The Commission underlines the importance of dock dues and exemptions for local producers. Dock dues give the local authorities the means to help threatened local economic activities survive in an adverse economic climate. Dock dues provide local authorities with resources to promote the economic and social development of each region, as an adjunct to Community policies, and to maintain a certain level of education and health. The Commission report none the less draws attention to the criteria laid down by the Court of Justice for exemptions from dock dues, which must be shown to be necessary, proportionate and precisely determined.

[3] COM(1999) 621 final.

3. Article 299(2) of the Treaty establishing the European Community, which has replaced Article 227(2) since 1 May 1999, constitutes the legal basis for the adoption of special measures for the outermost regions of the EU in order to help overcome their permanent handicaps. Article 299(2) of the EC Treaty therefore recognises the special characteristics of the outermost regions, which include the French DOMs. These provisions lay down the legal framework for these regions. Although the provisions of the EC Treaty apply to these regions, [4] account should be taken of their structural social and economic situation. The aggravating factors identified by the Treaty are their remoteness, insularity, small size, difficult topography and climate, and their economic dependence on a few products, the combination and permanence of which severely restrain their development. On this basis, the Council is requested to adopt specific measures in order to establish the conditions for applying the EC Treaty to these regions. Specific measures can be adopted in the area of fiscal policy. These specific measures must take account of the special characteristics and constraints of the outermost regions without undermining the integrity and the coherence of the Community legal order, including the internal market and common policies. This is the context in which the new fiscal measures applicable to the DOMs should be set.

[4] In the case of taxation, the application of a number of provisions forming part of the secondary legislation under the EC Treaty was excluded to certain territories, among them the French overseas departments. This applies to the common system of value added tax established under the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover tax and the general arrangements under Council Directive 92/12/EEC of 25 February 1992 for products subject to excise duty and on the holding, movement and monitoring of such products.

4. A number of positions adopted by successive European Councils, [5] Parliament, [6] the Committee of the Regions, [7] and the Economic and Social Committee [8] highlight the characteristics of these regions, they stress their handicaps and the need to adopt the specific measures provided for in Article 299(2) of the EC Treaty in order to offset them and call on the Commission to propose these measures as soon as possible.

[5] Paragraph 38 of the conclusions of the Cologne European Council of 4 June 1999, paragraph 59 of the conclusions of the Lisbon European Council of 24 March 2000, paragraph 53 of the conclusions of the Feira European Council of 20 June 2000, conclusions of the European Council held in Nice on 7, 8, and 9 December 2000, conclusions of the Göteborg European Council of 15 and 16 June 2001, conclusions of the Seville European Council of 21 and 22 June 2002.

[6] European Parliament resolution of 24 April 1997 on development problems in the outermost regions of the European Union (OJ C150, 19.5.1997, p.62).

[7] Opinion of the Committee of the Regions of 13 December 2000 on the problems of the outermost regions in connection with the report on the implementation of Article 299(2) (OJ C 144, 16.5.2001, p.11).

[8] Opinion No 682 of the Economic and Social Committee of 29 May 2002 on the future strategy for the outermost regions of the European Union.

5. In a report that it adopted on 13 March 2000, [9] the Commission identified a number of specific measures. With regard to the tax component, the report indicates that Article 299(2) authorises special measures for the outermost regions which must be considered in response to the requests made by the Member States concerned. The Commission's report also indicates that in each case the instruments most appropriate to the regional development and support of these regions should be sought, including tax derogations, which could apply on a long-term basis.

[9] Commission Report of 13 March 2000 on the implementation of Article 299(2) to the outermost regions (COM (2000) 147 final).

6. On 12 March 2002 France sent a request to the European Commission to extend exemptions from dock dues for ten years. This request did not specify which goods were to be exempted under the future system and the rate differentials between local products and imports and the grounds for these exemptions and rate differentials with regard to the handicaps of the DOMs. The Commission notified the French authorities that this information was needed in order to draw up a proposal for a Council Decision in line with the requirements of Article 299(2). In these circumstances, on 28 August 2002 the Commission presented a proposal for a Council Decision [10] extending for one year, until the end of 2003, the Council Decision of 22 December 1989. This proposal was adopted by the Council on 10 December 2002 (Council Decision 2002/973/EC). [11]

[10] COM(2002) 473 final.

[11] OJ L 337, 13.12.2002, p 83.

7. On 14 April 2003 France sent a further request to the Commission, in response to the above requirements. For each DOM it contains a list of products for which it asks to apply dock dues exemptions or reductions for local production. It also indicates the maximum tax differential that could be applied according to whether the products are local or not: 10, 20, 30 or 50 percentage points. The French authorities wished the Council Decision to apply for a period of 15 years subject to a three-yearly review of the need to adjust the scheme. The differential of 10 percentage points would apply mainly to basic products and those for which a balance has been achieved between local and external production. The 20-point differential would cover products requiring substantial investment which has an impact on the cost price of goods manufactured locally for a limited market. The 30-point differential would apply mainly to products manufactured by large-scale enterprises and to products which are extremely vulnerable to imports from the DOMs' neighbouring countries. The 50-point differential would apply, in Guyana and Réunion, to alcohol, in particular to rum. The French request sought additional measures such as permission not to require payment of dock dues on products manufactured locally by enterprises with an annual turnover of less than EUR 550 000, permission to apply a 15% reduction in the taxable amount to dock dues for products manufactured locally, and permission for local authorities to take emergency measures to amend the list of products covered by a tax differential in respect of dock dues.

8. The Commission has assessed this request in the light of the scale of the handicaps affecting industrial production activities in the French DOMs, the purpose of the tax differentials being to offset these handicaps. Between May and the end of September this year, letters were exchanged and meetings held between the French authorities and the Commission to discuss this request. The main aim has been to establish the grounds for the exemptions and quantify in cost price terms the handicaps affecting locally manufactured products compared with those from outside the DOMs.

9. The main handicaps found to affect the DOMs are the result of the factors listed in Article 299(2): remoteness, insularity, small size, difficult topography and climate, economic dependence on a few products. Three of the four DOMs are located 7 000 km away from metropolitan France and the fourth, Réunion, is some 9 000 km away. Of the seven outermost regions, the four French DOMs are by a long chalk the territories furthest away from continental Europe and yet part of the European Community. From time to time these areas are also affected by natural phenomena such as cyclones, volcanic eruptions and earthquakes.

10. The remoteness of these regions considerably hinders the free movement of people, goods and services. The dependence on air and sea transport is compounded by the fact that these modes of transport are not fully liberalised and as they are less efficient and more costly than road, rail or trans-European networks, they inevitably have a knock-on effect on production costs.

11. Higher production costs are not only due to isolation but also to raw material and energy dependence, the obligation to build up stocks and difficulties affecting the supply of production equipment.

12. The small size of the market and the low level of export activity because of the low purchasing power of the countries in the region, and the obligation to maintain diversified but small production lines in order to meet the requirements of a small market restrict the opportunities for economies of scale. "Exporting" products made in the French DOMs to metropolitan France or the other EU Member States is difficult because transport costs force up the cost of these products and hence their competitiveness. The weakness of the local market also leads to overstocking, which again affects firms' competitiveness.

13. The need to bring in specialised maintenance teams that have been properly trained and are capable of intervening swiftly and the virtual impossibility of sub-contracting, also raise firms' costs and affect their competitiveness.

14. It is clear from all these factor that firms in the French DOMs face organisational constraints that do not affect continental European firms and which mean that the prices of locally manufactured products reflect their higher cost price.

15. Products from the French DOMs face the additional handicap of having European cost prices which make it hard for their local products, especially agricultural products, to compete with those produced in neighbouring countries where labour costs are very much lower.

16. For these reasons, products manufactured locally could not, failing specific measures, compete with those produced elsewhere which do not face such handicaps, even taking into account the cost of transporting such products to the overseas departments. If local products cannot compete it will become impossible to sustain local production, with harmful consequences in terms of employment for the inhabitants of the DOMs.

17. The French request has been considered in the light of the principle of proportionality in order to ensure that, overall, the tax differentials which the French authorities would like to apply will not significantly exceed the scale of the handicaps faced by local products, in terms of cost price, compared with external products.

18. In the light of these considerations, the Commission therefore proposes to authorise the implementation of a tax applicable to a list of products for which tax exemptions or reductions can be envisaged for local products from the French DOMs. A separate list of products for each DOM must be drawn up because obviously the local products from each DOM are different, as are the handicaps they face.

19. The regional and national authorities will be responsible for implementing a differentiated rate of dock dues to products, within the limits of the maximum tax differential authorised. The rates set in the Community framework would be maximum rates and the national and regional authorities could, within these limits, modulate the rates to provide the necessary support for local production in the DOMs. The same would apply as regards the possibility of exempting local products - some products could be totally exempted and others only partially.

20. However, it is necessary to meet a combination of the requirements of Articles 299(2) and 90 of the Treaty and also to ensure the coherence of Community law and the internal market. This means only taking measures that are strictly necessary and proportionate to the objectives pursued, in the light of the handicaps of the DOMs' remoteness. The scope of the Community framework therefore consists of a list of sensitive products whose local production costs have been demonstrated to be significantly higher than the production costs of similar products from elsewhere. As stated above, however, the level of taxation must be set so that the sole purpose of the differential in dock dues is to offset the handicaps and not to turn this tax into a protectionist weapon that undermines the operating principles of the internal market. Similarly, coherence with Community law means ruling out a tax differential for agricultural products for processing or to be used as agricultural inputs when they benefit from the aid under Articles 2 and 3 of Regulation (EC) 1452/2001 of 28 June 2001, and especially the specific supply arrangements, so that the effect of the subsidies or duty exemptions granted is not cancelled out as a result of dock dues. A tax differential could, however, be applied to products that are not entitled to this aid because they are due to be released directly for consumption.

21. The products which could be entitled to tax exemptions or reductions in favour of local production can be divided into three categories, according to the size of the tax differential that it is proposed to authorise: 10, 20 or 30 percentage points. The Commission did not consider it possible to propose a tax differential of 50 percentage points for alcohol.

22. However, in the case of locally manufactured products to which only a tax reduction is applied, it will be possible to exceed the maximum differentials authorised if the persons liable for the tax normally due on locally manufactured products have an annual turnover of less than EUR 550 000. This will accordingly exempt these persons from payment of this tax and reduce their obligations. This provision must not, however, result in an increase of more than 5 percentage points in the ceilings referred to in Article 1(2). So, for example, for a product for which a tax differential of 10 percentage points is authorised, if the goods produced in the DOMs were assessed for dock dues at a rate of 5%, dock dues could be applied at a rate of 15% for those produced elsewhere. If firms with an annual turnover of less than EUR 550 000 were exempt from dock dues on products manufactured locally, the maximum authorised tax differential would therefore be 10+5=15 percentage points for goods manufactured by such firms and 10 percentage points for goods manufactured by firms with a turnover of EUR 550 000 or more.

23. For products that are not covered by the Decision, the national and regional authorities would nevertheless retain the possibility of charging dock dues provided that the tax applies under exactly the same conditions to both local products and products from outside the DOMs. This would not be the case if there were a reduction in the taxable amount solely for locally manufactured products. However, as in cases in which a tax differential is authorised, exempting firms with a turnover of less than EUR 550 000 from dock dues on products manufactured locally could result, in such cases, in the application of a tax differential of up to five percentage points.

24. The objectives of supporting the social and economic development of the French DOMs, already provided for in the 1989 Decision, are confirmed by the requirements regarding the purpose of the tax and the allocation of the revenue from dock dues. It is a legal obligation that the revenues from this tax are to be incorporated in the resources of the French overseas departments' economic and tax regime and allocated to an economic and social development strategy involving aid for promoting local activities.

25. To speed up the procedure in certain circumstances where a decision needs to be taken urgently, the Council, acting by a qualified majority on a proposal from the Commission, may adopt the measures necessary for the implementation of this Decision. Although these changes are minor, the measures affect the list of products or the amount of the tax exemptions or reductions that can be applied. This justifies giving the Council the right to exercise implementing powers within the meaning of Article 202 of the Treaty. This provision should help to expedite the process of updating the Council Decision, especially in cases where new local production has started up in one of the DOMs. This expedited procedure should also prove useful if urgent measures need to be taken in response to certain unfair commercial practices. In such situations, the Commission would not hesitate to propose to the Council, at the request of the national authorities, the necessary urgent measures.

26. The arrangements are set to last for ten years. The French authorities would like a longer period but this does not seem possible. Ten years is the longest period that has been adopted for derogations based on Article 299(2) of the EC Treaty. It will nevertheless be necessary to evaluate the proposed system after five years. The French authorities must therefore present a report to the Commission by 31 December 2007 on the application of the arrangements referred to in Article 1, in order to assess the impact of the measures taken and their contribution to promoting or maintaining local economic activities, in the light of the handicaps affecting the outermost regions. On this basis, the scope of the measures and the exemptions authorised under Community law will be revised as necessary.

27. To ensure continuity with the arrangements under the previous Council Decisions (89/688/EEC of 22 December 1989 and 2002/973/EC of 10 December 2002) this Decision should apply from 1 January 2004. However, because of the time taken by the French authorities to provide the necessary justifications in support of their request, especially the lists of products for which they wish to apply a tax differential and also the size of the tax differential, the arrangements for the entry into force of the Decision should be adjusted in order to enable the French authorities to adopt a national law to implement the Council Decision. It is therefore proposed that (i) the provisions of the Decision concerning the products entitled to a tax differential and the measures necessary for the implementation of the Decision will not take effect until 1 July 2004 and (ii) the application of Council Decision 89/688/EEC of 22 December 1989 will be extended until that date, i.e. for a period of six months.

28. This proposal has no effect on the Treaty provisions concerning State aid control.

Comments on the articles.

Article 1

Article 1(1) authorises the French authorities to apply, until 31 December 2013 (i.e. for ten years) exemptions from dock dues or reduced dock dues for the products listed in the Annex, which are manufactured locally in the French DOMs.

Article 1(2) sets the maximum authorised tax differentials between local products and products from abroad. Depending on the categories of goods listed in the Annex, these maximum differentials are 10, 20 or 30 percentage points.

For products to which only a tax reduction is applied, Article 1(3) allows the maximum differentials to be exceeded if the persons liable for the tax normally due are firms whose annual turnover is less than EUR 550 000 and which are accordingly exempt from the tax. The extra tax differential may not, however, exceed 5 percentage points.

For products that are not listed in the Annex and for which there should be no tax difference, Article 1(4) authorises the exemption for small firms referred to in Article 1(3) to result in the application of a tax difference. This shall not, however, exceed 5 percentage points.

Article 2

This Article is designed to exclude the application of tax differentials to agricultural products for processing or for use as agricultural inputs which are entitled to the aid provided for in Articles 2 and 3 of Regulation (EC) 1452/2001 of 28 June 2001, and especially the specific supply arrangements, in the form of subsidies or exemptions from customs duties.

Article 3

This Article gives the Council, acting by a qualified majority, responsibility for the implementing measures for Articles 1 and 2.

Article 4

This Article requires the French authorities to notify the Commission without delay of dock dues arrangements providing for differential taxation of goods. It also allows for adapting the Community framework at the end of five years by means of a proposal from the Commission to the Council, on the basis of an evaluation report which the French authorities are obliged to transmit to the Commission, to check the impact of the measures and their contribution to promoting or maintaining local economic activities.

Article 5

This Article provides for entry into force and application. In order to ensure continuity with the current arrangements, the date from which the Decision becomes applicable is set at 1 January 2004. However, to enable the French authorities to implement the Council Decision by means of a national law, Article 5(2) states that the provisions of Article 1 and Article 2 will not take effect until 1 July 2004. To avoid any sort of legal vacuum, Article 5(3) extends the application of Council Decision 89/688/EEC of 22 December 1989 for a six-month period until that date.

2003/0308 (CNS)

Proposal for a COUNCIL DECISION concerning the dock dues in the French overseas departments and extending the period of validity of Decision 89/688/EEC

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 299(2) thereof,

Having regard to the proposal from the Commission, [12]

[12] OJ C [...], [...], p. [...].

Having regard to the opinion of the European Parliament, [13]

[13] OJ C [...], [...], p. [...].

Whereas:

(1) Pursuant to Article 299(2) of the Treaty, the provisions of the Treaty apply to the outermost regions and hence the French overseas departments, taking account of their structural social and economic situation, which is compounded by their remoteness, insularity, small size, difficult topography and climate, economic dependence on a few products, the permanence and combination of which severely restrain their development. This Treaty provision dovetails with measures adopted previously in aid of the outermost regions, in particular the French overseas Departments (DOMs), in Council Decision 89/687/EEC of 22 December 1989 establishing a programme of options specific to the remote and insular nature of the French overseas departments (POSEIDOM). [14]

[14] OJ L 399, 30.12.1989, p. 39.

(2) Article 2(3) of Council Decision 89/688/EEC of 22 December 1989 concerning the dock dues in the French overseas departments [15] states that in view of the specific constraints on the overseas departments, partial or total exemptions from dock dues may be authorised for local production activities for a period of not more than ten years from the date of the introduction of the charge. This period should have expired on 31 December 2002 as the system was introduced on 1 January 1993.

[15] OJ L 399, 30.12.1989, p. 46, as amended by Decision 2002/973/EC (OJ L 337, 31.12.2002, p. 83).

(3) Under Article 3 of Council Decision 89/688/EEC, the Commission had to submit a report on the implementation of the arrangements in order to ascertain the impact of the measures and decide whether to maintain the possibility of exemptions. In the report that it sent to the Council 24 November 1999, the Commission concludes that the four French overseas departments (DOMs) are in a much more fragile economic and social situation compared with the rest of the European Union by virtue of being outermost regions. [16] The Commission underlines the importance of dock dues and exemptions for local production in terms of the social and economic development of these regions.

[16] COM(1999) 621 final.

(4) According to the Commission report of 14 March 2000 on the measures to implement Article 299(2) of the Treaty, [17] this Article must be implemented in partnership with the Member States concerned on the basis of detailed requests from them.

[17] COM(2000) 147 final.

(5) On 12 March 2002 France sent a request to the European Commission to extend exemptions from dock dues for ten years. The request did not specify which goods were to be exempted under the future system or the rate differentials between local products and imports or the grounds for these exemptions and rate differentials with regard to the handicaps of the DOMs. In these circumstances, in order to avoid a legal vacuum being created by the lack of a complete request, the period of application of Decision 89/688/EEC was extended by one year under Decision 2002/973/EC.

(6) On 14 April 2003 France sent a further request to the Commission, in response to the above requirements. In this request, the French authorities asked for the Council Decision to apply for a period of 15 years subject to a three-yearly review of the need to adjust the scheme. France sought to apply a scheme of differential taxation of dock dues enabling goods from outside the DOMs to be taxed more heavily that products from the DOMs in question. The differential of 10 percentage points would apply mainly to basic products and those for which a balance has been achieved between local and external production. The 20-point differential would cover products requiring substantial investment which had an impact on the cost price of goods manufactured locally for a limited market. The 30-point differential would apply mainly to products manufactured by large-scale enterprises and to products which are extremely vulnerable to imports from the DOMs' neighbouring countries. The 50-point differential would apply, in Guyana and Réunion, to alcohol, in particular to rum. The French request sought additional measures such as permission not to require payment of dock dues on products manufactured locally by enterprises with an annual turnover of less than EUR 550 000, permission to apply a 15% reduction in the taxable amount to dock dues for products manufactured locally, and permission for local authorities to take emergency measures to amend the list of products covered by a tax differential in respect of dock dues.

(7) The Commission has assessed this request in the light of the scale of the handicaps affecting industrial production activities in the French DOMs. The main handicaps found to affect the DOMs are the result of the factors listed in Article 299(2) of the Treaty: remoteness, insularity, small size, difficult topography and climate, economic dependence on a few products. From time to time these areas are also affected by natural phenomena such as cyclones, volcanic eruptions and earthquakes.

(8) The remoteness of these regions considerably hinders the free movement of people, goods and services. The dependence on air and sea transport is compounded by the fact that these modes of transport are not fully liberalised and as they are less efficient and more costly than road, rail or trans-European networks, they have a knock-on effect on production costs.

(9) Higher production costs are not only due to isolation but also to raw material and energy dependence, the obligation to build up stocks and difficulties affecting the supply of production equipment.

(10) The small size of the market and the low level of export activity because of the low purchasing power of the countries in the region, and the obligation to maintain diversified but small production lines in order to meet the requirements of a small market restrict the opportunities for economies of scale. "Exporting" products made in the French DOMs to metropolitan France or the other EU Member States is difficult because transport costs force up the cost of these products and hence their competitiveness. The weakness of the local market also leads to overstocking, which again affects firms' competitiveness.

(11) The need to bring in specialised maintenance teams that have been properly trained and are capable of intervening swiftly and the virtual impossibility of sub-contracting, also raise firms' costs and affect their competitiveness.

(12) The combination of these handicaps means, in financial terms, that the cost price of goods produced locally is increased, so that without specific measures they could not compete with those produced elsewhere without such handicaps, even taking into account the cost of transporting such goods to the overseas departments. If local products cannot compete it will become impossible to sustain local production, with harmful consequences in terms of employment for the inhabitants of the DOMs.

(13) Products from the French DOMs face the additional handicap of having European cost prices which make it hard for their local products, especially agricultural products, to compete with those produced in neighbouring countries where labour costs are very much lower.

(14) The French request has been considered in the light of the principle of proportionality in order to ensure that, overall, the tax differentials which the French authorities would like to apply will not significantly exceed the scale of the handicaps faced by local products, in terms of cost price, compared with external products

(15) In the light of these considerations, the Commission therefore proposes to authorise the implementation of a tax applicable to a list of products for which tax exemptions or reductions can be envisaged for local products from the French DOMs. The effect of this differentiated taxation is to restore the competitiveness of local production and so to enable employment-generating activities to be maintained in the DOMs. A separate list of products for each DOM must be drawn up because the local products from each DOM are different.

(16) However, it is necessary to meet a combination of the requirements of Articles 299(2) and 90 of the Treaty and also to ensure the coherence of Community law and the internal market. This means only taking measures that are strictly necessary and proportionate to the objectives pursued, in the light of the handicaps of the DOMs' remoteness. The scope of the Community framework therefore consists of a list of sensitive products whose local production costs have been demonstrated to be significantly higher than the production costs of similar products from elsewhere. The level of taxation must, however, be modulated so that the sole purpose of the tax differential in dock dues is to offset the handicaps and not to turn this tax into a protectionist weapon that undermines the operating principles of the internal market. Similarly, coherence with Community law means ruling out a tax differential for agricultural products which benefit from aid under Articles 2 and 3 of Council Regulation (EC) 1452/2001 of 28 June 2001, introducing specific measures for certain agricultural products for the French overseas departments, amending Directive 72/462/EEC and repealing Regulations (EEC) No 525/77 and (EEC) No 3763/91 (Poseidom), [18] and in particular the specific supply arrangements.

[18] OJ L 198, 21.07.2001, p. 11.

(17) The products which could be entitled to tax exemptions or reductions in favour of local production can be divided into three categories, according to the size of the tax differential that it is proposed to authorise: 10, 20 or 30 percentage points.

(18) However, it should be possible to exempt local producers with an annual turnover of less than EUR 550 000 from payment of the tax. For this purpose, where the products they manufacture are subject only to a tax reduction, it should be possible to exceed the maximum differentials authorised. This provision must not, however, result in an increase of more than five percentage points in the ceilings set.

(19) For the sake of consistency, the planned exemption from dock dues on locally manufactured products not listed in the Annex for firms with an annual turnover of less than EUR 550 000, should be such that the tax differential for such products depends on whether or not such products are locally manufactured. As in the previous case, this tax difference must not exceed five percentage points.

(20) The objectives of supporting the social and economic development of the French DOMs, already provided for in Decision 1989/688/EEC, are confirmed by the requirements regarding the purpose of the tax and the allocation of the revenue from dock dues. It is a legal obligation that the revenues from this tax are to be incorporated in the resources of the French overseas departments' economic and tax regime and allocated to an economic and social development strategy involving aid for promoting local activities.

(21) To speed up the procedure in certain circumstances where a decision needs to be taken urgently, the Council, acting by a qualified majority on a proposal from the Commission, should be able to adopt the measures required for the implementation of this Decision, for instance as regards updating the lists of products in the Annex because of the emergence of new production activities in the DOMs or taking urgent measures if local production is threatened by certain commercial practices. Although these are minor changes, a potential major budgetary impact for the recipients of dock dues revenue cannot be ruled out. These measures also affect the list of products or the amount of exemptions or reductions that can be applied. These two reasons justify giving the Council the right to exercise implementing powers for this Decision.

(22) France must notify the Commission of any arrangement adopted in the light of this Decision.

(23) The arrangements are set to last for ten years. It will nevertheless be necessary to evaluate the proposed system at the end of a five-year period. The French authorities must therefore present a report to the Commission by 31 December 2007 on the application of the arrangements authorised, in order to assess the impact of the measures taken and their contribution to promoting or maintaining local economic activities, in the light of the handicaps affecting the French overseas departments. On this basis, the lists of products and the authorised exemption will be revised as necessary.

(24) To ensure continuity with the arrangements provided for in Decisions 89/688/EEC and 2002/973/EC this Decision should apply from 1 January 2004. However, in order to enable the French authorities to adopt a national law in order to implement this Decision, it is proposed that the provisions of the Decision concerning the products entitled to a tax differential and the adoption of the measures necessary for the implementation of the Decision should not take effect until 1 July 2004, and to avoid any sort of legal vacuum, the application of Decision 89/688/EEC should be extended until 30 June 2004.

HAS ADOPTED THIS DECISION:

Article 1

1. By way of derogation from Articles 23, 25 and 90 of the Treaty, the French authorities shall be authorised, until 31 December 2013, to apply exemptions or reductions to the "dock dues" tax for the products listed in the Annex which are produced locally in the French overseas departments of Guadeloupe, Guyana, Martinique and Réunion.

These exemptions must be in keeping with the economic and social development strategy of the overseas departments, taking account of its Community framework, and contribute to promoting local activities while not being such as to adversely affect the terms of trade to an extent contrary to the common interest.

2. With reference to the rate of taxation applied to similar products not originating in the overseas departments, the application of total or partial exemptions referred to in paragraph 1 may not result in differences of more than:

(a) 10 percentage points for the products listed in part A of the Annex,

(b) 20 percentage points for the products listed in part B of the Annex,

(c) 30 percentage points for the products listed in part C of the Annex.

3. In order to allow the French authorities to exempt products manufactured locally by a trader with a turnover of less than EUR 550 000, the differentials provided for in paragraph 2 may be increased by a maximum of five percentage points.

4. For products not listed in the Annex which are manufactured locally by a trader referred to in paragraph 3, the French authorities may nonetheless apply a difference in taxation in order to exempt them. This shall not, however, exceed five percentage points.

Article 2

The French authorities shall apply the same taxation arrangements as those applied to products manufactured locally to products that have benefited from the specific supply arrangements under Articles 2 and 3 of Council Regulation (EC) No 1452/2001.

Article 3

The Council, acting by a qualified majority on a proposal from the Commission, shall adopt the measures necessary for the implementation of Articles 1 and 2, especially as regards updating the lists of products in the Annex because of the emergence of new production in the French overseas departments or taking urgent measures if local production is threatened by certain commercial practices.

Article 4

France shall immediately notify the Commission of the arrangements referred to in Article 1.

The French authorities shall present to the Commission by 31 December 2007 at the latest a report on the application of the arrangements referred to in Article 1, in order to check the impact of the measures taken and their contribution to the promotion or maintenance of local economic activities, in the light of the handicaps affecting the outermost regions.

On the basis of this report, the Commission shall present a report to the Council giving a full economic and social analysis, and where appropriate a proposal for adapting the provisions of this Decision.

Article 5

The period of validity of Decision 89/688/EEC is hereby extended to 30 June 2004.

Article 6

Articles 1 to 4 shall be applicable as from 1 July 2004.

Article 5 shall be applicable as from 1 January 2004.

Article 7

This Decision is addressed to the French Republic.

Done at Brussels,

For the Council

The President

ANNEX

A. List of products referred to in Article 1(2)(a) according to the classification of the Common Customs Tariff nomenclature [19]

[19] Annex I to Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ L 256, 7.9.1987, p. 1), as last amended by Commission Regulation (EC) No 2176/2002 of 6 December 2002 (OJ L 331, 7.12.2002, p. 3).

1. Department of Guadeloupe

0105, 0201, 0203, 0205, 0207, 0208, 0209, 0305 except 0305 10, 0403, 0405, 0406, 08 except 0807, 1106, 2001, 2005, 2103, 2104, 2209, 2302, 2505, 2710, 2711 12, 2711 13, 2712, 2804, 2806, 2811, 2814, 2836, 2851 00, 2907, 3204, 3205, 3206, 3207, 3211 00 00, 3212, 3213, 3214, 3215, 3808, 3809, 3925 except 3925 10 00, 3925 20 00, 3925 30 00 et 3925 90, 4012, 4407 10, 4409 except 4409 20, 4415 20, 4818 except 4818 10, 4818 20 et 4818 30, 4820, 7003, 7006 00, 7225, 7309 00, 7310, 7616 91 00, 7616 99, 8419 19 00, 8471, 8902 00 18, 8903 99.

2. Department of Guyana

3824 50, 6810 11.

3. Department of Martinique

0105, 0201, 0203, 0205, 0207, 0208, 0209, 0305, 0403 except 0403 10, 0406, 0706 10 00, 0707, 0709 60, 0709 90, 0710, 0711, 08 except 0807, 1106, 1209, 1212, 1904, 2001, 2005, 2103, 2104, 2209, 2302, 2505 10 00, 2505 90 00, 2710, 2711 12, 2711 13, 2712, 2804, 2806, 2811, 2814, 2836, 2851 00, 2907, 3204, 3205, 3206, 3207, 3211 00 00, 3212, 3213, 3214, 3215, 3808 90, 3809 91, 3820 00 00, 4012, 4401, 4407, 4408, 4409, 4415 20, 4418 except 4418 10, 4418 20, 4418 30, 4418 50 et 4418 90, 4421 90, 4811, 4820, 6902, 6904 10 00, 7003, 7006 00, 7225, 7309 00, 7310, 7616 91 00, 7616 99, 8402 90 00, 8419 19 00, 8438, 8471, 8903 99.

4. Department of Réunion

0105, 0207, 0208, 0209, 0301, 0302, 0303, 0304, 0305, 0403, 0405, 0406, 0407, 0408, 0601, 0602, 0710, 0711, 08, 0904, 0905 00 00, 0910 91, 1106, 1212, 1604 14, 1604 19, 1604 20, 1701, 1702, 1902 except 1902 11 00, 1902 19, 1902 20, 1902 30 et 1902 40, 1904, 2001, 2005 except 2005 51, 2006, 2007, 2103, 2104, 2201, 2309, 2710, 2712, 3211 00 00, 3214, 3402, 3505, 3506, 3705 10 00, 3705 90 00, 3804 00, 3808, 3809, 3811 90, 3814 00, 3820, 3824, 39 except 3917, 3919, 3920, 3921 90 60, 3923, 3925 20 00 et 3925 30 00, 4009, 4010, 4016, 4407 10, 4409 except 4409 20, 4415 20, 4421, 4806 40 90, 48 11, 48 18 except 4818 10, 4820, 6306, 6809, 6811 90 00, 7009, 7312 90, 7314 except 7314 20, 7314 39 00, 7314 41 90, 7314 49 et 7314 50 00, 7606, 8310, 8418, 8421, 8471, 8537, 8706, 8707, 8708, 8902 00 18, 8903 99, 9001, 9021 29 00, 9405, 9406 except 9406 00, 9506.

B. List of products referred to in Article 1(2)(b) according to the classification of the Common Customs Tariff nomenclature [20]

[20] Annex I to Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ L 256, 7.9.1987, p. 1), as last amended by Commission Regulation (EC) No 2176/2002 of 6 December 2002 (OJ L 331, 7.12.2002, p. 3).

1. Department of Guadeloupe

0210, 0301, 0302, 0303, 0304, 0305 10, 0306, 0307, 0407, 0409 00 00, 0601, 0602, 0603, 0604, 0702, 0705, 0706 10 00, 0707 00, 0709 60, 0709 90, 0807, 1008 90 90, 1601, 1602, 1604 20, 1605, 1702, 1704, 1806, 1902, 1905, 2105 00, 2201 10, 2202 10 00, 2202 90, 2309, 2523 21 00, 2523 29 00, 2828 10 00, 2828 90 00, 3101 00 00, 3102, 3103, 3104, 3105, 3301, 3302, 3305, 3401, 3402, 3406 00, 3917, 3919, 3920, 3923, 3924, 3925 10 00, 3925 20 00, 3925 30 00, 3925 90, 3926 10 00, 3926 90, 4409 20, 4418, 4818 10, 4818 20, 4818 30, 4819, 4821, 4823, 4907 00 90, 4909 00, 4910 00 00, 4911 10, 6306, 6805, 6810, 6811 90 00, 7213, 7214, 7217, 7308, 7314, 7610 10 00, 7610 90 90, 9401, 9403, 9404, 9406.

2. Department of Guyana

0303 79, 0306 13, 0403 10, 1006 20, 1006 30, 2009 80, 2202 10, 2309 90, 2505 10 00, 2517 10, 2523 21 00, 3208 20, 3209 10, 3917, 3923, 3925, 7308 90, 7610 90.

3. Department of Martinique

0210, 0302, 0303, 0304, 0306, 0307, 0403 10, 0405, 0407, 0409 00 00, 0601, 0602, 0603, 0604, 0702, 0705, 0807, 1008 90 90, 1102, 1601, 1602, 1604 20, 1605, 1702, 1704, 1806, 1902, 2105 00, 2106, 2201, 2202 10 00, 2202 90, 2309, 2523 21 00, 2523 29 00, 2828 10 00, 2828 90 00, 3101 00 00, 3102, 3103, 3104, 3105, 3301, 3302, 3305, 3401, 3402, 3406 00, 3808 except 3808 90, 3809 except 3809 91, 3820 except 3820 00 00, 3917, 3919, 3920, 3923, 3924, 3925, 3926, 4418 10, 4418 20, 4418 30, 4418 50 et 4418 90, 4818, 4819, 4821, 4823, 4907 00 90, 4909 00, 4910 00 00, 4911 10, 6103, 6104, 6105, 6107, 6203, 6204, 6205, 6207, 6208, 6306, 6805, 6810, 6811 90 00, 7213, 7214, 7217, 7308, 7314, 7610, 9401, 9403, 9404, 9405 60, 9406.

4. Department of Réunion

0306, 0307, 0409 00 00, 0603, 0604, 0709 60, 0901 21 00, 0901 22 00, 0910 10 00, 0910 30 00, 1507 90, 1508 90, 1510 00 90, 1512 19, 1515 29, 1516, 1601, 1602, 1605, 1704, 1806, 1901, 1902 11 00, 1902 19, 1902 20, 1902 30, 1902 40, 1905, 2005 51, 2008, 2105 00, 2106, 2828 10 00, 2828 90 00, 3208, 3209, 3210, 3212, 3301, 3305, 3401, 3917, 3919, 3920, 3921 90 60, 3923, 3925 20 00, 3925 30 00, 4012, 4418, 4818 10, 4819, 4821, 4823, 4907 00 90, 4909 00, 4910 00 00, 4911 10, 4911 91, 7308, 7309 00, 7310, 7314 20, 7314 39 00, 7314 41 90, 7314 49, 7314 50 00, 7326, 7608, 7610, 7616, 8419 19 00, 8528, 9401, 9403, 9404, 9406 00.

C. List of products referred to in Article 1(2)(c) according to the classification of the Common Customs Tariff nomenclature [21]

[21] Annex I to Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ L 256, 7.9.1987, p. 1), as last amended by Commission Regulation (EC) No 2176/2002 of 6 December 2002 (OJ L 331, 7.12.2002, p. 3).

1. Department of Guadeloupe

0901 11 00, 0901 12 00, 0901 21 00, 0901 22 00, 1006 30, 1006 40 00, 1101 00, 1517 10, 1701, 1901, 2006, 2007, 2009, 2106, 2203 00, 2208 40, 2517 10, 3208, 3209, 3210, 3705 10 00, 3705 90 00, 7009 91 00, 7009 92 00, 7015 10 00, 71 13, 71 14, 71 15, 71 17, 90 01 40.

2. Department of Guyana

2208 40, 4403 49, 4407 29.

3. Department of Martinique

0901 11 00, 0901 21 00, 0901 22 00, 1006 30, 1006 40 00, 1101 00, 1517 10, 1701, 1901, 1905, 2006, 2007, 2008, 2009, 2203 00, 2208 40, 2517 10, 3208, 3209, 3210, 7009, 7015 10 00, 7113, 7114, 7115, 7117, 9001 40.

4. Department of Réunion

2009, 2202 10 00, 2202 90, 2203 00, 2204 21, 2206 00, 2208 40, 2402 20, 2403, 7113, 7114, 7115, 7117, 8521.

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