Proposal for a COUNCIL REGULATION (EC) modifying Regulation (EEC) No 1101/89 on structural improvements in inland waterway transport
Date: 1993-11-16
Institutions: European Commission
Subjects: development plan, industrial restructuring, inland waterway fleet, inland waterway shipping, transport policy, vessel

COMMISSION OF THE EUROPEAN COMMUNITIES 

COM(93) 553 final - SYN 475 

Brussels,  16 November 1993 

i? 

on the effect  of the structural improvement measures in inland waterway transport, 
as introduced by Council Regulation (EEC) No  1101/89 of 27 April  1989 

Report from the Commission 

Proposal for a 
COUNCIL REGULATION  flBCi 

SYN 475 

modifying  Regulation (EEC) No  1101/89 on structural improvements in 
inland waterway transport 

K.:-

(presented by the Commission) 

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on me effect of the structural improvement measures in inland waterway transport, 
as introduced by Council Regulation (EEC) No  1101/89 of 27 April  1989 

1.  Introduction 

Council  Regulation  (EEC)  No.  1101/89  of  27  April  1989(1), 
introduced  a  number  of  measures  designed  to  remove  the  structural 
overcapacity  in  inland  navigation  which  has  characterized  this 
market  since  the  economic  recession  of  the  1980's.  The  Council 
Regulation  created  two  sets  of  measures  :  (a)  the  granting  of 
scrapping  premiums  to  reduce  the  capacity  of  the  active  inland 
waterway  fleet and  (b) measures to curb investment  in extra vessels 
in  the  course  of  the  coordinated  scrapping  scheme.  (The  main 
elements of Council Regulation  1101/89 are described  in more detail 
in chapter 2 ). These  latter measures, which  are generally  known  as 
the  "old-for-new"  system,  were  introduced  for  a  period  of  five 
years  from the entry  into  force of  the Regulation  (28.4.1989) with 
the possibility  of  an  extension  for  a  further  period  of  a maximum 
five years. 

Article  8  paragraph  5° of  the  Council  Regulation  No.  1101/89 
states : 

"On  the  basis  of  a  Commission  proposal  accompanied  by  a  well-
founded  report,  the  Council  may  take  a  decision  to  extend  the 
period  referred to  in paragraph  1 by a maximum of  five years"(2). 

The present  report  sets out why  the Commission  considers that  such 
an  extension  is  called  for.  The  relevant  proposal  is  attached  as 
Annex I. 

Background 

The  Council  Regulation  No.  1101/89  and  the  related  Commission 
Regulation  (EEC)  No.  1102/89  of  27  April  1989<3),  laying  down 
certain  measures  for  implementing  the  Council  Regulation,  are 
designed  to  remove  the  structural  imbalance  between  demand  and 
supply  in the  inland  waterway  market. The main elements of what  is 
called  in  short  the  "EC  scrapping  scheme"  can  be  listed  as 
follows : 

a)  In  a  harmonized  Community  framework,  national  scrapping  funds 
operate  in the Member  States whose  inland waterways  are  linked 
to  those  of  another  Member  State  and  the  tonnage  of  whose 
inland  fleet  is  above  100.000  tonnes.  These  Member  States 
directly  concerned  are  Belgium,  Germany,  France  and  the 
Netherlands. 

(1) O.J. L  116  of  28.4.1989, p.  25  last  amended  by  Council  Regulation 
(EEC) No. 3572 of 4.12.19:0, see O.J. L 353 ci 17.12.1990, p. 14 
(2) The period  referred  to  in paragraph  1 is the period  from  28.4.1989 

till 27.4.1994 during which the old-for-new  system applies. 

(3) O.J.  L  116  of  28.4.1989,  p.  30,  last  amended  by  Commission 
Regulation  (EEC)  No.  3690/92  of  21.12.1992,  see  O.J.  L  347  of 
22.12.1992 p. 22. 

'$'! 

-  2 

-

Vessels  registered  in other Member  States  (e.g. Luxemburg) but 
operating  on  the  same  network  adhere  to  one  of  the  scrapping 
funds. 

b)  The  total  active  fleet  of  cargo  carrying  inland  waterway 
vessels  and  push boats operating  on  the principal  network  and 
registered  in  a  Member  State  is  subject  to  the  scrapping 
scheme.  A  limited  number  of  exemptions  are  specified  in  the 
Regulation. 

c)  The  initial  target  of  the  Community  scrapping  action  was  to 
remove  from  the market, between  1.1.1990 and  1.12.1990,  10% of 
the  capacity  of  the  dry  cargo  fleet  and  15%  of  the  tanker 
fleet. 

d)  To  disencourage  waterway  operators  from  creating  new  surplus 
capacity, the  so-called  "old  for  new"  system was created.  This 
implies  that  carriers  who  wish  to  bring  into  service  extra 
capacity  shall : 

* 

* 

either  scrap tonnage equivalent  to the new vessel without, 
however, receiving a scrapping premium; 

or,  if  they  decide  not  to  scrap  tonnage,  shall  pay  a 
special  contribution  into  the  scrapping  fund,  which  is 
equivalent  to the  scrapping  premium  for the type of  vessel 
brought  into service. 

e)  The  total  amount  required  for  the  granting  of  scrapping 
premiums  was  made  available  to  the  scrapping  funds  by  the 
governments  concerned  in  the  form  of  repayable  interest  free 
loans.  The  loans  are  being  repaid  by  the  inland  navigation 
industry  over  a  period  of  years.  For  this  purpose,  vessel 
owners  pay  to  the  funds  annual  contributions  based  on  the 
tonnage and the type of their vessels. 

f)  The  Swiss  authorities  have  introduced  simultaneously  identical 
measures  for their  fleet. The operations  of the Swiss  fund  are 
coordinated with those of the other funds. 

g)  A  system  of  financial  solidarity  applies  between  the  funds  in 
order  to ensure  that the reimbursement  period  for the  interest 
free loans will be the same in all States concerned. 

Since this is a Community  system decisions on its operation have to 
be taken at Community  level. The Commission  is authorized  to adopt 
certain  decisions  on the application  of  the  system. The  Commission 
has  thus  fixed  :  the  level  of  the  scrapping  premiums  for  the 
different  types  of  vessels, the  level  of  the  annual  contributions 
to  be  paid  to  the  funds,  the  detailed  rules  for  the  mechanism  of 
financial  solidarity, etc. 
In  addition,  the  Commission's  services  organise  at  regular 
intervals  coordination  meetings with  representatives  of  the  States 
concerned  an^  the  authorities  responsible  for  the  scrapping  funds 
in  order  to  ensure  a  uniform  application  of  the  rules.  In  this 
context the inland waterway profession  is also consulted  regularly. 

- 3 -

3.  Summary of the results of the EC scrapping  action 

The  Commission  presented  a  first  report  on  the  outcome  of  the 
common  scrapping  action  on  15  July  1992(4).  in  the  following  the 
main  elements  of  this  report  are briefly  summarized  and  completed 
with  additional  information  received  from  the  scrapping  funds  and 
other sources for the subsequent period. 

Between  1 January  1990 and 1 May  1990 vessel owners could  introduce 
applications  for  scrapping  premiums.  In  the  course  of  1990  1615 
applications  for  a scrapping premium were accepted  by the  funds. A 
summary  of the overall  results  for different  categories  of  vessels 
is presented below. 

Tabel 1 : Scrapping  applications  accepted  by  funds of B, D,  F,  NL, 

and CH 

Scrapping application  accepted 

number 

tonnage or kw 

average 
tonnage 
or kw 

606t 
1.017t 

dry cargo 
tankers 
push boats 

1.318 
260 
37 

799.200 
264.398 

30.407 

822kw 

In order to make a comparison between the total capacity  taken out 
of  the market  and  the  remaining  capacity  of the  active  fleet, the 
differences  in productivity  of different  vessel types  (e.g.  : self 
propelled  vessels,  barges,  towed  vessels)  have  to  be  taken  into 
account.  To  this  end  Commission  Regulation  No.  1102/89  defines 
adjustment  coefficients,  which  make  it  possible  to  express  the 
capacity  of  the  fleet  in  "equivalent  tonnage  of  motorvessels  of 
over 650 tonnes". 

Tabel 2  : Capacity  reduction achieved by the joint scrapping  action 

Active fleet  1991 
B + D + F + N L + CH 

(a) 

Scrapping  application 
accepted 
(b) 

dry cargo 
tankers 
push boats 

7.819.964 eq.t 
1.710.625 eq.t 
330.171 kw 

613.357 eq.t 
222.663 eq.t 
30.407 kw 

% 

(b:a) 

7,84 
13,02 
9,21 

(4) Report  from  the  Commission  on  the  effect  of  the  structural 
improvement measures in inland waterway transport, as introduced by 
Council Regulation  (EEC) No. 1101/89 of 27  April 1989. 
Document No. SEC  (92)1284 final of 15.7.1992. 

-  4 -

It  appears  that  roughly  8%  of  the  dry  cargo  and  13% of  the  tanker 
capacity  has been  scrapped  in the  framework  of the  joint  scrapping 
action organised  in 1990. 

4.  Additional  scrapping  actions 

Following  the  German  unification  on  3  October  1990  an  additional 
scrapping action was organised  for the inland waterway  fleet of the 
ex-DDR. The results of this  small  scale action  have to be added  to 
the figures presented above. 

On  request  of  the  German  government  the  Commission  by  Regulation 
(EEC)  No.  317/91 (5) laid  down  the  conditions  for  this  additional 
scrapping  action.  In  total  196  applications  representing  a  total 
carrying  capacity  of  98.589  tonnes, were accepted  in the course of 
1991. The volume scrapped  represents  14,25% of the initial capacity 
of the ex-DDR  fleet. What  remains  of the ex-DDR  fleet  is now  fully 
integrated  in the Community  scrapping scheme. 

In  addition,  the  measures  taken  by  the  French  government  on  the 
basis of Article  2.3. of Council Regulation No. 1101/89 have to be 
mentioned. This Article allows the Member States to exclude vessels 
with  a  dead  weight  of  less  than  450  tonnes  from  the  scope  of  the 
Regulation  if  the  economic  and  social  situation  in  this  specific 
sector  so  requires.  In  this  case  an  alternative  plan  has  to  be 
drawn  up  by  the  Member  State  concerned.  France  made  use  of  this 
possibility  and  communicated  to  the  Commission  a  national 
improvement  plan  under  the  state-aid  rules.  This  so-called  "Plan 
Economique et Social" is designed to take a considerable  proportion 
of  the  small  vessel  fleet  (20% or more)  out  of  the market  over  a 
period  of  years. The  plan  provides  for  scrapping  premiums  and  for 
accompanying  social  measures.  Guarantees  have  been  built  in  to 
avoid  distortions  of  competition.  This  implies  that  vessel  owners 
subject  to  the  "Plan  Economique  et  Social"  do  also  have  to  pay 
annual  contributions  at  a  rate  comparable  to  the  rates  applied  in 
the Community scheme. 

When  the  "Plan  Economique  et  Social"  entered  into  force  on 
1.1.1990,  2.153  dry  cargo  vessels with a total  loading  capacity  of 
980.288  tonnes  were  subject  to  the  scheme.  In  the  period  from 
1.1.1990  to  1.1.1993  569  scrapping  applications,  representing  a 
loading  capacity  with  203.287  tonnes,  were  accepted.  This 
corresponds  with  20;7%  of  the  capacity  of  the  initial  fleet.  The 
French authorities plan to terminate the scheme by the end of 1994. 

5-  Total scrapping activity  (1990-1992) 

In  round  figures,  the  global  result  of  the  various  scrapping 
actions  mentioned  above,  which  were  undertaken  in the  period  from 
1.1.1990 to 1.1.1993,  is as follows : 

(5) O.J. L 37 of 9.2.1991, p. 27. 

-  5 -

dry  cargo  : over  2.000 vessels  scrapped  with  a  total  loading 
capacity of 1.1 million tonnes; 

tankers 
tonnes. 

260  vessels  scrapped  with  a  capacity  of  260.000 

In  addition  30.000  kw of  push boat  capacity  has  been  taken  out of 
the market  in that period. 

6.  Financial  implications 

The total expenditure  for the granting of  scrapping  premiums  under 
the  joint  scrapping  scheme  (including  the  ex-DDR  fleet)  in  the 
years  1990-1992  is estimated  at 104.401.576 ECU of which  66.041.893 
ECU  for  dry  cargo  vessels  and  push  boats,  and  38.359.683  ECU  for 
tankers^"). 
As has been mentioned  above, these amounts have been made available 
to  the  scrapping  funds  by  the  governments  of  the  Member  States 
directly  concerned  in the  form  of  interest  free  loans. The  amount 
is  now  being  paid  back  by  the  inland  waterway  operators  through 
annual  contributions  based  on  the  tonnage  and  the  type  of  their 
vessels  (e.g. 1 ECU per tonne p.a.  for dry  cargo motorvessels over 
650 tonnes). 
The  special  contributions  paid  by  inland  waterway  operators  who 
bring  new vessels  into service without  scrapping  an equivalent  old 
tonnage, serve as a second  source of income for the funds. 
The total  receipts of the 5 funds since the beginning  of the  joint 
scrapping action can be summarized  as follows : 

Table  3 : Receipts per annum  (B + D + F + NL + CH) in ECU 

Year 

Dry cargo 

Tankers 

(incl. push boats) 

1990 

1991 

1992 

9.620.185 

5.801.845 

9.694.580 

7.908.491 

9.825.993 

15.570.928 

1990 - 1992 

29.140.758 

29.281.264 

(6) In  addition,  15.9  mio  ECU  has  been  allocated  for  the  granting  of 
scrapping  premiums  under  the  French  "Plan  Economique  et  Social". 
This amount  is financed outside the context of the joint action and 
is not considered  further  in this chapter. 

- 6 -

In  the  dry  cargo  sector  44% of  the  interest  free  loans  had  been 
reimbursed  by the end  of  1992. Whilst  in the tanker  sector  76% had 
been  reimbursed  already.  The  difference  is  due  to  substantial 
amounts of  special  old-for-new  contributions received  by  the  funds 
in relation to the construction of new tankers in 1991 and in 1992. 

For  reasons  set  out  in  chapters  7  and  8,  Commission  Regulation 
No. 3690/92  of  21  December  1992  provides  that  the  special 
contribution  received  for  vessels  newly  brought  into  service 
without scrapping  an equivalent tonnage, shall as from 1.1.1993, no 
longer be used  for the reimbursement  of the interest  free loans but 
shall be used  for the granting  of  scrapping premiums. The  receipts 
in the  years  1993  and  following  are  to  be  estimated  at  roughly  9 
mio  ECU  in  the  dry  cargo  sector  and  some  5  mio  ECU  p. a.  for 
tankers.  As  a  consequence,  the  loans  in  the  dry  cargo  sector  are 
likely to be fully reimbursed  around the end of 1996, whilst  in the 
tanker sector the break even point might be attained  in 1994. 

Considering  that  Council  Regulation  No.  1101/89  provides  in  its 
Article  6.4.  that  the  repayment  period  shall  not  exceed  10  years 
(starting  1990) it can be concluded that the repayment  is certainly 
well on schedule. 

7.  The economic  impact of the scrapping action 

A  major  socio-economic  effect  of  the  joint  1990  scrapping  action 
has been that a considerable number of private owner operators were 
enabled to leave the business on financially  acceptable terms. 
Another possibly  even more important objective of the operation was 
to  create  a  better  revenue  situation  for  those  who  stayed  in 
business. 

In the  framework  of the Commission's Market  Observation  System  the 
evolution  of  costs  and  prices  on  certain  waterway  sub-markets  is 
monitored  on  a  permanent  basis.  The  Rhine  market  is  the  most 
important  of  these  sub-markets  and  covers  more  than  than  half  of 
all waterway  carriage in the Community. 

Dry cargo 

The  following  graph  presents  the  evolution  of  cost  and  price 
indices  for dry  cargo carriage on the Rhine  since the beginning  of 
the  scrapping  action. The  year  1988  has been  chosen  as  the base-
year,  because  it  is  the  year  preceding  the  coming  into  force  of 
Council Regulation No. 1101/89. Prices and costs as observed  at the 
beginning  of  1988  are thus  set  at  "100". However, this  should  not 
be  taken  as  a  sign  that  prices  were  equal  to  costs.  On  the 
contrary, prices  in 1988 were extremely  low and  far  from  full  cost 
coverage levels. 

-  7 

-

Rhine market,  dry  cargo 
cost  and  price  indices  (1988=100) 

index 

200 

150 

100 

50 

/ 

N 

costs 

o • 
12  3  4 
1988 

2  3  4 
1989 

2  3  4 
1990 

2  3  4 
1991 

2  3  4  12 
1992 

11993 

quarter  / year 

As  the  graph  shows,  prices  went  up  more  than  costs  in  the 
subsequent years  : 1989,  1990, 1991 and the beginning of 1992. (For 
a  detailed  overview  of  cost-  and  price-indices  see table  4 on  the 
next  page). 

This evolution was caused  by  a combination  of  reducing  the  surplus 
capacity  and  a  stable  demand.  Statistical  data  derived  from  the 
Market  Observation  System  show the  following  picture  for the total 
volume  carried  in dry  cargo  by  inland  waterway  in  EUR-5  (B, D,  F, 
L, NL) : 

1988 =  344,6 mio t.;  1989  =  343,9  mio t. 
1991 = 349,2<7) mio t. 

1990  = 347,8 mio  t. and 

Statistical  data  for  1992  or  1993  are  not  yet  available. 
Nevertheless, it is commonly  held that the general  economic climate 
suddenly  deteriorated  in  the  course of  1992.  Important  sectors  for 
the  waterway  industry  such  as  the  building  sector,  the  steel- and 
coal  industry  and  the  chemical  industry  reported  sharp  drops  in 
production.  This  immediately  had  an  impact  on  prices  in  the 
waterway  market. Where  the price  index  for Rhine dry  cargo traffic 
reached  a peak-level of  164 in the first quarter of 1992, the index 
dropped  to  124 at the end  of  1992 and  went  down  further  f-o 119  in 
the second quarter of 1993. 

(7) preliminary  figure, 

- 8 -

Table 4  : Cost en price indices, Rhine traffic  (1988 = 100) 

dry cargo 

liquid cargo 

cost 

prices 

cost 

prices 

1988 

1989 

1990 

1991 

1992 

1993 

I 
II 
III 
IV 

I 
II 
III 
IV 

I 
II 
III 
IV 

I 
II 
III 
IV 

I 
II 
III 
IV 

I 
II 

100 
100 
100 
100 

101 

103 

HI 

106 
110 

116 
113 
112 
113 

115 
113 
116 
115 

121 
121 

100 
100 
105 
105 

115 

127 

115 
127 
129 
132 

147 
139 
135 
129 

164 
139 
125 
124 

126 
119 

100 
100 
100 
100 

100 

102 

110 

106 
108 

114 
113 
112 
112 

114 
113 
115 
114 

119 
119 

100 
100 
85 
85 

81 

132 

197 
153 
167 
204 

184 
281 
254 
185 

239 
165 
132 
128 

125 
116 

Considering  that  the  cost  index  had  also  gone  up  to  about  this 
level  (121 in the  same quarter), the conclusion has to be that the 
cost/price  ratio  in the  first  half  of  1993 was  again  as  low  as at 
the beginning  of  1988. 

Cost and price  indices  for the free Rhine market  are a good general 
indicator  for  the  market  situation  of  carriers  operating  larger 
vessels.  However,  for the  smaller  categories  of  vessels  the  number 
of waiting days between two transport operations as recorded on the 
skippers  bourses  can  serve  as  a  useful  additional  indicator.  The 
following  graph  shows  the  evolution  of  waiting  days  for  the 
transport relations Netherlands-Belgium  and Netherlands-France. 

/ 

Mi' 

-  9 

North-South  market 
waiting  days,  moving  average 

waiting  days 

Netherlands  -  France 

0'-

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 34 

1988 

] 

1989 

| 

1990 

| 

1991 

| 

1992 

quarter  /  year 

The  long  waiting  times  (10  to  20  days)  recorded  at  the  bourses 
clearly  indicate  that  there  is  substantial  overcapacity  in  this 
market.  The  relation NL -> F showed  a gradual  reduction  of waiting 
times  in the period  1989-1991. This was caused  by  the  scrapping of 
a  considerable  number  of  small vessels both  in Belgium,  France and 
the  Netherlands,  which  had  a  positive  effect  on  the  turnaround 
times of the remaining vessels. 
The  said  effect  is  less  apparent  in  the  relation  NL  ->  B  because 
small vessels play a less important role in this traffic. 
The  effect  of  the  gradually  decreasing 
shippersbourses was thus compensated  by the scrapping action. 
However, this evolution came to a stop and even reversed  in 1992 as 
a  result  of  further  decreasing  demand.  The  strikes  and 
manifestations  of  North-South  operators  in  the  Netherlands  and 
Belgium  in  the  summer  of  1993,  require  no  further  statistical 
evidence  to  illustrate  that  the  economic  situation  of  these 
operators has again fallen to a critical level. 

on  the 

demand 

i 

V 

-  10 -

Liquid  cargo 

In  1988  the  inland  waterway  tanker  market  was  even more  depressed 
than  the  dry  cargo  market.  Therefore  the  target  was  set  to  scrap 
15% of the tanker  fleet compared to  10%  in the dry cargo sector. As 
mentioned  above,  the  outcome  has  been  that  13%  of  the  available 
capacity  was  taken  out  of  the  market.  As  is  illustrated  in  the 
following  graph, prices  for  the  carriage  of  liquid  cargo  in Rhine 
traffic  started  to  recover  in  the  course  of  1989  and  reached  a 
peak-level  in the first half of 1991. 

Rhine market, liquid cargo 
cost  and  price  indices  (1988=100) 

index 

300; 

250 I 

200 

150 

loo  i —-
i 
50 ! 

/ 

\ 

\ 

Pr l c e s/V 

I 

\  J 

\ 

—  • 

^ 

costs 

V 

0' 

1 

2  3  4 

2  3  4 

2  3  4 

2  3  4 

2  3  4 

12 

1988 

1989 

1990 

1991 

1992 

11993 

quarter  / year 

This  upswing  was  caused  by  a  combination  of  factors  such  as 
temporary  peaks  in  demand  (low  water  periods, Gulf-crisis)  but  in 
particular  by the  significant  reduction  of  the  fleet  capacity.  The 
strong  recovery  of prices  is remarkable  since the  structural  trend 
in demand  for  liquid  cargo was  rather  down  than up as  follows  from 
the  following  figures  (EUR-5) : 

1988  =  74,7  mio  t.;  1989 
1991 = 69,8(8>  mio t. 

=  70,0  mio  t.;  1990  =  69,0  mio  t.  and 

(8) preliminary figure. 

-  11 -

Just  as in dry  cargo, the tanker market  remained  bullish  until the 
first  half  of  1992. Then  with  the  change  in  the  general  economic 
climate,  prices  dropped  sharply,  to  such  extent  that  the 
cost/price ratio in mid  1993 is similar to that in 1988. 

General  assessment 

From  the description  given  it  is apparent  that  the  rehabilitation 
measures taken by the Council  in 1989 were effective  in ending  the 
current crisis. However, from the analysis it also follows that the 
sector  remains  very  vulnerable  to  fluctuations  in  demand  and  is 
presently severely affected by the economic recession. 

8.  The old-for-new measure 

The  old-for-new  measure  was  designed  to  counteract  the  observed 
tendency to over  investment. Has this objective been  achieved? 

As  a  first  point  it  should  be  noted  that  the old-for-new  rule was 
never meant  to block  all  investment  in new capacity.  Contrary  to a 
tonnage stop, an old-for-new  regime should not hinder the necessary 
modernization  of  the  fleet.  Even  if  the market  as  a  whole  is  not 
expanding,  there  will  still  be  a  need  for  expansion  and 
modernization  in  certain  sub-markets.  In the reference  period  this 
has been the case in particular  in the sub-markets  for the carriage 
of  containers  and  chemical  products.  It  has  been  observed  in 
practice  that  a  sufficient  number  of  such  new  vessels  have  been 
brought  into service over the  last years. In addition, a number of 
new  push  barges  were  brought  into  service.  Therefore,  as  a  first 
point  it can be  concluded  that the restraint  on  investment  has not 
been applied too severely. 

A  second  question  is  whether  the  regime  has  been,  perhaps,  too 
loose  to  be  effective?  Based  on  data  received  from  the  five 
cooperating  scrapping  funds,  table  5  (see  next  page)  gives  an 
overview  of  all  operations  having  been  subject  to  the  old-for-new 
rule.  In  analysing  these  figures  a  distinction  has  to  be  made 
between the dry cargo sector and the tanker market. 

In the dry cargo sector 177.431 tonnes of extra capacity were added 
to  the  fleet  during  the  period  from  28.4.1989  to  1.1.1993.  This 
represents  an  average  expansion  rate  of  some  50.000  tonnes  per 
annum,  or  0,5%  p. a.  of  the  total  fleet  capacity  (10  mio  tonnes). 
This  is  a  relatively  low  figure.  As  an  example  it  might  be 
mentioned  that  in  the  year  1988  alone  210.117  tonnes  of  new 
capacity were added to the Communities dry cargo inland  fleet. 

In  addition, the  new  capacity  brought  into  service  was  to  a  large 
extent  (67%) compensated  by the  scrapping  of  118.689  tonnes  of old 
capacity  on  behalf  of  those  who  had  new  vessels  constructed.  For 
the  new  tonnage  not  being  compensated  special  contributions  were 
paid  into  the  funds  to  a total  of  4.036 mio  ECU,  this  sum  served 
for the partial reimbursement of the interest  froe loans. 

V 

V 

V: 

Table 5  : Application  of the old-for-new role in the period 28.4.1989  -  1.1.1993 

"Old-for-new'  role  : special  contributions and compensation  tonnage offered  for scrapping 

(Period  : 28.04.1989  - 01.01.1993) 

Type of 
the vessel 

Dry  cargo 

-  self-propelled 
-  barges 
-  lighters 

Total 

Liquid  cargo 

-  self-propelled 
-  barges 
-  lighters 

Total 

Pushbarges* 

New constructions,  etc. 

Extensions 

Special  contributions  (ECUS) 

Compensation  tonnage 

Number 

Tonnage 

Number 

Tonnage 

Total 
contribution 
due 

already 
received  by 
the  Fund 

Total 

already 
scrapped 

10 
49 
9 

68 

41 
1 

42 

1 

22.081 
123.626 
21.952 

167.659 

86.630 
955 

87.625 

3.960 

56 
5 

61 

20 
1 

21 

9 

9.352 
420 

1.600.650 
2.408.361 
27.117** 

802.814 
2.408.361 
27.117 

24.058 
94.631 

24.058 
94.631 

9.772 

4.036.128 

3.238.292 

118.689 

118.689 

I 

54.871 
767 

14.705.908 
190.804 

13.423.012 
190.804 

19.734 
4.254 

5.638 

1.803 

14.896.712 

13.613.816 

251.925 

194.345 

23.988 

4.784 

19.734 
4.254 

23.988 

4.784 

*/kw 
••/compensation  tonnage in barges in lieu of  special  contributions 

-  13 -

On the whole  it can be concluded that the figures  for the dry cargo 
sector  show  a picture which  globally  corresponds  with  the  initial 
objectives that  is : 

(a) to  bring  the  investments  down  to  a  level  sufficient  to  cope 

with  legitimate modernization requirements; and 

(b) to  persuade  boat  owners  to  "compensate"  new  construction  by 

scrapping when possible. 

The  figures  for the liquid  cargo sector, however, show a different 
picture.  In  the  reference  period  93.263  tonnes  of  additional 
capacity were brought  into  service, corresponding  to  25.000  tonnes 
per  annum, which  represents  an  average  expansion  rate  of  1,2%  per 
annum  compared to the  size of the total tanker  fleet. Only  a small 
portion  (26%) of the new capacity was  compensated  by the  scrapping 
of  old  tonnage  (23.988  t . ). Most  operators  preferred  to  pay  the 
special contribution  in stead of scrapping. 

The  reasons  for  this  behaviour  are  to  be  found  in  the  market 
situation  in 1991 and the first half of  1992. When transport  prices 
for liquid cargo continued to rise in 1991 several tanker operators 
decided  to  have  new  vessels  constructed.  The  increased  prices  for 
second  hand  tankers  and  the  low  construction  prices  offered  by 
shipyards  in  Eastern  Europe  contributed  to  the  investment 
decisions.  Because  of  the  high  prices  for  second  hand  vessels  at 
that  particular  moment  in  time  it  was  cheaper  to  pay  the  special 
contribution  than  to  scrap,  which  explains  the  low  compensation 
rate. 

As  soon  as  figures  on  the  above  evolution  became  available  the 
Commission  undertook  to  analyse  and  remedy  the  situation.  In 
concertation  with  the Member  States concerned, the  scrapping  funds 
and  the  professional  organisations,  it  was  concluded  that  in  the 
market situation - where second hand boats including very old ones, 
are  temporarily  overpriced  -  the  functioning  of  the  old-for-new 
mechanism  could  be  improved  by reserving  the  special  contributions 
received  by  the  funds  for  granting  scrapping  premiums  at  a  later 
date. Hence, the  special  contribution  should  no  longer be used  for 
the advanced reimbursement of the interest  free loans but should be 
used  to  take  an  equivalent  tonnage  out  of  the  market  as  soon  as 
prices  of  old  vessels  come  down  to  the  level  of  the  scrapping 
premiums offered. 

On  21  December  1992  the  Commission  adopted  Regulation  No.  3690/92 
establishing  the  modifications  as  set  out  above  and  laying  down 
detailed  rules for the granting of scrapping premiums under the new 
procedure.  The  Regulation  entered  into  force  on  1.1.1993.  As  from 
this  date  boat  owners  again  have  the  possibility  to  introduce 
applications  for  scrapping  premiums.  However,  the  financial 
resources  available  are  limited  and  consist  only  of  the  special 
contributions  received  after  the  mentioned  date.  Properly 
documented  scrapping  applications which  cannot  be accepted  because 
of  lack  of  financial  means  are  inscribed  on  a waiting  list  if the 
owner wishes so. 

-  14 -

The first results of the new system are summarized  in the  following 
table. 

Table 6  : Scrapping  applications accepted between  1.1.1993  and 

1.7.1993 

number of 
vessels 

capacity 
scrapped 

scrapping 
premiums paid 

dry cargo 
push boats 
tankers 

1 
1 
23 

2.185 ton 
985 kw 

11.877 ton 

131.000 ECU 
236.400 ECU 
1.956.356  ECU 

Because  of  the  limited  financial  resources  available  only  2 
applications  could  be  accepted  in  the  dry  cargo  sector  (of  which 
one  push  boat).  In  the  tanker  sector  more  substantial  amounts 
became  available  -  following  the bringing  into  service of  some new 
tankers ordered  in the boom period - which allowed the scrapping of 
almost  12.000 tonnes of surplus capacity. 

However,  in  the  first  6  months  of  1993  the  cooperating  scrapping 
funds  received  many  more  scrapping  applications  than  could  be 
accepted within the budgetary  limits. At 1 July  1993 there remained 
220  applications  on  the  waiting  list  for  the  dry  cargo  sector 
including push boats and 27 applications  for tankers. 

Conclusions 

As  regards  the  old-for-new  measure  it  can  be  concluded  that  the 
modification  introduced  on  1.1.1993  represents  an  improvement, 
since  it ensures  that all  capacity  newly brought  into  service will 
be compensated  by the scrapping of an equivalent tonnage. 
The  large  number  of  scrapping  applications  included  on  the waiting 
list clearly  indicates that there  is a need for the continuation of 
the current  rehabilitation measures. With regard to the question as 
whether  the  old-for-new  rule  as  laid  down  in Article  8 of  Council 
Regulation  No.  1101/89  should  be  reviewed  on  28  April  1994,  the 
answer  has  to  be  positive  in  the  light  of  the  present  market 
situation.  In  line with Article  8 paragraph  6 of  the  said  Council 
Regulation,  the  Commission  herewith  presents  a  proposal  to  the 
Council on the extension of the old-for-new rule, which  is attached 
to this report. 

-  AS  -

Proposai  fora 
COUNCIL REGULATION (EC\ 

SYN 475 

modifying  Regulation (EEC) No  1101/89 on structural improvements in 
inland waterway transport 

(presented by the Commission) 

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Explanatory memorandum 

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1.  The  Council,  acting  on  a Commission  proposal,  adopted  on  27 April 
1989  a  package  of  measures  designed  to  reduce  structural 
overcapacity  in  inland  navigation.  These  measures  are  set  out  in 
Council  Regulation  (EEC)  No.  H O I / 8 9 ^1).  The  Regulation  provides 
for two sets of measures : 

(a) the  granting  of  scrapping  premiums  to  reduce  the  capacity  of 

the active inland waterway  fleet; and 

(b) measures  to  curb  investment  in extra  vessels  in  the  course of 
the  coordinated  scrapping  scheme.  These  latter  measures  are 

generally  known  as  "the  old-for-new-rule".  The  old-for-new 
provision  is of a temporary  character and expires on 28.4.1994. 

2.  The  Regulation  No.  1101/89  stipulates  in  Article  8.S that  the 
Council  on  the  basis  of  a  Commission  proposal  accompanied  by  a 
well-founded  report, may  take  a decision  to  extend  the  period  for 
which  the  old-for-new-  rule  was  introduced  by  a  maximum  of  five 
years. 

The  report, which  is annexed,  shows that  the old-for-new  mechanism 
effectively  contributes  to the  reduction  of  overcapacity.  However, 
the report also shows that the waterway  industry has been  seriously 
affected  by  a recent drop in demand  caused  by the general  economic 
recession which emerged  in the course of 1992. 

For these  reasons  it is considered  that  a prolongation  of the old-
for-new measure  is called  for to further reduce overcapacity. 

3.  During  consultations  organised  by  the  Commission  services,  the 
Member  States  directly  concerned  and  the  organisations  of  inland 
waterway  operators  expressed  the view that  the  old-for-new  measure 
should  be  temporarily  extended  for the reasons  summarized  in point 
2 and said out  in more detail  in the attached report. 

4.  The package of capacity  reduction measures as introduced  by Council 
Regulation  No.  1101/89  is  financed  by  the  industry  itself.  Under 
the  scheme  Community  operators  are  obliged  to  pay  annual 
contributions  to the  scrapping  fund  for a period  stretching  beyond 
the  date  of  28.4.1994. The  eventual  non-extension  of  the  old-for-
new rule would  disrupt the balance of the package. 

5.  On the grounds  set out above the Commission considers that the old-

for-new  rule  should  be  extended  for  another  period  of  five years. 
However,  because  of  the  fluctuations  in  the  market  situation  it 
would  be  appropriate  to reexamine  the  situation  by  the end  of  1996 
and  to  present  additional  proposals  to  the  Council  if  required. 
These proposals could  include a gradual  reduction  of the  conditions 
under the old-for-new  rule to allow for a smooth transition. 

(1) O.J.  No.  L  116  of  28.4.1989,  p.  25  last  amended  by  Council 
Regulation  (EEC)  No.  3572  of  4.12.1990,  see  O.J.  No.  L  353  of 
17.12.1990, p. 14. 

-"n-

Proposal  for a 

Council Regulation  (EC) No. 

of 

modifying Regulation  (EEC) No. 1101/89 on structural 
improvements in inland waterway transporte1) 

THE COUNCIL OF THE EUROPEAN COMMUNITIES, 

Having regard to the Treaty establishing the European Community, and in 
particular Article 75 thereof, 

Having regard to the proposal  from the Commission^)  r 

In cooperation with the European Parliament(3), 

Having regard to the opinion of the Economic and Social Committee(^), 

Whereas  Council  Regulation  (EEC)  No.  1101/89  introduced  a  number  of 
measures  designed  to  remove  the  structural  overcapacity  in the  inland 
waterway  sector and whereas one of these measures, which is designed to 
temporarily  curb  investment  in  extra  capacity,  was  initially  foreseen 
for a five year period; 

Whereas  these  said  measures  have  contributed  to  the  reduction  of 
structural  overcapacity  in  the  inland  waterway  sector;  whereas, 
however, the  recent  economic  downturn  has  caused  a drop  in demand  for 
waterway  services  resulting  in  renewed  overcapacity  felt  in  every 
sector of the inland waterway transport market; whereas it is therefore 
appropriate  to  maintain  the  current  structural  improvement  measures, 
for a certain period; 

Whereas  given  that  forecasts  indicate  that  the  overcapacity  is  likely 
to  persist  for  considerable  time,  it  is  appropriate  to  reexamine  the 
situation  before  the  end  of  1996  in  the  light  of  the  then  existing 
market situation. 

HAS ADOPTED THIS REGULATION : 

(1) O.J. L 116 of 28.4.1989, p. 25 
(2) 
(3) 
(4) 

-If-

Article 1 

"""' 

V 

Regulation (EEC) No. 1101/89 is hereby amended as follows : 

-, 

1.  In  Article  8  paragraph  1(a)  first  phrase,  the  period  of  "five 

years" is replaced by "ten years". 

.  . 

2.  The following paragraph 5 is added to Article 10 : 

"5. The Commission  shall draw up a report  evaluating  the overall 
effect  of  the  measures  provided  for  by  this  Regulation, 
together with  proposals  if appropriate, and  submit  it to the 
European Parliament and the Council by 31 December 1996". 

'  Article 2 

This Regulation shall enter into force on 28 April 1994. 

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

Done at Brussels, 

For the Council, 

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"7 2 

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