Council Regulation (EC) No 1177/2002 of 27 June 2002 concerning a temporary defensive mechanism to shipbuilding
Date: 2002-06-27
Institutions: Council of the European Union
Subjects: EU aid, South Korea, container, market protection, restriction on competition, shipbuilding, single market, tanker

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I

(Acts whose publication is obligatory)

COUNCIL REGULATION (EC) No 1177/2002

of 27 June 2002

concerning a temporary defensive mechanism to shipbuilding

THE COUNCIL OF THE EUROPEAN UNION,

(4)

Having regard to the Treaty establishing the European Commu-
nity, and in particular Articles 87(3)(e), 89 and 133 thereof,

Having regard to the proposal from the Commission (1),

Having regard to the Opinion of the European Parliament (2),

Whereas:

(1)

(2)

(3)

The European Commission and the Government of the
Republic of Korea, hereinafter ‘Korea’, signed the Agreed
Minutes relating to world shipbuilding on 22 June 2000,
hereinafter ‘the Agreed Minutes’, with the aim of restor-
ing fair and transparent competitive conditions. How-
ever, the commitments under the Agreed Minutes, not-
ably the commitment of ensuring an effective price
surveillance mechanism, have not been effectively imple-
mented by the Korean side and therefore a satisfactory
result has not been obtained.

Operating aid has not been effective in ensuring that the
European shipbuilding industry is not injured by compe-
tition not respecting normal competitive conditions in
the shipbuilding market. Accordingly, as follows from
Article 3 of Council Regulation (EC) No 1540/98 of 29
June 1998 establishing new rules on aid to shipbuild-
ing (3), contract-related operating aid to shipbuilding
may not be granted in respect of contracts agreed as
from 1 January 2001.

However, as an exceptional and temporary measure, and
in order to assist Community shipyards in those seg-
ments that have suffered adverse effects in the form of
material
injury and serious prejudice caused by unfair
Korean competition, a temporary defensive mechanism
should be authorised for limited market segments and
for a short and limited period only. Regulation (EC) No
1540/98 should apply mutatis mutandis.

(1) OJ C 304 E, 30.10.2001, p. 208.
(2) OJ C 140 E, 13.6.2002, p. 380.
(3) OJ L 202, 18.7.1998, p. 1.

The situation in the Community shipbuilding industry is
heterogeneous. According to the Commission’s Fourth
and Fifth Reports on the Situation in World Shipbuild-
ing, approximately half of compensated gross tonnage
produced in Community shipyards concerns the market
segments in which Community shipyards are in a strong
position on the international market. However, in other
segments, there is evidence that Community shipyards
have suffered adverse effects in the form of material
injury and serious prejudice caused by unfair Korean
competition. Therefore, contract-related temporary sup-
port may be authorised in certain circumstances in those
segments, namely container ships and product and che-
mical tankers.

(5)

Considering the exceptional development in the sector of
LNG carriers, the Commission will continue to monitor
this market. Contract-related temporary support may be
authorised in this sector if the Commission confirms, on
the basis of investigations covering the period of 2002,
that the Community industry has suffered material injury
and serious prejudice in this sector caused by unfair
Korean practices to the same extent as has been found
for container ships and product and chemical tankers.

(6)

Support of 6 % of contract value before aid may be
authorised in order to effectively enable Community
shipyards to overcome unfair Korean competition.

(7)

The temporary defensive mechanism should only be
authorised after the Community initiates dispute settle-
ment proceedings against Korea, by requesting consulta-
tions with Korea, in accordance with the World Trade
Organisation’s Understanding on the Rules and Proce-
dures for the Settlement of Disputes and may no longer
be authorised if these dispute settlement proceedings are
resolved, or suspended on the grounds that the Commu-
nity considers that the Agreed Minutes have been effec-
tively implemented,

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HAS ADOPTED THIS REGULATION:

Aid under this Article may be authorised for shipbuilding
3.
contracts up to a maximum intensity of 6 % of contract value
before aid.

Article 1

For the purposes of this Regulation, the relevant definitions
listed in Article 1 of Regulation (EC) No 1540/98 shall apply.
In addition, the following definitions shall apply:

(a) ‘container ships’ shall mean ships designed with a single
deck hull with an arrangement of holds to carry containers
(standard or non-standard; refrigerated or non-refrigerated),
whose holds are fitted with cell guides to facilitate the
positioning of the containers, as may be some of the deck
storage space. Other ships combining cargo carrying capa-
city for containers and other cargo are considered as con-
tainer ships if the larger part of the cargo carrying capacity
is dedicated to containers;

(b) ‘chemical tankers’ shall mean ships designed with a single
deck hull with an arrangement of integral and/or indepen-
dent tanks suited to carry chemical products in liquid form.
Chemical tankers are characterised by the ability to carry
and handle several substances at the same time and the par-
ticular equipment of the tanks with coatings, reflecting the
nature and hazard of the cargo carried;

(c) ‘product tankers’ shall mean ships designed with a single
deck hull with an arrangement of integral and/or indepen-
dent tanks suited to carry refined petroleum products in
liquid form;

(d) ‘LNG carriers’ (Liquefied Natural Gas carriers) shall mean
ships designed with a single deck hull with fixed integral
and/or independent tanks suited to carry natural gas in
liquid form.

Article 2

1.
Subject to paragraphs 2 to 6, direct aid in support of con-
tracts for the building of container ships, product and chemical
tankers as well as LNG carriers shall be considered compatible
with the common market when there has been competition for
the contract from a Korean shipyard offering a lower price.

This Regulation shall not apply in respect of any ship
4.
delivered more than three years from the date of signing of the
final contract. The Commission may, however, grant an exten-
sion of the three-year delivery limit when this is found justified
by the technical complexity of the individual shipbuilding pro-
ject concerned or by delays resulting from unexpected disrup-
tions of a substantial and defensible nature in the working pro-
gramme of
circumstances,
unforeseeable and external to the company.

to exceptional

yard due

a

5.
The Commission will keep under review the market seg-
ments eligible for aid under paragraph 1, with regard to evi-
dence clearly proving that a specific market segment within the
Community has been directly injured by unfair and non-trans-
parent competitive conditions.

6.

Regulation (EC) No 1540/98 shall apply mutatis mutandis.

Article 3

Aid covered by Article 2 shall be subject to the provisions of
Article 88 of the Treaty. The Commission shall adopt a decision
in accordance with Regulation (EC) No 659/1999 of 22 March
1999 laying down detailed rules for the application of Article
88 (1) of the EC Treaty (2).

Article 4

The Regulation shall be applied to final contracts signed from
the entry into force of this Regulation until its expiry, with the
exception of final contracts signed before the Community gives
notice in the Official Journal of the European Communities that it
has initiated dispute settlement proceedings against Korea by
requesting consultations in accordance with the World Trade
Organisation’s Understanding on the Rules and Procedures for
the Settlement of Disputes and final contracts signed one
month or more after the Commission gives notice in the Official
Journal of the European Communities that these dispute settlement
proceedings are resolved, or suspended on the grounds that the
Community considers that the Agreed Minutes have been effec-
tively implemented.

Article 5

2.
Direct aid in support of contracts for the building of LNG
carriers may only be authorised under this Article for final con-
tracts signed after the Commission gives notice in the Official
Journal of the European Communities that it confirms, on the basis
of investigations covering the period of 2002, that Community
industry has suffered material injury and serious prejudice in
this market segment caused by unfair Korean practices.

This Regulation shall enter into force on the day following that
of its publication in the Official Journal of the European Commu-
nities and shall expire on 31 March 2004.

(1) The numbering of Articles in the Treaty establishing the European

Community has been changed in the Treaty of Amsterdam.

(2) OJ L 83, 27.3.1999, p. 1.

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

Done at Luxembourg, 27 June 2002.

For the Council

The President

M. ARIAS CAÑETE