Brussels, 25 November 2002

EUROPEAN UNION COMMON POSITION
(Replaces doc. 20511/02 CONF-M 71/02)
Subject : Chapter 25: Customs Union

This position of the European Union is based on its general position for the Accession Conference with Malta (CONF-M 2/00), and is subject to the negotiating principles endorsed by the Conference (CONF-14/00), in particular:

"- any view expressed by either party on a chapter of the negotiations will in no way prejudge the position which may be taken on other chapters;

"- agreements - even partial - reached during the course of the negotiations on chapters to be examined successively may not be considered as final until an overall agreement has been established".

The EU underlines the importance for Malta of compliance with the Association Agreement as well as the Accession Partnership, which constitute basic elements of its specific pre-accession strategy. The EU encourages Malta to continue the alignment of its policies with the acquis and its effective implementation.

The EU notes that Malta, in its negotiating positions (CONF-M 66/00, 90/02, 97/02 and 98/02), accepts the acquis under chapter 25 as in force on 30 June 2002, and that Malta declares that it will be able to implement it by accession. The EU also takes note of the additional information provided by Malta (CONF-M 138/02).

In particular, the EU notes that, notwithstanding the transitional period granted to Malta as set out below, Malta accepts to implement fully before the date of accession the entire customs union acquis, including Articles 23 and 25 of the Treaty establishing the European Community (CONF-M 138/02).

With regard to levies on agricultural and processed agricultural goods, the EU recalls that such levies are considered to have an equivalent effect to customs duties and are discriminatory and incompatible with the Association Agreement and the acquis. The EU takes note that Malta has agreed that by accession it will replace agricultural import levies by a special temporary State aid regime (CONF-M 141/02), which is being dealt with under chapter 7, Agriculture.

As regards Malta's request for a transitional period for woven fabrics of combed wool or of combed fine animal hair (CN Code 5112 11 10), denim (CN Code 5209 42 00), woven fabrics of artificial filament yarn (CN Code 5408 22 10) and other made up clothing accessories (CN Code 6217 10 00), the EU recalls its general negotiating position that transitional measures are exceptional, limited in time and scope and accompanied by a plan with clearly defined stages for application of the acquis. They must not involve amendments to the rules or policies of the Union, disrupt their proper functioning, or lead to significant distortions of competition. The EU also recalls that it accepts a five-year transitional period from the date of Malta’s accession to the EU, with a schedule of implementation involving the progressive increase of tariff duties as follows, and that this has been agreed by the Conference (CONF-M 93/02):

- zero rate during the first and second year;

- one third of the prevailing EU duty ad valorem during the third and fourth year;

- two thirds of the prevailing EU duty ad valorem during the fifth year;

for the following volumes:

- For CN Code 5112 11 10: a maximum of 20,000 square metres per year

- For CN Code 5209 42 00: a maximum of 1,200,000 square metres per year

- For CN Code 5408 22 10: a maximum of 110,000 square metres per year

- For CN Code 6217 10 00: a maximum of 5,000 kilos per year.

This transitional arrangement shall expire at the end of the fifth year after Malta's accession to the EU or on 31 December 2008, whichever is the earlier.

In this context, the EU recalls that the EU's acceptance of this transitional period is exceptional and takes into account the particular nature of the wearing apparel sector in Malta, as well as the circumstances of the particular case in question, and the need to phase out a specific situation that has arisen from the application of the Association Agreement in Malta.

The same provisions as those contained in Article 101 of the Accession Treaty with Austria, Finland and Sweden will apply mutatis mutandis to the above-mentioned tariff quota. In particular, the Commission and the competent Maltese authorities shall take whatever measures are needed to ensure that the materials are used in the territory of Malta for the production of men’s and boys’ outerwear (not knitted or crocheted), on the basis of the existing provisions on end-use of the acquis.

In this context, the EU recalls its view that the end-use regime under customs supervision proposed by Malta imposes an additional administrative burden and creates the risk of fraud, in particular in the absence of internal borders in the enlarged customs union. Moreover, the EU considers that the allocation system proposed by Malta is not compatible with the EU system of tariff quotas, as it is not based on a "first come, first served" principle. The EU therefore recalls that all interested operators must have access to the above-mentioned tariff quotas.

The EU welcomes the entry into force of the new Customs Code and takes note of the timetable for the adoption and entry into force of all outstanding legislation, as set out in CONF-M 26/02. Moreover, the EU invites Malta to take all necessary measures to ensure that the new legislation is correctly implemented. Particular attention should be paid to the implementation of the provisions on free zones and end use.

The EU invites Malta to continue the implementation of the Business Change Management Plan, and in particular to strengthen its customs department, including in the area of customs procedures with economic impact, valuation and post-clearance control.

The EU takes note of Malta's revised information technology (IT) strategy and of the time schedule for the rolling out of the e-Customs 2000 system to all customs sites as set out in CONF-M 26/02. The EU also recalls that the full installation and operation, as soon as possible, of the relevant customs-related IT applications necessary for smooth implementation of the acquis remains a priority and that a sufficient number of specialised IT staff should be in place prior to accession.

The EU encourages Malta to foster cooperation between the Customs Department and other bodies, also by means of Memoranda of Understanding. The EU also welcomes the conclusion of a contract between the Customs Department and the Malta National Laboratory.

With regard to border control and enforcement, the EU takes note of the information provided by Malta. The EU encourages Malta to improve the use of risk analysis techniques and risk profiling, also by developing the necessary computerised modules in the framework of its new IT strategy.

The EU takes note of the information provided by Malta concerning its efforts to strengthen customs ethics, as well as the legal and institutional measures taken to ensure proper collection and control of future EU own resources and the proper management of all Community policies managed by the customs authorities, and in particular the Common Agricultural Policy (CAP). The EU encourages Malta to ensure that the CAP unit within the Customs Department will reach its full capacity according to the timetable foreseen in CONF-M 26/02.

Finally, the EU recalls that provisions on the following items will be included in the Accession Treaty with Malta (texts annexed), as agreed by the Conference (CONF-M 93/02):

- a provision ensuring continued validity after accession of evidence of origin issued before accession in the framework of preferential agreements concluded by the applicant state with third countries. Such a measure is necessary in order to respect the legal confidence of the operators;

- provisions concerning customs warehousing, inward processing, processing under customs control and temporary importation. Such provisions are necessary in order to specify the conditions under which these procedures shall be discharged.

- provisions concerning remission, recovery and repayment of duties. Such provisions are necessary for the proper management of resources.

* * *

The EU notes that, at this stage, this chapter does not require further negotiation. Monitoring of progress in the adoption and implementation of the acquis will continue throughout the negotiations, in particular as regards proper functioning of the customs services and the implementation of provisions on free zones. A final assessment of the conformity of Malta's legislation and policies with the acquis and its implementation can only be made at a later stage of the negotiations. Particular consideration needs to be given to the links with other negotiating chapters, notably Free Movement of Goods, Agriculture, Taxation, Cooperation in the Fields of Justice and Home Affairs, and External Relations. In addition to all the information the EU may require for the negotiations on this chapter and which is to be provided to the Conference, the EU invites Malta to provide regularly detailed, written information to the Association Council on progress in the adoption and implementation of the acquis, in particular regarding the preparation and evolution of its customs policy and legislation, and on the operation of its services.

In view of the above considerations, the EU may return to this chapter at an appropriate moment.

Furthermore, the EU recalls that there may be new acquis between 1 July 2002 and the conclusion of the negotiations.

ANNEX

Council Regulation (EEC) No 2913/92 of 12 October 1992 (OJ No L 302 of 19.10.1992), as last amended by European Parliament and Council Regulation (EC) No 2700/2000 of 16 November 2000 (OJ No L 311 of 12.12.2000) and Commission Regulation (EEC) No 2454/93 of 2 July 1993 (OJ No L 253 of 11.10.93), as last amended by Commission Regulation (EC) No 2787/2000 of 15 December 2000 (OJ No L 330 of 27.12.2000), and protocols of origin included in preferential agreements concluded by the Community:

Without prejudice to the following provisions, this Community Legislation shall be applicable to the new Member States as from the date of accession.

1. Without prejudice to the application of any measure deriving from the common commercial policy, evidences of origin properly issued by third countries in the framework of preferential agreements concluded by Malta with those countries or in the framework of unilateral national legislation of the new Member States shall be accepted in the respective new Member States, provided that:

- the evidence of origin and the transport documents have been issued the day before accession at the latest;

- the evidence of origin is submitted to the customs authorities four months after accession at the latest.

2. The new Member States are authorised to retain the authorisations with which the status of "approved exporters" had been granted in the framework of agreements concluded with third countries, provided that:

- such a provision is also provided for in the agreements concluded by those third countries with the Union as at present constituted;

- the approved exporters apply the Community rules of origin.

These authorisations shall be replaced, one year after accession at the latest, by new authorisations issued under the conditions of Community legislation.

3. Requests for subsequent verification of evidences of origin referred to in paragraphs 1 and 2 shall be accepted by the competent customs authorities of the Union as at present constituted and those of the new Member States for a period of three years after issuing of the evidence of origin concerned.

4. Where the evidence of origin and/or the transport documents have been issued before accession, and where customs formalities are necessary in respect of trade of goods between the new Member States and the Union as at present constituted or between the new Member States themselves, the provisions of the Protocol concerning the definition of the concept of "originating products" and methods of administrative cooperation, of the Association Agreement apply.

B. Articles 98 to 113 of Council Regulation (EEC) 2913/92 and 503 to 548 of Commission Regulation (EEC) 2454/93 regarding customs warehousing:

The procedure shall be discharged under the conditions of Community legislation. Where the discharge gives rise to a customs debt, the amount paid shall be considered as own resources of the Community. Where the amount of a customs debt is determined on the basis of the nature of the import goods, the value for customs purposes and the quantity of the import goods at the time of acceptance of the declaration of their placing under customs warehousing and where this declaration was accepted before accession, these elements are those resulting from the legislation applicable before accession in the new Member State concerned.

C. Articles 114 to 129 of Council Regulation (EEC) 2913/92 and 549 to 649 of Commission Regulation (EEC) 2454/93 regarding inward processing:

1. The procedure shall be discharged under the conditions of Community legislation. Where the discharge gives rise to a customs debt, the amount paid shall be considered as own resources of the Community. Where the amount of a customs debt is determined on the basis of the tariff classification, quantity, value for customs purposes and origin of the import goods, at the time of acceptance of the declaration of their placing under inward processing and where this declaration was accepted before accession, these elements are those resulting from the legislation applicable before accession in the new Member State concerned.

In order to maintain, where the discharge gives rise to a customs debt, the equity between the holder of an authorisation established in the Union as at present constituted and those in the new Member States, compensatory interest shall be paid on the import duties due under the conditions of Community legislation from the date of accession.

2. If the declaration for inward processing has been accepted under a drawback system, the drawback is done under the conditions of Community legislation, by and at the expense of the new Member State where the customs debt in respect of which drawback is requested was incurred before the date of accession.

D. Articles 130 to 136 of Council Regulation (EEC) 2913/92 and 650 to 669 of Commission Regulation (EEC) 2454/93 regarding processing under customs control:

The procedure shall be discharged under the conditions of Community legislation. Where the discharge gives rise to a customs debt, the amount paid shall be considered as own resources of the Community.

E. Articles 137 to 144 of Council Regulation (EEC) 2913/92 and 670 to 747 of Commission Regulation (EEC) 2454/93 regarding temporary importation:

The procedure shall be discharged under the conditions of Community legislation. Where the discharge gives rise to a customs debt, the amount paid shall be considered as own resources of the Community. Where the amount of a customs debt is determined on the basis of the tariff classification, quantity, value for customs purposes and origin of the import goods at the time of acceptance of the declaration of their placing under temporary importation and where this declaration was accepted before accession, these elements are those resulting from the legislation applicable before accession in the new Member State concerned.

In order to maintain, where the discharge gives rise to a customs debt, the equity between the holder of an authorisation established in the Union as at present constituted and those in the new Member States, compensatory interest shall be paid on the import duties due under the conditions of Community legislation from the date of accession.

F. Articles 201 to 232 of Council Regulation (EEC) 2913/92 and 868 to 876 bis of Commission Regulation (EEC) 2454/93 regarding entry in the accounts and post-clearance recovery:

The recovery is done under the conditions of the Community legislation. However, where the customs debt was incurred before the date of accession, the recovery is done under the conditions in force in the new Member State concerned, by it and in its own favour.

G. Articles 235 to 242 of Council Regulation (EEC) 2913/92 and 877 to 912 of Commission Regulation (EEC) 2454/93 regarding repayment and remission of duty:

The repayment and remission of duties are done under the conditions of the Community legislation. However, where the duties whose repayment or remission is requested relate to a customs debt which was incurred before the date of accession, the repayment and remission of duties are done under the conditions in force in the new Member State concerned, by it and at its own expense.