CELEX: 51993PC0259
Language: en
Date: 1993-07-13
Title: Proposal for a COUNCIL REGULATION (EEC) amending Regulation (EEC) No 636/82 establishing economic outward processing arrangements applicable to certain textiles and clothing products reimported into the Community after working or processing in certain third countries

COMMISSION OF THE EUROPEAN COMMUNITIES
                                              COM(93) 259 final
                                              Brussels, 13 July 1993
                             Proposal for a
                        COUNCIL REGULATION (EEC)
  amending Regulation (EEC) No 636/82 establishing economic outward
      processing arrangements applicable to certain textiles and
         clothing products reimported into the Community after
           working or processing in certain third countries
                     (presented by the Commission)
 ---pagebreak---                                         - 2 -
                              EXPLANATORY MEMORANDUM
Council Regulation     (EEC) No 636/82 of 16 March         1982 (*•) created economic
outward processing arrangements applicable to certain textiles and clothing
products  reimported     into  the  Community    after   working    or  processing    in
certain  third   countries.     In the   context    of   the  application     of   these
arrangements   the  annual    quantities   of   compensating     products    which   the
beneficiaries of these arrangements have been allowed              to reimport, were
distributed until the end of        1992 by the competent authorities of each
Member State within the limits of the annual quantities of compensating
products whose    reimportation    the Member State concerned was           allowed   to
authorize.
As it has been outlined in the communications of the Commission on the
completion of the Internal Market in trade in textile and clothing products
(doc.  7006/92),   as    approved  by  the   Council,    the   establishment     of  the
Internal Market in 1993 has resulted in the creation of an area without
internal frontiers comprising, inter alia, the free movement of goods and
the elimination of disparities in import arrangements.
It is therefore necessary to introduce the indispensable modifications to
Council Regulation (EEC) No. 636/82 in order to ensure an implementation of
the arrangements created by this Regulation at Community level.
In order to achieve this objective, the Commission proposed in January 1993
(COM(93) 10 final) a two-tier approach:
-  .  As a first step, to be introduced by 1 January 1993, the existing
      national outward processing        quotas would be replaced         by Community
      quotas, open to those operators eligible under Council Regulation
      No 636/82    on    a  first  come,    first   served    basis.    The   competent
      authorities     in   Member   States   would     continue    to  deliver     prior
      authorizations to applicants.        By means of an information system to
      be established between Member states and the Commission, they have to
      make sure that the allocated prior authorizations do not exceed the
      total  annual     quantities   available.    It   will   also   be   possible   to
      reimport the compensating products in any Member state regardless of
      which Member State issued the prior authorization.
(1)   OJ No L 76, 20.3.19 82, p. 1.
 ---pagebreak---                                           3 -
-     As a second step, to be implemented by the •nd           of 1993 at the latest,
      the rules    for   implementation of Council Regulation No 636/12, in
      particular the admission of beneficiaries, which up to now has not
      been   uniform    in   the  different   Member    States, would       have   to  be
      harmonised,     other outstanding issue» like the management of the 14%
      derogation     for    third   countries'   fabrics/yarn       are    also    to  be
      addressed.
In the court» of the discussion in the 113 committee of the Commission's
proposal for the first step, it appeared that a large majority of Member
States was not prepared to adopt the two-tier approach but preferred to
proceed with a complete revision of Council Regulation No 636/t2 which
would  encompass    all   the   necessary   adaptations     in   order   to   ensure   an
implementation of the arrangements at community level in accordance with
the objectives of the Internal Market.
In order to achieve this objective, the Commission has decided to propose a
comprehensive revision of Council Regulation No 636/82 which includes its
proposal   of  January     1993   and  addresses    in   particular      the    following
elements :
(a)   The   allocation     of  quantities   available.     Under    the   proposed    new
      system, the allocation for applicants other than operators with past
      performance    rights, would     be done on     a   first    come, first     served
      basis,    by    maximum     'tranches',    through     the     issue     of   prior
      authorizations.      To this effect an information system will be set up
      between the Member States and the Commission in order to make sure
      that the allocated amounts do not exceed the total annual quantities
      available.
(b)   The concept of beneficiary and the relevant criteria.                The criteria
      for obtaining the benefit of outward processing arrangements are not
      clearly defined in Council Regulation No 636/82.               This has resulted
      in divergent interpretations and applications in Member States. The
      present proposal aims at defining more clearly those criteria. At the
      same time, past performance rights of operators will be preserved.
      They can, however, be reviewed with regard to those operators who
      have   not been manufacturing       in the Community        for  at   least   three
      years,    when    available    quantities    for    newcomers     do    not   prove
      sufficient.
 ---pagebreak---                                       . 4 -
(c) The  notion   of   similar   products.    Under    the  existing    regulation,
    operators seeking to obtain a prior authorization must in principle
    establish    that    they   manufacture     similar    products.     Regulation
    No 636/82, however, does not        contain    an operational   definition of
    "similar products".      It is therefore proposed to group the different
    categories of products into three groups of categories and to define
    similar products as "products        falling within the same category or
    within the same group of cateqories".
(d) The  link between outward      processing    and production.      The  existing
    link between the benefit of outward processing arrangements and the
    level of domestic production needs to be more clearly defined. It is
    proposed, without touching the rights of legitimate past performers,
    that during the first nine months of each year, prior authorizations
    would only be granted by Member State authorities to those persons
    who during the preceding year had maintained a value of production in
    the Community of at least 50% of their total turnover.               During the
    remaining three months, persons not meeting this condition but who
    maintain a significant production in the Community would also become
    eligible for allocation of quantities.
(e) The   14%  derogation.     The   application     by  Member   States    of   the
    derogation   which   provides   that   up   to   14% of   fabrics   going   into
    outward processing operations        can be of     third country    origin, if
    those goods are not sufficiently available wthin the Community, is
    not  uniform.    To   eliminate   the   discrepancies,    it  is   proposed   to
    implement  this derogation      clause at the      level of each     individual
    beneficiary. A higher percentage of derogation would nonetheless be
    permitted   in exceptional     and   economically    justified   cases   on  the
    basis of a decision taken in accordance with the procedure laid down
    in  Article 12     of   the   existing    Regulation,    which    governs    the
    applicable rules on the management of the Regulation.
 ---pagebreak---                                       5 -
At the same time the proposal covers two issues which need to be addressed:
(a)   a technical adaptation of th»? list of textile products   (categories)
      to  which  the  Regulation  applies in  order  to  take  into  account
      modifications in the Combined Nomenclature which occurred since the
      entry into force of Council Regulation No 636/82;
(b)   inclusion of a provision in order to ensure a uniform application of
      the   tariff   exemption   accorded  to   PECOs   for   reimports   of
      textile/clothing goods after outward processing in those countries.
 ---pagebreak---                                          - 6 -
                                    Proposal for a
                              COUNCIL REGULATION (EEC)
     amending Regulation (EEC) No 6 36/82 establishing economic outward
         processing arrangements applicable to certain textiles and
            clothing products reimported into the Community after
                working or processing in certain third countries
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Economic Community,
and in particular Article 113 thereof,
Having regard to the proposal from the Commission,
Whereas   the   import   arrangements    in the     Community      for   the  textile  and
clothing   sectors    as   regards   certain   third        countries   contain   specific
measures    applicable     to   products    resulting         from   outward    processing
operations;
Whereas Council Regulation        (EEC) No 6 3 6 / 8 2 ^ ) , as amended by the Act of
Accession    of   Spain   and   Portugal   created        economic   outward    processing
arrangements applicable to certain textile and clothing products reimported
into the Community after working or processing in certain third countries;
Whereas the creation of the Internal Market of 1993 entails an area without
frontiers   in   which   in   particular   the   free      movement   of   goods  will  be
ensured; whereas this entails, inter alia, the abolition of controls at
internal frontiers and the elimination of disparities as regards import
arrangements, as well as the option of reimporting compensating products
into a Member State other than that in which the prior authorization was
granted;
(1)   OJ No L 76, 20.3.1982, p. 1.
 ---pagebreak---                                            - 7 -
Whereas trade in textile and clothing products should be in line with the
functioning    of the    said   Internal    Market, in particular          as regards     the
application of the economic outward processing arrangements for textiles;
Whereas the earlier regional outward processing quotas have been replaced
as from 1 January,       1993 by a system of Community quotas not allocated
between Member States;
Whereas the competent authorities of Member States should continue to issue
prior   authorizations      to   applicants     wanting     to    make    use   of   outward
processing,    but   in  doing    so  should    communicate      to   the   commission    the
quantities    requested    in   order   to   verify   whether      those   quantities     are
available within the total limits established at Community level;
Whereas   quantities     should    be  allocated     by   maximum      tranches,    and   the
applications for a new tranche should only be possible when the previously
allocated tranche has been utilized by at least 50%;
Whereas   the   criteria    and   conditions    which   Member     state    operators    must
observe in order to qualify under these arrangements are not at present
applied uniformly throughout the Community;
Whereas, therefore, the rules          for   implementation      of these criteria        and
conditions    have   to be    harmonized    in order     to   allow     access   to  outward
processing under conditions common to the whole Community, especially in
respect of the definition "beneficiary", the term of "similar products",
the priority for manufacturers maintaining an important production within
the Community and the derogation from the rule concerning the origin of the
product exported for outward procèssing;
Whereas the allocation of product quantities to each applicant should take
account not only of the quantities available under the import arrangements
established    with   regard    to   the   particular     product      and   third   country
concerned,    but   also   of   the   bona    fide   status     of   the   beneficiary     as
manufacturer and the efforts of the manufacturer to maintain production and
employment    within    the    Community    of   articles      at   the    same    stage   of
manufacture,    while   at   the   same  t ime    not   reducing     the   quantities     made
available to and used by legitimate past beneficiaries;
 ---pagebreak---                                        - 8
Whereas in keeping with the objectives of this Regulation it is appropriate
that the product quantities allocated to persons who have not manufactured
similar products    in the Community     for more  than  three years    should  be
reviewed   at  the  end  of   each  year   in  which  available   quantities   for
newcomers do not prove sufficient;
Whereas for the purpose of ensuring an efficient and impartial management
of the system, the distribution of outward processing quantities which have
not  been   set   aside  to   meet  the   applications   of  .persons  with   past
performance rights should be effected on a first-come, first-served basis;
Whereas, in view of Protocol No 1 on Textiles and Clothing products to the
Europe   Agreements   and   the   Interim   Agreements  concluded    between   the
Community and the Czech Republic, the Slovak Republic, Poland, Hungary,
Bulgaria and Romania, it is appropriate that the scope of the application
of the Regulation be extended to certain liberalized categories of products
originating in those countries;
Whereas it is necessary that the list of products to which this Regulation
applies should be in conformity with the present classification of textile
products (categories) based on the combined Nomenclature;
whereas the present Regulation should not affect reimportations into the
Community of products after their working or processing in third countries
pursuant to prior authorizations issued before the date of its application;
Whereas   an efficient Community     administration  of the outward processing
arrangements requires close cooperation between the Member States and the
Commission,
HAS ADOPTED THIS REGULATION:
                                    Article 1
Regulation (EEC) No 636/82 is amended as follows:
1.     In Article 1(1), the words "50 to 62 of the Common Customs Tariff"
       are replaced by the words "50 to 63 of the Combined Nomenclature".
 ---pagebreak---                                     - 9 -
2. At the beginning of Article 1(3) the following words are inserted:
   "Without prejudice to the third paragraph of Article 11."
3. In Article 1(4) the following subparagraphs are added:
   "(c) 'competent   authority' means       the  authority     in a Member      State
        which   is competent   to <*pply the provisions         laid down in the
        present    Regulation,   in    particular      the   granting     of    prior
        authorizations.
    (d) 'similar products' are      lefined as products falling within the
        same category    or within     the   same  group    of categories      as is
        listed in Annex I, which may be modified in accordance with the
        procedure laid down in Article 12."
4. Article 2(2)(a) is replaced by the following text:
   "(a) that person must:
        -     prove to the competent authority, when applying                for his
              first   prior   authorization       each     year,    that    he    has
              manufactured   in   the    preceding   year    products    which    are
              similar to and at the same stage of manufacture                 as the
              compensating products in respect of which the application
              for the arrangement is made;
        -     perform,   within     --he    Community,     the   main    production
              processes on those products        (cutting, sewing, assembling,
              or knitting) on his own account, either in his or her own
              factory, or alternatively, in respect of some but not all
              of  those  production     processes,    in a    factory   of   another
              manufacturer   linked      to   him  by    a    joint   venture,     by
              subcontracting,    or    by    some   other    form    of   long-term
              cooperation contract;
              manufacture in the community those products for sale on the
              market."
 ---pagebreak---                                   - 10 -
5. In Article 2(2)(b) the second part of the sentence is replaced by the
   following text:
   "... operations    within  the  quantities  allocated  by the  competent
   authorities of the Member State where the application is made, and
   subject to the conditions laid down in Article 3."
6. In Article 2(2)(c) the last sentence of the first subparagraph is
   replaced by the following text:
   "Such derogations may not be granted in respect of more than 14% of
   the total value of the goods(*) in respect of which the benefit of
   the arrangement was granted to the beneficiary during the previous
   year. In exceptional and economically justified cases the competent
   authorities, on the basis of a decision taken in accordance with the
   procedure laid down in Article 12, may agree to a higher percentage
   of derogation.
   (*)   'Total value of the goods" means:
        -     in the case of the goods imported beforehand, their value
              for customs purposes as defined by Regulation           (EEC)
              No 1224/80 (OJ No L 134, 31.5.1980, p. 1 ) ;
              in all other cases, the ex-factory price."
7. In Article 2(3), the second sentence of the fourth subparagraph is
   deleted.
8. Article 3 is replaced by the following text:
                                "Article 3
   1.   The   Council   shall  establish   at Community  level  the  annual
        quantities of compensating products whose reimportation may be
        authorized under the specific import arrangements referred to in
        Article 1(3).
    2.  The competent authorities shall distribute the annual quantities
        referred to in paragraph (1) above amongst the beneficiaries as
        defined in Article 2.
 ---pagebreak---                                - 11 -
3. Without prejudice to Article 2(3) or paragraph (5) below, this
   distribution shall be such as to ensure that the objective of
   maintaining the industrial activity of the beneficiary in the
   Community,   as   laid down    in Article    2(2)(a),    is respected    as
   regards both the nature of the products            and their quantities
   expressed in physical units or added value.
4. The   annual    quantities    of   compensating     products    shall    be
   distributed   among    the   beneficiaries    on   the   basis  of    their
   demands presented in conformity with Article 4(2).
   The  allocation will be effected         by maximum    amounts   for each
   category   and    for  each   third    country    concerned.   If   a   new
   application is submitted, additional amounts for each category
   and for each third country concerned may be allocated by the
   competent authorities to a particular beneficiary only when the
   previously   authorized     amount   for   that   beneficiary   has    been
   actually utilized by at Least 50%.
5. Each legitimate beneficiary shall be entitled to an amount equal
   to the total quantity of compensating products for each category
   and for each third country concerned for which it carried out
   outward processing operations       in conformity with the provisions
   of  the   Regulation,     during   one   of   the   two   calendar    years
   preceding the year of its application.          Beneficiaries mentioned
   in this paragraph become eligible for allocations in accordance
   with paragraph     (6) only when they have fully used their past
   performance rights.
   In  addition,    a   legitimate   beneficiary     who   waives  his    past
   performance   rights    in respect    of   a specific    category   and/or
   country becomes eligible to apply for an equivalent quantity in
   another category and/or country, in accordance with the first
   subparagraph of paragraph (6) (general rules for newcomers); the
   criteria generally to be applied in such cases shall be decided
   in accordance with the procedure laid down in Article 12.
 ---pagebreak---                                - 12 -
6. The competent authorities shall allocate on a first-come, first-
   served basis the quantities of compensating products which have
   not been temporarily set aside to fulfil the applications made
   under paragraph (5).
   During the first nine months of each year allocations shall be
   granted   to   those   manufacturers    who   can   prove   that   in   the
   preceding    year   they   maintained    a   production    value   in   the
   Community of at least 50'* of their total turnover.
   During    the    remaining    three   months     of   each    year    those
   manufacturers who can       prove that    in the preceding      year they
   maintained,    in   the   Community,    a  significant     production    of
   similar products, in relation to the quantities requested,              can
   participate in the distribution of the remaining quota.
7. Where those beneficiaries referred in paragraph (5) do not use
   the total quantities to which they are entitled, the remainder
   of such quantities, but in any case not more than 10.5% of each
   total   quantity(*),     shall   be  added   to   the  following    year's
   quantities referred to in paragraph (6).
8. At  the   end   of  each   year   in  which    available   quantities    of
   compensating products prove to be insufficient to satisfy the
   applications    made  under    paragraph   (6) consideration     shall be
   given in accordance with the procedure laid down in Article 12,
   to the extent to which, and the way in which, allocations to
   those persons who have not manufactured similar products for at
   least three years have to be reduced.
9. Provisions relating to the application of this Article shall be
   adopted    in   accordance    with   the    procedures    laid   down    in
   Article 12.
   <*)  According to Article 4(2) of Annex XXIII of Council
         Regulation No 4136/36, which expired on 31 December 1992."
 ---pagebreak---                                   13 -
9.  Article 4(1) is replaced by the following text:
    "1.  Application      of   the     arrangements     contained    in   this
         Regulation is subject to the issue of a prior authorization
         by the competent authorities.
         In order to ensure that the allocated prior authorizations
         do not exceed the total annual quantities of compensating
         products    established     at   Community    level   the   competent
         authorities    shall    issue    prior  authorizations     only  upon
         confirmation      by  the    Commission    that    there  are   still
         quantities available of the total Community quota for the
         category    and the third country concerned,          for which the
         quantities are requested by the persons concerned."
10. Article 4(2)is deleted.
11. Article 5(4) is replaced by the following text:
    "4.  When     granting     prior      authorizations      the    competent
         authorities must be satisfied that the level of employment
         in   the   factory   oi    factories   of   the   applicant   is  not
         significantly affected."
12. In Article 7, the first paragraph is deleted.
13. In Article 8, the words        at the end of paragraph        (1) "by the
    Member  state    that   issued   the   prior   authorization    for  those
    products" are deleted.
14. Article 8(2) is deleted.
15. In the first and second paragraphs of Article 9, the words "of
    the Member State concerned" are deleted.
 ---pagebreak---                               - 14 -
16. In Article 11, the second paragraph is replaced by the following
    text :
    "Council Regulation (EEC) No 2473/86 of 24 July 1986 on outward
    processing    relief   arrangements    and  the    standard  exchange
    system^*),    as   well   as   any   provisions    adopted   for   its
    application, shall not be affected by those arrangements.
    (*>OJ No L 212, 2.8.1986, p. 1."
17. In Article 11 a third paragraph is added, as follows:
    "For   the  application   of  the  provisions   of   Article  2(3)  of
    Protocol No 1 on Textiles and Clothing Products to the Europe
    Agreement and the Interim Agreements between the Community and
    the   Czech  Republic,   the   Slovak   Republic,   Hungary,   Poland,
    Romania and Bulgaria respectively, the products which are listed
    in Annex 2 and which originate in those countries in accordance
    with Protocol No 4 on Origin to the Europe Agreements with the
    Community, do not need to be subject to the arrangements or the
    specific measures    referred   to in Article    1(3) or the    annual
    limits referred to in Article 2(2)(b).      Prior authorizations for
    those categories of products shall be issued by the competent
    authorities    after   notification    to  the   Commission   of   the
    quantities requested, and provided that all other conditions of
    this Regulation are fulfilled."
18. The attached    Appendix 1 becomes Annex 1 to the Regulation.
19. The Annex is replaced by the attached Appendix 2 and becomes
    Annex 2 to the Regulation; and references made in the Regulation
    to the Annex become references to Annex 2.
 ---pagebreak---                                    - 15 -
                                 Article 2
The  present  Regulation  shall  not  affect  the  reimportation  into  the
Community of products after working or processing in third countries on the
basis of prior authorizations issued before the entry into force of this
Regulation.
                                 Article 3
This Regulation shall enter into force on the seventh day following its
publication in the official Journal of the European Communities.
This Regulation shall be binding in its entirety and directly applicable in
all Member States.
Done at Brussels,                               For the Council
                                                The President
 ---pagebreak---                                               - 16 -
                                                                          Appendix 1
                                             'ANNEX 1
                     Groups of categories referred to in Article l(4)di
Similar products at the same stage of manufacture are defined as products
falling within the same category or within the same group of categories as
listed below:
1st group (Outerwear)
c a t e g o r i e s 4, 5, 6, 7, 8,  14, 1 5 / 1 6 , 17, 2 1 , 2 6 , 27, 28, 29, 73,  74, 75,
76, 77, 78, 83.
2nd group (Underwear)
categories 4, 13, 18, 24, 28, 31, 6), 72, 78, 83, 86.
3rd group (Other products)
categories 10, 12, 68, 70, 72, 78, 33, 85, 87.
 ---pagebreak---                                     - 17 -
                                                           Appendix 2
                                   "ANNEX 2
      List of maximum processing levels referred to in Article 2(2)(d)
Compensating products by categories(1)           Maximum processing level
Categories                                       Operation
"4, 5, 6, 7, 8,  10, 12, 13, 14, 15,             Processing from woven or
16,  17, 18, 21, 24, 26, 27, 28, 29              knitted fabrics(2)
31, 68, 69, 70,  72, 73, 74, 75, 76, 77,
78, 83, 85, 86,  87, 91."
 (1)   Categories refer to those listed in Annex 1 to council Regulation
 (2)   However, the operation whereby fully fashioned knitwear is obtained
       from yarn may also count as a processing operation within the meaning
       of this Regulation, provided that the temporary exports of yarn
       authorized for this purpose in any year do not exceed 7% by weight of
       the total temporary exports authorized in the Community in the
       previous year under specific arrangements of the type referred to in
       Article 1(3).
       The Commission shall ensure that the limit of 7% as foreseen above
       will not be exceeded at the Community level.
       To this end the provisions of Article 4, paragraph 1, subparagraph 2,
       shall apply."
 ---pagebreak---                                              - 18 -
                                                                     ISSN 0254-1475
                                                              COM(93) 259 final
                                                      DOCUMENTS
EN                                                                          11 02
                                 Catalogue number : CB-CO-93-286-EN-C
                                                             ISBN 92-77-56468-7
Office for Official Publications of the European Communities
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