Proposal for Council Decision authorising France to extend the application of a reduced rate of excise duty on "traditional" rum produced in its overseas departments
Date: 2001-06-28
Institutions: European Commission
Subjects: France, excise duty, fiscal policy, originating product, overseas department (France), spirits

C 270 E/148

EN

Official Journal of the European Communities

25.9.2001

Proposal for Council Decision authorising France to extend the application of a reduced rate of
excise duty on (cid:145)traditional(cid:146) rum produced in its overseas departments

(2001/C 270 E/22)

COM(2001) 347 final (cid:151) 2001/0142(CNS)

(Submitted by the Commission on 28 June 2001)

THE COUNCIL OF THE EUROPEAN UNION,

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

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Parliament,

Whereas:

(1) By a Council decision of 30 October 1995, France was
authorised to apply to traditional rum produced in its
overseas departments (OD) a rate of excise duty lower
than the full rate of excise duty applicable to ethyl
alcohol.

(2) The decision was taken pending the effects of the existing
measures taken to improve the competitiveness of
the
cane-rum-sugar sector in those departments, and also to
take account of the consequences of the abolition of tariff
quotas on imports of rum originating in the ACP States; it
expires on 31 December 2002.

(3) In its memorandum regarding the measures concerning
the outermost regions to be implemented under Article
299(2) of the Treaty, France indicates that it is essential to
maintain the tax arrangements applicable to traditional
rum marketed in mainland France.

the

(4) Account being taken of the sugar CMO review in 2001
and the dismantling in 2003 of the customs protection for
spirits, the Community and national measures taken to
improve
cane-sugar-rum
sector in the overseas departments still do not in them-
selves make it possible to reach the level of competi-
tiveness which would enable the French Republic to
adapt
traditional rum produced in its
the taxation of
overseas departments.

competitiveness of

the

(5) Given the small

the OD
distilleries can keep up their activities only by retaining
their share of the market in mainland France, this being

the local market,

scale of

the market

shares of
the

for mainland France)

the main outlet for their rum production (over 50 % of
the total); the trend on the Community market shows that
competition from non-Community rum has caused a
considerable drop in the volume of OD rum sold on
the Community market. On a market with 28 % growth
(average for the period 1986-99), the ACP countries’ share
rose by 64,3 %, and that of other countries by 64,5 %;
over the same period, the OD share dropped by 22,4 %;
rum sold on the
in 1999,
following: 64,7 % (or
Community market were
for rum from the ACP
346 084 hl of pure alcohol)
countries, 15,5 % (or 82 706 hl of pure alcohol)
for
rum from other non-Community countries and 19,8 %
(or 105 950 hl of pure alcohol, of which 85 000 hl of
pure alcohol
for OD rum. The
inability to compete on the Community market, which
is due
is mainly the result of higher marketing prices,
to the difference between the
rum
produced in the OD and of
rum produced outside
Community territory; in the case of OD rum, attention
is drawn to the purchase cost of sugar cane on the local
market (four to six times higher than the prices applicable
labour
outside Community territory) and the cost of
(three
than in
and a half
In future this inability to
non-Community countries).
compete will be further accentuated by the need to
include in the cost price of rum the costs resulting
from bringing rum production units in the OD into line
in accordance with
with environmental
standards,
the mainland
therefore,
Community legislation. Only,
France market,
in which OD rum qualifies for special
tax arrangements that offset the competitive disadvantage
resulting from its higher cost price, has made it possible
to safeguard rum-producing activities in the OD.

cost price of

times higher

to three

(6) In view of the size of the turnover and the number of jobs
involved,
it is essential to maintain the cane-sugar-rum
sector in the overseas departments in order to ensure
in the
those departments’ economic and social balance;
three departments most affected, i.e. RØunion, Guadeloupe
and Martinique, the sector produces an annual turnover of
over EUR 228 673 526 and provides some 40 000 jobs,
including 22 000 direct jobs.

(7) It

is

therefore necessary and justified for France to
maintain, by way of derogation from Article 90 of the
Treaty, a reduced rate of excise duty on (cid:145)traditional(cid:146) rum
produced in its overseas departments in order to avoid
endangering their development.

25.9.2001

EN

Official Journal of the European Communities

C 270 E/149

(8) In order not

to undermine the single market,

the
quantities of rum originating in the overseas departments
which may qualify for this measure may not, as before,
exceed a level corresponding to traditional trade flows
recorded in the last few years.

(9) In view of the need to create a climate of legal certainty
for traders in the cane-sugar-rum sector and given the
time it takes to amortise equipment and buildings, the
derogation should be granted for seven years.

(10) The granting of a seven-year period must be subject to the
condition that a mid-term report is produced so that the
Commission can assess whether the reasons which justify
the granting of the tax derogation still exist.

(11) This proposal

for a decision shall not prejudice the
possible application of Articles 87 and 88 of the Treaty,

HAS ADOPTED THIS DECISION:

Article 1

By way of derogation from Article 90 of the Treaty, France
shall be authorised to extend the application in mainland
France to (cid:145)traditional(cid:146) rum produced in its overseas departments
of a rate of excise duty lower than the full rate on alcohol laid
down in Article 3 of Council Directive 92/84/EEC (1).

Article 2

The derogation referred to in Article 1 shall be confined to
rum as defined in Article 1(4)(a) of Council Regulation (EEC)
No 1576/89 (2), produced in the French overseas departments
from sugar cane harvested in the place of manufacture, having
a content of volatile substances other than ethyl and methyl
alcohol equal to or exceeding 225 grams per hectolitre of pure
alcohol and an alcoholic strength by volume of 40 % vol. or
more.

Article 3

1.
The reduced rate of excise duty applicable to the product
referred to in Article 2 shall be confined to an annual quota of
90 000 hl of pure alcohol.

2.
The reduced rate may be lower than the minimum rate of
excise duty on alcohol set by Directive 92/84/EEC, but may not
be more than 50 % lower than the standard national excise
duty on alcohol.

Article 4

This decision shall be applicable from 1 January 2003 until
31 December 2009. By 30 June 2006 at the latest, France shall
send the Commission a report to enable it to assess whether
the reasons which justified the granting of the reduced rate still
exist.

Article 5

This decision is addressed to the French Republic.

(1) OJ L 316, 31.10.1992.

(2) (OJ L 160, 12.6.1989, p. 1), Regulation last amended by Regulation

(EC) No 3378/94 (OJ L 366, 31.12.1994, p. 1).