AGREEMENT between the European Economic Community and Hong Kong on trade in textile products Done at Brussels on 2 October 1986

THE COUNCIL OF THE EUROPEAN COMMUNITIES,

of the one part, and

THE GOVERNMENT OF HONG KONG,

of the other part,

RECOGNIZING the importance of trade in textile products between the European Economic Community (hereinafter referred to as the 'Community', and Hong Kong,

HAVING REGARD to the Arrangement regarding International Trade in Textiles, and in particular Article 4 thereof, and to the Protocol adopted on 31 July 1986 in accordance with the Conclusions of the Textiles Committee forming an integral part of the Protocol, which Arrangement and Protocol are hereinafter referred to as the 'Geneva Arrangement',

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

THE COUNCIL OF THE EUROPEAN COMMUNITIES:

THE GOVERNMENT OF HONG KONG:

WHO HAVE AGREED AS FOLLOWS:

SECTION I

Trade arrangements

Article 1

1. The parties recognize and confirm that, subject to the provisions of this Agreement and without prejudice to their rights and obligations under the General Agreement on Tariffs and Trade, the conduct of their mutual trade in textile products shall be governed by the provisions of the Geneva Arrangement.

2. In respect of the products covered by this Agreement, the Community undertakes not to introduce quantitative restrictions under Article XIX of the General Agreement on Tariffs and Trade or Article 3 of the Geneva Arrangement.

3. Measures having equivalent effect to quantitative restrictions on the importation into the Community of the products covered by this Agreement shall be prohibited.

Article 2

1. This Agreement shall apply to trade in textile products of cotton, wool and man-made fibres originating in Hong Kong which are listed in Annex I.

2. The classification of the products covered by this Agreement is based on the nomendature of the Common Customs Tariff and on the Nomenclature of Goods for the External Trade Statistics of the Community and the Statistics of Trade between Member States (NIMEXE).

From the entry into force in the Community of the International Convention on the Harmonized Commodity Description and Coding System (HS) this classification will be based on the Harmonized System and on the Community nomenclatures derived from that system.

3. The origin of the products covered by this Agreement shall be determined in accordance with the rules in force in the Community and the procedures for control of the origin of the products set out in Protocol A.

Article 3

Hong Kong agrees to restrain its exports to the Community of the products described in Annex II to the limits set out therein for each Agreement year.

Exports of textile products set out in Annex II shall be subject to a double-checking system specified in Protocol A.

Article 4

Hong Kong and the Community recognize the special and differential character of re-imports of textile products into the Community after processing in Hong Kong.

Such re-imports may be provided for outside the quantitative limits established under this Agreement provided that they are effected in accordance with the regulations on economic outward processing in force in the Community.

Article 5

1. Exports to the Community of textile products covered by this Agreement shall not be subject to the quantitative limits established in Annex II, provided that they are declared to be for re-export outside the Community in the same state or after processing, within the framework of the administrative system of control which exists within the Community.

However, the release for home use of products imported under the conditions referred to above shall be subject to the production of an export licence issued by the Hong Kong authorities and to proof of origin, in accordance with the provisions of Protocol A.

2. Where the competent authorities in the Community have evidence that products exported from Hong Kong and set off by Hong Kong against a quantitative limit established in Annex II have been subsequently re-exported outside the Community, the authorities concerned shall notify Hong Kong of the quantities involved. Upon receipt of such notification, Hong Kong may authorize exports for the current or the following Agreement year of identical quantities of products, within the same category, which shall not be set off against the quantitative limits established in Annex II.

Article 6

1. In any one Agreement year advance use of a portion of the quantitative limit established for the following Agreement year may be agreed following consultations in accordance with the procedures referred to in Article 14 (1) for each category of products between 1 % and 5 % of the quantitative limit for the current Agreement year. Amounts delivered in advance shall be deducted from the corresponding quantitative limits established for the following Agreement year.

2. Carryover to the corresponding quantitative limit for the following Agreement year of amounts not used during

any one Agreement year may be agreed following consultations in accordance with the procedures referred to in Article 14 (1) for each category of product between 2 % and 7 % of the quantitative limit for the current Agreement year.

3. Transfers in respect of categories in Group I shall not be made from any categories except as follows:

- transfers between categories 2 and 3 may be made for any Agreement year up to 4 % of the quantitative limit for the category to which the transfer is made,

- transfers between categories 4, 5, 6, 7 and 8 may be made for any Agreement year up to 4 % of the quantitative limit for the category to which the transfer is made.

Transfers into any category in Groups II and III may be made from any category or categories in Groups I, II and III for any Agreement year up to 5 % of the quantitative limit for the category to which the transfer is made.

The table of equivalence applicable to such transfers is given in Annex I to this Agreement.

4. The increase in any category of products resulting from the cumulative application of the provisions in paragraphs 1, 2 and 3 above during an Agreement year shall not exceed 12 %.

5. Prior notification shall be given by the authorities of Hong Kong in the event of recourse to the provisions of paragraphs 1, 2 and 3 above.

6. Hong Kong shall provide the Community with export data showing the amounts of carryover available in any Agreement year. If substantial statistical differences exist between the export data from which the amount to be carried over is calculated and the Community's data, the Community may, within the first 120 days of the following Agreement year, request consultations in accordance with the procedures referred to in Article 14 (1) on the amounts involved. Any such request shall be accompanied by full particulars of the alleged statistical differences. Where such a request is made, the portions carried over shall not be used until the parties have completed consultations. If no such request is made within a 120-day period, the portion carried over shall be presumed to have been calculated correctly.

Article 7

1. Given the desire of both parties to eliminate real risks of market disruption, and in view of the well-established and effective Hong Kong system of export authorization, the following procedures shall apply.

2. Exports of textile products described in the categories listed in Annex I which are not subject to quantitative limits in Annex II shall be subject to the issue of export authorizations.

3. In respect of textile products covered by export authorizations mentioned in paragraph 2 above, the

Community may request consultations in accordance with the procedure described in Article 14 (1) with a view to establishing a quantitative limit.

4. Until a mutually acceptable conclusion has been arrived at by means of such consultation, Hong Kong undertakes, if so requested, to suspend from the date of receipt of the request for consultation, the issue of export authorizations for the product or products in any category concerned, and to inform the Community forthwith of the level of quantities covered by export authorizations issued at the time of suspension. The Community shall accept exports from Hong Kong of the product or products concerned in respect of export authorizations issued prior to the receipt of the request for suspension.

5. Should the parties be unable in the course of consultations held in accordance with the provisions of paragraph 3 to reach a mutually acceptable solution, Hong Kong undertakes, if so requested by the Community, to limit exports of the product or products in the category in question for the Agreement year in which the request for consultations is made to an annual level not lower than the highest of the following:

(a) the level of imports into the Community in 1985 of products originating in Hong Kong in that category;

(b) the level resulting from the application of paragraph 8 below;

(c) the level resulting from the application of paragraph 9 below;

(d) 106 % of the level of exports reached during the calendar year preceding that in which the level of export authorizations issued by Hong Kong exceeded the level resulting from the application of paragraphs 8 and 9 and gave rise to the request for consultations; or

(e) the level of export authorizations already issued at the time of suspension.

6. The annual growth rate for the quantitative limits introduced under this Article shall be determined during the course of the consultations referred to in paragraph 3 above.

7. The provisions of this Article may be invoked by the Community at a regional level.

8. The Community undertakes not to invoke the provisions of paragraph 3 of this Article before the level of export authorizations for textile products mentioned in paragraph 2 in any category exceeds, in relation to the preceding year's total imports into the Community of products in that category, the following rates:

- for categories of products in Group I:0,4 %,

- for categories of products in Group II:2,0 %,

- for categories of products in Group III:6,0 %.

9. The Community further undertakes not to invoke the provisions of this Article on a regional basis before the level of export authorizations for textile products mentioned in paragraph 2 in any category exceeds the following regional percentages of the levels referred to in paragraph 8:

Germany 25,5 %.

Benelux 9,5 %.

France 16,5 %.

Italy 13,5 %.

Denmark 2,7 %.

Ireland 0,8 %.

United Kingdom 21,0 %.

Greece 1,5 %.

Spain 7,5 %.

Portugal 1,5 %.

10. Up to the date of communication of the statistics referred to in Article 9 (6) the provisions of paragraph 2 as qualified by paragraphs 7 and 8 of this Article shall apply on the basis of the annual statistics previously communicated by the Community.

11. In order to facilitate forecasts of Hong Kong's future export trends, Hong Kong undertakes to supply the Community with half-monthly statistical returns showing the quantities covered by the export authorizations mentioned in paragraph 1 which are issued under the system to Hong Kong exporters. Such data on export authorizations shall be provided by the Hong Kong authorities promptly in such detail and as frequently as the Community may reasonably request.

12. In the implementation of the provisions of the Article, Hong Kong shall notify the Community immediately upon receipt of any application for an export authorization in an exceptionally large amount.

13. The Hong Kong authorties undertake to notify the Community of any changes to the export authorization system having a direct effect on the implementation of this Agreement. Where necessary, consultations may be requested under Article 14 (1) of this Agreement.

14. The provisions of this Agreement which concern exports of products subject to the quantitative limits established in Annex II shall also apply to products for which quantitative limits are introduced under this Article.

Article 8

1. Hong Kong undertakes to supply the Community with precise statistical information on all export licences issued by the Hong Kong authorities for all categories of textile products subject to the quantitative limits established under this Agreement.

Hong Kong shall set out in its periodical statistical reports the maximum export levels for each category subject to a quantitative limit and the rate of utilization of these levels.

2. The Community shall likewise supply to the Hong Kong authorities precise statistical information on import documents issued by the Community authorities in respect of export licenses issued by Hong Kong.

3. The information referred to in paragraphs 1 and 2 shall, for all categories of products, be transmitted before the end of the second month following the quarter to which the statistics relate.

4. For the purpose of applying provisions of Article 8, the Community may ask Bulgaria to transmit available statistical information on textiles exports of products covered by this Agreement by country of destination.

The Community shall transmit to the Hong Kong authorities import statistics for all products covered by Article 7, and for products covered by Article 5 (1).

5. The information referred to in paragraph 4 shall, for all categories of products, be transmitted before the end of the third month following the quarter to which the statistics relate.

6. For the purpose of applying the provisions of Article 7, the Community undertakes to provide the Hong Kong authorities before 15 April of each year with the preceding year's statistics on imports of all textile products covered by this Agreement, broken down by supplying country and Community Member State.

7. Should it be found on analysis of the information exchanged that there are significant discrepancies between the returns for exports and those for imports, consultations may be initiated in accordance with the procedure specified in Article 14 of this Agreement.

Any such consultations shall be resolved on the basis of the agreed descriptions of the products contained in Annex I.

8. Hong Kong also undertakes to supply the Community with statistical information on all textile exports by country of destination. This information shall be transmitted before the end of the third month following the quarter to which the statistics refer.

Article 9

1. The authorities of Hong Kong shall be informed of any amendment to the Common Customs Tariff, the NIMEXE or the HS based nomenclatures of the Community or any decision, made in accordance with the procedures in force in the Community, relating to the classification of products covered by this Agreement.

Any such amendment or any decision which results in a modification of the classification of products covered by this Agreement shall not have the effect of reducing Hong Kong's ability to use the quantitative limits established in Annex II.

The procedures for the application of this paragraph are set out in Protocol A.

2. In case of divergent opinions between Hong Kong and the competent Community authorities at the point of entry into the Community on the classification of products covered by the present Agreement, consultations in accordance with

Article 14 (1) shall be held with a view to reaching agreement on the appropriate classification of the products concerned and to resolving any difficulties arising therefrom.

For this purpose, the authorities of Hong Kong shall be informed by the competent authorities of the Community as soon as a case of divergent opinions on the classification of products arises.

Pending agreement on the appropriate classification and in order to avoid disruption to trade, the products in question shall be imported on the basis of the classification indicated by the competent Community authorities at the point of entry, in conformity with the provisions of this Agreement.

Article 10

1. Hong Kong and the Community agree to cooperate fully in preventing the circumvention of the present Agreement by transhipment, re-routing or whatever other means.

2. Where information available to the Community as a result of the investigation carried out in accordance with the procedures set out in Protocol A constitutes evidence that products of Hong Kong origin subject to quantitative limits established under this Agreement have been transhipped, re-routed or otherwise imported into the Community in circumvention of this Agreement, the Community may request the opening of consultations in accordance with the procedures described in Article 14 (1) of this Agreement, with a view to reaching agreement on an equivalent adjustment of the corresponding quantitative limits established under the Agreement.

3. Should the parties be unable in the course of consultation to reach a satisfactory solution within the period specified in Article 14 (1) of the Agreement, the Community shall have the right, where clear evidence of circumvention has been provided, to deduct from the quantitative limits established under this Agreement amounts equivalent to the products of Hong Kong origin.

Article 11

1. Hong Kong shall endeavour to ensure that exports of textile products subject to quantitative limits are spaced out as evenly as possible over an Agreement year, due account being taken, in particular, of seasonal factors.

2. Export data shall be provided by the Hong Kong authorities promptly in such detail and as frequently as the Community may reasonably request. If, on the basis of such data, the Community has evidence that there is a sharp and substantial increase in the concentration of exports, other than a concentration attributable to normal seasonal factors, of particular products in any one category subject to quantitative limits established in Annex II, the Community may request consultations in accordance with the procedure specified in Article 14 of this Agreement with a view to remedying this situation.

Article 12

1. For the purpose of the administration of this Agreement, the limits referred to in Article 3 are broken down into shares for each of the Community's regions as set out in Annex II.

2. The Community undertakes to examine with care and reply within four weeks to any request by Hong Kong for a portion of any quantitative limit established in Annex II not used in one region of the Community to be re-allocated to another region.

If, in the course of the application of the Agreement Hong Kong finds that the break-down of a limit established in Annex II causes particular difficulties, it may request the opening of consultations in accordance with the procedure specified in Article 14 with a view to reaching a mutually satisfactory solution.

3. After the first of June of each year of application of the Agreement, Hong Kong may transfer, subject to prior notification to the Community, unused quantities within the regional quota-shares of a Community quantitative limit, set out in Annex II, to the quota-shares of the same limit of other regions of the Community provided that the regional quota-share from which the transfer is made is utilized by less than 80 %, and up to the amount of the following percentages of the quota-share to which the transfer is made:

1 % in the first year of application of the Agreement.

2 % in the second year of application of the Agreement,

4 % in the third year of application of the Agreement,

6 % in the fourth year of application of the Agreement.

The percentage in the fifth year of the application of the Agreement shall be determined following consultations between the parties.

4. Should it appear in any given region of the Community that additional supplies are required, the Community may, where measures taken pursuant to paragraph 1 above are inadequate to cover those requirements, authorize the importation of amounts greater than those stipulated in Annex II.

Article 13

1. Hong Kong and the Community undertake to refrain from discrimination in the allocation of export licences and import documents respectively.

Artikel 14

1. The special consultation procedures referred to in this Agreement shall be governed by the following rules:

- any request for consultations shall be notified in writing to the other Party, together with a statement setting out

the reasons and circumstances which, in the opinion of the requesting Party, justify the submission of such a request,

- the Parties shall enter into consultations within 15 days of notification of the request at the latest, with a view to reaching agreement or a mutually acceptable conclusion within a further 15 days at the latest.

2. The Community may request consultations in accordance with paragraph 1 when it ascertains that during a particular year of application of the Agreement difficulties arise in the Community or one of its regions due to a sharp and substantial increase, by comparison to the preceding year, in imports of a given category of Group I subject to the quantitative limits set out in Annex II.

3. If necessary, at the request of either of the Parties and in conformity with the provisions of the Geneva Arrangement, consultations shall be held on any problems arising from the application of this Agreement. Any consultations held under this Article shall be approached by both Parties in a spirit of cooperation and with a desire to reconcile the differences between them.

Article 15

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

Article 16

1. This Agreement shall enter into force on the first day of the month following its signature. It shall be applicable until 31 December 1991.

2. This Agreement shall apply with effect from 1 January 1987.

3. Either Party may at any time propose amendments to this Agreement.

4. Either Party may at any time denounce this Agreement, provided that at least 120 days' notice is given. In that event the Agreement shall come to an end on the expiry of the period of notice.

5. The Annexes and Protocols, as well as Exchanges of Letters, Agreed Minutes and Declarations to this Agreement shall form an integral part thereof.

Article 17

This Agreement shall be drawn up in two copies in the Danish, Dutch, English, French, German, Greek, Italian, Portuguese and Spanish languages, each of those texts being equally authentic.

ANNEX I

LIST OF PRODUCTS

1. When the constitutive material of the products of categories 1 to 114 is not specifically mentioned these products are to be taken to be made exclusively of wool or of fine animal hair, of cotton or of man-made fibres.

2. Garments which are not recognizable as being garments for men or boys or as garments for women or girls are classified with the latter.

3. Where the expression 'babies' garments' is used, this is meant also to cover girls' garments up to and including commercial size 86.

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ANNEX II (*)

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PROTOCOL A

TITLE I

CLASSIFICATION

Article 1

1. The competent authorities of the Community undertake to inform Hong Kong of any changes in the Common Customs Tariff, the NIMEXE or the HS based nomenclatures before the date of their entry into effect in the Community.

2. The competent authorities of the Community undertake to inform Hong Kong of any decisions relating to the classification of products subject to the Agreement within one month of their adoption at the latest. Such communication shall include:

(a) a description of the products concerned;

(b) the relevant category and the related tariff and statistical references;

(c) the reasons which have led to the decision.

3. Where a decision on classification results in a change of classification practice or a change of category of any product subject to the Agreement, the competent authorities of the Community shall provide 30 days' notice, from the date of the Community's communication, before the decision is put into effect. Products shipped before the date of application of the decision shall remain subject to the earlier classification practice, provided that the goods in question are presented for importation into the Community within 60 days of that date.

4. Where a Community decision on classification resulting in a change of classification practice or a change of categorization of any product subject to the Agreement affects a category subject to restraint, the Community undertakes to enter into consultations without delay in accordance with the procedures described in Article 14 (1) of this Agreement with a view to agreeing necessary adjustments to the appropriate quantitative limits established in Annex II and mitigating any disruptive effects which might arise from such a Community decision.

TITLE II

ORIGIN

Article 2

1. Products originating in Hong Kong for export to the Community in accordance with the arrangements established by this Agreement shall be accompanied by a certificate of Hong Kong origin conforming to the model annexed to this Protocol.

2. The certificate of Hong Kong origin shall be issued by the competent governmental authorities of Hong Kong if the products in question can be considered products originating in that country within the meaning of the relevant rules in force in the Community.

3. Certificates of Hong Kong origin shall contain a full and detailed description of the goods. In particular, certificates of Hong Kong origin shall indicate:

- in respect of clothing, shipments where the articles in question are incomplete or unfinished;

- in respect of fabrics, including knitted or crocheted fabric and products of categories 95 and 96, shipments where the products in question are dyed, printed, impregnated or coated,

- and in respect of products of categories 19, 20, 38B, 39, 40 and 84, shipments where the articles in question are embroidered.

4. The certificate of Hong Kong origin referred to in paragraph 1 shall not be required for import of goods covered by a certificate of origin Form A completed in accordance with the relevant Community rules in order to qualify for generalized tariff preferences.

Article 3

The discovery of slight discrepancies between the statements made in the certificate of origin and those made in the documents produced to the customs office for the purpose of carrying out the formalities for importing the product shall not ipso facto cast doubt upon the statements in the certificate.

TITLE III

DOUBLE-CHECKING SYSTEM FOR CATEGORIES OF

PRODUCTS WITH QUANTITATIVE LIMITS

Section I

Exportation

Article 4

The competent authorities of Hong Kong shall issue an export licence in respect of all consignments from Hong Kong of textile products referred to in Annex II, up to the relevant quantitative limits as may be modified by Articles 6, 12 and 14 of the Agreement and of textile products subject to any definitive or provisional quantitative limits established as a result of the application of Article 7 of the Agreement.

Article 5

1. The export licence shall conform to the model annexed to this Protocol. It must certify, inter alia, that the quantity of the product in question has been set off against the quantitative limit prescribed for the category of the product in question.

2. Each export licence shall only cover one of the categories of products listed in Annex II of the Agreement.

Article 6

The competent Community authorities must be notified forthwith of the withdrawal or alteration of any export licence already issued.

Article 7

1. Exports shall be set off against the quantitative limits established for the year in which shipment of the goods has been effected, even if the export licence is isued after such shipment.

2. For the purposes of applying paragraph 1, shipment of the goods is considered to have taken place on the date of their loading on to the exporting aircraft, vehicle or vessel.

Article 8

The presentation of an export licence, in application of Article 10 below, shall be effected not later than 31 March of the year following that in which the goods covered by the export licence have been shipped.

Section II

Importation

Article 9

Importation into the Community of textile products subject to quantitative limits shall be subject to the presentation of an import authorization or document.

Article 10

1. The competent Community authorities shall issue such import authorization or document automatically within five working days of the presentation by the importer of the original of the corresponding export licence.

The import authorization or document shall be valid for six months.

2. The competent Community authorities shall cancel the already issued import authorization or document if the corresponding export licence has been withdrawn.

However, if the competent Community authorities have not been notified about the withdrawal or cancellation of the export licence until after the products have been imported into the Community, the quantities involved shall be set off against the quantitative limit for the category and the quota year in question and Hong Kong shall be informed as soon as possible.

Article 11

1. If the competent Community authorities find that the total quantities covered by export licences issued by Hong Kong for a particular category in any Agreement year exceed the quantitative limit established in Annex II for that category, as may be modified by Articles 6, 12 and 14 of the Agreement, or any definitive or provisional limit established under Article 7 of the Agreement, the said authorities may suspend the further issue of import authorizations or documents. In this event, the competent Community authorities shall immediately inform the authorities of Hong Kong and the special consultation procedure set out in Article 14 (1) of the Agreement shall be initiated forthwith.

2. Exports of Hong Kong origin not covered by Hong Kong export licences issued in accordance with the provisional of this Protocol may be refused the issue of import authorization or documents by the competent Community authorities.

However if the import of such products is allowed into the Community by the competent Community authorities, the quantities involved shall not be set off against the appropriate quantitative limits set out in Annex II or established as a result of the application of Article 7 of the Agreement, without the express agreement of Hong Kong.

TITLE IV

FORM AND PRODUCTION OF THE EXPORT LICENCES AND CERTIFICATES OF ORIGIN, AND COMMON PROVISIONS

Article 12

1. The export licence and the certificate of Hong Kong origin may comprise additional copies duly indicated as such. They shall be made out in English or French. If they are completed by hand, entries must be in ink and in printscript.

These documents shall measure 210 × 297 mm. The paper used must be white writing paper weighing not less than

25 g/m².

Only the original, clearly marked 'original', shall be accepted by the competent authorities in the Community as being valid for the purpose of export to the Community in accordance with the arrangements established by the Agreement.

2. Each export licence and certificate of Hong Kong origin shall bear a serial number, whether or not printed, by which it can be identified.

The number for the export licence shall be standardized and composed of the following elements:

- two letters identifying Hong Kong as follows: HK,

- two letters identifying Member State of destination as follows:

BL = Benelux

DK = Denmark

DE = Federal Republic of Germany

ES = Spain

FR = France

GB = United Kingdom

GR = Greece

IE = Ireland

IT = Italy

PT = Portugal,

- a one-digit number identifying quota year, corresponding to the last figure in the respective Agreement year, e.g.

7 for 1987,

- two spaces identifying the particular issuing office concerned in Hong Kong,

- a five-digit number running consecutively from 00001 to 99999 allocated to the respective country of destination.

Article 13

The export licence and certificate of origin may be issued after shipment of the products to which they relate. In such cases they shall bear either the endorsement 'delivré a posteriori' or the endorsement 'issued retrospectively'.

Article 14

1. In the event of theft, loss or destruction of an export licence or a certificate of origin, the exporter may apply to the competent governmental authority which issued the document for a duplicate to be made out on the basis of the export documents in his possession. The duplicate of any such certificate or licence so issued shall bear the endorsement 'duplicata'.

2. The duplicate must bear the date of the original export licence or certificate of origin.

TITLE V

ADMINISTRATIVE COOPERATION

Article 15

The Community and Hong Kong shall cooperate closely to implement the provisions of this Agreement. To this end,

contacts and exchanges of view (including on technical matters) shall be facilitated by both parties, in particular to established the authenticity and accuracy of documentation required under the provisions of the Agreement.

Article 16

Hong Kong shall send the Commission of the European Comuinities the names and addresses of the governmental authorities competent for the issue and verification of export licences and certificates of origin together with specimens of the stamps used by these authorities. Hong Kong shall also notify the Commission of any change in this information.

Article 17

1. Verification of certificates of Hong Kong origin or export licences shall be carried out at random by the Hong Kong authorities.

2. The Competent Community authorities may request subsequent verification of certificates of Hong Kong origin or export licences at random or whenever they have reasonable doubt as to the authenticity of such certificates or licences or as to the accuracy of the information regarding the products in question.

In such cases the competent authorities in the Community shall return the certificate of Hong Kong origin or export licence, or a copy therof to the Hong Kong authorities, giving, where appropriate, the reasons for an enquiry. If the invoice has been submitted, such invoice shall be attached to the certificate or licence or its copy. The authorities shall also forward any information that has been obtained suggesting that the particulars given on the said certificate or licence are inaccurate.

3. Should the results of the random verification referred to in paragraph 1 above reveal serious contravention of the provisions of this Agreement, the Hong Kong authorities shall notify the competent Community authorities of the results.

Where the competent Community authorities have requested verification under paragraph 2 above, the results of such verification shall be communicated to the competent Community authorities within three months at the latest. The information communicated shall indicate whether the disputed certificate or licence applies to the goods actually exported and whether these goods are eligible for export in accordance with the arrangements established by this Agreement. Where the competent Community authorities so request, the information communicated shall also include copies of such other available documentation as may facilitate the full determination of the facts and, in particular, the true origin of the goods.

4. For the purpose of subsequent verification of certificates of Hong Kong origin and export licences, copies of these together with relevant supporting documentation required to be lodged with the Hong Kong authorities for the issue of such certificates or licences shall be kept for a period of at least two years by the Hong Kong authorities.

Article 18

1. Where the verification procedure referred to in Article 17 or where information available to the Community or to Hong Kong indicates or appears to indicate that the provisions of this Agreement are being contravened, both parties shall cooperate closely and with the appropriate urgency to prevent such contravention.

2. To this end, Hong Kong shall, on its own initiative or at the request of the Community, carry out appropriate enquiries or arrange for such enquiries to be carried out concerning operations which are or appear to be in contravention of this Agreement. Hong Kong shall communicate the results of these enquiries to the Community together with any other pertinent information enabling the true origin of the goods to be determined.

3. By agreement between the Community and Hong Kong, officials designated by the Community may be present at the enquiries referred to in paragraph 2.

4. In pursuance of the cooperation referred to in paragraph 1, Hong Kong and the Community shall exchange any information considered by either Party to be of use in preventing the contravention of the provisions of this Agreement. These exchanges may include information on textile production in Hong Kong and on trade in textile products of a kind covered by this Agreement between Hong Kong and other countries, particularly where the Community has reasonable grounds to consider that the products in question may be in transit across the territory of Hong Kong prior to their importation into the Community. This information shall include, at the request of the Community, copies of all relevant documentation.

5. Where it is established to the satisfaction of both Parties that the provisions of this Agreement have been contravened, Hong Kong and the Community agree to take all reasonable measures to prevent a recurrence of such contravention.

ANNEX I to Protocol A (Article 2)

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PROTOCOL B

The annual growth rate for the quantitative limits introduced under Article 7 of the Agreement shall be determined as follows:

For products in categories falling within Group I, II or III, the growth rate shall be fixed by agreement between the Parties in accordance with the consultation procedure established in Article 14 of the Agreement. Such growth rate may in no case be lower than the highest rate applied to corresponding products under bilateral agreements concluded under the Geneva Arrangement between the Community and other third countries having a level of trade equal to or comparable with that of Hong Kong.

Joint Declaration concerning Article 10

1. The Community and Hong Kong note the well-established and close cooperation which exists between the two parties in preventing and dealing with problems relating to the contravention through

circumvention of the provisions of previous Agreements between the Community and Hong Kong, and, in particular, the mutually satisfactory solutions which have been reached on equivalent debiting of the corresponding quantitative limits established under those previous Agreements.

2. The two parties reaffirm their willingness to strengthen this cooperation in all its aspects having regard to the administrative and technical procedures in force in the Community and Hong Kong for the implementation of this Agreement.

3. Hong Kong confirms that its export control system permits the prompt debiting of circumvented amounts to the appropriate quantitative limits established under this and previous Agreements between the Community and Hong Kong.

4. In agreeing to the provisions of Article 10, the Community and Hong Kong also agree, in the light of the foregoing, that for practical and specific reasons, paragraph 3 of that Article shall, as a general rule, be implemented in the following manner:

- where the evidence provided clearly establishes that the provisions of this Agreement have been circumvented, Hong Kong undertakes, at the request of the Community, to debit the circumvented amounts to the appropriate quantitative limits for the year in which the circumvention took place or for subsequent years, the timing and apportioning of such debiting being decided in consultation with the Community, to ensure that, where appropriate, such debiting may be satisfactorily implemented.

5. In respect of circumvention arising from imports into the Community before 1 January 1987, the following shall apply:

- requests concerning imports from 1 January 1983 shall be dealt with under the terms of Article 10 of this Agreement and this Joint Declaration.

6. Should the consultation period provided for in Article 14 (1) be insufficient to complete the examination of the evidence adduced the parties may agree to extend that period.

Declaration concerning Article 2 (3) of the Agreement

The Community declares that, if any amendment is made to the rules of origin referred to in Article 2 (3) of the Agreement, the Community shall, with the agreement of Hong Kong, take appropriate

measures to avoid any possible consequent reduction of Hong Kong's ability to use the quantitative limits established in Annex II of the present Agreement.

The Community further declares that any amendment made to the abovementioned rules shall continue to be based on criteria not requiring, in order to confer originating status, more extensive operations than those constituting a single complete process.

Agreed Minute

With reference to Article 12 (3) of the Agreement on trade in textiles between the European Economic Community and Hong Kong initialled on 2 October 1986, it is understood that the percentage for the fifth year of the application of the Agreement will be at least equal to the percentage applicable in the fourth year.

Head of Delegation of Hong Kong

Head of Delegation of the

European Economic Community

Agreed Minute

The Community and Hong Kong agree that:

- carryover to the quantitative limits for the year 1987 of quantities not used in 1986 is authorized up to 2 % on the corresponding quantitative limits for 1987 for Group I and up to 3 % for other Groups,

- advance use of a portion of quantitative limits for 1987 is authorized for any quantitative limit for the year 1986 up to 2 % for Group I and up to 3 % for other Groups, subject to an agreement of the two Parties establishing the de facto-application of the new bilateral agreement.

Head of Delegation of Hong Kong

Head of Delegation of the

European Economic Community

Exchange of notes

The Minister for Hong Kong Commercial Relations with the European Communities and the Member States presents his compliments to the Directorate-General for External Relations of the Commission of the European Communities and has the honour to refer to the Agreement in textile products negotiated between Hong Kong and the Community and initialled on 2 October 1986.

The Ministers wishes to inform the Directorate-General that whilst awaiting the completion of the necessary procedures for the conclusion and the coming into force of the Agreement, the Government

of Hong Kong is prepared to allow the provisions of the Agreement to apply de facto from 1 January 1987 if the Community is disposed to do likewise. This is on the understanding that either party may at any time terminate this de facto application of the Agreement provided that 120 days' notice is given.

The Minister would be grateful if the Community would confirm its agreement to the foregoing.

The Minister for Hong Kong Commercial Relations with the European Communities and the Member States avails himself of this opportunity to renew to the Directorate-General for External Relations the assurance of his highest consideration.

Exchange of notes

The Directorate-General for External Relations of the Commission of the European Communities presents its compliments to the Minister for Hong Kong Commercial Relations with the European Communities and the Member States and has the honour to refer to the Minister's Note of regarding the Agreement in textile products negotiated between Hong Kong and the Community and initialled on 2 October 1986.

The Directorate-General wishes to confirm to the Minister that whilst awaiting the completion of the necessary procedures for the conclusion and the coming into force of the Agreement, the Community is prepared to allow the provisions of the agreement to apply de facto from 1 January 1987. This is on the understanding that either party may at any time terminate this de facto application of the Agreement provided that 120 days' notice is given.

The Directorate-General for External Relations avails itself of this opportunity to renew to the Minister of Hong Kong Commercial Relations with the European Communities and the Member States the assurance of its highest consideration.