2007/659/EC: Council Decision of 9 October 2007 authorising France to apply a reduced rate of excise duty on traditional rum produced in its overseas departments and repealing Decision 2002/166/EC
Date: 2007-10-09
Institutions: Council of the European Union
Subjects: France, French overseas department and region, VAT rate, excise duty, originating product, spirits, tax relief

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Official Journal of the European Union

13.10.2007

COUNCIL DECISION

of 9 October 2007
authorising France to apply a reduced rate of excise duty on ‘traditional’ rum produced in its
overseas departments and repealing Decision 2002/166/EC

(2007/659/EC)

THE COUNCIL OF THE EUROPEAN UNION,

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

establishing the European

Having regard to the proposal from the Commission,

Having regard to the Opinion of the European Parliament (1),

(3)

Whereas:

(1)

the Treaty,

to Article 299(2) of

Pursuant
the Treaty
applies to the French overseas departments, the Azores,
Madeira and the Canary Islands. However, taking account
of the structural social and economic situation of the
French overseas departments, the Azores, Madeira and
the Canary Islands, which is compounded by their re-
moteness, insularity, small size, difficult topography and
climate, economic dependence on a few products, the
permanence and combination of which severely restrain
their development,
the Council, acting by a qualified
majority on a proposal from the Commission and after
consulting the European Parliament, shall adopt specific
laying down the
in particular, at
measures aimed,
the Treaty to those
conditions of
regions,
is
required, when adopting such measures,
to take into
account areas such as fiscal policy. When adopting
these measures,
it has to take into account the special
characteristics and constraints of the outermost regions
without undermining the integrity and the coherence of
the Community legal order, including the internal market
and common policies.

including common policies. The Council

application of

(4)

(2)

these provisions of
in respect of

the
the Treaty,
On the basis of
Council adopted,
the French overseas
departments, Decision 2002/166/EC of 18 February
2002 authorising France to extend the application of a
reduced rate of excise duty on ‘traditional’ rum produced
in its overseas departments (2). Compared with the rates
of taxation applied to similar products not originating in

(1) Opinion of 25 September 2007. Not yet published in the Official

Journal.

(2) OJ L 55, 26.2.2002, p. 33.

set

by Council Directive

the French overseas departments, the reduced rate may
be lower than the minimum rate of excise duty on
alcohol
92/84/EEC of
19 October 1992 on the approximation of the rates of
excise duty on alcohol and alcoholic beverages (3), but
may not be more than 50 % lower than the standard
national excise duty on alcohol. The Council Decision
was to apply until 31 December 2009, with a mid-
term report to be drawn up by June 2006 at the latest.

On 27 December 2005 the
French Government
presented a mid-term report indicating that it was vital
that the tax arrangements for traditional rum marketed in
mainland France be maintained. Furthermore, in view of
developments on the Community market for rum, which
are mainly benefiting products originating in third
countries, and given the economic and social importance
of the sector and the structural nature of the production
conditions that diminish the sector’s productivity in the
overseas departments and make it difficult to maintain its
production on the Community market, France has asked
that the volume and duration of the tax arrangements for
traditional rum on the mainland market be extended.

of

an

and

annual

In the

is vital

turnover

some
It

three departments most
and Martinique,

Maintaining the cane-sugar-rum sector in the overseas
economic and social
departments
to their
affected,
balance.
sector
Réunion, Guadeloupe
the
EUR
produces
over
provides
250 000 000
jobs,
40 000
including 22 000 direct
is also advisable to
jobs.
note the positive impact which the cultivation of cane
in the
has for the safeguarding of
overseas departments. Together with the banana sector,
this sector is the only significant exporting activity in
areas whose exports represent not more than 7 % of
It is therefore necessary and justified for
the imports.
France to maintain, by way of derogation from Article
90 of the Treaty, a reduced rate of excise duty on ‘tra-
ditional’ rum produced in its overseas departments in
order to avoid endangering their development.

the environment

(5)

The overhaul of the common organisation of the markets
in the sugar sector in February 2006 goes some way
towards securing the sector’s future. Thus,
there are
plans to introduce support measures under the Posei

(3) OJ L 316, 31.10.1992, p. 29.

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Official Journal of the European Union

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(6)

(7)

(8)

(9)

systems (Council Regulation (EC) No 247/2006 of 30
January 2006 laying down specific measures for agri-
culture in the outermost regions of the Union (1)),
in
the form of both Community and national aid,
in
order to improve the competitiveness of the overseas
departments’
these
measures still do not offset the gradual dismantling of
customs
overseas
and maintain
departments’ share of the rum market.

cane-sugar-rum sector. However,

protection

the

Given the small scale of the local market, the overseas
departments’ distilleries can continue their activities only
if they have sufficient access to the market in mainland
France, which is the main outlet for their rum production
(over 50 % of the total).

The inability to compete on the Community market,
which is mainly the result of increased market prices,
originates from cost prices which have increased since
2001. Since that date both production and labour costs
have increased substantially in the overseas departments.
Moreover, overseas departments’ rums have to comply
with Community regulatory standards, which call
for
significant non-productive
Since 2001,
investment.
investment
in the overseas departments has exceeded
EUR 45 500 000, over half of which was destined for
conservation of the environment, representing 47 % of
the total. However, though part of this investment has
been covered by structural funds, this is not the case of
the resulting operating costs, which, depending on the
distillery, can add about 10 to 15 % to the cost price of
rum.

high cost of production faced by traditional
producers.

rum

(11)

In order to ensure that the present decision does not
undermine the single market,
the quantities of rums
originating in the overseas departments eligible for this
measure may not, as before, exceed the trade flows
recorded in recent years for the different sources of
supply.

(12) Given the need to create a climate of legal certainty for
operators in the cane-sugar-rum sector and in view of the
depreciation periods for plant and buildings, and in the
interests of consistency with other Community rules for
the sector, the derogation should be granted to the end
of 2012.

(13)

The granting of such a duration must, however, be
to the condition that a mid-term report be
subject
produced so that the Commission can assess whether
the reasons which justify the granting of the tax dero-
gation still apply and, if need be, consider whether the
duration or quantities concerned should be revised in the
light of developments on the Community rum market.

(14) Decision 2002/166/EC should be replaced.

(15)

This Decision is without prejudice to the possible appli-
cation of Articles 87 and 88 of the Treaty,

All these costs, which have increased significantly since
2001, place overseas departments’ businesses in financial
difficulties. The only way to ensure the sector’s long-term
survival is to offset these costs against greater output.

HAS ADOPTED THIS DECISION:

for

special

enabled the overseas departments’

Since 2002 the total volume shipped to the Community
market has fallen by 12 %, from 176 791 hectolitres of
pure alcohol
to 155 559 hectolitres of pure alcohol.
Only the market in mainland France, where rum from
the overseas departments qualifies
tax
arrangements that partially compensate its high cost
price, has
rum
industry to survive. Since the competitiveness of tradi-
tional rum from the overseas departments needs to be
supported on the market in mainland France in order to
safeguard the activity of their sugar-cane-rum sector, the
quantities of traditional rum originating in the overseas
departments eligible for a reduced rate of excise duty
when released for consumption on that market should
be reviewed.

(10)

The tax advantage authorised by the present decision
does not go beyond what is necessary to address the

Article 1

By way of derogation from Article 90 of the Treaty, France is
authorised to extend the application on the French mainland, to
‘traditional’ rum produced in its overseas territories, of a rate of
excise duty lower than the full rate for alcohol set by Article 3
of Directive 92/84/EEC.

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 of 29 May 1989 laying down general rules on the
spirit drinks (2),
definition, description and presentation of
produced in the overseas departments
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 % volume or more.

from sugar

(1) OJ L 42, 14.2.2006, p. 1. Regulation as amended by Regulation (EC)

(2) OJ L 160, 12.6.1989, p. 1. Regulation as last amended by the 2005

No 2013/2006 (OJ L 384, 29.12.2006, p. 13).

Act of Accession.

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Article 3

Article 6

1.
The reduced rate of excise duty applicable to the product
referred to in Article 2 shall be confined to an annual quota of
108 000 hectolitres 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.

1.

Decision 2002/166/EC is hereby repealed.

References to the repealed Decision shall be construed as

2.
references to this Decision.

Article 7

Article 4

This Decision is addressed to the French Republic.

the

latest, France

send the
By 30 June 2010 at
Commission a report
the
to enable it
reasons which justified the granting of the reduced rate still
exist and, if need be, whether the quota needs to be adjusted
in the light of developments on the market.

shall
to assess whether

Done at Luxembourg, 9 October 2007.

Article 5

This Decision shall apply from 1 January 2007 until 31
December 2012.

For the Council
The President

F. TEIXEIRA DOS SANTOS