Proposal for a COUNCIL DECISION amending Decision 2007/659/EC as regards its period of application and the annual quota benefiting from a reduced rate of excise duty
Date: 2011-09-22
Institutions: European Commission
Subjects: French overseas department and region, spirits, tax, tax exemption

EUROPEAN COMMISSION 

Brussels, 22.9.2011 
COM(2011) 577 final 

2011/0248 (CNS) 

Proposal for a 

COUNCIL DECISION 

amending Decision 2007/659/EC as regards its period of application and the annual 
quota benefiting from a reduced rate of excise duty  

 
 
  
 
EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

Article 349 of the Treaty on the Functioning of the European Union (TFEU), which applies to 
the EU's outermost regions, including the French overseas departments (FOD) provides that, 
taking  account  of  the  structural  social  and  economic  situation  of  the  outermost  regions, 
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,  the  Council,  on  a  proposal  from  the  Commission  and  after 
consulting  the  European  Parliament,  will  adopt  specific  measures  aimed,  in  particular,  at 
laying down the conditions of application of the Treaties to those regions, including common 
policies. One of the areas concerned by these specific measures is fiscal policy. The Council 
adopts  the  measures  referred  to  in  the  first  paragraph  taking  into  account  the  special 
characteristics and constraints of the outermost regions without undermining the integrity and 
the coherence of the Union legal order, including the internal market and common policies. 

Council Decision 2007/659/EC of 9 October 2007, adopted on the basis of Article 299(2) of 
the  EC  Treaty  (now  Article 349 TFEU),  authorises  France  to  apply  to  'traditional'  rum 
produced in its overseas departments and sold on the French mainland a reduced rate of excise 
duty which may be lower than the minimum rate of excise duty set by Directive 92/84/EEC 
but not more than 50% lower than the standard national excise duty on alcohol. The reduction 
in  excise  duty  is  limited  to  an  annual  quota  of  108 000 hl  of  pure  alcohol.  The  derogation 
expires on 31 December 2012.  

that 

the  annual  quota  be 

On  29 June 2010,  the  French  authorities  sent  the  Commission  the  report  provided  for  in 
Article 4  of  Decision 2007/659/EC.  The  report  contains  two  requests.  First,  the  French 
authorities  ask 
to 
125 000 hectolitres of pure alcohol to reflect developments on the market for rum in the EU. 
Secondly, they request an extension by one year, i.e. to 31 December 2013, of the period of 
application  of  Decision 2007/659/EC  so  as  to  bring  it  into  line  with  that  of  the  State  aid 
decision  on  the  same  issue  taken  by  the  Commission  on  27 June 2007  (State  aid  No 
N 530/2006). 

from  108 000 hectolitres 

increased 

2. 

RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND 
IMPACT ASSESSMENTS 

There  was  no  need  for  external  expertise  and  no  impact  analysis  has  been  carried  out.  The 
French authorities have provided statistics on the quantities of rum released for consumption, 
however, and these have been examined carefully. 

Developments in this regard have been as follows: 

EN 

2 

   EN 

 
Trends on the European rum market 

Rum 
from 
third 
countries 

Rum  from 
the FOD 

FOD 
share (%) 

Year 

Total 

1986 

1987 

1988 

1989 

1990 

1991 

1992 

1993 

1994 

1995 

1996 

1997 

1998 

1999 

2000 

2001 

2002 

2003 

2004 

2005 

2006 

2007 

2008 

313 459

152 252

161 207

300 152 

158 117  142 035 

252 877 

130 976  121 901 

293 462 

161 485  131 977 

368 913 

227 975  140 938 

336 252 

221 861  114 391 

332 145 

223 522  108 623 

322 743 

231 059  91 684 

357 936 

253 215  104 721 

284 178 

184 835  99 343 

359 295 

249 239  110 056 

453 050 

354 858  98 192 

500 295 

395 031  105 264 

567 449 

428 790  138 659 

645 237 

495 625  149 612 

695 033 

534 316  160 717 

734 249 

557 458  176 791 

880 653 

713 535  167 118 

727 772 

569 278  158 494 

726 876 

571 317  155 559 

791 542 

626 157  165 385 

785 695 

608 449  177 246 

851 748 

657 725  194 023 

51%

47% 

48% 

45% 

38% 

34% 

33% 

28% 

29% 

35% 

31% 

22% 

21% 

24% 

23% 

23% 

24% 

19% 

22% 

21% 

21% 

23% 

23% 

Source: Eurostat 

EN 

3 

   EN 

 
Trends in the release for consumption of rum in mainland France 
(hectolitres of pure alcohol) 

Released for consumption at 
the reduced rate of excise 
duty 

Non-quota 

From third 
countries 

Total 

105 700 

40 600 

20 000 

166 300 

102 400 

99 500 

96 100 

90 000 

90 000 

87 900 

86 400 

86 900 

86 200 

78 300 

32 400 

33 000 

33 500 

33 500 

35 500 

5 500 

131 000 

30 800 

26 200 

37 000 

26 500 

30 000 

1 000 

109 300 

2010 

2009 

2008 

2007 

2006 

2005 

2004 

2003 

2002 

2001 

2000 

The information provided by the French authorities shows that quantities of 'traditional' rum 
coming onto the market at the reduced rate of excise duty have grown since the adoption of 
Decision 2007/659/EC, from 96 100 hectolitres of pure alcohol in 2007 to 105 700 hectolitres 
in 2010, i.e. an annual increase of 3.2%. If this trend continues, the quantities of 'traditional' 
rum  coming  onto  the  market  should  be  around  109 100 hectolitres  of  pure  alcohol  in  2011, 
the 
112 600 hectolitres 
108 000 hectolitre  quota  provided  for  by  Decision 2007/659/EC.  A  similar  upward  trend  in 
the consumption of rum has been seen on the EU market as a whole since 2005. 

in  2012  and  116 200 hectolitres 

thus  exceeding 

in  2013, 

Third-country  rum  released  for  consumption  has  a  minor  share  of  the  French  market 
compared  with  its  share  of  the  EU  market  as  a  whole.  Its  share  of  the  French  market  has 
grown,  however,  from  less  than  1%  in  2000  to  4.2%  in  2005  and  12%  in  2010.  The  most 
recent figures for the EU as a whole show that third-country rum has a market share of 77% 
against 23% for FOD rum. 

EN 

4 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3. 

LEGAL ELEMENTS OF THE PROPOSAL 

Summary of the proposed measures 

Adjusting the quota of 108 000 hectolitres of pure alcohol in line with the above findings. It is 
proposed  that  the  108 000 hectolitre  quota  established  under  Decision 2007/659/EC  be 
increased  to  120 000 hectolitres.  Judging  by  the  3.2%  increase  between  2007  and  2010,  the 
volume of rum coming onto the market should reach 116 200 hectolitres in 2013. Increasing 
the quota to 120 000 hectolitres would cover annual growth of 4.3%, i.e. a little more than the 
3.2% increase recorded in 2007-10. 

Extending by one year the period of application of Decision 2007/659/EC so as to bring it into 
line  with  that  of  the  State  aid  decision  on  the  same  issue  taken  by  the  Commission  on 
27 June 2007 (State aid No N 530/2006). 

Legal basis 

Article 349 TFEU. 

Subsidiarity principle 

Only the Council is authorised, on the basis of Article 349 TFEU, to adopt specific measures 
to  adjust  the  application  of  the  Treaties  to  the  outermost  regions,  including  the  common 
policies, because of the permanent handicaps which affect the economic and social conditions 
of those regions. 

The proposal therefore complies with the subsidiarity principle. 

Proportionality principle 

The proposal complies with the proportionality principle for the following reasons. 

It aims to amend Decision 2007/659/EC only in so far as is necessary. The new annual quota 
of rum qualifying for the reduced rate of excise duty has been calculated on the basis of the 
quantities marketed between 2007 and 2010. 

The findings justify extending the period of application of Decision 2007/659/EC by one year, 
to 31 December 2013, so as to bring it into line with that of the State aid decision on the same 
issue taken by the Commission on 27 June 2007 (State aid No N 530/2006). 

Choice of instrument 

Proposed instrument: Council Decision. 

Other instruments would not have been appropriate for the following reasons. 

The text to be amended is itself a Council Decision, adopted on the same legal basis (what was 
Article 299(2) of the EC Treaty).  

EN 

5 

   EN 

 
4. 

BUDGETARY IMPLICATIONS 

The proposal has no impact on the budget of the European Union. 

EN 

6 

   EN 

 
2011/0248 (CNS) 

Proposal for a 

COUNCIL DECISION 

amending Decision 2007/659/EC as regards its period of application and the annual 
quota benefiting from a reduced rate of excise duty  

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 349 thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national Parliaments, 

Having regard to the opinion of the European Parliament1, 

Acting in accordance with a special legislative procedure, 

Whereas: 

(1) 

Council  Decision 2007/659/EC  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/EC2  authorises  the  French  authorities  to  apply  to 
'traditional' rum produced in its overseas departments and sold on the French mainland 
a  reduced  rate  of  excise  duty  which  may  be  lower  than  the  minimum  rate  of  excise 
duty  set  by  Directive 92/84/EEC  but  not  more  than  50%  lower  than  the  standard 
national  excise  duty  on  alcohol.  The  'traditional'  rum  to  which  the  reduced  rate  of 
excise  duty  applies  is  now  defined  at  point 1(f)  in  Annex II  of  Regulation  (EC) 
No 110/2008 of 15 January 2008 on the definition, description, presentation, labelling 
and  the  protection  of  geographical  indications  of  spirit  drinks  and  repealing  Council 
Regulation (EEC) No 1576/89. The reduction in excise duty is confined to an annual 
quota of 108 000 hl of pure alcohol. The derogation expires on 31 December 2012. 

(2) 

On 29 June 2010, the French authorities sent the Commission the report provided for 
in  Article 4  of  Decision 2007/659/EC.  The  report  contains  two  requests.  First,  as 
provided for in Article 4, the French authorities ask that the annual quota be increased 
from 108 000 hectolitres to 125 000 hectolitres of pure alcohol to reflect trends on the 
market  for  rum  in  the  EU.  Secondly,  they  request  an  extension  by  one  year,  i.e. to 
31 December 2013,  of  the  period  of  application  of  Decision 2007/659/EC  so  as  to 

1 
2 

OJ C , , p. . 
OJ L 270, 13.10.2007, p. 12. 

EN 

7 

   EN 

 
                                                 
bring  it  into  line  with  that  of  the  State  aid  decision  on  the  same  issue  taken  by  the 
Commission on 27 June 2007 (State aid No N 530/2006). 

The  information  provided  by  the  French  authorities  shows  that  quantities  of 
'traditional' rum coming onto the market at the reduced rate of excise duty have grown 
since  the  adoption  of  Decision 2007/659/EC,  from  96 100 hectolitres  of  pure  alcohol 
in  2007  to  105 700 hectolitres  in  2010,  i.e. an  annual  increase  of  3.2%.  If  this  trend 
continues, the quantities of 'traditional' rum coming onto the market should be around 
109 100 hectolitres  of  pure  alcohol  in  2011,  112 600 hectolitres  in  2012  and 
116 200 hectolitres in 2013, thus exceeding the 108 000 hectolitre quota provided for 
by  Decision 2007/659/EC.  The 
by 
Decision 2007/659/EC should be increased to 120 000 hectolitres. This increase would 
cover  annual  growth  of  4.3%,  i.e. a  little  more  than  the  3.2%  increase  witnessed  in 
2007-10. 

108 000 hectolitre 

established 

quota 

analysis 

of 
This 
Decision 2007/659/EC  by  one  year  so  that  it  ends  at  the  same  time  as  that  of  the 
above-mentioned State aid decision. 

application 

extending 

justifies 

period 

also 

the 

of 

(3) 

(4) 

HAS ADOPTED THIS DECISION:  

Article 1 

Decision 2007/659/EC is amended as follows: 

1) The title is replaced by the following title: 

'Council Decision of 9 October 2007 authorising France to apply a reduced rate of excise duty 
on 'traditional' rum produced in Guadeloupe, French Guiana, Martinique and Réunion'. 

2) Article 1 is replaced by the following: 

'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  Guadeloupe,  French 
Guiana, Martinique and Réunion, of a rate of excise duty lower than the full rate for alcohol 
set by Article 3 of Directive 92/84/EEC.' 

3) Article 2 is replaced by the following: 

'The  derogation  referred  to  in  Article 1  shall  be  confined  to  rum  as  defined  at  point 1(f)  in 
Annex II of Regulation (EC) No 110/2008 of 15 January 2008 on the definition, description, 
presentation,  labelling  and  the  protection  of  geographical  indications  of  spirit  drinks  and 
repealing  Council  Regulation  (EEC)  No 1576/893  produced  in  Guadeloupe,  French  Guiana, 
Martinique  and  Réunion  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%/volume 
or more.' 

3 

OJ L 39, 13.2.2008, p. 16. 

EN 

8 

   EN 

 
                                                 
4) Article 3(1) is replaced by the following: 

'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  for  the  period  up  to 
31 December 2010.  For  the  period  between  1 January 2011  and  31 December 2013,  the 
annual quota shall be 120 000 hectolitres.' 

5) In Article 5, '31 December 2012' is replaced by '31 December 2013'. 

Article 2 

This Decision is addressed to the French Republic. 

Done at Brussels, 

For the Council 
The President 

EN 

9 

   EN