Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL concerning the exercise of the Union's rights for the application and enforcement of international trade rules
Date: 2012-12-18
Institutions: European Commission
Subjects: Dispute Settlement Body, certificate of origin, international trade law, protective clause, trade agreement (EU)

EUROPEAN 
COMMISSION 

Brussels, 18.12.2012  
COM(2012) 773 final 

2012/0359 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

concerning the exercise of the Union's rights for the application and enforcement of 
international trade rules 

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EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

Grounds and objectives  

The present proposal for a Regulation of the European Parliament and of the Council reflects 
the  Union's  priority  to  enforce  effectively  its  trade  rights.  This  objective  was  set  out  in  the 
Commission  Communication  on  "Trade,  growth  and  world  affairs"1  and  endorsed  in  the 
Council conclusions of 21 December 20102. 
The  Union  currently  does  not  have  a  common  legislative  framework3  to  enforce  its  rights 
under international trade agreements. The present proposal aims to remedy this situation. 

General context 

The Union may be called on to take unilateral measures to enforce and defend its rights and 
interests  under  international  trade  agreements.  This  is  the  case  under  the  dispute  settlement 
rules of the World Trade Organization (WTO), as well as under bilateral or regional dispute 
settlement  mechanisms.  A  similar  situation  exists  as  regards  trade  safeguards  and  so-called 
"rebinding" exercises under international agreements. Any such measures require rapid action 
in  order  to  function  as  an  effective  and  credible  tool  to  induce  compliance  and  in  order  to 
meet  the  deadlines  set  out  in  the  Union's  relevant  international  commitments.  This  calls  for 
rapid, efficient and flexible decision-making within the structures provided by the Treaty of 
Lisbon. 

Prior to the entry into force of the Lisbon Treaty, the Union approached enforcement in an ad 
hoc manner in the form of Regulations adopted by the Council on the basis of a Commission 
proposal,  based  on  former  Article  133.  On  the  other  hand,  after  the  entry  into  force  of  the 
Treaty  of  Lisbon,  the  Council  and  the  European  Parliament  are  co-legislators  under  the 
ordinary  legislative  procedure  in  relation  to  the  measures  defining  the  framework  for 
implementing the common commercial policy (Article 207 of the Treaty on the Functioning 
of  the  European  Union,  "the  TFEU").  Enforcement  of  rights  under  international  trade 
agreements  is  a  typical  executive  function  that  may  require  adopting  and  implementing 
measures within strict deadlines. It is appropriate for the Council and the European Parliament 
to establish a clear and predictable framework for the adoption of any such acts. 

The  practice  prior  to  the  entry  into  force  of  the  TFEU  serves  as  an  illustration  of  the 
desirability  to  operate  under  procedures  that  enable  quick  and  efficient  decision-making  to 
enforce the Union's rights: 

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2 
3 

In the WTO dispute settlement case US-Foreign Sales Corporation, the adoption of 
Council Regulation (EC) 2193/2003 of 8 December 2003 increasing customs duties 
on  some  imports  from  the  US  took  8  months  from  the  adoption  of  a  Commission 
proposal.  The  suspension  of  that  measure,  through  Council  Regulation  (EC)  No 
728/2006 of 15 May 2006, took 3 days to adopt from the adoption of a Commission 
proposal. 

See COM (2010)612 final of 9.11.2010, section 4. 
See Council conclusions on the EU’s trade policy of 21.12.2010, paragraph 8. 
The  EU  has  always  acted  on  a  case-by-case  basis  in  the  past  (Council  Regulation  on  Commission 
proposal based on former - Article 133).  

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– 

– 

– 

In the WTO dispute settlement case US-Byrd, Council Regulation (EC) No 673/2005 
of 25 April 2005 increasing customs duties on certain products originating in the US 
took  approximately  2  months  to  be  adopted,  from  the  adoption  of  a  Commission 
proposal. 

In  WTO  dispute  settlement  case  US-wheat  gluten,  Council  Regulation  (EC)  No 
1804/98 of 14 August 1998 reserved the EU rights to rebalance the adverse effects of 
the US safeguards measures in accordance with Article 8 of the WTO agreement on 
safeguards. Its adoption took 1 month from the adoption of a Commission proposal. 

In US-Steel, adoption of Council Regulation (EC) No 1031/2002 of 13 June 2002 on 
safeguard rebalancing measures took 2 months; repeal of rebalancing under the same 
case only took 4 days. 

In the absence of an appropriate legislative framework for the implementation of commercial 
policy measures in situations similar to the above mentioned cases, it would be necessary to 
resort to the ordinary legislative procedure for the adoption of measures in certain situations. 
It takes 15 to 31 months on average for the adoption of a legislative act, a length which could 
affect the ability of the Union to exercise its rights effectively within the time frames defined 
in international trade agreements. 

The present draft Regulation is rooted in the consideration that (a) the adoption of commercial 
policy  measures  to  enforce  the  Union's  rights  under  international  agreements  is  a  typical 
executive function that needs to be implemented within a framework of common rules; (b) in 
the absence of an appropriate legislative framework, the Union's ability to effectively enforce 
its rights may be compromised; (c) there is a potential conflict between the relatively lengthy 
Union's decision-making time frames and the time frames for the enforcement of rights under 
international trade agreements.  

In  this  context,  the  present  draft  Regulation  proposes  the  creation  of  a  common  legislative 
framework to enforce the Union's rights under international trade agreements, in line with the 
Treaty  of  Lisbon.  The  Regulation  proposes  to  empower  the  Commission  to  adopt 
implementing acts in accordance with Article 291 of the TFEU, within the scope established 
by this draft Regulation and within the limits and in accordance with the criteria expressly set 
out.  The  scope  of  the  Regulation  extends  to  adoption,  suspension,  modification  and 
termination of implementing acts with regard to: 

(a) 

(b) 

(c) 

Enforcement  of  the  Union's  rights  under  binding  multilateral  and  bilateral  dispute 
settlement rules; 

Rebalancing measures under multilateral and bilateral safeguard rules;  

Rebalancing measures in cases of modifications by a third country of its concessions 
under Article XXVIII GATT 1994. 

Under  the  present  draft  Regulation,  the  Commission  may  adopt  the  following  types  of 
commercial policy measures: customs duties, quantitative restrictions on imports or exports of 
goods,  and  measures  in  the  area  of  public  procurement.  This  approach  results  from  the 
experience  gained  over  the  years  in  the  adoption  of  commercial  policy  measures,  and  it 
reflects the fact that action in the selected areas is practicable and generally effective. At the 
current  stage  of  development  of  Union  law,  particularly  taking  into  account  national 
regulations on services and intellectual property and the limits to effective action inherent to 
the nature of those sectors, it is appropriate to focus on other commercial policy areas for the 

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purposes  of  the  Commission's  empowerment.  It  should  be  noted  that  so-called  "cross 
retaliation" (i.e. suspension of concessions or other obligations in a different sector from the 
one where the violation was adjudicated) is generally possible under WTO rules and that there 
is  no  limitation  on  "cross  retaliation"  in  the  Union's  free  trade  agreements.  Should  it  prove 
necessary  for  the  Union  to  resort  to  commercial  policy  measures  not  covered  by  the  draft 
Regulation, including with regard to trade in services or the commercial aspects of intellectual 
property  rights,  the  Commission  could  make  proposals  for  a  legislative  act  on  the  basis  of 
Article 207 TFEU or resort to other applicable procedures.  

A  review  clause  establishes  that  the  Commission  shall  assess  the  functioning  of  the  present 
Regulation  three  years  after  the  first  instance  of  implementation  of  the  draft  Regulation 
occurred.  The  Commission  shall  issue  a  report  and,  if  the  circumstances  so  warrant,  may 
propose  adequate  measures  to  improve  the  Regulation  efficiency.  In  this  context, 
consideration can be given to the range of commercial policy measures under the Regulation 
such as trade in services and intellectual property rights, in addition to goods.  

With  respect  to  government  procurement,  under  the  terms  of  the  WTO  Agreement  on 
Government  Procurement  ("the  GPA"),  both  in  the  version  currently  in  force  and  in  the 
revised version, when a GPA Party fails to respect its commitments, other GPA Parties may 
suspend  concessions  or  other  obligations  only  with  regard  to  procurement  markets.  Given 
this,  it  is  important  to  foresee  in  the  proposed  draft  Regulation  the  possible  adoption  of 
commercial policy measures concerning public procurement, in order to make it possible for 
the  Union  to  effectively  enforce  its  legal  rights  with  respect  to  government  procurement 
covered  by  the  Union's  international  obligations.  Aside  from  the  WTO  dispute  settlement 
system,  which  has  been  used  in  several  occasions  to  tackle  practices  contrary  to  the  GPA, 
action  to  enforce  procurement  commitments  is  also  likely  to  arise  in  a  bilateral  context,  as 
recent  bilateral  trade  agreements  concluded  by  the  Union  include  fully-fledged  dispute 
settlement  mechanisms.  The  Union  has  experience  in  the  implementation  of  commercial 
policy measures limiting access for third countries to the Union's procurement markets, where 
necessary4. Due to the particularities of public procurement, in particular the existence of an 
administrative procedure that regulates and determines access to specific calls for tenders, it is 
possible  to  foresee  action  as  regards  procurement  of  both  goods  and  services.  Furthermore, 
commercial  policy  measures  under  this  draft  Regulation  would  match  the  scope  of  the 
procurement  commitments  that  are  suspended  –i.e.  they  would  apply  to  certain  entities  and 
above certain thresholds only. Finally, the relationship between the present proposal and the 
Commission proposal for a Regulation of the European Parliament and of the Council on the 
access  of  third-country  goods  and  services  to  the  Union's  internal  market  in  public 
procurement (COM(2012) 124 of 21 March 2012) should be noted. The latter proposal aims 
at increasing the Union's leverage for the negotiation of terms of access for the Union's goods, 
services and suppliers to the public procurement markets of third countries: it thus focuses on 
the  access  to  the  Union's  procurement  market  of  third  country  goods  and  services  not 
benefiting  from  any  market  access  commitments  under  existing  international  agreements 
covering public procurement. The present proposal, by contrast, deals in a horizontal manner 
with  the  enforcement  of  such  agreements:  it  thus  completes  the  regulation  of  international 
aspects of public procurement, in so far as it provides a framework of rules that will allow the 
enforcement of procurement provisions in international trade agreements. 

4 

See  in  this  regard  Council  Regulation  (EEC)  No  1461/93  concerning  access  to  public  contracts  for 
tenderers from the United States of America; and Council Regulation (EC) No 1836/95 completing the 
Annex  to  Regulation  (EEC)  No  1461/93  concerning  access  to  public  contracts  for  tenderers  from  the 
United States of America. 

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2. 

RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND 
IMPACT ASSESSMENTS 

In  the  preparation  of  the  present  proposal,  two  non-papers  were  circulated  to  the  Council's 
Trade  Policy  Committee  and  the  European  Parliament's  International  Trade  Committee 
(INTA)  on  19  September  2011  and  11  November  2011,  respectively.  Member  States  were 
consulted in two technical meetings on 27 September and 28 November 2011 respectively.  

The  purpose  of  efficient  and  efficacious  enforcement  of  the  Union's  rights  enjoys  broad 
support.  

No impact assessment of the present proposal has been carried out, since: the present initiative 
does  not  have  a  direct  economic,  social  or  environmental  impact  and  the  nature  of  the 
measures at issue (case by case) does not in any case allow an ex-ante evaluation. 

3. 

LEGAL ELEMENTS OF THE PROPOSAL 

Summary  

The Union does not have a common legislative framework to enforce the Union's rights under 
international  trade  agreements.  The  current  initiative  intends  to  remedy  to  this  situation  by 
proposing  the  establishment  of  a  legislative  instrument  to  allow  the  Union  to  enforce  and 
defend its rights in compliance with its international obligations. Its objective is efficient and 
swift  implementation  with  a  view  to  safeguarding  the  Union's  interest.  Accordingly,  on  the 
basis of Article 207 of the TFEU, it proposes to empower the Commission to adopt, suspend, 
modify or terminate implementing acts to enforce the Union's rights within the structure of the 
Treaty of Lisbon, i.e. in accordance with Article 291 of the TFEU.  

Under  WTO  and  bilateral  dispute  settlement  rules  as  well  as  multilateral  and  bilateral 
safeguard measures the Union may be required to take unilateral measures to defend its rights 
and  interests.  Enforcement  action  under  dispute  settlement  provisions  or  re-balancing 
measures  requires  relatively  swift  action  in  compliance  with  the  relevant  trade  rules  and  in 
order to function as an effective tool to induce compliance. 

The  regulation  must  be  adopted  at  Union  level.  The  common  commercial  policy  is  an 
exclusive competence of the Union.  

Legal basis  

Article 207 of the TFEU.  

Structure of the Regulation 

The objective of the draft Regulation is to lay down rules and procedures to ensure that the 
Union is in a position to effectively exercise its rights to suspend or withdraw concessions in 
response to breaches of by a third country of international trade rules with a view to securing 
a satisfactory solution; and to rebalance concessions or other obligations in the trade relations 
with third countries, when the import treatment accorded to goods from the Union is altered. 

The scope of the draft Regulation, as set out in Article 3 covers the following situations: 

(a) 

Following  the  adjudication  of  trade  disputes  under  the  WTO  Dispute  Settlement 
Understanding (DSU), when the Union has been authorised to suspend concessions 

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or other obligations under the multilateral and plurilateral agreements covered by the 
Dispute Settlement Understanding.  

Under  the  WTO,  suspension  of  concessions  or  other  obligations  is  governed  by 
Article 22, paragraph 3 of the DSU; in case of prohibited subsidies, Article 4.10 of 
the Agreement on Subsidies and Countervailing Measures applies5 and with regard to 
so  called  actionable  subsidies  Article  7.9  of  the  Agreement  on  Subsidies  and 
Countervailing Measures.  

(b) 

Following  the  adjudication  of  trade  disputes  under  other  international  trade 
agreements, including regional or bilateral agreements, when the Union has the right 
to suspend concessions or other obligations under such agreements. 

Such international trade agreements concluded by the Union set out rules for dispute 
settlement  which  entitles  the  parties  to  enforce  their  own  rights  in  accordance  with 
the rules set out in the relevant agreement.  

(c) 

For the rebalancing of concessions or other obligations, to which the application of a 
safeguard measure by a third country may give right pursuant to either Article 8 of 
the  WTO  Agreement  on  Safeguards  (AoS)  or  the  provisions  on  safeguard  rules 
included in the Union's regional or bilateral agreements. 

Article 8 AoS, which only relates to goods6, states that Members applying safeguard 
measures  generally  must  offer  trade  compensation  to  countries  affected  by  the 
safeguard adverse effects following consultation prior to the application or extension 
of a safeguard measures, in accordance with Article 12, paragraph 3 of the AoS. In 
the event no agreement is reached, the affected exporting Members individually may 
take re-balancing measures, not later than 90 days after the measure is applied. The 
right to take re-balancing measures vis-à-vis the Member applying the safeguard may 
be exercised a) either three years after the measure has come into effect or b) as soon 
as  the  measure  is  found  to  be  WTO-incompatible  by  the  WTO  Dispute  Settlement 
Body  (DSB)  (the  three-year  grace  period  set  out  in  Article  8  of  the  AoS  does  not 
apply if the measure is based on a relative increase in imports). Similarly rebalancing 
measures may arise under the application of safeguard rules embedded in bilateral or 
regional FTAs7. 

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Under specific circumstances, Article 4.10 ASCM grants authorization to the complaining member to 
take "appropriate countermeasures". 
The WTO Agreement on Safeguards and safeguards rules under the FTAs only relate to trade in goods. 
WTO  Members  have  yet  to  agree  on  an  emergency  safeguards  for  services  for  which  multilateral 
negotiations have been mandated by Article X of the general agreement on trade in services (GATS). 
E.g. Article 3.4 of the EU/Korea FTA: « 1. A Party applying a bilateral safeguard measure shall consult 
with  the  other  Party  in  order  to  mutually  agree  on  appropriate  trade  liberalising  compensation  in  the 
form  of  concessions  having  substantially  equivalent  trade  effects  or  equivalent  to  the  value  of  the 
additional duties expected to result from the safeguard measure. The Party shall provide an opportunity 
for such consultations no later than 30 days after the application of the bilateral safeguard measure. 2. If 
the  consultations  under  paragraph  1  do  not  result  in  an  agreement  on  trade  liberalising  compensation 
within 30 days after the consultations begin, the Party whose goods are subject to the safeguard measure 
may suspend the application of substantially equivalent concessions to the Party applying the safeguard 
measure.  3.  The  right  of  suspension  referred  to  in  paragraph  2  shall  not  be  exercised  for  the  first  24 
months  during  which  a  bilateral  safeguard  measure  is  in  effect,  provided  that  the  safeguard  measure 
conforms to the provisions of this Agreement”.  

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The  existing  Union  legislation  implementing  multilateral  and  bilateral  safeguard 
measures does not regulate these aspects of either Article 8 of the AoS or the relevant 
rules  in  the  FTAs  but  rather  establishes  the  procedures  for  the  application  of 
safeguard  measures  by  the  Union.  Any  rebalancing  measure  would  in  principle  be 
subject  to  the  ordinary  legislative  procedure,  unless  covered  by  the  present  single 
legislative framework. 

(d) 

In cases of modification of concessions by a WTO member under Article XXVIII of 
the General Agreement on Tariffs and Trade (GATT) 1994, where no compensatory 
adjustments have been agreed. 

In case of modification of a concession by another WTO member pursuant to Article 
XXVIII of the GATT 1994, if no agreement is achieved with the members holding 
negotiating  or  supplying  rights,  the  contracting  party  which  proposes  to  modify  its 
concession  is  free  to  do.  In  this  case,  those  members8  holding  a  right  may  take 
rebalancing  measures  not  later  than  six  months  after  such  modification  of  the 
concession has occurred. Such rebalancing measures would imply withdrawing, upon 
the expiration of thirty days from the day on which written notice of the withdrawal 
of  the  concession  is  received  by  the  contracting  parties,  substantially  equivalent 
concessions  to  those  initially  negotiated  with  the  contracting  party  that  modifies  or 
withdraws  a  concession.  So  far  the  Union  has  not  withdrawn  concessions  under 
Article XXVIII of the GATT 1994. However, should the possibility arise, trade re-
balancing  stemming  from  modification  of  concessions  by  other  WTO  members 
under  Article  XXVIII  GATT  respectively  would  occur  within  relatively  short 
deadlines  (not  later  than  6  months  after  the  Member  modifies  or  withdraws  its 
concession).  Effective  decision-making  procedures 
implement  rebalancing 
measures would allow the Union to engage credibly vis-à-vis its partner in rebinding 
negotiations  and  may  influence  the  course  of  negotiations  on  compensatory 
adjustment to the Union's advantage. 

to 

The Regulation is without prejudice to the adoption of commercial policy measures 
under  other  procedures,  for  instance  with  regard  to  commercial  policy  measures  in 
the  sector  of  services  and  intellectual  property  rights  following  multilateral  and 
regional or bilateral dispute settlement adjudication.  

Pursuant  to  Article  291  of  the  TFEU,  when  action  is  necessary  to  enforce  the  EU 
rights  under  the  circumstances  above  mentioned  the  Commission  shall  adopt 
implementing  acts  in  accordance  with  the  examination  procedure  (Article  4 
"Exercise  of  the  Union's  rights").  Implementing  acts  shall  respect  the  rule  that  the 
level of countermeasures should not exceed the level of nullification and impairment, 
generally  intended  as  the  adverse  impact  on  the  Union  resulting  from  the  third 
country  measure,  as  defined  in  the  relevant  agreement  (Article  2  "Definitions").  In 
determining the scope of the implementing act to be adopted the Commission shall 
also  rely  on  various  criteria,  in  addition  to  the  interests  expressed  in  the  public 
consultations and the Union's general interests, i.e. effectiveness of the measures in 
inducing compliance of third countries with international trade rules; potential of the 
measures to provide relief to economic operators within the Union affected by third 
country  measures;  availability  of  alternative  sources  of  supply  for  the  products 
concerned,  in  order  to  avoid  or  minimise  any  negative  impact  on  downstream 

8 

On condition they hold an “initial negotiating right”, a “principal supplying interest” or a “substantial interest”. 

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industries  or  final  consumers  within  the  Union;  any  specific  criteria  that  may  be 
established  in  international  trade  agreements  in  connection  with  the  situations 
foreseen in Article 3.  

The  types  of  commercial  measures  that  may  be  enacted  by  means  of  an 
implementing act are measures concerning imports or exports of goods and measures 
in the field of public procurement.  

Import  or  export  measures  include  the  suspension  of  tariff  concessions  and  the 
imposition  of  new  or  increased  customs  duties;  introduction  or  increase  of 
quantitative  restrictions  on  imports  or  exports,  whether  made  effective  through 
quotas, import or export licenses or other measures.  

The  WTO  Agreement  on  Government  Procurement  states  that  any  dispute  arising 
thereunder  shall  not  result  in  the  suspension  of  concessions  or  other  obligations 
under any other covered agreement of the WTO. Being so, it is important to foresee 
in  the  proposed  Regulation  the  possible  adoption  of  commercial  policy  measures 
concerning  public  procurement,  in  order  to  make  it  possible  for  the  Union  to 
effectively enforce its legal rights. Due to the particularities of public procurement, 
in  particular  the  existence  of  an  administrative  procedure  that  regulates  and 
determines  access  to  specific  calls  for  tenders,  it  is  possible  to  foresee  action  as 
regards procurement of both goods and services. 

In this regard, the type of commercial policy measures that may be enacted concern 
the exclusion from public procurement of tenders the total value of which is made up 
for more than 50% of goods or services originating in the third country concerned; 
and/or  the  imposition  of  a  mandatory  price  penalty  on  that  part  of  the  tender 
consisting of goods or services originating in the third country concerned (Article 5 
"Commercial policy measures").  

The  examination  procedure  should  be  used  for 
the  adoption,  suspension, 
modification  and  termination  of  the  implementing  acts  determining  the  appropriate 
commercial  policy  measures  for  the  exercise  of  the  Union's  rights  (Articles  4 
"Exercise of the Union's rights" and 7 "Suspension, modification and termination of 
measures").  In  adopting  implementing  acts,  and  with  a  view  to  avoiding  the 
proliferation  of  additional  structures,  the  Commission  should  be  assisted  by  the 
existing  Trade  Barrier  Regulation  Committee,  established  by  Regulation  (EC)  No 
3286/94. 

4. 

BUDGETARY IMPLICATION  

None.  

The proposed Regulation provides a mechanism to enforce the Union's rights and apportion 
responsibility between all institutions. 

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2012/0359 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

concerning the exercise of the Union's rights for the application and enforcement of 
international trade rules 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 207 thereof, 

Having regard to the proposal from the European Commission, 

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

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

(3) 

The Union has concluded a number of multilateral, regional and bilateral international 
trade agreements creating rights and obligations for the mutual benefit of the parties.  

It is essential that the Union possesses appropriate instruments to ensure the effective 
exercise  of  the  Union's  rights  under  international  trade  agreements,  in  order  to 
safeguard its economic interests. This is particularly the case in situations where third 
countries  enact  trade  restrictive  measures  that  diminish  the  benefits  accruing  to  the 
Union's  economic  operators  under  international  trade  agreements.  The  Union  should 
be  in  a  position  to  react  swiftly  and  in  a  flexible  manner  in  the  context  of  the 
procedures  and  deadlines  set  out  by  the  international  trade  agreements  which  it  has 
concluded.  The  Union  should  therefore  adopt  legislation  defining  the  framework  for 
exercising the Union's rights in certain specific situations. 

The  WTO  and  other,  including  regional  or  bilateral,  dispute  settlement  mechanisms 
aim  at  finding  a  positive  solution  to  any  disputes  arising  between  the  Union  and  the 
other  party  or  parties  to  those  agreements.  The  Union  should,  nevertheless,  suspend 
concessions  or  other  obligations,  in  accordance  with  those  dispute  settlement  rules, 
when other avenues to find a positive solution to a dispute have proven unsuccessful. 
Action by the Union in such cases serves the purpose of inducing compliance of the 
third country concerned with the relevant international trade rules, in order to restore a 
situation of reciprocal benefits. 

(4) 

Under  the  WTO  Agreement  on  Safeguards,  a  WTO  member  proposing  to  apply  a 
safeguard measure or seeking the extension of a safeguard measure should endeavour 
to  maintain  a  substantially  equivalent  level  of  concessions  and  other  obligations 
between it and the exporting members, which would be adversely affected by such a 

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safeguard  measure.  Similar  rules  apply  in  the  context  of  other,  including  regional  or 
bilateral  international  trade  agreements  concluded  by  the  Union.  The  Union  should 
take  rebalancing  measures  by  suspending  concessions  or  other  obligations  in  cases 
where the third country concerned implements no satisfactory adjustments. Action by 
the  Union  in  such  cases  serves  the  purpose  of  inducing  the  introduction  of  trade-
enhancing  measures  by  third  countries  in  order  to  restore  a  situation  of  reciprocal 
benefits. 

Article  XXVIII  of  the  GATT  1994  and  the  related  Understanding  govern  the 
modification or withdrawal of concessions established in the tariff schedules of WTO 
Members. WTO members affected by any such modification are entitled, under certain 
conditions, to withdraw substantially equivalent concessions. The Union should adopt 
rebalancing  measures  in  such  cases,  unless  compensatory  adjustments  are  agreed. 
Action by the Union would be aimed at inducing third countries to implement trade-
enhancing measures.  

The Union should have the possibility to enforce its rights in the area of government 
procurement  in  view  of  the  fact  that  the  WTO  Agreement  on  Government 
Procurement  states  that  any  dispute  arising  thereunder  shall  not  result  in  the 
suspension of concessions or other obligations under any other covered agreement of 
the WTO. 

This  Regulation  should  focus  on  those  measures  where  the  Union  has  experience  in 
their design and application; the possibility to extend the scope of this Regulation to 
the sectors of services and intellectual property rights should be assessed in due time 
with regard to the specificities of each area. 

(5) 

(6) 

(7) 

(8)  When enforcing the rights of the Union, the origin of a good should be determined in 
accordance with Council Regulation (EEC) No 2913/92 of the Council of 12 October 
1992 establishing the Community Customs Code9; with regard to enforcing the Union 
rights following dispute settlement in the government procurement area, the origin of a 
service should be determined on the basis of the origin of the natural or legal person 
providing it. 

(9) 

The Commission should evaluate the functioning of this Regulation no later than three 
years  after  the  first  instance  of  its  implementation  with  a  view  to  assessing  and,  if 
necessary, improving its efficiency. 

(10) 

Implementing  acts  pursuant  to  this  Regulation  should  be  adopted  subject  to  specific 
criteria of appropriateness laid down in the Regulation.  

(11)  The  Council  Regulation  (EC)  No  3286/94  of  22  December  1994  laying  down 
Community  procedures  in  the  field  of  the  common  commercial  policy  in  order  to 
ensure  the  exercise  of  the  Community's  rights  under  international  trade  rules,  in 
particular those established under the auspices of the World Trade Organization (also 
known as the "Trade barrier Regulation"(TBR)) should be amended in order to reflect 
the  adoption  of  this  Regulation  with  regard  to  the  implementation  of  commercial 
policy measures.   

9 

OJ L 302, 19.10.1992, p. 1. 

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(12) 

In  order  to  ensure  uniform  conditions  for  the  implementation  of  this  Regulation, 
implementing  powers  should  be  conferred  to  the  Commission.  Those  powers  should 
be  exercised  in  accordance  with  Regulation  (EU)  No  182/2011  of  the  European 
Parliament  and  of  the  Council  of  16  February  201110  laying  down  the  rules  and 
general  principles  concerning  mechanisms  for  control  by  Member  States  of  the 
Commission's exercise of implementing powers. 

(13) 

In order to safeguard the Union's interests, the Commission should adopt immediately 
applicable  implementing  acts  where,  in  duly  justified  cases  relating  to  the  need  to 
adapt the commercial policy measures to the behaviour of the third party concerned, 
imperative grounds of urgency so require,  

HAVE ADOPTED THIS REGULATION: 

Article 1 

Objective 

This Regulation lays down rules and procedures in order to ensure an effective exercise of the 
Union's  rights  to  suspend  or  withdraw  concessions  or  other  obligations  under  international 
trade agreements, with the aim of:  

(a) 

(b) 

responding to breaches by third countries of international trade rules which affect the 
interests of the Union, with a view to seeking a satisfactory solution. 

rebalancing  concessions  or  other  obligations  in  the  trade  relations  with  third 
countries, when the import treatment accorded to goods from the Union is altered.  

Article 2 

Definitions 

For the purposes of this Regulation the following definitions apply: 

(a) 

(b) 

(c) 

(d) 

"country" means any State or separate customs territory; 

"concessions or other obligations" means tariff concessions or any other benefits that 
the  Union  committed  to  apply  in  its  trade  with  third  countries  by  virtue  of 
international trade agreements to which it is a party, 

"level of nullification or impairment" means the degree to which the Union's interests 
under an international trade agreement are affected. Except as otherwise defined in 
the relevant agreement, it shall include any adverse economic impact resulting from a 
third country measure; 

‘mandatory price penalty’ means an obligation for contracting authorities or entities 
conducting public procurement procedures to increase, subject to certain exceptions, 
the price of services and/or goods originating in certain third countries that have been 
offered in contract award procedures. 

10 

OJ L 55, 28.2.2011, p. 13. 

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Article 3 

Scope 

1. 

This Regulation applies: 

(a) 

(b) 

(c) 

following the adjudication of trade disputes under the WTO Dispute Settlement 
Understanding, when the Union has been authorised to suspend concessions or 
other obligations under the multilateral and plurilateral agreements covered by 
the WTO Dispute Settlement Understanding; 

following  the  adjudication  of  trade  disputes  under  other  international  trade 
agreements, including regional or bilateral agreements, when the Union has the 
right to suspend concessions or other obligations under such agreements; 

for the rebalancing of concessions or other obligations, to which the application 
of a safeguard measure by a third country may give right pursuant to Article 8 
of  the  WTO  Agreement  on  Safeguards  or  to  the  provisions  on  safeguards 
included in other international trade agreements, including regional or bilateral 
agreements; 

(d) 

in  cases  of  modification  of  concessions  by  a  WTO  member  under  Article 
XXVIII  of  the  General  Agreement  on  Tariffs  and  Trade  1994,  where  no 
compensatory adjustments have been agreed. 

This Regulation is without prejudice to the adoption of commercial policy measures 
under other relevant procedures in cases where the measures provided for in Article 5 
are  not  available  or  would  provide  an  inadequate  or  ineffective  response  to  the 
situations referred to in paragraph 1. 

Article 4 

Exercise of the Union's rights 

Where action is necessary to safeguard the interests of the Union in the cases referred 
to in Article 3(1), the Commission shall adopt an implementing act determining the 
appropriate commercial policy measures. Such implementing act shall be adopted in 
accordance with the examination procedure referred to in Article 8(2). 

Implementing  acts  adopted  pursuant  to  the  first  paragraph  shall  meet  the  following 
conditions: 

2. 

1. 

2. 

(a)  Where  concessions  or  other  obligations  are  suspended  following 

the 
adjudication  of  a 
the  WTO  Dispute  Settlement 
Understanding,  their  level  shall  not  exceed  the  level  authorised  by  the  WTO 
Dispute Settlement Body. 

trade  dispute  under 

(b)  Where concessions or other obligations are suspended following the discharge 
of an international dispute settlement procedure under a bilateral or a regional 
agreement, their level shall not exceed the level of nullification or impairment 

EN 

12 

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resulting  from  the  third  country  measure  at  stake  as  determined  by  the 
Commission or through recourse to arbitration, as the case may be.  

(c) 

In the case of rebalancing of concessions or other obligations under provisions 
on  safeguards  in  international  trade  agreements,  the  Union's  action  shall  be 
substantially equivalent to the level of concessions or other obligations affected 
by  the  safeguard  measure,  in  accordance  with  the  conditions  of  the  WTO 
Agreement  on  Safeguards  or  of  the  provisions  on  safeguards  in  regional  or 
bilateral trade agreements under which the safeguard measure is applied.  

(d)  Concessions  withdrawn  in  the  trade  with  a  third  country  in  connection  with 
Article  XXVIII  of  the  GATT  1994  and  the  related  Understanding  shall  be 
substantially equivalent to the concessions modified or withdrawn by that third 
country,  in  accordance  with  the  terms  established  in  Article  XXVIII  of  the 
GATT 1994 and the related Understanding. 

3. 

Commercial policy measures in accordance with paragraph 1 shall be determined on 
the basis of the following criteria, in light of available information and of the Union's 
general interest: 

(a) 

effectiveness  of  the  measures  in  inducing  compliance  of  third  countries  with 
international trade rules; 

(b)  potential  of  the  measures  to  provide  relief  to  economic  operators  within  the 

Union affected by third country measures; 

(c) 

availability of alternative sources of supply for the products concerned, in order 
to  avoid  or  minimise  any  negative  impact  on  downstream  industries  or  final 
consumers within the Union; 

(d) 

any  specific  criteria  that  may  be  established  in  international  trade  agreements 
in connection with the situations foreseen in Article 3.  

Article 5 

Commercial policy measures 

Without  prejudice  to  any  international  agreement  to  which  the  Union  is  a  party,  the 
commercial policy measures that may be enacted by means of an implementing act pursuant 
to Article 4(1) shall be: 

(a) 

(b) 

the suspension of tariff concessions and the imposition of new or increased customs 
duties, including the re-establishment of customs duties at the most favoured nation 
level or the imposition of customs duties beyond most favoured nation level, or the 
introduction of any additional charge on imports or exports of goods;  

the  introduction  or  increase  of  quantitative  restrictions  on  imports  or  exports  of 
goods,  whether  made  effective  through  quotas,  import  or  export  licences  or  other 
measures; 

(c) 

the suspension of concessions in the area of public procurement, through: 

EN 

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(i) 

the  exclusion  from  public  procurement  of  tenders  the  total  value  of  which  is 
made  up  for  more  than  50%  of  goods  or  services  originating  in  the  third 
country concerned; and/or 

(ii) 

the  imposition  of  a  mandatory  price  penalty  on  that  part  of  the  tender 
consisting of goods or services originating in the third country concerned. 

Article 6 

Rules of Origin 

1. 

2. 

The  origin  of  a  good  shall  be  determined  in  accordance  with  Council  Regulation 
(EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code11.  

The origin of a service shall be determined on the basis of the origin of the natural or 
legal person providing it. The origin of the service provider shall be deemed to be: 

(a) 

in the case of a natural person, the country of which the person is a national or 
where he has a right of permanent residence; 

(b) 

in the case of a legal person any of the following: 

(i) 

(ii) 

if  the  service  is  provided  other  than  through  a  commercial  presence 
within  the  Union,  the  country  where  the  legal  person  is  constituted  or 
otherwise organised under the laws of that country and in the territory of 
which the legal person is engaged in substantive business operations; 

if  the  service  is  provided  through  a  commercial  presence  within  the 
Union, the Member State where the legal person is established and in the 
territory  of  which  it  is  engaged  in  substantive  business  operations  such 
that it has a direct and effective link with the economy of a Member State 
concerned. 

For the purposes of point (ii) if the legal person is not engaged in substantive 
business  operations  such  that  it  has  a  direct  and  effective  link  with  the 
economy  of  a  Member  State  concerned,  the  origin  of  the  natural  or  legal 
persons which own, or control the legal person providing the service. 

The  legal  person  providing  the  service  shall  be  considered  to  be  "owned"  by 
persons  of  a  given  country  if  more  than  50 %  of  the  equity  interest  in  it  is 
beneficially owned by persons of that country and "controlled" by persons of a 
given  country  if  such  persons  have  the  power  to  name  a  majority  of  its 
directors or otherwise to legally direct its actions. 

Article 7 

Suspension, modification and termination of measures 

11 

OJ L 302, 19.10.1992, p. 1. 

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1. 

Where, subsequently to the adoption of an implementing act pursuant to Article 4(1), 
the  third  country  concerned  accords  satisfactory  compensation  to  the  Union  in  the 
cases  referred  to  in  Article  3(1)(a)  and  (b),  the  Commission  may  suspend  the 
application of that implementing act for the duration of the compensation period. The 
suspension shall be decided in accordance with the examination procedure referred to 
in Article 8(2). 

2. 

The Commission shall terminate an implementing act adopted under Article 4(1) in 
any of the following circumstances: 

(a)  when  the  third  country  whose  measures  were  found  to  be  inconsistent  with 
international  trade  rules  in  a  dispute  settlement  procedure  brings  itself  into 
compliance,  or  where  a  mutually  satisfactory  solution  has  otherwise  been 
reached; 

(b) 

(c) 

in  cases  of  rebalancing  of  concessions  or  other  obligations  following  the 
adoption  by  a  third  country  of  a  safeguard  measure,  when  the  safeguard 
measure is withdrawn or expires, or when the third country concerned accords 
satisfactory  compensation  to  the  Union  subsequently  to  the  adoption  of  an 
implementing act under Article 4(1); 

in  cases  of  modification  of  concessions  by  a  WTO  member  under  Article 
XXVIII of the General Agreement on Tariffs and Trade 1994, when the third 
the  Union 
country  concerned  accords  satisfactory  compensation 
subsequently to the adoption of an implementing act under Article 4(1). 

to 

The termination shall be decided in accordance with the examination procedure 
set out in Article 8(2).  

Where  it  is  necessary  to  make  adjustments  to  commercial  policy  measures  adopted 
under  this  Regulation,  account  taken  of  the  conditions  and  criteria  laid  down  in 
Article 4(2) and 4(3), the Commission may introduce any appropriate modifications 
in accordance with the examination procedure set out in Article 8(2).  

On  duly  justified  imperative  grounds  of  urgency  relating  to  the  termination  or  the 
modification  of  the  third  country  measure  concerned,  the  Commission  shall  adopt 
immediately  applicable  implementing  acts  suspending,  modifying  or  terminating 
implementing  acts  adopted  under  Article  4(1),  as  provided  for  in  this  Article,  in 
accordance with the procedure referred to in Article 8(3). 

Article 8 

Committee procedure 

The  Commission  shall  be  assisted  by  the  committee  established  by  Council 
Regulation  (EC)  No  3286/94.  That  committee  shall  be  a  committee  within  the 
meaning of Article 3 of Regulation (EU) No 182/2011. 

Where  reference  is  made  to  this  paragraph,  Article  5  of  Regulation  (EU)  No 
182/2011 shall apply. 

3. 

4. 

1. 

2. 

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15 

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3. 

Where  reference  is  made  to  this  paragraph,  Article  8  of  Regulation  (EU)  No 
182/2011 in conjunction with Article 5 thereof, shall apply. 

Article 9 

Information gathering 

1. 

2. 

3. 

4. 

5. 

6. 

The Commission shall seek information and  views  regarding the Union's economic 
interests in specific products or sectors, in the application of this Regulation, through 
a  notice  in  the  Official  Journal  of  the  European  Union  or  other  suitable  public 
communication means. 

Information received pursuant to this Regulation shall be used only for the purpose 
for which it was requested. 

Neither the Commission nor the Council, nor the European Parliament nor Member 
States,  nor  their  officials  shall  reveal  any  information  of  a  confidential  nature 
received pursuant to this Regulation, without specific permission from the supplier of 
such information. 

The  supplier  of  information  may  request  that  information  supplied  be  treated  as 
confidential. In such cases, it shall be accompanied by a non-confidential summary 
or a statement of the reasons why the information cannot be summarised. 

If  it  appears  that  a  request  for  confidentiality  is  not  justified  and  if  the  supplier  is 
unwilling  either  to  make  the  information  public  or  to  authorise  its  disclosure  in 
generalised or summary form, the information in question may be disregarded. 

Paragraphs  2  to  5  shall  not  preclude  the  disclosure  of  general  information  by  the 
Union  authorities.  Such  disclosure  must  take  into  account  the  legitimate  interest  of 
the parties concerned in not having their business secrets divulged. 

Article 10 

Review 

No later than three years after the first instance of adoption of an implementing act under this 
Regulation,  the  Commission  shall  review  its  implementation  and  report  to  the  European 
Parliament and the Council.  

Article 11 

Amendments to other acts 

In  Article  13(3)  of  Council  Regulation  (EC)  No  3286/94  [the  TBR]  is  replaced  by  the 
following text: 

"Where the Union, having acted in accordance with Article 12(2), has to take a decision on 
the measures of commercial policy to be adopted pursuant to Article 11(2)(c) or pursuant to 

EN 

16 

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Article  12,  it  shall  act,  without  delay,  in  accordance  with  Article  207  of  the  Treaty  and,  as 
appropriate, Regulation No XX/XX or any other applicable procedures". 

This Regulation shall enter into force on the […] day following that of its publication in the 
Official Journal of the European Union. 

Article 12 

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

Done at Brussels,  

For the European Parliament 
The President 

For the Council 
The President 

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