Today the European Commission has adopted by written procedure a regulation providing the legal grounds for Member States to begin issuing import licenses to Chinese exports currently blocked from entering the European Union. The regulation will be published in the Official Journal September 13 and will come into force on Wednesday September 14. At this time, Member states will have the legal grounds to issue import licences to the relevant products.

The Regulation will provide for the following:

• The import levels have been modified to provide sufficient amounts to enable the import of all the blocked quantities (estimated at 87 m pieces). Half of this amount will be unblocked through flexibilities agreed with China: transfer of agreed quantities from 2006 into 2005 in categories 6 (trousers) and 31 (brassieres) to clear totally the pending goods, as well as partially (up to 5 % of the 2006 level) for category 5 (pullovers); for the other categories and for the rest of the amounts needed for category 5, the amounts will be transferred from the 2005 quantities of category 2 (cotton fabrics).
• The other half of the quantities needed are being provided by a unilateral increase of the import levels on the European side through the provision of additional quantities.

In order to avoid any possible further problems of blockages this year a number of measures have been taken:

• the additional quantities provided by the EU have been rounded up in order to have an extra security margin
• a reserve of 2073 tons in category 2, which China agreed to provide from the 2005 levels will provide a reserve which can be used by the Commission to transfer from category 2 into other categories amounts that may be necessary
• flexibility provisions allowing 5 % of advance use, 7 % of carry over from previous years, and 4 % of inter-category transfer among certain product categories, have been introduced.
• These flexibility provisions will be available also in 2006 and 2007, thus enabling a better management of the agreed levels.
• The deadline for importers to request the issue of import licences for goods shipped from China before 20 July has been extended until 20 September. This should allow parties to have the clearest possible picture of the number of license applications pending. After that date, no such requests will be considered.
• A facility for Outward Processing Traffic - whereby part-finished clothing is finished in China and re-imported to Europe - has been introduced and will be immediately available for use by industry, in accordance with the normal rules in force within the EU.

The Commission and the Chinese authorities are in close contact. A Joint Administrative Arrangement to ensure a smooth management of the MoU of between the Commission and China’s Ministry of Commerce is also being finalised.

The European Commission presented today a revised proposal of 187 € / tonne for most favoured nation (MFN) suppliers of bananas. The new tariff is intended to replace as of 1 January 2006 the present regime based on tariff quotas for MFN - mostly Latin American - supplying countries. The Commission’s proposal also maintains an equivalent level of preference for ACP bananas through a tariff quota for 775,000 tonnes at zero duty. The proposed MFN tariff is designed to maintain total market access for MFN suppliers, in line with the results of the WTO arbitration, which had been established after a request of Brazil, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Nicaragua, Panama and Venezuela. The Commission will now engage in consultations with its Latin American partners according to the procedure set out in the Annex to the WTO waiver on the EU-ACP Partnership Agreement (Cotonou waiver) for the introduction of the tariff only regime as from 1 January 2006.

Background:

The EU agreed with Ecuador and the United States in 2001 to move from a complex import system based on a combination of tariffs and quotas for MFN bananas to a regime solely based on a tariff by 1 January 2006.

In accordance with these understandings, the EU proposed in January 2005 an import duty of 230 €/tonne to replace the existing bound duty of 680 €/tonne with a quota of 2,200,000 tonnes subject to an in-quota rate of 75 €/tonne. The EU proposal was based on a calculation aimed at maintaining total market access for suppliers benefiting from Most Favoured Nation (MFN) treatment.

The WTO arbitrators, while acknowledging the EU’s use of the price gap methodology for the calculation of a tariff equivalent, criticised some aspects of its application in this case.

The Commission believes the new proposal addresses all the criticisms raised by the WTO arbitrators. In the absence of a mutually agreed solution with all concerned parties, a second round of arbitration may be requested in order to allow the arbitrator to ascertain whether the EC has “rectified the matter.”