Proposal for a Council Decision concerning the dock dues in the French overseas departments and extending the period of validity of Decision 89/688/EEC
Date: 2003-12-17
Institutions: European Commission
Subjects: French overseas department and region, local tax, tax exemption, tax system

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 17.12.2003
COM(2003) 792 final

2003/0308 (CNS)

Proposal for a

COUNCIL DECISION

concerning the dock dues in the French overseas departments and extending the period
of validity of Decision 89/688/EEC

(presented by the Commission)

EN

  EN

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EXPLANATORY MEMORANDUM

Article 2(3) of Council Decision 89/688/EEC of 22 December 1989 concerning the
dock  dues  in  the  French  overseas  departments1  states  that  in  view  of  the  specific
constraints on the overseas departments, partial or total exemptions from dock dues
may  be  authorised  for  local  production  activities  for  a  period  of  not  more  than  ten
years from the date of the introduction of the charge. This period should have expired
on 31 December 2002 as the system was introduced  on  1  January  1993  under  Law
No  92-676  of  17  July  1992,2  which  transposed  Council  Decision  89/688/EEC  of
22 December 1989 into French legislation.

Under  Article  3  of  Council  Decision  89/688/EEC,  on  24  November  1999  the
Commission sent a report to the Council, assessing the Community system of dock
dues since its entry into force. It concludes that the four French overseas departments
are in a much more fragile economic and social situation compared with the rest of
3the  European  Union  by  virtue  of  being  outermost  regions.  The  Commission
underlines  the  importance  of  dock  dues  and  exemptions  for  local  producers.  Dock
dues give the local authorities the means to help threatened local economic activities
survive  in  an  adverse  economic  climate.  Dock  dues  provide  local  authorities  with
resources  to  promote  the  economic  and  social  development  of  each  region,  as  an
adjunct  to  Community  policies,  and  to  maintain  a  certain  level  of  education  and
health. The Commission report none the less draws attention to the criteria laid down
by the Court of Justice for exemptions from dock dues, which must be shown to be
necessary, proportionate and precisely determined.

Article  299(2)  of  the  Treaty  establishing  the  European  Community,  which  has
replaced Article 227(2) since 1 May 1999, constitutes the legal basis for the adoption
of special measures for the outermost regions of the EU in order to  help overcome
their permanent handicaps. Article 299(2) of the EC Treaty therefore recognises the
special  characteristics  of  the  outermost  regions,  which  include  the  French  DOMs.
These  provisions  lay  down  the  legal  framework  for  these  regions.  Although  the
provisions of the EC Treaty apply to these regions,4 account should be taken of their
structural  social  and  economic  situation.  The  aggravating  factors  identified  by  the
Treaty are their remoteness, insularity, small size, difficult topography and  climate,
and their economic dependence on a few products, the combination and permanence
of which severely restrain their development. On this basis, the Council is requested
to  adopt  specific  measures  in  order  to  establish  the  conditions  for  applying  the  EC
Treaty to these regions. Specific measures can be adopted in the area of fiscal policy.
These  specific  measures  must  take  account  of  the  special  characteristics  and
constraints  of  the  outermost  regions  without  undermining  the  integrity  and  the

OJ L 399, 30.12.1989, p. 46.
French Official Journal, 19.07.2002, p. 9697.
COM(1999) 621 final.
In  the  case  of  taxation,  the  application  of  a  number  of  provisions  forming  part  of  the  secondary
legislation  under  the  EC  Treaty  was  excluded  to  certain  territories,  among  them  the  French  overseas
departments. This applies to the common system of value added tax established under the Sixth Council
Directive (77/388/EEC) of 17 May 1977 on the harmonisation of the laws of the Member States relating
to turnover tax and the general arrangements under Council Directive 92/12/EEC of 25 February 1992
for products subject to excise duty and on the holding, movement and monitoring of such products.

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coherence of the Community legal order, including the internal market and common
policies.  This  is  the  context  in  which  the  new  fiscal  measures  applicable  to  the
DOMs should be set.

A number  of  positions adopted by  successive European  Councils,5  Parliament,6  the
Committee of the Regions,7 and the Economic and Social Committee8 highlight the
characteristics of these regions, they stress their handicaps and the need to adopt the
specific measures provided for in Article 299(2) of the EC Treaty in order to offset
them and call on the Commission to propose these measures as soon as possible.

In a report that it adopted on 13 March 2000,9 the Commission identified a number
of  specific  measures.  With  regard  to  the  tax  component,  the  report  indicates  that
Article 299(2) authorises special measures for the outermost regions which must be
considered  in  response  to  the  requests  made  by  the  Member  States  concerned.  The
Commission's report also indicates that in each case the instruments most appropriate
to the regional development and support of these regions should be sought, including
tax derogations, which could apply on a long-term basis.

On  12  March  2002  France  sent  a  request  to  the  European  Commission  to  extend
exemptions from dock dues for ten years. This request did not specify which goods
were to be exempted under the future system and the rate differentials between local
products and imports and the grounds for these exemptions and rate differentials with
regard  to  the  handicaps  of  the  DOMs.  The  Commission  notified  the  French
authorities  that  this  information  was  needed  in  order  to  draw  up  a  proposal  for  a
Council  Decision  in  line  with  the  requirements  of  Article  299(2).  In  these
circumstances,  on  28  August  2002  the  Commission  presented  a  proposal  for  a
Council  Decision10  extending  for  one  year,  until  the  end  of  2003,  the  Council
Decision  of  22  December  1989.  This  proposal  was  adopted  by  the  Council  on
10 December 2002 (Council Decision 2002/973/EC).11

7. 

On 14 April 2003 France sent a further request to the Commission, in response to the
above requirements. For each DOM it contains a list of products for which it asks to
apply dock dues exemptions or reductions for local production. It also indicates the

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Paragraph 38 of the conclusions of the Cologne European Council of 4 June 1999, paragraph 59 of the
conclusions of the Lisbon European Council of 24 March 2000, paragraph 53 of the conclusions of the
Feira European Council of 20 June 2000, conclusions of the European Council held in Nice on 7, 8, and
9 December 2000, conclusions of the Göteborg European Council of 15 and 16 June 2001, conclusions
of the Seville European Council of 21 and 22 June 2002.
European Parliament resolution of 24 April 1997 on development problems in the outermost regions of
the European Union (OJ C150, 19.5.1997, p.62).
European  Parliament  resolution  of  25  October  2000  on  the  Commission  report  on  the  measures  to
implement Article 299(2) in respect of the outermost regions (OJ C 197, 12.7.2001, p.197).
Opinion  of  the  Committee  of  the  Regions  of  13  December  2000  on  the  problems  of  the  outermost
regions in  connection  with  the  report  on  the  implementation  of  Article  299(2)  (OJ  C  144,  16.5.2001,
p.11).
Opinion No 682 of the Economic and Social Committee of 29 May 2002 on the future strategy for the
outermost regions of the European Union.
Commission Report of 13 March 2000 on the implementation of Article 299(2) to the outermost regions
(COM (2000) 147 final).
COM(2002) 473 final.
OJ L 337, 13.12.2002, p 83.

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maximum tax differential that could be applied according to whether the products are
local or  not:  10,  20,  30  or  50 percentage  points.  The  French  authorities  wished  the
Council Decision to apply for a period of 15 years subject to a three-yearly review of
the need to adjust the scheme. The differential of 10 percentage points would apply
mainly to basic products and those for which a balance has been  achieved between
local  and  external  production.  The  20-point  differential  would  cover  products
requiring  substantial  investment  which  has  an  impact  on  the  cost  price  of  goods
manufactured  locally  for  a  limited  market.  The  30-point  differential  would  apply
mainly to products manufactured by large-scale enterprises and to products which are
extremely  vulnerable  to  imports  from  the  DOMs’  neighbouring  countries.  The
50-point differential would apply, in Guyana and Réunion, to alcohol, in particular to
rum.  The  French  request  sought  additional  measures  such  as  permission  not  to
require payment of dock dues on products manufactured locally by enterprises with
an annual turnover of less than EUR 550 000, permission to apply a 15% reduction
in  the  taxable  amount  to  dock  dues  for  products  manufactured  locally,  and
permission  for  local  authorities  to  take  emergency  measures  to  amend  the  list  of
products covered by a tax differential in respect of dock dues.

The Commission has assessed this request in the light of the scale of the handicaps
affecting industrial production activities in the French DOMs, the purpose of the tax
differentials being to offset these handicaps. Between May and the end of September
this  year,  letters were  exchanged  and meetings held  between  the  French  authorities
and the Commission to discuss this request. The main aim has been to establish the
grounds for the exemptions and quantify in cost price terms the handicaps affecting
locally manufactured products compared with those from outside the DOMs.

The main handicaps found to affect the DOMs are the result of the  factors listed in
Article  299(2):  remoteness,  insularity,  small  size,  difficult  topography  and  climate,
economic dependence on a few products. Three of the four DOMs are located 7 000
km away from metropolitan France and the fourth, Réunion, is some 9 000 km away.
Of  the  seven  outermost  regions,  the  four  French  DOMs  are  by  a  long  chalk  the
territories  furthest  away  from  continental  Europe  and  yet  part  of  the  European
Community. From time to time  these areas are also affected by natural phenomena
such as cyclones, volcanic eruptions and earthquakes.

The remoteness of these regions considerably hinders the free movement of people,
goods and services. The dependence on air and sea transport is compounded by the
fact  that  these  modes  of  transport  are  not  fully  liberalised  and  as  they  are  less
efficient and more costly than road, rail or trans-European networks, they inevitably
have a knock-on effect on production costs.

Higher  production  costs  are  not  only  due  to  isolation  but  also  to  raw  material  and
energy  dependence,  the  obligation  to  build  up  stocks  and  difficulties  affecting  the
supply of production equipment.

The small size of the market and the low level of export activity because of the low
purchasing  power  of  the  countries  in  the  region,  and  the  obligation  to  maintain
diversified  but  small  production  lines  in  order  to  meet  the  requirements  of  a  small
market restrict the opportunities for economies of scale. "Exporting" products made
in  the  French  DOMs  to  metropolitan  France  or  the  other  EU  Member  States  is
difficult because transport costs force up the cost  of these products  and  hence their

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competitiveness. The weakness of the local market also leads to overstocking, which
again affects firms' competitiveness.

The need to bring in specialised maintenance teams that have been properly trained
and  are  capable  of  intervening  swiftly  and  the  virtual  impossibility  of  sub-
contracting, also raise firms' costs and affect their competitiveness.

It  is  clear  from  all  these  factor  that  firms  in  the  French  DOMs  face  organisational
constraints  that  do  not  affect  continental  European  firms  and  which  mean  that  the
prices of locally manufactured products reflect their higher cost price.

Products  from  the  French  DOMs  face  the  additional  handicap  of  having  European
cost  prices  which  make  it  hard  for  their  local  products,  especially  agricultural
products,  to  compete  with  those  produced  in  neighbouring  countries  where  labour
costs are very much lower.

For  these  reasons,  products  manufactured  locally  could  not,  failing  specific
measures, compete with those produced elsewhere which do not face such handicaps,
even  taking  into  account  the  cost  of  transporting  such  products  to  the  overseas
departments.  If  local products  cannot compete it will  become  impossible  to  sustain
local  production,  with  harmful  consequences  in  terms  of  employment  for  the
inhabitants of the DOMs.

The  French  request  has  been  considered  in  the  light  of  the  principle  of
proportionality in order to ensure that, overall, the tax differentials which the French
authorities  would  like  to  apply  will  not  significantly  exceed  the  scale  of  the
handicaps  faced  by  local  products,  in  terms  of  cost  price,  compared  with  external
products.

In the light of these considerations, the Commission therefore proposes to authorise
the implementation of a tax applicable to a list of products for which tax exemptions
or reductions can be envisaged for local products from the French DOMs. A separate
list  of  products  for  each  DOM  must  be  drawn  up  because  obviously  the  local
products from each DOM are different, as are the handicaps they face.

The  regional  and  national  authorities  will  be  responsible  for  implementing  a
differentiated  rate  of  dock  dues  to  products,  within  the  limits  of  the  maximum  tax
differential  authorised.  The  rates  set  in  the  Community  framework  would  be
maximum rates and the national  and regional  authorities  could, within  these  limits,
modulate  the  rates  to  provide  the  necessary  support  for  local  production  in  the
DOMs. The same would apply as regards the possibility of exempting local products
- some products could be totally exempted and others only partially.

it 

is  necessary 

to  meet  a  combination  of 

However, 
the  requirements  of
Articles 299(2) and 90 of the Treaty and also to ensure the coherence of Community
law  and  the  internal  market.  This  means  only  taking  measures  that  are  strictly
necessary and proportionate to the objectives pursued, in the light of the handicaps of
the  DOMs'  remoteness.  The scope  of  the  Community  framework  therefore  consists
of a list of sensitive products whose local production costs have been demonstrated
to  be  significantly  higher  than  the  production  costs  of  similar  products  from
elsewhere. As stated above, however, the level of taxation must be set so that the sole
purpose of the differential in dock dues is to offset the handicaps and not to turn this

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tax  into  a  protectionist  weapon  that  undermines  the  operating  principles  of  the
internal  market.  Similarly,  coherence  with  Community  law  means  ruling  out  a  tax
differential  for  agricultural  products  for  processing  or  to  be  used  as  agricultural
inputs  when  they  benefit  from  the  aid  under  Articles  2  and  3  of  Regulation
(EC) 1452/2001 of 28 June 2001, and especially the specific supply arrangements, so
that the effect of the subsidies or duty exemptions granted is not cancelled out as a
result of dock dues. A tax differential could, however, be applied to products that are
not entitled to this aid because they are due to be released directly for consumption.

The  products  which  could  be  entitled  to  tax  exemptions  or  reductions  in  favour  of
local production can be divided into three categories, according to the size of the tax
differential  that  it  is  proposed  to  authorise:  10,  20  or  30  percentage  points.  The
Commission  did  not  consider  it  possible  to  propose  a  tax  differential  of
50 percentage points for alcohol.

However, in the case of locally manufactured products to which only a tax reduction
is applied, it will be possible to exceed the maximum differentials authorised if the
persons  liable  for  the  tax  normally  due  on  locally  manufactured  products  have  an
annual  turnover  of  less  than  EUR  550  000.  This  will  accordingly  exempt  these
persons from payment of  this  tax  and  reduce their obligations.  This  provision  must
not, however, result in an increase of more than  5 percentage points in  the ceilings
referred to in Article 1(2). So, for example, for a product for which a tax differential
of  10  percentage  points  is  authorised,  if  the  goods  produced  in  the  DOMs  were
assessed for dock dues at a rate of 5%, dock dues could be applied at a rate of 15%
for  those  produced  elsewhere.  If  firms  with  an  annual  turnover  of  less  than
EUR 550 000  were  exempt  from  dock  dues  on  products  manufactured  locally,  the
maximum authorised tax differential would therefore be 10+5=15 percentage points
for  goods  manufactured  by  such  firms  and  10  percentage  points  for  goods
manufactured by firms with a turnover of EUR 550 000 or more.

For  products  that  are  not  covered  by  the  Decision,  the  national  and  regional
authorities would nevertheless retain the possibility of charging dock dues provided
that  the  tax  applies  under  exactly  the  same  conditions  to  both  local  products  and
products  from  outside  the  DOMs.  This  would  not  be  the  case  if  there  were  a
reduction in the taxable amount solely for locally manufactured products. However,
as in cases in which a tax differential is authorised, exempting firms with a turnover
of  less  than  EUR 550 000  from  dock  dues  on  products  manufactured  locally  could
result, in such cases, in the application of a tax differential of up to five percentage
points.

The  objectives  of  supporting  the  social  and  economic  development  of  the  French
DOMs, already provided for in the 1989 Decision, are confirmed by the requirements
regarding the purpose of the tax and the allocation of the revenue from dock dues. It
is  a  legal  obligation  that  the  revenues  from  this  tax  are  to  be  incorporated  in  the
resources of the French overseas departments' economic and tax regime and allocated
to  an  economic  and  social  development  strategy  involving  aid  for  promoting  local
activities.

To  speed  up  the  procedure  in  certain  circumstances  where  a  decision  needs  to  be
taken  urgently,  the  Council,  acting  by  a  qualified  majority  on  a  proposal  from  the
Commission,  may  adopt  the  measures  necessary  for  the  implementation  of  this
Decision. Although these changes are minor, the measures affect the list of products

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or the amount of the tax exemptions or reductions that can be applied. This justifies
giving the Council the right to exercise implementing powers within the meaning of
Article  202  of  the  Treaty.  This  provision  should  help  to  expedite  the  process  of
updating  the  Council  Decision,  especially  in  cases  where  new  local  production  has
started up in one of the DOMs. This expedited procedure should also prove useful if
urgent measures need to be taken in response to certain unfair commercial practices.
In such situations, the Commission would not hesitate to propose to the Council, at
the request of the national authorities, the necessary urgent measures.

The  arrangements  are  set  to  last  for  ten  years.  The  French  authorities  would  like  a
longer period but this does not seem possible. Ten years is the longest period that has
been  adopted  for  derogations  based  on  Article  299(2)  of  the  EC  Treaty.  It  will
nevertheless  be  necessary  to  evaluate  the  proposed  system  after  five  years.  The
French  authorities  must  therefore  present  a  report  to  the  Commission  by
31 December 2007 on the application of the arrangements referred to in Article 1, in
order to assess the impact of the measures taken and their contribution to promoting
or maintaining  local  economic  activities,  in  the  light  of  the  handicaps  affecting  the
outermost  regions.  On  this  basis,  the  scope  of  the  measures  and  the  exemptions
authorised under Community law will be revised as necessary.

To  ensure  continuity  with  the  arrangements  under  the  previous  Council  Decisions
(89/688/EEC  of  22  December  1989  and  2002/973/EC  of  10  December  2002)  this
Decision should apply from 1 January 2004. However, because of the time taken by
the  French  authorities  to  provide  the  necessary  justifications  in  support  of  their
request, especially the lists of products for which they wish to apply a tax differential
and also the size of the tax differential, the arrangements for the entry into force of
the Decision should be adjusted in order to enable the French authorities to adopt a
national law to implement the Council Decision. It is therefore proposed that (i) the
provisions of the Decision concerning the products entitled to a tax differential and
the  measures  necessary  for  the  implementation  of  the  Decision  will  not  take  effect
until  1  July  2004  and  (ii)  the  application  of  Council  Decision  89/688/EEC  of
22 December 1989 will be extended until that date, i.e. for a period of six months.

28. 

This proposal has no effect on the Treaty provisions concerning State aid control.

Comments on the articles.

Article 1

Article 1(1) authorises the French authorities to apply, until 31 December 2013 (i.e.
for  ten  years)  exemptions  from  dock  dues  or  reduced  dock  dues  for  the  products
listed in the Annex, which are manufactured locally in the French DOMs.

Article  1(2)  sets  the  maximum  authorised  tax  differentials  between  local  products
and products from abroad. Depending on the categories of goods listed in the Annex,
these maximum differentials are 10, 20 or 30 percentage points.

For  products  to  which  only  a  tax  reduction  is  applied,  Article  1(3)  allows  the
maximum differentials to be exceeded if the persons liable for the tax normally due
are firms whose annual turnover is less than EUR 550 000 and which are accordingly
exempt  from  the  tax.  The  extra  tax  differential  may  not,  however,  exceed
5 percentage points.

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For  products that are  not listed in  the  Annex  and  for  which  there  should  be  no  tax
difference,  Article  1(4)  authorises  the  exemption  for  small  firms  referred  to  in
Article 1(3) to result in the application of a tax difference. This shall not, however,
exceed 5 percentage points.

Article 2

This Article is designed to exclude the application of tax differentials to agricultural
products for processing or for use as agricultural inputs which are entitled to the aid
provided for in Articles 2 and 3 of Regulation (EC) 1452/2001 of 28 June 2001, and
especially the specific supply arrangements, in the form of subsidies or exemptions
from customs duties.

Article 3

This Article gives the Council, acting by a qualified majority,  responsibility for the
implementing measures for Articles 1 and 2.

Article 4

This Article requires the French authorities to notify the Commission without delay
of dock dues arrangements providing for differential taxation of goods. It also allows
for  adapting  the  Community  framework  at  the  end  of  five  years  by  means  of  a
proposal from the Commission  to the Council,  on  the  basis  of  an  evaluation  report
which the French authorities are obliged to transmit to the Commission, to check the
impact  of  the  measures  and  their  contribution  to  promoting  or  maintaining  local
economic activities.

Article 5

This  Article  provides  for  entry  into  force  and  application.  In  order  to  ensure
continuity with the current arrangements, the date from which the Decision becomes
applicable  is  set  at  1  January  2004.  However,  to  enable  the  French  authorities  to
implement the Council Decision by means of a national law, Article 5(2) states that
the  provisions  of  Article  1  and  Article  2  will  not  take  effect  until  1  July  2004.  To
avoid  any  sort  of  legal  vacuum,  Article  5(3)  extends  the  application  of  Council
Decision 89/688/EEC of 22 December 1989 for a six-month period until that date.

8

 
2003/0308 (CNS)

Proposal for a

COUNCIL DECISION

concerning the dock dues in the French overseas departments and extending the period
of validity of Decision 89/688/EEC

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,12

Having regard to the opinion of the European Parliament,13

Whereas:

(1) 

(2) 

(3) 

12

13

14

15

Pursuant  to  Article  299(2)  of  the  Treaty,  the  provisions  of  the  Treaty  apply  to  the
outermost regions and hence the French overseas departments, taking account of their
structural  social  and  economic  situation,  which  is  compounded  by  their  remoteness,
insularity, small size, difficult topography and climate, economic dependence on a few
products,  the  permanence  and  combination  of  which  severely  restrain 
their
development. This Treaty provision dovetails with measures adopted previously in aid
of  the  outermost  regions,  in  particular  the  French  overseas  Departments  (DOMs),  in
Council  Decision  89/687/EEC  of  22  December  1989  establishing  a  programme  of
options specific  to  the  remote  and  insular  nature  of the  French overseas departments
(POSEIDOM).14

Article  2(3)  of  Council  Decision  89/688/EEC  of  22  December  1989  concerning  the
dock  dues  in  the  French  overseas  departments15  states  that  in  view  of  the  specific
constraints  on  the  overseas  departments,  partial  or  total  exemptions  from  dock  dues
may  be  authorised  for  local  production  activities  for  a  period  of  not  more  than  ten
years from the date of the introduction of the charge. This period should have expired
on 31 December 2002 as the system was introduced on 1 January 1993.

Under  Article  3  of  Council  Decision  89/688/EEC,  the  Commission  had  to  submit  a
report on the implementation of the  arrangements  in  order  to  ascertain the  impact of
the  measures  and  decide  whether  to  maintain  the  possibility  of  exemptions.  In  the
report that it sent to the Council 24 November 1999, the Commission concludes that

OJ C […], […], p. […].
OJ C […], […], p. […].
OJ L 399, 30.12.1989, p. 39.
OJ L 399, 30.12.1989, p. 46, as amended by Decision 2002/973/EC (OJ L 337, 31.12.2002, p. 83).

9

 
                                                
(4) 

(5) 

(6) 

the four  French overseas departments  (DOMs)  are in  a  much  more  fragile  economic
and social situation compared with the rest of the European Union by virtue of being
outermost  regions.16  The  Commission  underlines  the  importance  of  dock  dues  and
exemptions for local production in terms of the social and economic development of
these regions.

According to the Commission report of 14 March 2000 on the measures to implement
Article  299(2)  of  the  Treaty,17  this  Article  must  be  implemented  in  partnership  with
the Member States concerned on the basis of detailed requests from them.

On  12  March  2002  France  sent  a  request  to  the  European  Commission  to  extend
exemptions  from  dock  dues  for  ten  years.  The  request  did  not  specify  which  goods
were  to  be  exempted  under  the  future  system  or  the  rate  differentials  between  local
products and  imports or the  grounds  for  these  exemptions  and  rate  differentials  with
regard to the handicaps of the DOMs. In these circumstances, in order to avoid a legal
vacuum being created by the lack of a complete request, the period of application of
Decision 89/688/EEC was extended by one year under Decision 2002/973/EC.

On 14 April 2003 France sent a further request to the Commission, in response to the
above  requirements.  In  this  request,  the  French  authorities  asked  for  the  Council
Decision to apply for a period of 15 years subject to a three-yearly review of the need
to adjust the scheme. France sought to apply a scheme of differential taxation of dock
dues enabling  goods from outside the DOMs  to be taxed more  heavily  that  products
from  the  DOMs  in  question.  The  differential  of  10  percentage  points  would  apply
mainly  to  basic  products  and  those  for  which  a  balance  has  been  achieved  between
local  and  external  production.  The  20-point  differential  would  cover  products
requiring  substantial  investment  which  had  an  impact  on  the  cost  price  of  goods
manufactured  locally  for  a  limited  market.  The  30-point  differential  would  apply
mainly to products manufactured by large-scale enterprises and to products which are
extremely  vulnerable  to  imports  from  the  DOMs’  neighbouring  countries.  The
50-point differential would apply, in Guyana and Réunion, to alcohol, in particular to
rum. The French request sought additional measures such as permission not to require
payment of dock dues on products manufactured locally by enterprises with an annual
turnover of less than EUR 550 000, permission to apply a 15% reduction in the taxable
amount  to  dock  dues  for  products  manufactured  locally,  and  permission  for  local
authorities to take emergency measures to amend the list of products covered by a tax
differential in respect of dock dues.

(7) 

The  Commission  has  assessed  this  request  in  the  light  of  the  scale  of  the  handicaps
affecting  industrial  production  activities  in  the  French  DOMs.  The  main  handicaps
found to  affect the DOMs  are the  result of the  factors listed in  Article  299(2)  of  the
Treaty: remoteness, insularity, small size, difficult topography and climate, economic
dependence  on  a  few  products.  From  time  to  time  these  areas  are  also  affected  by
natural phenomena such as cyclones, volcanic eruptions and earthquakes.

16

17

COM(1999) 621 final.
COM(2000) 147 final.

10

 
                                                
(8) 

(9) 

The  remoteness  of  these  regions  considerably  hinders  the  free  movement  of  people,
goods  and  services.  The  dependence  on  air  and  sea  transport  is  compounded  by  the
fact that these modes of transport are not fully liberalised and as they are less efficient
and  more  costly  than  road,  rail  or  trans-European  networks,  they  have  a  knock-on
effect on production costs.

Higher  production  costs  are  not  only  due  to  isolation  but  also  to  raw  material  and
energy  dependence,  the  obligation  to  build  up  stocks  and  difficulties  affecting  the
supply of production equipment.

(10)  The small size of the market and the low level of  export activity  because  of  the  low
purchasing  power  of  the  countries  in  the  region,  and  the  obligation  to  maintain
diversified  but  small  production  lines  in  order  to  meet  the  requirements  of  a  small
market restrict the opportunities for economies of scale. "Exporting" products made in
the French DOMs to metropolitan France or the other EU Member States is difficult
because  transport  costs  force  up  the  cost  of  these  products  and  hence  their
competitiveness. The weakness of the local market also leads to overstocking, which
again affects firms' competitiveness.

(11)  The  need  to  bring  in  specialised  maintenance  teams  that  have  been  properly  trained
and are capable of intervening swiftly and the virtual impossibility of sub-contracting,
also raise firms' costs and affect their competitiveness.

(12)  The  combination  of  these  handicaps  means,  in  financial  terms,  that  the  cost  price  of
goods produced locally is increased, so that without specific measures they could not
compete  with  those  produced  elsewhere  without  such  handicaps,  even  taking  into
account  the  cost  of  transporting  such  goods  to  the  overseas  departments.  If  local
products  cannot compete it  will  become  impossible  to  sustain  local  production,  with
harmful consequences in terms of employment for the inhabitants of the DOMs.

(13)  Products from the French DOMs face the additional handicap of having European cost
prices which make it hard for their local products, especially agricultural products, to
compete  with  those  produced  in  neighbouring  countries  where  labour  costs  are  very
much lower.

(14)  The French request has been considered in the light of the principle of proportionality
in order to ensure that, overall, the tax differentials which the French authorities would
like  to  apply  will  not  significantly  exceed  the  scale  of  the  handicaps  faced  by  local
products, in terms of cost price, compared with external products

(15) 

In  the  light  of  these  considerations,  the  Commission  therefore  proposes  to  authorise
the implementation of a tax applicable to a list of products for which tax exemptions
or reductions can be envisaged for local products from the French DOMs. The effect
of this differentiated taxation is to restore the competitiveness of local production and
so  to  enable  employment-generating  activities  to  be  maintained  in  the  DOMs.  A
separate list of products for each DOM must be drawn up because the local products
from each DOM are different.

(16)  However, it is necessary to meet a combination of the requirements of Articles 299(2)
and  90  of  the  Treaty  and  also  to  ensure  the  coherence  of  Community  law  and  the
internal  market.  This  means  only  taking  measures  that  are  strictly  necessary  and
proportionate  to  the  objectives  pursued,  in  the  light  of  the  handicaps  of  the  DOMs'

11

 
remoteness.  The  scope  of  the  Community  framework  therefore  consists  of  a  list  of
sensitive  products  whose  local  production  costs  have  been  demonstrated  to  be
significantly higher than the production costs of similar products from elsewhere. The
level  of  taxation  must,  however,  be  modulated  so  that  the  sole  purpose  of  the  tax
differential  in  dock  dues  is  to  offset  the  handicaps  and  not  to  turn  this  tax  into  a
protectionist weapon that undermines the  operating  principles of the internal market.
Similarly,  coherence  with  Community  law  means  ruling  out  a  tax  differential  for
agricultural  products  which  benefit  from  aid  under  Articles  2  and  3  of  Council
Regulation (EC) 1452/2001 of 28 June 2001, introducing specific measures for certain
agricultural  products  for  the  French  overseas  departments,  amending  Directive
72/462/EEC  and  repealing  Regulations  (EEC)  No  525/77  and  (EEC)  No  3763/91
(Poseidom),18 and in particular the specific supply arrangements.

(17)  The  products  which  could  be  entitled  to  tax  exemptions  or  reductions  in  favour  of
local production can be divided into three categories, according to the size of the tax
differential that it is proposed to authorise: 10, 20 or 30 percentage points.

(18)  However, it should be possible to exempt local producers with an annual turnover of
less than EUR 550 000 from payment of the tax. For this purpose, where the products
they manufacture are subject only to a tax reduction, it  should  be  possible  to exceed
the maximum differentials authorised. This provision must not, however, result in an
increase of more than five percentage points in the ceilings set.

(19)  For  the  sake  of  consistency,  the  planned  exemption  from  dock  dues  on  locally
manufactured  products  not  listed  in  the  Annex  for  firms  with  an  annual  turnover  of
less  than  EUR  550  000,  should  be  such  that  the  tax  differential  for  such  products
depends on whether or not such products are locally manufactured. As in the previous
case, this tax difference must not exceed five percentage points.

(20)  The  objectives  of  supporting  the  social  and  economic  development  of  the  French
DOMs,  already  provided  for  in  Decision  1989/688/EEC,  are  confirmed  by  the
requirements regarding the purpose of the tax and the allocation of the revenue from
dock dues. It is a legal obligation that the revenues from this tax are to be incorporated
in  the  resources  of  the  French  overseas  departments'  economic  and  tax  regime  and
allocated to an economic and social development strategy involving aid for promoting
local activities.

(21)  To speed up the procedure in certain circumstances where a decision needs to be taken
urgently,  the  Council,  acting  by  a  qualified  majority  on  a  proposal  from  the
Commission, should be able to adopt the measures required for the implementation of
this  Decision,  for  instance  as  regards  updating  the  lists  of  products  in  the  Annex
because of the emergence of new production activities in the DOMs or taking urgent
measures if local production is threatened by certain commercial practices. Although
these are minor changes, a potential major budgetary impact for the recipients of dock
dues revenue cannot be ruled out. These measures also affect the list of products or the
amount  of  exemptions  or  reductions  that  can  be  applied.  These  two  reasons  justify
giving the Council the right to exercise implementing powers for this Decision.

18

OJ L 198, 21.07.2001, p. 11.

12

 
                                                
(22)  France  must  notify  the  Commission  of  any  arrangement  adopted  in  the  light  of  this

Decision.

(23)  The  arrangements  are  set  to  last  for  ten  years.  It  will  nevertheless  be  necessary  to
evaluate the proposed system at the end of a five-year period. The French authorities
must  therefore  present  a  report  to  the  Commission  by  31  December  2007  on  the
application  of  the  arrangements  authorised,  in  order  to  assess  the  impact  of  the
measures  taken  and  their  contribution  to  promoting  or  maintaining  local  economic
activities, in the light of the handicaps affecting the French overseas departments. On
this  basis,  the  lists  of  products  and  the  authorised  exemption  will  be  revised  as
necessary.

(24)  To ensure continuity with the arrangements provided for in Decisions 89/688/EEC and
2002/973/EC this  Decision should  apply  from 1 January  2004.  However,  in  order  to
enable  the  French  authorities  to  adopt  a  national  law  in  order  to  implement  this
Decision,  it  is  proposed  that  the  provisions  of  the  Decision  concerning  the  products
entitled  to  a  tax  differential  and  the  adoption  of  the  measures  necessary  for  the
implementation of the Decision should not take effect until 1 July 2004, and to avoid
any sort of legal vacuum, the application of Decision 89/688/EEC should be extended
until 30 June 2004.

HAS ADOPTED THIS DECISION:

1. 

2. 

3. 

4. 

Article 1

By  way  of  derogation  from  Articles  23,  25  and  90  of  the  Treaty,  the  French
authorities  shall  be  authorised,  until  31  December  2013,  to  apply  exemptions  or
reductions  to  the  "dock  dues"  tax  for  the  products  listed  in  the  Annex  which  are
produced  locally  in  the  French  overseas  departments  of  Guadeloupe,  Guyana,
Martinique and Réunion.

These  exemptions  must  be  in  keeping  with  the  economic  and  social  development
strategy  of  the  overseas  departments,  taking  account  of  its  Community  framework,
and  contribute  to  promoting  local  activities  while  not  being  such  as  to  adversely
affect the terms of trade to an extent contrary to the common interest.

With reference to  the rate of taxation applied to  similar  products  not  originating  in
the overseas departments, the application of total or partial exemptions referred to in
paragraph 1 may not result in differences of more than:

(a)

10 percentage points for the products listed in part A of the Annex,

(b)

20 percentage points for the products listed in part B of the Annex,

(c)

30 percentage points for the products listed in part C of the Annex.

In order to allow the French authorities to exempt products manufactured locally by a
trader  with  a  turnover  of  less  than  EUR 550 000,  the  differentials  provided  for  in
paragraph 2 may be increased by a maximum of five percentage points.

For  products  not  listed  in  the  Annex  which  are  manufactured  locally  by  a  trader
referred to in paragraph 3, the French authorities may nonetheless apply a difference

13

 
in taxation in order to exempt them. This shall not, however, exceed five percentage
points.

Article 2

The  French  authorities  shall  apply  the  same  taxation  arrangements  as  those  applied  to
products  manufactured  locally  to  products  that  have  benefited  from  the  specific  supply
arrangements under Articles 2 and 3 of Council Regulation (EC) No 1452/2001.

Article 3

The Council, acting by a qualified majority on a proposal from the Commission, shall adopt
the  measures  necessary  for  the  implementation  of  Articles  1  and  2,  especially  as  regards
updating the lists of products in the Annex because of the emergence of new production in the
French  overseas  departments  or  taking  urgent  measures  if  local  production  is  threatened  by
certain commercial practices.

Article 4

France shall immediately notify the Commission of the arrangements referred to in Article 1.

The French authorities shall present to the Commission by 31 December 2007 at the latest a
report  on  the  application  of  the  arrangements  referred  to  in  Article  1,  in  order  to  check  the
impact of the measures taken and their contribution to the promotion or maintenance of local
economic activities, in the light of the handicaps affecting the outermost regions.

On the basis of this report, the Commission shall present a report to the Council giving a full
economic and social analysis, and where appropriate a proposal for adapting the provisions of
this Decision.

The period of validity of Decision 89/688/EEC is hereby extended to 30 June 2004.

Article 5

Article 6

Articles 1 to 4 shall be applicable as from 1 July 2004.

Article 5 shall be applicable as from 1 January 2004.

14

 
Article 7

This Decision is addressed to the French Republic.

Done at Brussels,

For the Council
The President

15

 
ANNEX

A.  List  of  products  referred  to  in  Article  1(2)(a)  according  to  the  classification  of  the
Common Customs Tariff nomenclature19

1. 

Department of Guadeloupe

0105, 0201, 0203, 0205, 0207, 0208, 0209, 0305 except 0305 10, 0403, 0405, 0406, 08 except
0807, 1106, 2001, 2005, 2103, 2104, 2209, 2302, 2505, 2710, 2711 12, 2711 13, 2712, 2804,
2806,  2811,  2814,  2836,  2851  00,  2907,  3204,  3205,  3206,  3207,  3211  00  00,  3212,  3213,
3214, 3215, 3808, 3809, 3925 except 3925 10 00, 3925 20 00, 3925 30 00 et 3925 90, 4012,
4407  10,  4409  except  4409  20,  4415  20,  4818  except  4818  10,  4818  20  et  4818  30,  4820,
7003, 7006 00, 7225, 7309  00, 7310, 7616 91  00, 7616  99,  8419 19 00,  8471,  8902 00 18,
8903 99.

2. 

Department of Guyana

3824 50, 6810 11.

3. 

Department of Martinique

0105,  0201,  0203,  0205,  0207,  0208,  0209,  0305,  0403  except  0403  10,  0406,  0706  10  00,
0707, 0709 60, 0709 90, 0710, 0711, 08 except 0807, 1106,  1209, 1212, 1904, 2001, 2005,
2103, 2104, 2209, 2302, 2505 10 00, 2505 90 00, 2710, 2711 12, 2711 13, 2712, 2804, 2806,
2811,  2814,  2836,  2851  00,  2907,  3204,  3205,  3206,  3207,  3211  00  00,  3212,  3213,  3214,
3215, 3808 90,  3809 91, 3820 00 00, 4012,  4401,  4407,  4408,  4409,  4415  20,  4418  except
4418  10,  4418  20,  4418  30,  4418  50  et  4418  90,  4421  90,  4811,  4820,  6902,  6904  10  00,
7003, 7006 00, 7225, 7309  00, 7310, 7616 91  00, 7616  99,  8402 90 00,  8419  19 00, 8438,
8471, 8903 99.

4. 

Department of Réunion

0105, 0207, 0208, 0209, 0301, 0302, 0303, 0304, 0305, 0403, 0405, 0406, 0407, 0408, 0601,
0602, 0710, 0711, 08, 0904, 0905 00 00, 0910 91, 1106, 1212, 1604 14, 1604 19, 1604 20,
1701,  1702,  1902  except  1902  11  00,  1902  19,  1902  20,  1902  30  et  1902  40,  1904,  2001,
2005  except  2005  51,  2006,  2007,  2103,  2104,  2201,  2309,  2710,  2712,  3211  00  00,  3214,
3402, 3505, 3506,  3705  10 00, 3705 90 00,  3804  00,  3808,  3809,  3811  90,  3814  00,  3820,
3824, 39 except 3917, 3919, 3920, 3921 90 60, 3923, 3925 20 00 et 3925 30 00, 4009, 4010,
4016, 4407 10, 4409 except 4409 20, 4415 20, 4421, 4806 40 90, 48 11, 48 18 except 4818
10, 4820, 6306, 6809, 6811 90 00, 7009, 7312 90, 7314 except 7314 20, 7314 39 00, 7314 41
90, 7314 49 et 7314 50 00, 7606, 8310, 8418, 8421, 8471, 8537, 8706, 8707, 8708, 8902 00
18, 8903 99, 9001, 9021 29 00, 9405, 9406 except 9406 00, 9506.

19

Annex  I  to  Council  Regulation  (EEC)  No  2658/87  of  23  July  1987  on  the  tariff  and  statistical
nomenclature  and  on  the  Common  Customs  Tariff  (OJ  L  256,  7.9.1987,  p.  1),  as  last  amended  by
Commission Regulation (EC) No 2176/2002 of 6 December 2002 (OJ L 331, 7.12.2002, p. 3).

16

 
                                                
B.  List  of  products  referred  to  in  Article  1(2)(b)  according  to  the  classification  of  the
Common Customs Tariff nomenclature20

1. 

Department of Guadeloupe

0210,  0301,  0302,  0303,  0304,  0305 10,  0306,  0307,  0407,  0409 00 00,  0601,  0602,  0603,
0604,  0702,  0705,  0706 10 00,  0707 00,  0709 60,  0709 90,  0807,  1008 90 90,  1601,  1602,
1604 20, 1605, 1702, 1704, 1806, 1902, 1905, 2105 00, 2201 10, 2202 10 00, 2202 90, 2309,
2523 21 00, 2523 29 00, 2828 10 00, 2828 90 00, 3101 00 00, 3102, 3103, 3104, 3105, 3301,
3302,  3305,  3401,  3402,  3406 00,  3917,  3919,  3920,  3923,  3924,  3925 10 00,  3925 20 00,
3925 30 00, 3925 90, 3926 10 00, 3926 90, 4409 20, 4418, 4818 10, 4818 20, 4818 30, 4819,
4821, 4823, 4907 00 90, 4909 00, 4910 00 00, 4911 10, 6306, 6805, 6810, 6811 90 00, 7213,
7214, 7217, 7308, 7314, 7610 10 00, 7610 90 90, 9401, 9403, 9404, 9406.

2. 

Department of Guyana

0303 79,  0306 13,  0403 10,  1006 20,  1006 30,  2009 80,  2202 10,  2309 90,  2505 10 00,
2517 10, 2523 21 00, 3208 20, 3209 10, 3917, 3923, 3925, 7308 90, 7610 90.

3. 

Department of Martinique

0210,  0302,  0303,  0304,  0306,  0307,  0403  10,  0405,  0407,  0409  00  00,  0601,  0602,  0603,
0604,  0702,  0705,  0807,  1008  90  90,  1102,  1601,  1602,  1604  20,  1605,  1702,  1704,  1806,
1902, 2105 00, 2106, 2201, 2202 10 00, 2202 90, 2309, 2523 21 00, 2523 29 00, 2828 10 00,
2828  90  00,  3101  00  00,  3102,  3103,  3104,  3105,  3301,  3302,  3305,  3401,  3402,  3406  00,
3808 except 3808 90, 3809 except 3809 91, 3820 except 3820 00 00, 3917, 3919, 3920, 3923,
3924, 3925, 3926, 4418 10, 4418 20, 4418 30, 4418 50 et 4418 90, 4818, 4819, 4821, 4823,
4907 00 90, 4909 00, 4910 00 00, 4911 10, 6103, 6104, 6105, 6107, 6203, 6204, 6205, 6207,
6208, 6306, 6805, 6810, 6811 90 00, 7213, 7214, 7217, 7308, 7314, 7610, 9401, 9403, 9404,
9405 60, 9406.

4. 

Department of Réunion

0306,  0307,  0409 00 00,  0603,  0604,  0709 60,  0901 21 00,  0901 22 00,  0910 10 00,
0910 30 00, 1507 90, 1508 90, 1510 00 90, 1512 19, 1515 29, 1516, 1601, 1602, 1605, 1704,
1806, 1901, 1902 11 00, 1902 19, 1902 20, 1902 30, 1902 40, 1905, 2005 51, 2008, 2105 00,
2106, 2828 10 00, 2828 90 00, 3208, 3209, 3210, 3212, 3301, 3305, 3401, 3917, 3919, 3920,
3921 90 60,  3923,  3925 20 00,  3925 30 00,  4012,  4418,  4818 10,  4819,  4821,  4823,
4907 00 90,  4909 00,  4910 00 00,  4911 10,  4911 91,  7308,  7309 00,  7310,  7314 20,
7314 39 00,  7314 41 90,  7314 49,  7314 50 00,  7326,  7608,  7610,  7616,  8419 19 00,  8528,
9401, 9403, 9404, 9406 00.

20

Annex  I  to  Council  Regulation  (EEC)  No  2658/87  of  23  July  1987  on  the  tariff  and  statistical
nomenclature  and  on  the  Common  Customs  Tariff  (OJ  L  256,  7.9.1987,  p.  1),  as  last  amended  by
Commission Regulation (EC) No 2176/2002 of 6 December 2002 (OJ L 331, 7.12.2002, p. 3).

17

 
                                                
C.  List  of  products  referred  to  in  Article  1(2)(c)  according  to  the  classification  of  the
Common Customs Tariff nomenclature21

1. 

Department of Guadeloupe

0901 11 00,  0901 12 00,  0901 21 00,  0901 22 00,  1006 30,  1006 40 00,  1101 00,  1517 10,
1701,  1901,  2006,  2007,  2009,  2106,  2203 00,  2208 40,  2517 10,  3208,  3209,  3210,
3705 10 00,  3705 90 00,  7009 91 00,  7009 92 00,  7015 10 00,  71 13,  71 14,  71 15,  71 17,
90 01 40.

2. 

Department of Guyana

2208 40, 4403 49, 4407 29.

3. 

Department of Martinique

0901 11 00,  0901 21 00,  0901 22 00,  1006 30,  1006 40 00,  1101 00,  1517 10,  1701,  1901,
1905,  2006,  2007,  2008,  2009,  2203 00,  2208 40,  2517 10,  3208,  3209,  3210,  7009,
7015 10 00, 7113, 7114, 7115, 7117, 9001 40.

4. 

Department of Réunion

2009, 2202 10 00, 2202 90, 2203 00, 2204 21, 2206 00, 2208 40, 2402 20, 2403, 7113, 7114,
7115, 7117, 8521.

21

Annex  I  to  Council  Regulation  (EEC)  No  2658/87  of  23  July  1987  on  the  tariff  and  statistical
nomenclature  and  on  the  Common  Customs  Tariff  (OJ  L  256,  7.9.1987,  p.  1),  as  last  amended  by
Commission Regulation (EC) No 2176/2002 of 6 December 2002 (OJ L 331, 7.12.2002, p. 3).

18

 
                                                
FINANCIAL STATEMENT

BUDGET HEADING:

DATE: 2004
APPROPRIATIONS:

TITLE OF MEASURE:
Proposal for a Council Decision concerning the dock dues in the French overseas departments
LEGAL BASIS:
Article 299(2) of the EC Treaty.
OBJECTIVES:
To extend and amend the tax arrangements as regards exemptions and reductions in dock dues for
products manufactured locally in the French overseas departments.
FINANCIAL IMPACT
No financial impact for the Community
budget.

1.

2.

3.

4.

5.

19