Proposal for a COUNCIL REGULATION (EC) establishing favourable tariff treatment for imports of certain goods into the free zones of Madeira and the Azores by reason of their end use
Date: 1995-11-06
Institutions: European Commission
Subjects: Azores, Madeira, customs regulations, free zone, processing industry, regional aid

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels,  06.11.1995 
COM(95) 524 final 

Proposal  for  a 

COUNCIL  REGULATION  (EC) 

establishing favourable tariff treatment for imports of 
certain goods into the free zones of Madeira and the Azores 
by reason of their end use 

(presented  by  the  Commission) 

EXPLANATORY  MEMORANDUM 

1 

2. 

In  a  letter  from  its  Permanent  Representative's  Office  dated  7 February  1994,  the  Portuguese 
government  requested  a  reduction  in  the  customs  duties  levied  on  raw  materials  released  for  free 
circulation in Madeira for processing in the free zone. 

Among the arguments  marshalled  in support  of  its  request,  the  Portuguese  government  underlined 
the economic and social  situation of the archipelago:  it believes that a diversification  of production 
could help boost Madeira's industrial development. 

By  Decision  91/315/EEC of 26 June  1991, the Council  set up a programme  of options  specific  to 
Madeira  and the Azores  (POSEIMA).  Two of this  programme's  measures  are  customs  measures. 
The  first,  of general  scope,  provides  that  processing  activities  in the  free  zones  of  the  outermost 
regions  are  not  subject  to  the  economic  conditions  attached  to  the  inward  processing  procedure. 
The second is the temporary  suspension of customs duties levied on capital goods for the free zones 
of Madeira and the Azores. 

3. 

The  Commission  departments  have  studied  Portugal's  request  in  respect  of the  Azores  as  well  as 
Madeira since the two archipelagos have similar social and economic features. 

They  found  that  POSEIMA's  objectives  had  not  been  fully  achieved  and  that  supplementary 
Community action would be desirable.  Of these objectives, procurement  of raw materials  is one of 
the  most  important  in  that  it  is  a  prerequisite  for  any  diversification  and  upgrading  of  local 
production.  There arc many obstacles  to supplies  at  present,  one of them being the  remoteness of 
the archipelagos. 

For  these  reasons  Portugal's  request  should  be  acceded  to,  and  a  measure  adopted  to  give 
favourable tariff treatment for the raw materials referred to above. 

4. 

The draft  Regulation  merely creates a general  framework  for  according favourable  tariff  treatment. 
The  actual  rules  arc  those  laid  down  by  the  Customs  Code  and  its  implementing  provisions,  in 
particular the provisions concerning  release for  free  circulation of goods accorded favourable  tariff 
treatment by reason of their end use. 

The  draft  Regulation  also  authorizes  the  Commission  to  examine  requests  presented  by  the 
Portuguese authorities and to establish lists of goods eligible for favourable  tariff treatment  and the 
tariff  reductions  applicable  to the goods  in question.  Other  implementing  provisions  will  also be 
adopted  by  the  Commission,  which  will  be  assisted  by  the  Customs  Code  Committee,  working 
according to its rules of procedures, and by the management committees. 

This is the purpose of the attached proposal. 

Attached: Proposal for a Council Regulation. 

L 

Proposal for a Council Regulation (EC) No 

/95 

of 

establishing favourable tariff treatment for imports of 
certain goods into the free zones of Madeira and the Azores 
by reason of their end use 

THE COUNCIL OF THE EUROPEAN UNION 

Having regard to the Treaty establishing the European Community, and in particular Article 28 thereof, 

Having regard to the proposal from the Commission1, 

Whereas Council  Decision  91/315/EEC set up a programme of options specific to Madeira and the Azores 
(POSEIMA)2;  whereas  the  programme  recognizes  in  its  preamble  that  the  free  zones  of  the  Azores  and 
Madeira  are  essential  for  the  development  of  the  two  archipelagos  and  to  this  end  lays  down  specific 
measures to stimulate activity there; 

Whereas  Declaration  26 on the outermost  regions  of the Community,  annexed  to the  Treaty  on  European 
Union,  advocates  specific  measures  for  the  economic  and  social  development  of those  regions  as  long  as 
there is an objective need to take such measures; 

Whereas  the  situation  of  the  productive  sectors  in  these  archipelagos,  as  described  in  the  Commission's 
report on the implementation of POSEIMA in  1992-93, calls for additional customs measures; 

Whereas  the  Portuguese government  by  a  letter  dated  7 February  1994  requested  a  reduction  in  customs 
duties  on  raw  materials  for  processing  in  the  free  zone  of  Madeira  and  subsequently  released  for  free 
circulation in the territory of the Community in the form of compensating products; 

Whereas  the  free  zones  of  Madeira  and  the  Azores  are  a  key  component  of  the  economic  and  social 
development  strategy of the two  regions; whereas  increasing activity  in the free zones will have  significant 
repercussions on the development of these archipelagos by diversifying  production and creating jobs; 

Whereas, in view of the economic and geographical  similarities between  Madeira and the Azores, measure 
should be proposed for the free zones of both archipelagos; 

Whereas Madeira and the Azores are among the least-developed regions of the Community, their per capita 
GNP being less than half the Community average and their trade balance in deep deficit  because of,  among 
other  things,  the  scarcity  of  exportable  products;  whereas  their  products,  for  these  reasons,  encounter 
serious difficulties  in reaching the Community market; whereas this handicap cannot be surmounted without 
diversifying and upgrading production; 

I 
2 

Oil, TO, 2*.*-*99>.  R I* 

Whereas  supplying  the  archipelagos  with  raw  materials  is  likely  to  stimulate  sustainable  processing 
activities  and  so satisfy  requirements; whereas,  in order to facilitate  the marketing  of the products  of  such 
processing activities, provision  should  be made for  favourable  tariff  treatment of imports  into  Madeira and 
the Azores of raw materials for  processing; whereas, however, to avoid  injury  to the Community  producers 
concerned,  the  granting  of  such  tariff  treatment  should  be  subject  to  specific  conditions,  namely  that 
processing takes place in the free zones and that it constitutes a substantial processing of the goods; 

Whereas,  admission  of  the  goods  with  entitlement  to  the  said  tariff  treatment  should  be  granted  in 
accordance  with  the  Community  provisions  on  end  use;  whereas,  moreover,  the  Community  rules  on  the 
origin of goods arc  appropriate for determining the amount of processing  required; whereas they lay down 
that goods may not be consumed or used in free zones; 

Whereas favourable  tariff  treatment will be granted  on a temporary  basis  linked to the economic lift-off  of 
the free  zones of Madeira and the Azores; whereas the relief should nevertheless be available over a period 
long enough to enable  economic operators  to  plan their  activities  and  make  adequate  investment;  whereas 
this objective could be achieved if the measure in question is applicable for a minimum often  years, 

Whereas the granting of favourable  tariff treatment  should be considered product by product on the basis of 
requests  made by the  Portuguese  authorities; whereas the Commission,  assisted  by the Committee  referred 
to in Article 247 of Regulation  (EEC) No 2913/92 of  12 October  19923, should examine these requests and 
ensure  that  favourable  tariff  treatment  is  not  granted  to  the  detriment  of  other  sectors  of  activity  in  the 
archipelagos, 

HAS ADOPTED THIS REGULATION 

Article 1 

1.  The customs duties applicable to goods  released  for  free  circulation  in the free  zones of  Madeira and 

the Azores may be reduced by up to  100% on condition that: 

the goods arc to be processed  at  least  to the extent required by Article 24 of Council  Regulation 
(EEC) No 2913/92 and by Articles 35 to 46 of Commission  Regulation (EEC) No 2454/93;4 

the processing is wholly carried out in the geographical  confines  of the free  zones of Madeira and 
the Azores. 

2.  Excluded from the field of application of this ruling are the agricultural products in the sense of Article 
38  of  the Treaty  and  the  products  not  contained  in  Annex  II  obtained  from  agricultural  products  or 
those that incorporate such products.  This exclusion does not include the products of the fishing sector 
except those which benefit  from  the Community  system of compensation  for  surcharges generated  for 
remoter  regions  as  provided  for  in  Council  decision  n°  91/315/CEE  instituting  the  POSEIMA 
programme. 

3  OJ L 302, 19.10.1992, p. 1. 
OJL253,  11.10.1993, p. 1. 
4 

k 

3.  Goods  shall  be  eligible  for  favourable  tariff  treatment  in  accordance  with  Articles 291  to  304  of 
Regulation  (EEC) No  2454/93.  However,  the  authorizations  required  for  application  of  such  tariff 
treatment shall be accorded only to persons established in the Community. 

Article 2 

The  list  of  goods  eligible  under  this  Regulation  and  the  reduced  rates  of  the  customs  duties  shall  be 
established by the Commission  in accordance with the procedure provided for in Article 3(2), on the basis of 
requests made by the Portuguese authorities. 

The other implementing provisions for this Regulation shall be adopted by the same procedure. 

Article 3 

1.  The  Commission  shall  be  assisted  by  the  Customs  Code  Committee  set  up  under  Article 247  of 

Regulation (EEC) No 2913/92. 

2.  The  representative  of  the  Commission  shall  submit  to  the  Committee  a  draft  of  the  measure  to  be 
adopted.  The Committee  shall deliver  its opinion on the draft  within a time-limit which the  chairman 
may  lay  down  according  to the  urgency  of  the  matter.  In the  case  of  decisions  that  the  Council  is 
required to adopt on a proposal  from  the Commission, the opinion  shall be delivered  by  a majority  of 
votes,  in accordance  with  Article  148 (2) of the Treaty.  The votes  of  representatives  of the  Member 
States on the Committee shall be weighted  in the manner set out in that article.  The chairman shall not 
vote. 

The Commission  shall  adopt  measures which apply  immediately.  However,  if these measures  are not 
in  accordance  with  the  opinion  of  the  Committee,  they  shall  forthwith  be  communicated  by  the 
Commission  to  the  Council.  In  that  event  the  Commission  shall  defer  application  of  the  measures 
which it has adopted for three months from the date of notification. 

The Council, acting by a qualified  majority,  may take a different  decision within the period  laid down 
above. 

3.  The  Committee  may  examine  any  matter  concerning  the  implementation  of this  Regulation  which  is 

raised by its chairman on his own initiative or at the request of a Member State. 

Goods  released  for  free  circulation  with  the  tariff  treatment  provided  for  in this  Regulation  shall  remain 
under customs surveillance in accordance with Article 82 of Refutation  (EEC) No 2913/92. 

Article 4 

Ç" 

Article 5 

The  competent  Portuguese  authorities  shall  notify  the  Commission  before  30 January  each  year  of  the 
volume of imports admitted in the previous year with the tariff treatment provided for in this Regulation. 

Article 6 

Should the volume or price of imports admitted  with the tariff  treatment  provided for  in this  Regulation be 
such as to cause or threaten to cause injury to Community producers of like or directly competing products, 
the relevant duties  shall be reimposed  in full  or  in part on the products in question,  in accordance with the 
procedure provided for  in the second paragraph of Article 3.  Such measures may also be taken where there 
is serious injury or the threat of serious injury to a single region of the Community. 

Article 7 

The tariff treatment provided for in this Regulation shall be applicable until  31 December 2005. 

After  consultations  with the  competent  Portuguese  authorities, the  Commission  shall,  in the  course  of the 
year 2000, study the effects  of this measure on the economies of the two archipelagos.  On the basis  of its 
findings, it shall, if necessary, present suitable proposals to the Council for the remaining period. 

Article 8 

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

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

Done at Brussels, 

For the Council 
The President 

c 

I 

2. 

3. 

FINANCIAL  STATEMENT 

Budget heading concerned: Chapter  12, Article 120 

Legal basisArticle 28 of the  Treaty 

Title of the measure: 

Proposal  for a Council  Regulation  establishing  favourable  tariff  treatment 

for  imports of certain goods into the free zones of  Madeira and the Azores by  reason of their end 

use 

4. 

Objective: 

Ensure favourable conditions for the procurement of a number of raw materials  for 

release  for  free  circulation  in  the  free  zones  of  Madeira  and  the  Azores  for  the  purpose  of 

processing them there 

5. 

Method of calculation 

CN codes: 

3921.90; 3923.21 ; 3926.20 

4805.60; 4811.29; 4821.90 

5208.31; 5209.31; 5209.39; 5407.52; 5408.31 

9006.90; 9617.19 

s 

•.  •  i  • 

Duties to be levied: exempt 

CCT duties: various 

6. 

The  1993 data  on  inward  processing  operations  in the  Madeira  free  zone  by  enterprises  working 

suggest  an  annual  loss  of  revenue  of  ECU 42 415.  Note  that  the  arrangements  provkie  for  the 

exemption of such goods from customs duties. 

ISSN 0254-1475 

COM(95) 524  final 

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ISBN 92-77-95385-3 

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