AGREEMENT between the European Economic Community of the one part and the Government of Denmark and the Home Government of the Faroe Islands of the other part

THE EUROPEAN ECONOMIC COMMUNITY

of the one part, and

THE GOVERNMENT OF DENMARK AND THE HOME GOVERNMENT OF THE FAROE ISLANDS,

of the other part,

RECALLING the status of the Faroe Islands as a self-governing integral part of one of the Member States of the Community;

RECALLING the Resolution of the Council of 4 February 1974 on the problems of the Faroe Islands;

CONSIDERING the vital importance for the Faroe Islands of fisheries, which constitute their essential economic activity, fish and fishery products being their main export articles;

CONSIDERING the importance of the fisheries relationship laid down in the agreement on fisheries between the parties, who confirm that the trade aspects of the present agreement should not affect the functioning of the fisheries agreement and that, consequently, the volume of the mutual fisheries possibilities under that agreement should continue to be maintained at a satisfactory level;

DESIRING to consolidate and to extend the economic relations existing between the Community and the Faroe Islands and to ensure, with due regard for fair conditions of competition, the harmonious development of their commerce for the purpose of contributing to the work of constructing Europe;

RESOLVED to this end to eliminate progressively the obstacles to substantially all their trade, in accordance with the provisions of the General Agreement on Tariffs and Trade concerning the establishment of free trade areas;

DECLARING their readiness to examine, in the light of any relevant factor, and in particular of developments in the Community, the possibility of developing and deepening their relations where it would appear to be useful in the interests of their economies to extend them to fields not covered by this Agreement;

HAVE DECIDED, in pursuit of these objectives and considering that no provisions of this Agreement may be interpreted as exempting the Contracting Parties from the obligations which are incumbent upon them under other international agreements,

TO CONCLUDE THIS AGREEMENT:

Article 1

The aim of this Agreement is:

(a) to promote through the expansion of reciprocal trade harmonious development of economic relations between the European Economic Community and the Faroe Islands and thus to foster in the Community and in the Faroe Islands the advance of economic activity, the improvement of living and employment conditions, and increased productivity and financial stability;

(b) to provide fair conditions of competition for trade between the Contracting Parties;

(c) to contribute in this way, by the removal of barriers to trade, to the harmonious development and expansion of world trade.

Article 2

This Agreement shall apply to products originating in the Community or the Faroe Islands:

(i) which fall within Chapters 25 to 97 of the Harmonized System, other than those listed in Annex II to the Treaty establishing the European Economic Community, and other than those listed in Annex I;

(ii) which are specified in Protocols 1, 2 and 4, with due regard to the arrangements provided for in those Protocols.

Article 3

1. No new customs duty on imports shall be introduced in trade between the Community and the Faroe Islands.

2. The Community as constituted on 31 December 1985 shall abolish customs duties on imports from the Faroe Islands on 1 January 1992.

3. The Kingdom of Spain shall reduce its customs duties applicable to the Faroe Islands in accordance with Article 31 (1) and (3) of the Act of Accession.

4. The Portuguese Republic shall reduce its customs duties applicable to the Faroe Islands in accordance with Article 190 (1) and (3) of the Act of Accession. Article 4

The Faroe Islands shall abolish customs duties on imports from the Community on 1 January 1992, as specified in Annex II.

Article 5

1. The provisions concerning the abolition of customs duties on imports shall apply also to import duties of a fiscal nature.

The Faroe Islands may replace an imports duty of a fiscal nature or the fiscal element of an import duty by an internal tax.

2. The Faroe Islands may temporarily retain the import duties of a fiscal nature in existence on 1 May 1991, as mentioned in Annex II, part A.

3. The Faroe Islands may temporarily introduce new import duties of a fiscal nature and increase existing import duties of a fiscal nature, provided that such duties or duty increases respect the conditions laid down in Article 19. The Faroe Islands shall notify the Community of such changes.

4. The Faroe Islands shall abolish all import duties of a fiscal nature in connection with the implementation of the reform described in Annex II and no later than 1 January 1993.

Article 6

No new charge having an effect equivalent to a customs duty shall be introduced in trade between the Community and the Faroe Islands.

Charges having an effect equivalent to customs duties on imports in trade between the Community and the Faroe Islands shall be abolished upon the entry into force of this Agreement.

Article 7

No customs duty on exports or charge having equivalent effect shall be introduced in trade between the Community and the Faroe Islands.

Customs duties on exports and charges having equivalent effect shall be abolished not later than 1 January 1992.

Article 8

Protocol 1 lays down the tariff treatment and arrangements applicable to certain fish and fishery products released for free circulation in the Community or imported into the Faroe Islands.

Article 9

Protocol 2 lays down the tariff treatment and arrangements applicable to certain products obtained by processing agricultural products.

Article 10

1. In the event of specific rules being established as a result of the implementation of its agricultural policy or of any alteration of the current rules, the Contracting Party in question may adapt the arrangements resulting from this Agreement in respect of the products which are the subject of those rules or alterations.

2. In such cases the Contracting Party in question shall take due account of the interests of the other Contracting Party. To this end the Contracting Parties may consult each other within the Joint Committee provided for in Article 30.

Article 11

Protocol 3 lays down the rules of origin.

Article 12

A Contracting Party which is considering the reduction of the effective level of its duties or charges having equivalent effect applicable to third countries benefiting from most-favoured-nation treatment, or which is considering the suspension of their application, shall, as far as may be practicable, notify the Joint Committee not less than thirty days before such reduction or suspension comes into effect. It shall take note of any representations by the other Contracting Party regarding any distortions which might result therefrom.

Article 13

1. No new quantitative restriction on imports or measures having equivalent effect shall be introduced in trade between the Community and the Faroe Islands.

2. The Contracting Parties shall abolish quantitative restrictions on imports and any measures having an effect equivalent to quantitative restrictions on imports not later than 1 January 1992. Article 14

1. The Community reserves the right to modify the arrangements applicable to the petroleum products falling within headings Nos 2710, 2711, ex 2712 (excluding ozokerite, lignite wax and peat wax) and 2713 of the combined nomenclature upon adoption of a common definition of origin for petroleum prducts, upon adoption of decisions under the common commercial policy for the products in question or upon establishment of a common energy policy.

In this event, the Community shall take due account of the interests of the Faroe Islands; to this end it shall inform the Joint Committee, which shall meet under the conditions set out in Article 32.

2. The Faroe Islands reserve the right to take similar action should they be faced with like situations.

3. Subject to paragraphs 1 and 2, this Agreement shall not prejudice the non-tariff rules applied to imports of petroleum products.

Article 15

1. The Contracting Parties declare their readiness to foster, so far as their agricultural policies allow, the harmonious development of trade in agricultural porducts to which this Agreement does not apply.

2. The Contracting Parties shall apply their rules in veterinary, health and plant health matters in a non-discriminatory fashion and shall not introduce any new measures that have the effect of unduly obstructing trade.

3. The Contracting Parties shall examine, under the conditions set out in Article 33, any difficulties that might arise in their trade in agricultural products and shall endeavour to seek appropriate solutions.

Article 16

The Home Government of the Faroe Islands shall take the necessary control measures to ensure the correct application of the reference price fixed or to be fixed by the Community, referred to in Article 2 of Protocol 1.

The Contracting Parties shall ensure the correct application of the definition of the concept of 'originating products` and methods of administrative cooperation, laid down in Protocol 3.

Article 17

Protocol 4 lays down the special provisions applicable to imports of certain agricultural products other than those listed in Protocol 1.

Article 18

The Contracting Parties reaffirm their commitment to grant each other most-favoured-nation treatment in accordance with the General Agreement on Tariffs and Trade (GATT).

This Agreement shall not preclude the maintenance or establishment of customs unions, free trade areas or arrangements for frontier trade, except insofar as they alter the trade arrangements provided for in this Agreement, in particular the provisions concerning rules of origin.

Article 19

The Contracting Parties shall refrain from any measure or practice of an internal fiscal nature establishing, whether directly or indirectly, discrimination between the products of one Contracting Party and like products originating in the territory of the other Contracting Party.

Products exported to the territory of one of the Contracting Parties may not benefit from repayment of internal taxation in excess of the amount of direct or indirect taxation imposed on them. Article 20

Payments relating to trade in goods and the transfer of such payments to the Member State of the Community in which the creditor is resident or to the Faroe Islands shall be free from any restrictions.

Article 21

This Agreement shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality, law and order or public security, the protection of life and health of humans, animals or plants, the protection of national treasures of artistic, historic or archaeological value, the protection of industrial and commercial property, or rules relating to gold or silver.

Such prohibitions or restrictions must not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between the Contracting Parties.

Article 22

Nothing in this Agreement shall prevent a Contracting Party from taking any measures:

(a) which it considers necessary to prevent the disclosure of information contrary to its essential security interests;

(b) which relate to trade in arms, munitions or war materials or to research, development or production indispensable for defence purposes, provided that such measures do not impair the conditions of competition in respect of products not intended for specifically military purposes;

(c) which it considers essential to its own security in time of war or serious international tension.

Article 23

1. The Contracting Parties shall refrain from any measure likely to jeopardize the fulfilment of the objectives of this Agreement.

2. They shall take any general or specific measures required to fulfil their obligations under this Agreement.

If either Contracting Party considers that the other Contracting Party has failed to fulfil an obligation under this Agreement, it may take appropriate measures under the conditions and in accordance with the procedures laid down in Article 28.

Article 24

1. The following are incompatible with the proper functioning of this Agreement insofar as they may affect trade between the Community and the Faroe Islands:

(i) all agreements between undertakings, decisions by associations of undertakings and concerted practices between undertakings which have as their object or effect the prevention, restriction or distortion of competition as regards the production of, or trade in, goods;

(ii) abuse by one or more undertakings of a dominant position in the territories of the Contracting Parties as a whole or in a substantial part thereof;

(iii) any public aid which distorts, or threatens to distort, competition by favouring certain undertakings or the production of certain goods. 2. Should a Contracting Party consider that a given practice is incompatible with this Article, it may take appropriate measures under the conditions and in accordance with the procedure laid down in Article 28.

Article 25

Where an increase in imports of a given product is, or is likely to be, seriously detrimental to any production activity carried on in the territory of one of the Contracting Parties and where this increase is due to:

(i) the partial or total reduction in the importing Contracting Party, as provided for in this Agreement, of customs duties and charges having equivalent effect levied on the product in question; and

(ii) the fact that the duties or charges having equivalent effect levied by the exporting Contracting Party on imports of raw materials or intermediate products used in the manufacture of the product in question are significantly lower than the corresponding duties or charges levied by the importing Contracting Party, the Contracting Party concerned may take appropriate measures under the conditions and in accordance with the procedures laid down in Article 28.

Article 26

If one of the Contracting Parties finds that dumping is taking place in trade with the other Contracting Party, it may take appropriate measures against this practice in accordance with the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade, under the conditions and in accordance with the procedures laid down in Article 28.

Article 27

If serious disturbances arise in any sector of the economy or if difficulties arise which could bring about serious deterioration in the economic situation of a region, the Contracting Party concerned may take appropriate measures under the conditions and in accordance with the procedures laid down in Article 28.

Article 28

1. In the event of a Contracting Party subjecting imports of products liable to give rise to the difficulties referred to in Articles 25 and 27 to an administrative procedure, the purpose of which is to provide rapid information on the trend of trade flows, it shall inform the other Contracting Party.

2. In the cases specified in Articles 23 to 27, before taking the measures provided for therein or, in cases to which paragraph 3(d) applies, as soon as possible, the Contracting Party in question shall supply the Joint Committee with all relevant information required for a thorough examination of the situation with a view to seeking a solution acceptable to the Contracting Parties.

In the selection of measures, priority must be given to those which least disturb the functioning of this Agreement.

The safeguard measures shall be notified immediately to the Joint Committee and shall be the subject of periodical consultations within the Committee, particularly with a view to their abolition as soon as circumstances permit.

3. For the implementation of paragraph 2, the following provisions shall apply:

(a) as regards Article 24, either Contracting Party may refer the matter to the Joint Committee if it considers that a given practice is incompatible with the proper functioning of this Agreement within the meaning of Article 24 (1).

The Contracting Parties shall provide the Joint Committee with all relevant information and shall give it the assistance it requires in order to examine the case and, where appropriate, to eliminate the practice objected to.

If the Contracting Party in question fails to put an end to the practice objected to within the period fixed by the Joint Committee, or in the absence of agreement in the Joint Committee within three months of the matter being referred to it, the Contracting Party concerned may adopt any safeguard measures it considers necessary to deal with the serious difficulties resulting from the practices in question; in particular it may withdraw tariff concessions;

(b) as regards Article 25, the difficulties arising from the situation referred to in that Article shall be referred for examination to the Joint Committee, which may take any decision needed to put an end to such difficulties.

If the Joint Committee or the exporting Contracting Party has not taken a decision putting an end to the difficulties within thirty days of the matter being referred, the importing Contracting Party shall be authorized to levy a compensatory charge on the product imported.

The compensatory charge shall be calculated according to the incidence on the value of the goods in question of the tariff disparities in respect of the raw materials or intermediate products incorporated therein;

(c) as regards Article 26, consultation in the Joint Committee shall take place before the Contracting Party concerned takes the appropriate measures;

(d) where exceptional circumstances requiring immediate action make prior examination impossible, the Contracting Party concerned may, in the situations specified in Articles 25, 26 and 27, and also in the case of export aids having a direct and immediate incidence on trade, apply forthwith the precautionary measures strictly necessary to remedy the situation.

Article 29

Where one or more Member States of the Community or the Faroe Islands is in difficulties or is seriously threatened with difficulties as regards its balance of payments, the Contracting Party concerned may take the necessary safeguard measures. It shall inform the other Contracting Party forthwith.

Article 30

1. A Joint Committee is hereby established which shall be responsible for the administration of this Agreement and shall ensure its proper implementation. For this purpose, it shall make recommendations and take decisions in the cases provided for in the Agreement. These decisions shall be put into effect by the Contracting Parties in accordance with their own rules.

2. For the purpose of the proper implementation of this Agreement, the Contracting Parties shall exchange information and, at the request of either Party, shall hold consultations within the Joint Committee.

3. The Joint Committee shall adopt its own rules of procedure.

Article 31

1. The Joint Committee shall consist of representatives of the Contracting Parties.

2. The Joint Committee shall act by mutual agreement.

Article 32

1. Each Contracting Party shall preside in turn over the Joint Committee, in accordance with the agreements to be laid down in its rules of procedure.

2. The Chairman shall convene meetings of the Joint Committee at least once a year in order to review the general functioning of this Agreement.

The Joint Committee shall, in addition, meet whenever special circumstances so require, at the request of either Contracting Party, in accordance with the conditions to be laid down in its rules of procedure.

3. In the event of modifications to the nomenclature of the customs tariffs of the Contracting Parties affecting products referred to in this Agreement, the Joint Committee may adopt the tariff nomenclature of these products to conform with such modifications.

4. The Joint Committee may decide to set up any working party that can assist it in carrying out its duties.

Article 33

1. Where a Contracting Party considers that it would be useful in the common interest of both Contracting Parties to develop the relations established by this Agreement by extending them to fields not covered thereby, it shall submit a reasoned request to the other Contracting Party.

The Contracting Parties may instruct the Joint Committee to examine this request and, where appropriate, to make recommendations to them, particularly with a view to opening negotiations.

2. The agreements resulting from the negotiations referred to in paragraph 1 will be subject to ratification or approval by the Contracting Parties in accordance with their own procedures. Article 34

At the request of the Faroe Islands, the Community will consider:

- improving the access possibilities for specific products,

- extending its tariff concessions for Faroese fishery products to include new fish species caught by Faroese fishing vessels based and operating in the North Atlantic, or to include fishery products pertaining thereto not currently produced by the Faroese fishing industry. These new fish species or fishery products could be imported free of duty into the Community, subject to the necessary quantitative limitations, should the new fish species or fishery products be of a sensitive nature in the Community.

Article 35

The Annexes and Protocols to this Agreement shall form an integral part thereof.

Article 36

Either Contracting Party may denounce this Agreement by notifying the other Contracting Party. The Agreement shall cease to be in force twelve months after the date of such notification.

Article 37

This Agreement shall apply, on the one hand, to the territories to which the Treaty establishing the European Economic Community is applied and under the conditions laid down in that Treaty and, on the other hand, to the territory of the Faroe Islands.

Article 38

This Agreement is drawn up in duplicate in the Danish, Dutch, English, French, German, Greek, Italian, Portuguese, Spanish and Faroese languages, each of these texts being equally authentic.

This Agreement will be approved by the Contracting Parties in accordance with their own procedures.

It shall enter into force on 1 January 1992, provided that the Contracting Parties have notified each other before that date that the procedures necessary to this end have been completed. After this date, this Agreement shall enter into force on the first day of the second month following such notification.

The provisions applicable on 1 January 1992 shall be applied upon the entry into force of this Agreement if it enters into force after that date.

Hecho en Bruselas, el dos de diciembre de mil novecientos noventa y uno.

Udfærdiget i Bruxelles, den anden december nitten hundrede og enoghalvfems.

Geschehen zu Brüssel am zweiten Dezember neunzehnhunderteinundneunzig.

¸ãéíå óôéò ÂñõîÝëëåò, óôéò äýï Äåêåìâñßïõ ÷ßëéá åííéáêüóéá åíåíÞíôá Ýíá.

Done at Brussels on the second day of December in the year one thousand nine hundred and ninety-one.

Fait à Bruxelles, le deux décembre mil neuf cent quatre-vingt-onze.

Fatto a Bruxelles, addì due dicembre millenovecentonovantuno.

Gedaan te Brussel, de tweede december negentienhonderdeenennegentig.

Feito em Bruxelas, em dois de Dezembro de mil novecentos e noventa e um.

Gjørt í Bruxelles, hin annan dagin i december 1991.

Por el Consejo de las Comunidades Europeas

For Rådet for De Europæiske Fællesskaber

Für den Rat der Europäischen Gemeinschaften

Ãéá ôï Óõìâïýëéï ôùí Åõñùðáúêþí ÊïéíïôÞôùí

For the Council of the European Communities

Pour le Conseil des Communautés européennes

Per il Consiglio delle Comunità europee

Voor de Raad van de Europese Gemeenschappen

Pelo Conselho das Comunidades Europeias

Fyri Raoio fyri Europeisku Felagsskapirnar

>REFERENCE TO A FILM>

Por el Gobierno de Dinamarca y el Gobierno local de las Islas Feroe

For Danmarks regering og Færøernes landsstyre

Für die Regierung von Dänemark und die Landesregierung der Färöer

Ãéá ôçí êõâÝñíçóç ôçò Äáíßáò êáé ôçí ôïðéêÞ êõâÝñíçóç ôùí Öåñüùí ÍÞóùí

For the Government of Denmark and the Home Government of the Faroe Islands

Pour le gouvernement du Danemark et le gouvernement local des îles Féroé

Per il governo della Danimarca e il governo locale delle isole Faerøer

Voor de Regering van Denemarken en de Landsregering van de Faeröer

Pelo Governo da Dinamarca e o Governo regional das ilhas Faroé

Fyri ríkisstjórn Danmarkar og Føroya Landsst´yri

>REFERENCE TO A FILM>

ANNEX I

List of products referred to in Article 2 (i) of the Agreement

>TABLE>

ANNEX II

Implementation by the Faroe Islands of abolition of tariffs and duties on goods of Community origin

A. Faroese legislation on fiscal import duties and internal production levies in force on 1 May 1991:

1. Law No 53 from 11 February 1950 as later amended:

fiscal import duties and production levies on a number of specific products.

2. Law No 9 from 27 April 1961 as later amended:

a general fiscal import duty of 27 % with certain exceptions, mainly for raw materials and for goods used by the fishing industry.

3. Law No 32 from 19 May 1979 as later amended:

a general fiscal import duty of 6 % with certains exceptions, although with fewer exceptions than under No 2.

The European Commission will, at the date of signature of the Agreement, at the latest, receive a complete collection of the abovementioned legislation in force on 1 May 1991.

B. The Faroe Islands commit themselves to make the following changes in their customs and duties legislation:

1. On 1 January 1992:

(a) a new customs legislation will be enacted, introducing a customs tariff based upon the Harmonized System, and respecting the GATT obligations of Denmark;

(b) goods of EEC origin will be granted duty-free treatment with the exceptions mentioned in Protocols 2 and 4.

2. On 1 January 1993:

The existing system of fiscal import duties and production levies is abolished and replaced by a new system of indirect taxation based upon the following elements:

(a) a value-added tax (VAT), based upon the same principles as those recommended by the Community to its Member States, including non-discrimination of imported goods; and

(b) a system of excise duties, levied equally upon domestic production and imported goods.

PROTOCOL 1

concerning the special provisions applicable to imports of certain fish and fishery products

Article 1

As regards the products listed in the Annex to this Protocol and originating in the Faroe Islands:

1. no new customs duty shall be introduced in trade between the Community and the Faroe Islands;

2. the customs duties and other conditions to be applied on import into the Community as constituted on 31 December 1985 of products originating in and coming from the Faroe Islands shall be as indicated in the Annex to this Protocol;

3. the Kingdom of Spain shall reduce its customs duties applicable to the Faroe Islands in accordance with Article 173 (1) and (2) of the Act of Accession;

4. the Portuguese Republic shall reduce its customs duties applicable to the Faroe Islands in accordance with Article 360 (1) (b) and (2) of the Act of Accession.

Article 2

The preferential duty rates indicated in the Annex apply only if the free-at-frontier price, which is determined by the Member States in accordance with Article 21 of Regulation (EEC) No 3796/81 (OJ No L 379 of 31. 12. 1981), as last amended by Regulation (EEC) No 3468/88 (OJ No L 305 of 10. 11. 1988), is at least equal to the reference price fixed, or to be fixed, by the Community for the products under consideration or the categories of the products concerned.

Article 3

For the purpose of eliminating customs duties, reference ceilings are established in the Annex for certain products originating in the Faroe Islands.

Should imports of these products exceed the reference ceiling, the Community may introduce the full customs duty.

Article 4

The Faroe Islands shall abolish tariffs and duties on imports of fish and fishery products originating in the Community on the date specified in Article 5 of, and Annex II to, the Agreement.

ANNEX

The customs duties and other conditions to be applied on import into the Community of products originating in and coming from the Faroe Islands shall be as indicated below

TABLE I

>TABLE>

TABLE II

>TABLE>

PROTOCOL 2

concerning products subject to special arrangements to take account of differences in the costs of agricultural products incorporated therein

Article 1

In order to take account of differences in the cost of the agricultural products incorporated in the goods specified in the table annexed to this Protocol, the Agreement does not preclude:

(i) the levying, upon import, of a variable component or fixed amount, or the application of internal price compensation measures;

(ii) the application of measures adopted upon export.

Article 2

1. The Community as constituted on 31 December 1985 shall apply the customs duties on imports originating in the Faroe Islands on 1 January 1992 as indicated in the table annexed to this Protocol.

2. The Kingdom of Spain shall progressively abolish the difference between the basic duties on 1 January 1985 to products originating in the Faroe Islands and the duties applicable on 1 January 1992 which are shown in the table annexed to this Protocol, in accordance with Article 31 (1) and (2) of the Act of Accession.

3. The Portuguese Republic shall progressively abolish the difference between the basic duties on 1 January 1985 to products originating in the Faroe Islands and the duties applicable on 1 January 1992 which are shown in the table annexed to this Protocol, in accordance with Article 190 (1) and (3) of the Act of Accession.

Article 3

The Faroe Islands shall abolish tariffs and duties on imports of processed agricultural products originating in the Community on the date specified in Article 5 of, and Annex II to, the Agreement with the exceptions mentioned in Protocol 4, Table II.

Should the Faroe Islands introduce such measures for processed agricultural products as mentioned in Article 1 of this Protocol, the Community shall be duly notified.

TABLE

EUROPEAN ECONOMIC COMMUNITY

>TABLE>

PROTOCOL 3

concerning the definition of the concept of 'originating products` and methods of administrative cooperation

TITLE I

DEFINITION OF THE CONCEPT OF ORIGINATING PRODUCTS

Article 1

Origin criteria

1. For the purpose of implementing the Agreement, the following products shall be considered as:

1. Products originating in the Faroe Islands:

(a) products wholly obtained in the Faroe Islands;

(b) products obtained in the Faroe Islands in the manufacture of which products other than those referred to in (a) are used, provided that:

(i) the said products have undergone sufficient working or processing within the meaning of Article 3 of this Protocol; or that

(ii) those products are originating in the Community within the meaning of this Protocol;

2. Products originating in the Community:

(a) products wholly obtained in the Community;

(b) products obtained in the Community in the manufacture of which products other than those referred to in (a) are used, provided that:

(i) the said products have undergone sufficient working or processing within the meaning of Article 3 of this Protocol; or that

(ii) those products are originating in the Faroe Islands within the meaning of this Protocol.

2. Notwithstanding paragraph 1 (1) (b) (ii), products originating in the Community, within the meaning of this Protocol, and exported from the Faroe Islands into the Community in the same state or having undergone in the Faroe Islands no working or processing going beyond that referred to in Article 3, third paragraph, retain their origin.

Notwithstanding paragraph 1 (2) (b) (ii), products originating in the Faroe Islands, within the meaning of this Protocol, and exported from the Community to the Faroe Islands or having undergone in the Community no working or processing going beyond that referred to in Article 3, third paragraph, retain their origin.

Article 2

Wholly obtained products

1. Within the meaning of Article 1, paragraph 1 (1) (a) and (2) (a), the following shall be considered as wholly obtained either in the Community or in the Faroe Islands:

(a) mineral products extracted from their soil or from their seabed;

(b) vegetable products harvested therein;

(c) live animals born and raised therein;

(d) products from live animals raised therein;

(e) products obtained by hunting or fishing conducted therein;

(f) products of sea fishing and other products taken from the sea by their vessels;

(g) products made aboard their factory ships exclusively from products referred to in subparagraph (f);

(h) used articles collected there fit only for the recovery of raw materials;

(i) waste and scrap resulting from manufacturing operations conducted therein;

(j) goods produced there exclusively from the products specified in subparagraphs (a) to (i).

(2) The term 'their vessels` in paragraph 1 (f) shall apply only to vessels:

- which are registered or recorded in the Faroe Islands or in a Member State of the Community,

- which sail under the flag of the Faroe Islands or of a Member State of the Community,

- which are owned to an extent of at least 50 % by nationals of Member States of the Community, residents or non-residents of the Faroe Islands, or by a company with its head office in one of these States or the Faroe Islands, of which the manager or managers, chairman of the board of directors or the supervisory board, and the majority of the members of such boards are nationals of Member States of the Community, residents or non-residents of the Faroe Islands and of which, in addition, in the case of partnerships or limited companies, at least half the capital belongs to these States, to the Faroe Islands, to their public bodies or their nationals,

- of which the master and officers are nationals of Member States of the Community, residents or non-residents of the Faroe Islands,

- of which at least 75 % of the crew are nationals of Member States of the Community, residents or non-residents of the Faroe Islands.

3. The terms 'Faroe Islands` and 'the Community` shall also cover the territorial waters which surround the Faroe Islands and the Member States of the Community.

Sea-going vessels, including factory ships, on which the fish caught is worked or processed shall be considered as part of the territory of the Community or of the Faroe Islands provided that they satisfy the conditions set out in paragraph 2.

Article 3

Sufficiently processed products

1. For the purposes of Article 1, non-originating materials are considered to be sufficiently worked or processed when the product obtained is classified in a heading which is different from that in which all the non-originating materials used in its manufacture are classified, subject to paragraphs 2 and 3.

The expressions 'chapters` and 'headings` used in this Protocol shall mean the chapters and the headings (four-digit codes) used in the nomenclature which makes up the Harmonized Commodity Description and Coding System (hereinafter referred to as 'the Harmonized System` or HS).

The expression 'classified` shall refer to the classification of a product or material under a particular heading.

2. For a product mentioned in columns 1 and 2 of the list in Annex II, the conditions set out in column 3 for the product concerned must be fulfilled instead of the rule in paragraph 1.

For the products of Chapters 84 to 91 inclusive, as an alternative to satisfying the conditions set out in column 3, the exporter may opt to apply the conditions set out in column 4 instead.

(a) Where in the list in Annex II a percentage rule is applied in determining the originating status of a product obtained in the Community or in the Faroe Islands, the value added by the working or processing shall correspond to the ex-works price of the product obtained, less the value of third-country materials imported into the Community, or the Faroe Islands.

(b) The term 'value` in the list in Annex II shall mean the customs value at the time of the import of the non-originating materials used or, if this is not known and cannot be ascertained, the first ascertainable price paid for these materials in the territory concerned.

Where the value of the originating materials used needs to be established, the provisions of the above subparagraph shall be applied mutatis mutandis.

(c) The term 'ex-works price` in the list in Annex II shall mean the price paid for the product obtained to the manufacturer in whose undertaking the last working or processing is carried out, provided the price includes the value of all the materials used in manufacture, minus any internal taxes which are, or may be repaid when the product obtained is exported.

(d) 'Customs value` shall be understood as the value determined in accordance with the Agreement on implementation of Article VII of the General Agreement on Tariffs and Trade, established in Geneva on 12 April 1979.

3. For the purpose of implementing paragraphs 1 and 2 the following shall be considered as insufficient working or processing to confer the status of originating products, whether or not there is a change of heading:

(a) operations to ensure the preservation of products in good condition during transport and storage (ventilation, spreading out, drying, chilling, placing in salt, sulphur dioxide or other aqueous solutions, removal of damaged parts, and like operations);

(b) simple operations consisting of removal of dust, sifting or screening, sorting, classifying, matching (including the making-up of sets of articles, washing, painting, cutting up);

(c) (i) changes of packaging and breaking up and assembly of consignments;

(ii) simple placing in bottles, flasks, bags, cases, boxes, fixing on cards or boards etc., and all other simple packaging operations;

(d) affixing marks, labels and other like distinguishing signs on products or their packaging;

(e) simple mixing of products, whether or not of different kinds, where one or more components of the mixtures do not meet the conditions laid down in this Protocol to enable them to be considered as orginating either in the Community or in the Faroe Islands;

(f) simple assembly of parts of articles to constitute a complete article;

(g) a combination of two or more operations specified in subparagraphs (a) to (f);

(h) slaughter of animals.

Article 4

Neutral elements

In order to determine whether a product originates in the Community or the Faroe Islands, it shall not be necessary to establish whether the electrical power, fuel, plant and equipment and machines and tools used to obtain such product or whether any materials or products used in the course of production which do not enter and which were not intended to enter into the final composition of the product originate in third countries or not.

Article 5

Accessories, spare parts and tools

Accessories, spare parts and tools dispatched with a piece of equipment, machine, apparatus or vehicle which are part of the normal equipment and included in the price thereof or are not separately invoiced are regarded as one with the piece of equipment, machine, apparatus or vehicle in question.

Article 6

Sets

Sets, as defined in General Rule 3 of the Harmonized System, shall be regarded as originating when all component articles are originating products. Nevertheless, when a set is composed of originating and non-originating articles, the set as a whole shall be regarded as originating provided that the value of the non-originating articles does not exceed 15 % of the ex-works price of the set.

Article 7

Direct transport

1. The preferential treatment provided for under the Agreement applies only to products or materials which are transported between the territory of the Community or of the Faroe Islands without entering any other territory. However, goods constituting one single consignment may be transported through territory other than that of the Community or the Faroe Islands, with, should the occasion arise, transhipment or temporary warehousing in such territory, provided that the goods have remained under the surveillance of the customs authorities in the country of transit or of warehousing and that they have not undergone operations other than unloading, reloading or any operation designed to preserve them in good condition.

2. Evidence that the conditions referred to in paragraph 1 have been fulfilled shall be supplied to the responsible customs authorities by the production of:

(a) a through bill of lading issued in the exporting country or territory covering the passage through the country of transit;

(b) or a certificate issued by the customs authorities of the country of transit:

- giving an exact description of the goods,

- stating the dates of unloading and reloading of the goods or of the embarkation or disembarkation, identifying the ships used,

- certifying the conditions under which the goods remained in the transit country;

(c) or, failing these, any substantiating documents.

Article 8

Territorial requirement

The conditions set out in this title relative to the acquisition of originating status must be fulfilled without interruption in the Community or the Faroe Islands.

If originating goods exported from the Community or the Faroe Islands to another country are returned, they must be considered as non-orginating unless it can be demonstrated to the satisfaction of the customs authorities that:

- the goods returned are the same goods as those exported, and

- they have not undergone any operation beyond that necessary to preserve them in good condition while in that country.

TITLE II

PROOF OF ORIGIN

Article 9

Movement certificate EUR.1

Evidence of originating status of products, within the meaning of this Protocol, shall be given by a movement certificate EUR.1, a specimen of which appears in Annex III to this Protocol.

Article 10

Normal procedure for the issue of certificates

1. A movement certificate EUR.1 shall be issued on application having been made in writing by the exporter or, under the exporter's responsibility, by his authorized representative. Such application shall be made on a form, a specimen of which appears in Annex III to this Protocol, which shall be completed in accordance with this Protocol.

Applications for movement certificates EUR.1 must be preserved for at least two years by the customs authorities of the exporting country or territory.

2. The exporter or his representative shall submit with his request any appropriate supporting document proving that the products to be exported are such as to qualify for the issue of a movement certificate EUR.1.

He shall undertake to submit at the request of the appropriate authorities, any supplementary evidence they may require for the purpose of establishing the correctness of the originating status of the products eligible for preferential treatment and shall undertake to agree to any inspection of his accounts and to any check on the processes of the obtaining of the above products carried out by the said authorities.

Exporters must keep for at least two years the supporting documents referred to in this paragraph.

3. A movement certificate EUR.1 may be issued only where it can serve as the documentary evidence required for the purpose of implementing the agreement.

4. The movement certificate EUR.1 shall be issued by the customs authorities of the Faroe Islands if the goods to be exported can be considered as products originating in the Faroe Islands within the meaning of Article 1 paragraph 1 (1) of this Protocol. The movement certificate EUR.1 shall be issued by the customs authorities of a Member State of the European Economic Community if the goods to be exported can be considered as products originating in the Community within the meaning of Article 1 paragraph 1 (2) of this Protocol.

5. The customs authorities of the Member States of the Community or the Faroe Islands may issue movement certificates EUR.1 under the conditions laid down in this Protocol if the goods to be exported can be considered as products originating in the Faroe Islands or the Community within the meaning of Article 1, paragraph 2 of this Protocol and provided that the goods covered by the movement certificates EUR.1 are in the Community or in the Faroe Islands.

In these cases, the movement certificates EUR.1 shall be issued subject to the presentation of the proof of origin previously issued or made out. This proof of origin must be kept for at least two years by the customs authorities of the exporting state or territory.

6. Since the movement certificate EUR.1 constitutes the documentary evidence for the application of the preferential tariff and quota arrangements laid down in the Agreement, it shall be the responsibility of the customs authorities of the exporting country to take any steps necessary to verify the origin of the goods and to check the other statements on the certificate.

7. For the purpose of verifying whether the conditions stated in paragraphs 4 and 5 have been met, the customs authorities shall have the right to call for any documentary evidence or to carry out any check which they consider appropriate.

8. It shall be the responsibility of the customs authorities of the exporting State or territory to ensure that the forms referred to in paragraph 1 are duly completed. In particular, they shall check whether the space reserved for the description of the products has been completed in such a manner as to exclude all possibility of fraudulent additions. To this end, the description of the products must be indicated without leaving any blank lines. Where the space is not completely filled a horizontal line must be drawn below the last line of the description, the empty space being crossed through.

9. The date of issue of the movement certificate must be indicated in the part of the certificate reserved for the customs authorities.

10. A movement certificate EUR.1 shall be issued by the customs authorities of the exporting State or territory when the products to which it relates are exported. It shall be made available to the exporter as soon as actual export has been effected or ensured.

Article 11

Issue of EUR.1 retrospectively

1. In exceptional circumstances a movement certificate EUR.1 may also be issued after export of the products to which it relates if it was not issued at the time of export because of errors or involuntary omissions or special circumstances.

2. For the implementation of paragraph 1, the exporter must in the application:

- indicate the place and date of export of the products to which the certificate relates,

- certify that no movement certificate EUR.1 was issued at the time of export of the products in question, and state the reasons.

3. The customs authorities may issue a movement certificate EUR.1 retrospectively only after verifying that the information supplied in the exporter's application agrees with that in the corresponding file.

Certificates isued retrospectively must be endorsed with one of the following phrases:

'NACHTRÄGLICH AUSGESTELLT`, 'DÉLIVRÉ A POSTERIORI`, 'RILASCIATO A POSTERIORI`, 'ACHTERAF AFGEGEVEN`, 'ISSUED RETROSPECTIVELY`, 'UDSTEDT EFTERFØLGENDE`, 'ÅÊÄÏÈÅÍ ÅÊ ÔÙÍ ÕÓÔÅÑÙÍ`, 'EXPEDIDO A POSTERIORI`, 'EMITADO A POSTERIORI`, 'GIVIN EFTIRFYLGJANDI`.

4. The endorsement referred to in paragraph 3 shall be inserted in the 'Remarks` box on the movement certificate EUR.1.

Article 12

Issue of a duplicate EUR.1

1. In the event of the theft, loss or destruction of a movement certificate EUR.1, the exporter may apply to the customs authorities which issued it for a duplicate made out on the basis of the export documents in their possession.

2. The duplicate issued in this way must be endorsed with one of the following words:

'DUPLIKAT`, 'DUPLICATA`, 'DUPLICATO`, 'DUPLICAAT`, 'DUPLICATE`, 'ÁÍÔÉÃÑÁÖÏ`, 'DUPLICADO`, 'SEGUNDA VIA`, 'TVITAK`.

3. The endorsement referred to in paragraph 2 shall be inserted in the 'Remarks` box on the movement certificate EUR.1.

4. The duplicate, which must bear the date of issue of the original movement certificate EUR.1, shall take effect as from this date.

Article 13

Simplified procedure for the issue of certificates

1. By way of derogation from Articles 10, 11 and 12 of this Protocol, a simplified procedure for the issue of EUR.1 movement certificates can be used in accordance with the following provisions.

2. The customs authorities in the exporting State or territory may authorize any exporter, hereinafter referred to as 'approved exporter`, making frequent shipments for which EUR.1 movement certificates may be issued and who offer, to the satisfaction of the competent authorities, all guarantees necessary to verify the originating status of the products, not to submit to the customs office of the exporting State or territory at the time of export either the goods or the application for an EUR.1 certificate relating to those goods, for the purpose of obtaining an EUR.1 certificate under the conditions laid down in Article 10 of this Protocol.

3. The authorization referred to in paragraph 2 shall stipulate, at the choice of the competent authorities, that box No 11 'Customs endorsement` of the EUR.1 movement certificate must:

(a) either be endorsed beforehand with the stamp of the competent customs office of the exporting State or territory and the signature, which may be a facsimile, of an official of that office; or

(b) be endorsed by the approved exporter with a special stamp which has been approved by the customs authorities of the exporting State or territory and corresponds to the specimen given in Annex V of this Protocol. Such stamp may be pre-printed on the forms.

4. In the cases referred to in paragraph 3 (a), one of the following phrases shall be entered in box No 7 'Remarks` of the EUR.1 movement certificate:

'PROCEDIMIENTO SIMPLIFICADO`, 'FORENKLET PROCEDURE`, 'VEREINFACHTES VERFAHREN`, 'ÁÐËÏÕÓÔÅÕÌÅÍÇ ÄÉÁÄÉÊÁÓÉÁ`, 'SIMPLIFIED PROCEDURE`, 'PROCEDURE SIMPLIFIÉE`, 'PROCEDURE SEMPLIFICATA`, 'VEREENVOUDIGDE PROCEDURE`, 'PROCEDIMENTO SIMPLIFICADO`, 'EINFØLD MANNAGONGD`.

5. Box No 11 'Customs endorsement` of the EUR.1 certificate shall be completed if necessary by the approved exporter.

6. The approved exporter shall, if necessary, indicate in box No 13 'Request for verification` of the EUR.1 certificate the name and address of the authority competent to verify such a certificate.

7. Where the simplified procedure is applied, the customs authorities of the exporting State or territory may prescribe the use of EUR.1 certificates bearing a destinctive sign by which they may be identified.

8. In the authorization referred to in paragraph 2 the competent authorities shall specify in particular:

(a) the conditions under which the applications for EUR.1 certificates are to be made;

(b) the conditions under which these applications are to be kept for at least two years;

(c) in the cases referred to in paragraph 3 (b) the authority competent to carry out the subsequent verification referred to in Article 25 of this Protocol.

9. The customs authorities of the exporting State or territory may declare certain categories of goods ineligible for the special treatment provided for in paragraphe 2.

10. The customs authorities shall refuse the authorization referred to in paragraph 2 to exporters who do not offer all the guarantees which they consider necessary. The competent authorities may withdraw the authorization at any time. They must do so where the approved exporter no longer satisfies the conditions or no longer offers these guarantees.

11. The approved exporter may be required to inform the competent authorities, in accordance with the rule which they lay down, of the goods to be dispatched by him, so that such authorities may make any verification they think necessary before the departure of the goods.

12. The customs authorities of the exporting State or territory may carry out any check on approved exporters which they consider necessary. Such exporters must allow this to be done.

13. The provisions of this Article shall be without prejudice to the application of the rules of the Community and of the Member States concerning customs formalities and the use of customs documents.

Article 14

Replacement of certificates

It shall at any time be possible to replace one or more movement certificates EUR.1 by one or more other certificates provided that this is done at the customs office where the goods are located.

Article 15

Validity of certificates

1. A movement certificate EUR.1 must be submitted, within four months of the date of issue by the customs authorities of the exporting State or territory, to the customs office of the importing State or territory where the products are entered.

2. Movement certificates EUR.1 which are submitted to the customs authorities of the importing State or territory after the final date of presentation specified in paragraph 1 may be accepted for the purpose of applying preferential treatment, where the failure to submit the certificates by the final date set is due to reasons of force majeure or exceptional circumstances.

3. In other cases of belated presentation, the customs authorities of the importing State or territory may accept the certificates where the products have been submitted to them before the said final date.

Article 16

Exhibitions

1. Products sent from the Community or the Faroe Islands for exhibition in a country other than a Member State of the Community or the Faroe Islands and sold after the exhibition for importation into the Faroe Islands or the Community shall benefit on importation from the provisions of the Agreement on condition that the products meet the requirements of this Protocol entitling them to be recognized as originating in the Community or the Faroe Islands and provided that it is shown to the satisfaction of the customs authorities that:

(a) an exporter has consigned these products from the Community or the Faroe Islands to the country in which the exhibition is held and has exhibited them there;

(b) the products have been sold or otherwise disposed of by that exporter to someone in the Community or the Faroe Islands;

(c) the products have been consigned during the exhibition or immediately thereafter to the Community or the Faroe Islands in the state in which they were sent for exhibition;

(d) the products have not, since they were consigned for exhibition, been used for any purpose other than demonstration at the exhibition.

2. A movement certificate EUR.1 must be produced to the customs authorities in the normal manner. The name and address of the exhibition must be indicated thereon. Where necessary, additional documentary evidence of the nature of the products and the conditions under which they have been exhibited may be required.

3. Paragraph 1 shall apply to any trade, industrial, agricultural or crafts exhibition, fair or similar public show or display which is not organized for private purposes in shops or business premises with a view to the sale of foreign products, and during which the products remain under customs control.

Article 17

Submission of certificates

Movement certificates EUR.1 shall be submitted to the customs authorities in the importing State or territory in accordance with the procedures laid down by that State or territory. The said authorities may require a translation of a certificate. They may also require the import declaration to be accompanied by a statement from the importer to the effect that the products meet the conditions required for the implementation of the Convention.

Article 18

Importation by instalments

Without prejudice to Article 3, paragraph 3 of this Protocol, where, at the request of the person declaring the goods at the customs, a dismantled or non-assembled article falling within Chapter 84 or 85 of the Harmonized System is imported by instalments on the conditions laid down by the competent authorities, it shall be considered to be a single article and a movement certificate may be submitted for the whole article upon import of the first instalment.

Article 19

Preservation of certificates

Movement certificates EUR.1 shall be preserved by the customs authorities of the importing State or territory in accordance with the rules in force in that State or territory.

Article 20

Form EUR.2

1. Notwithstanding Article 9, the evidence of originating status, within the meaning of this Protocol, for consignments containing only originating products and whose value does not exceed ECU 4 800 per consignment, shall be given by a form EUR.2, a specimen of which appears in Annex IV to this Protocol.

2. The form EUR.2 shall be completed and signed by the exporter or, under the exporter's responsibility, by his authorized representative in accordance with this Protocol.

3. A form EUR.2 shall be completed for each consignment.

4. The exporter who applied for the form EUR.2 shall submit at the request of the customs authorities of the exporting country or territory all supporting documents concerning the use of this form.

Article 21

Discrepancies

The discovery of slight discrepancies between the statements made in the movement certificate EUR.1, in the form EUR.2 and those made in the documents submitted to the customs office for the purpose of carrying out the formalities for importing the products shall not ipso facto render the document null and void if it is duly established that it corresponds to the products submitted.

Article 22

Exemptions from proof of origin

1. Products sent as small packages to private persons or forming part of travellers' personal luggage shall be admitted as originating products without requiring the production of a movement certificate EUR.1 or the completion of form EUR.2, provided that such products are not imported by way of trade and have been declared as meeting the conditions required for the application of the agreement, and where there is no doubt as to the veracity of such declaration.

2. Imports which are occasional and consist solely of products for the personal use of the recipients or travellers or their families shall not be considered as imports by way of trade if it is evident from the nature and quantity of the products that no commercial purpose is in view.

Furthermore, the total value of these products must not exceed ECU 340 in the case of small packages or ECU 960 in the case of the contents of travellers' personal luggage.

Article 23

Amounts expressed in ecus

1. Amounts in the national currency of the exporting State or territory equivalent to the amounts expressed in ecus shall be fixed by the exporting State or territory and communicated to the other parties to the Agreement. When the amounts are more than the corresponding amounts fixed by the importing State or territory, the latter shall accept them if the goods are invoiced in the currency of the exporting State.

If the goods are invoiced in the currency of another Member State of the Community the importing State or territory shall recognize the amount notified by the country concerned.

2. Up to and including 30 April 1993, the ecu, to be used in any given national currency shall be the equivalent in that national currency of the ecu as at 3 October 1990. For each successive period of two years, it shall be the equivalent in that national currency of the ecu as at the first working day in October in the year immediately preceding that two-year period.

TITLE III

ARRANGEMENTS FOR ADMINISTRATIVE

COOPERATION

Article 24

Communication of impressions of stamps

The customs authorities of the Member States and the Faroe Islands shall provide each other, through the Commission of the European Communities, with specimen impressions of stamps used in their customs offices for the issue of EUR.1 certificates.

Article 25

Verification of movement certificates EUR.1 and of forms EUR.2

1. Subsequent verification of movement certificates EUR.1 and of forms EUR.2 shall be carried out at random or whenever the customs authorities of the importing State or territory have reasonable doubts as to the authenticity of the document or the accuracy of the information regarding the true origin of the products in question.

2. In order to ensure the proper application of this Protocol, the Member States of the Community and the Faroe Islands shall assist each other, through their respective customs administrations, in checking the authenticity of movement certificates EUR.1 and the forms EUR.2 and the accuracy of the information concerning the actual origin of the products concerned.

3. For the purpose of implementing paragraph 1, the customs authorities of the importing State or territory shall return the movement certificate EUR.1 or form EUR.2, or a photocopy thereof, to the customs authorities of the exporting State or territory, giving, where appropriate, the reasons of form or substance for an enquiry.

The relevant commercial documents or a copy thereof, shall be attached to the certificate EUR.1 or form EUR.2 and the customs authorities shall forward any information that has been obtained suggesting that the particulars given on the said certificate or the said form are inaccurate.

If the customs authorities of the importing State or territory decide to suspend execution of the provisions of the Agreement while awaiting the results of the verification, they shall offer to release the products to the importer subject to any precautionary measures judged necessary.

4. The customs authorities of the importing State or territory shall be informed of the results of the verification as soon as possible. These results must be such as to make it possible to determine whether the disputed movement certificate EUR.1 or form EUR.2 apply to the products actually exported and if they can, in fact, qualify for the application of the preferential arrangements.

5. Disputes which cannot be settled between the customs authorities of the importing State or territory and those of the exporting State or territory, or those which raise a question as to the interpretation of this Protocol, shall be submitted to the Customs Committee.

6. For the purpose of the subsequent verification of movement certificates EUR.1, the customs authorities of the exporting country must keep the export documents, or copies of certificates used in place thereof, for at least two years.

Article 26

Sanctions

Penalties shall be imposed on any person who draws up, or causes to be drawn up, a document which contains incorrect particulars for the purpose of obtaining a preferential treatment for products.

Article 27

Free zones

The Member States and the Faroe Islands shall take all necessary steps to ensure that products traded under cover of a movement certificate EUR.1, which in the course of transport use a free zone situated in their territory, are not substituted by other goods and that they do not undergo handling other than normal operations designed to prevent their deterioration.

TITLE IV

THE CANARY ISLANDS, CEUTA AND MELILLA

Article 28

Application of the Protocol

1. The term 'Community` used in this Protocol does not cover the Canary Islands, Ceuta or Melilla. The term 'products originating in the Community` does not cover products originating in these zones.

2. This protocol shall apply mutatis mutandis to products originating in the Canary Islands, Ceuta and Melilla, subject to particular conditions set out in Article 29.

Article 29

Special conditions

1. The following provisions shall apply instead of Article 1 and references to that Article shall apply mutatis mutandis to this Article.

2. Providing they have been transported directly in accordance with the provisions of Article 7, the following shall be considered as:

(1) Products originating in the Canary Islands, Ceuta and Melilla:

(a) products wholly obtained in the Canary Islands, Ceuta and Melilla;

(b) products obtained in the Canary Islands, Ceuta and Melilla in the manufacture of which products other than those referred to in (a) are used, provided that:

(i) the said products have undergone sufficient working or processing within the meaning of Article 3 of this Protocol; or that

(ii) those products are originating in the Faroe Islands or the Community within the meaning of this Protocol provided that they have been submitted to working or processing which goes beyond the insufficient working or processing referred to in Article 3, paragraph 3.

(2) Products originating in the Faroe Islands:

(a) products wholly obtained in the Faroe Islands;

(b) products obtained in the Faroe Islands in the manufacture of which products other than those referred to in (a) are used. provided that:

(i) the said products have undergone sufficient working or processing within the meaning of Article 3 of this Protocol; or that

(ii) those products are originating in the Canary Islands, Ceuta and Melilla or the Community within the meaning of this Protocol provided that they have been submitted to working or processing which goes beyond the insufficient working or processing referred to in Article 3, paragraph 3.

3. The Canary Islands, Ceuta and Melilla shall be considered as a single territory.

4. The exporter or his authorized representative shall enter 'Faroe Islands` and 'Canary Islands, Ceuta and Melilla` in box 2 of movement certificates EUR.1. In addition, in the case of products originating in the Canary Islands, Ceuta and Melilla, this shall be indicated in box 4 of movement certificates EUR.1.

5. The Spanish customs authorities shall be responsible for the application of this Protocol in the Canary Islands, and in Ceuta and Melilla.

6. Article 30 shall not apply to trade between the Canary Islands, Ceuta and Melilla, on the one hand, and the Faroe Islands on the other.

TITLE V

FINAL PROVISIONS

Article 30

Drawback and exemptions from customs duties

1. Without prejudice to the provisions of Article 1 of Protocol 2 and Article 1 of Protocol 4, products which are of the kind to which the Agreement applies, and which are used in the manufacture for which a movement certificate EUR.1 or a form EUR.2 are issued or completed, can only be the subject of drawback of customs duty or benefit from an exemption from customs duty of whatever kind when products originating in the Community or the Faroe Islands are concerned.

2. In this Article, the term 'customs duty` also means charges having an effect equivalent to customs duty.

Article 31

Petroleum products

The products set out in Annex VI shall be temporarily excluded from the scope of this Protocol. Nevertheless, the arrangements regarding administrative cooperation and Article 30 shall apply mutatis mutandis, to these products.

Article 32

Amendments to the Protocol

The Joint Committee may decide to amend provisions of this Protocol.

Article 33

Annexes

The Annexes to this Protocol shall form an integral part thereof.

Article 34

Implementation of the Protocol

The Community and the Faroe Islands shall each take the steps necessary to implement this Protocol.

LIST OF ANNEXES

Page

ANNEX I: Notes 51

ANNEX II: List of working and processing within the meaning of Article 3, paragraph 2 56

ANNEX III: Specimen of movement certificate EUR.1 106

ANNEX IV: Specimen of Form EUR.2 111

ANNEX V: Specimen impression of the stamp referred to in Article 13, paragraph 3 (b) 115

ANNEX VI: List of products referred to in Article 31 which are temporarily excluded from the scope of this Protocol 116

ANNEX I

NOTES

Foreword

These notes shall apply, where appropriate, to all manufactured products using non-originating materials, even if they are not subject to specific conditions contained in the list in Annex II but are subject instead to the change of heading rule set out in Article 3, paragraph 1.

Note 1

1.1. The first two columns in the list describe the product obtained. The first column gives the heading number or chapter number used in the Harmonized System and the second column gives the description of goods used in that system for that heading or chapter. For each entry in the first two columns a rule is specified in columns 3 or 4. Where, in some cases, the entry in the first column is preceded by an 'ex', this signifies that the rule in columns 3 or 4 applies only to the part of that heading or chapter as described in column 2.

1.2. Where several heading numbers are grouped together in column 1 or a chapter number is given and the description of products in column 2 is therefore given in general terms, the adjacent rule in columns 3 or 4 applies to all products which, under the Harmonized System, are classified in headings of the chapter or in any of the headings grouped together in column 1.

1.3. Where there are different rules in the list applying to different products within a heading, each indent contains the description of that part of the heading covered by the adjacent rule in columns 3 or 4.

1.4. For the products of Chapters 84 to 91 inclusive, if no origin rule is given in column 4, the rule set out in column 3 has to be applied.

Note 2

2.1. The term 'manufacture' covers any kind of working or processing including 'assembly' or specific operations. However, see Note 3.5 below.

2.2. The term 'material' covers any ingredient, raw material, component or part, etc., used in the manufacture of the product.

2.3. The term 'product' refers to the product being manufactured, even if it is intended for later use in another manufacturing operation.

TEXT CONTINUED UNDER DOC.NUM: 291A1231(01).1

2.4. The term 'goods' covers both materials and products.

Note 3

3.1. In the case of any heading not in the list or any part of a heading that is not in the list, the 'change of heading' rule set out in Article 3, paragraph 1 applies. If a 'change of heading' condition applies to any entry in the list, then it is contained in the rule in column 3.

3.2. The working or processing required by a rule in columns 3 or 4 has to be carried out only in relation to the non-originating materials used. The restrictions contained in a rule in columns 3 or 4 likewise apply only to the non-originating materials used.

3.3. Where a rule states that 'materials of any heading' may be used, materials of the same heading as the product may also be used, subject, however, to any specific limitations which may also be contained in the rule. However, the expression 'manufacture from materials of any heading, including other materials of heading No . . .' means that only materials classified in the same heading as the product of a different description than that of the product as given in column 2 of the list may be used.

3.4. If a product made from non-originating materials which has acquired originating status during manufacture by virture of the change of heading rule or its own list rule is used as a material in the process of manufacture of another product, then the rule applicable to the product in which it is incorporated does not apply to it.

For example:

An engine of heading No 8407, for which the rule states that the value of the non-originating materials which may be incorporated may not exceed 40 % of the ex-works price, is made from 'other alloy steel roughly shaped by forging' of heading No 7224.

If this forging has been forged in the country concerned from a non-originating ingot then the forging has already acquired origin by virtue of the rule for heading No ex 7224 in the list. It can then count as originating in the value calculation for the engine regardless of whether it was produced in the same factory or another. The value of the non-originating ingot is thus not taken into account when adding up the value of the non-originating materials used.

3.5. Even if the change of heading rule or the other rules contained in the list are satisfied, a product shall not acquire originating status if the processing carried out, taken as a whole, is insufficient within the meaning of Article 3, paragraph 3.

3.6. The unit of qualification for the application of the origin rules shall be the particular product which is considered as the basic unit when determining classification using the nomenclature of the Harmonized System. In the case of sets of products which are classified by virtue of General Rule 3 for the interpretation of the Harmonized System, the unit of qualification shall be determined in respect of each item in the set: this provision is equally applicable to sets of heading Nos 6308, 8206 and 9605.

Accordingly, it follows that:

- when a product composed of a group or assembly of articles is classified under the terms of the Harmonized System in a single heading, the whole constitutes the unit of qualification,

- when a consignment consists of a number of identical products classified under the same heading of the Harmonized System, each product must be taken individually when applying the origin rules.

Where, under General Rule 5 of the Harmonized System, packing is included with the product for classification purposes, it shall be included for the purposes of determining origin.

Note 4

4.1. The rule in the list represents the minimum amount of working or processing required and the carrying out of more working or processing also confers originating status; conversely, the carrying out of less working or processing cannot confer origin. Thus if a rule says that non-originating material at a certain level of manufacture may be used, the use of such material at an earlier stage of manufacture is allowed and the use of such material at a later stage is not.

4.2. When a rule in the list specifies that a product may be manufactured from more than one material, this means that any one or more materials may be used. It does not require that all be used.

For example:

The rule for fabrics says that natural fibres may be used and that chemical materials, among other materials, may also be used. This does not mean that both have to be used; one can use one or the other or both.

If, however, a restriction applies to one material and other restrictions apply to other materials in the same rule, then the restrictions only apply to the materials actually used.

For example:

The rule for sewing machines specifies that both the thread tension mechanism used and the zigzag mechanism used must originate; these two restrictions only apply if the mechanisms concerned are actually incorporated into the sewing machine.

4.3. When a rule in the list specifies that a product must be manufactured from a particular material, the condition obviously does not prevent the use of other materials which, because of their inherent nature, cannot satisfy the rule.

For example:

The rule for heading No 1904 which specifically excludes the use of cereals or their derivatives does not prevent the use of mineral salts, chemicals and other additives which are not produced from cereals.

For example:

In the case of an article made from non-woven materials, if the use of only non-originating yarn is allowed for this class of article, it is not possible to start from non-woven cloth - even if non-woven cloths cannot normally be made from yarn. In such cases, the starting material would normally be at the stage before yarn - that is the fibre stage.

See also Note 7.3 in relation to textiles.

4.4. If in a rule in the list two or more percentages are given for the maximum value of non-originating materials that can be used, then these percentages may not be added together. The maximum value of all the non-originating materials used may never exceed the highest of the percentages given. Furthermore, the individual percentages must not be exceeded in relation to the particular materials they apply to.

Note 5

5.1. The term 'natural fibres' is used in the list to refer to fibres other than artificial or synthetic fibres and is restricted to the stages before spinning takes place, including waste, and, unless otherwise specified, the term 'natural fibres' includes fibres that have been carded, combed or otherwise processed but not spun.

5.2. The term 'natural fibres' includes horsehair of heading No 0503, silk of heading Nos 5002 and 5003 as well as the wool fibres, fine or coarse animal hair of heading Nos 5101 to 5105, the cotton fibres of heading Nos 5201 to 5203 and the other vegetable fibres of heading Nos 5301 to 5305.

5.3. The terms 'textile pulp', 'chemical materials' and 'paper-making materials' are used in the list to describe the materials not classified in Chapters 50 to 63, which can be used to manufacture artificial, synthetic or paper fibres or yarns.

5.4. The term 'man-made staple fibres' is used in the list to refer to synthetic or artificial filament tow, staple fibres or waste, of heading Nos 5501 to 5507.

Note 6

6.1. In the case of the products classified within those headings in the list to which a reference is made to this Note, the conditions set out in column 3 of the list shall not be applied to any basic textile materials used in their manufacture which, taken together, represents 10 % or less of the total weight of all the basic textile materials used (but see also Notes 6.3 and 6.4 below).

6.2. However, this tolerance may only be applied to mixed products which have been made from two or more basic textile materials.

The following are the basic textile materials:

- silk,

- wool,

- coarse animal hair,

- fine animal hair,

- horsehair,

- cotton,

- paper-making materials and paper,

- flax,

- true hemp,

- jute and other textile bast fibres,

- sisal and other textile fibres of the genus Agave,

- coconut, abaca, ramie and other vegetable textile fibres,

- synthetic man-made filaments,

- artificial man-made staple filaments,

- synthetic man-made staple fibres,

- artificial man-made staple fibres.

For example:

A yarn of heading No 5205 made from cotton fibres of heading No 5203 and synthetic staple fibres of heading No 5506 is a mixed yarn. Therefore, non-originating synthetic staple fibres that do not satisfy the origin rules (which require manufacture from chemical materials or textile pulp) may be used up to a weight of 10 % of the yarn.

For example:

A woollen fabric of heading No 5112 made from woollen yarn of heading No 5107 and synthetic yarn of staple fibres of heading No 5509 is a mixed fabric. Therefore, synthetic yarn which does not satisfy the origin rules (which require manufacture from chemical materials or textile pulp) or woollen yarn that does not satisfy the origin rules (which require manufacture from natural fibres, not carded or combed or otherwise prepared for spinning) or a combination of the two may be used up to a weight of 10 % of the fabric.

For example:

Tufted textile fabric of heading No 5802 made from cotton yarn of heading No 5205 and cotton fabric of heading No 5210 is only a mixed product if the cotton fabric is itself a mixed fabric being made from yarns classified in two separate headings or if the cotton yarns used are themselves mixtures.

For example:

If the tufted textile fabric concerned had been made from cotton yarn of heading No 5205 and synthetic fabric of heading No 5407, then, obviously, the yarns used are two separate basic textile materials and the tufted textile fabric is accordingly a mixed product.

For example:

A carpet with tufts made from both artificial yarns and cotton yarns and with a jute backing is a mixed product because three basic textile materials are used. Thus, any non-originating materials that are at a later stage of manufacture than the rule allows may be used, provided their total weight taken together does not exceed 10 % of the weight of the textiles materials of the carpet. Thus, both the jute backing and/or the artificial yarns could be imported at that stage of manufacture, provided the weight conditions are met.

6.3. In the case of fabrics incorporating 'yarn made of polyurethane segmented with flexible segments of polyether whether or not gimped' this tolerance is 20 % in respect of this yarn.

6.4. In the case of fabrics incorporating strip consisting of a core of aluminium foil or of a core of plastic film whether or not coated with aluminium powder, of a width not exceeding 5 mm, sandwiched by means of an adhesive between two films of plastic film, this tolerance is 30 % in respect of this strip.

Note 7

7.1. In the case of those textile products which are marked in the list by a footnote referring to this note, textile materials, with the exception of linings and interlinings, which do not satisfy the rule set out in the list in column 3 for the made-up product concerned may be used provided that they are classified in a heading other than that of the product and that their value does not exceed 8 % of the ex-works price of the product.

7.2. Any non-textile trimmings and accessories or other materials used which contain textiles do not have to satisfy the conditions set out in column 3 even though they fall outside the scope of Note 4.3.

7.3. In accordance with Note 4.3., any non-originating non-textile trimmings and accessories or other product, which do not contain any textiles, may, anyway, be used freely where they cannot be made from the materials listed in column 3.

For example:

If a rule in the list says that for a particular textile item, such as a blouse, yarn must be used, this does not prevent the use of metal items, such as buttons, because they cannot be made from textile materials.

7.4. Where a percentage rule applies, the value of trimmings and accessories must be taken into account when calculating the value of the non-originating materials incorporated.

ANNEX II

LIST OF WORKING OR PROCESSING REQUIRED TO BE CARRIED OUT ON NON-ORIGINATING MATERIALS IN ORDER THAT THE PRODUCT MANUFACTURED CAN OBTAIN ORIGINATING STATUS

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ANNEX III

MOVEMENT CERTIFICATES EUR.1

1. Movement certificates EUR.1 shall be made out on the form of which a specimen appears in this Annex. This form shall be printed in one or more of the languages in which the Agreement is drawn up. Certificates shall be made out in one of these languages and in accordance with the provisions of the domestic law of the exporting State or territory. If they are handwritten, they shall be completed in ink and in capital letters.

2. Each certificate shall measure 210 × 297 mm; a tolerance of up to minus 5 mm or plus 8 mm in the length may be allowed. The paper used must be white, sized for writing, not containing mechanical pulp and weighing not less than 25 g/m². It shall have a printed green guilloche pattern background making any falsification by mechanical or chemical means apparent to the eye.

3. The Member States of the Community and the Faroe Islands may reserve the right to print the certificates themselves or may have them printed by approved printers. In the latter case each certificate must include a reference to such approval. Each certificate must bear the name and address of the printer or a mark by which the printer can be identified. It shall also bear a serial number, either printed or not, by which it can be identified.

MOVEMENT CERTIFICATE

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NOTES

1. Certificates must not contain erasures or words written over one another. Any alterations must be made by deleting the incorrect particulars and adding any necessary corrections. Any such alteration must be initialled by the person who completed the certificate and endorsed by the customs authorities of the issuing country or territory.

2. No spaces must be left between the items entered on the certificate and each item must be preceded by an item number. A horizontal line must be drawn immediately below the last item. Any unused space must be struck through in such a manner as to make any later additions impossible.

3.Goods must be described in accordance with commercial practice and with sufficient detail to enable them to be identified.

APPLICATION FOR A MOVEMENT CERTIFICATE

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DECLARATION BY THE EXPORTER

I, the undersigned, exporter of the goods described overleaf,

DECLARE that the goods meet the conditions required for the issue of the attached certificate;

SPECIFYas follows the circumstances which have enabled these goods to meet the above conditions:

SUBMITthe following supporting documents (1):

UNDERTAKE to submit, at the request of the appropriate authorities, any supporting evidence which these authorities may require for the purpose of issuing the attached certificate, and undertake, if required, to agree to any inspection of my accounts and to any check on the processes of manufacture of the above goods, carried out by the said authorities;

REQUESTthe issue of the attached certificate for these goods.

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ANNEX IV

FORM EUR.2

1. Form EUR.2 shall be made out on the form of which a specimen appears in this Annex. This form shall be printed in one or more of the languages in which the Agreement is drawn up. Forms shall be made out in one of these languages and in accordance with the provisions of the domestic law of the exporting State or territory. If they are handwritten, they shall be completed in ink and in capital letters.

2. Each Form EUR.2 shall measure 210 × 297 mm; a maximum tolerance of up to minus 5 mm or plus 8 mm in the length may be allowed. The paper used must be white, sized for writing, not containing mechanical pulp and weighing not less than 64 g/m².

3. The Member States of the Community and the Faroe Islands may reserve the right to print the forms themselves or may have them printed by approved printers. In the latter case each form must include a reference to such approval. Each form must bear the name and address of the printer or a mark by which the printer can be identified. It shall also bear a serial number, either printed or not, by which it can be identified.

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Instructions for the completion of form EUR. 2

1. A form EUR. 2 may be made out only for goods which in the exporting country fulfil the conditions specified by the provisions governing the trade referred to in box 1. These provisions must be studied carefully before the form is completed.

2.In the case of a consignment by parcel post the exporter attaches the form to the dispatch note. In the case of a consignment by letter post he encloses the form in a package. The reference 'EUR. 2' and the serial number of the form should be stated on the customs green label declaration C1 or on the customs declaration C2/CP3, as appropriate.

3.These instructions do not exempt the exporter from complying with any other formalities required by customs or postal regulations.

4.An exporter who uses this form is obliged to submit to the appropriate authorities any supporting evidence which they may require and to agree to any inspection by them of his accounts and of the processes of manufacture of the goods described in box 11 of this form.

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ANNEX V

Specimen impression of the stamp mentioned in Article 13 (3) (b)

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(2) Initials or coat of arms of the exporting State or territory.

(3) Such information as is necessary for the identification of the approved exporter.

ANNEX VI

LIST OF PRODUCTS REFERRED TO IN ARTICLE 31 WHICH ARE TEMPORARILY

EXCLUDED FROM THE SCOPE OF THIS PROTOCOL

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PROTOCOL 4

concerning agricultural products subject to special provisions applicable to imports

Article 1

In accordance with Article 17 of the Agreement, the European Economic Community grants to products originating in and coming from the Faroe Islands the following tariff quotas: >TABLE>

Article 2

In accordance with Article 5 and Annex II of the Agreement, the Faroe Islands shall grant freedom of tariffs and duties to goods of EEC origin, falling within Chapters 1 to 24 in the Harmonized System, with the following exceptions:

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Declaration by the European Economic Community concerning Article 23 (1) of the Agreement

The European Economic Community declares that, in the context of the autonomous implementation of Article 23 (1) of the Agreement which is incumbent on the Contracting Parties, it will assess any practices contrary to that Article on the basis of criteria arising from the application of the rules of Articles 85, 86, 90 and 92 of the Treaty establishing the European Economic Community.

Declaration by the European Economic Community concerning the regional application of certain provisions of the Agreement

The European Economic Community declares that the application of any measures it may take under Articles 23, 24, 25 or 26 of the Agreement, in accordance with the procedure and under the arrangements set out in Article 27, or under Article 28 may be limited to one of its regions by virtue of Community rules.

Joint Declaration concerning the review of the Trade Agreement in keeping with the

development of EEC-EFTA trade relations

If the Community - upon the conclusion of new agreements or arrangements between the Community and the Member States of EFTA in the context of the establishment of a European Economic Area - grants concessions to the EFTA countries going beyond those granted to the Faroe Islands in areas covered by this Agreement, the Community will, upon request from the Faroe Islands, consider in a positive spirit, case-by-case, to what extent and on what basis corresponding concessions could be offered to the Faroe Islands.

If agreements or arrangements are concluded between the Faroe Islands and the Member States of EFTA whereby the Faroe Islands grant concessions to EFTA countries going beyond those granted to the Community in areas covered by this Agreement, the Faroe Islands will, upon request from the Community, consider in a positive spirit, case-bay-case, to what extent and on what basis corresponding concessions could be offered to the Community.

Exchange of letters on mutual assistance

Letter from the Head of the Delegation of Denmark and the Faroe Islands

Sir,

I have the honour to confirm that the Government of Denmark and the Home Government of the Faroe Islands are prepared to conclude an Agreement with the European Economic Community on mutual administrative assistance in customs matters as soon as such an Agreement has been concluded with one or more of the Member States of the European Free Trade Association. I also confirm that the Agreement on mutual administrative assistance in customs matters to be concluded between the European Economic Community and the Government of Denmark and the Home Government of the Faroe Islands shall be based upon the Agreement or Agreements concluded between the European Economic Community and one or more of the Member States of the European Free Trade Association.

Please accept, Sir, the assurance of my highest consideration.

. . . . . . . .

Head of the Delegation of Denmark

and the Faroe Islands

Letter from the Head of the Delegation of the European Economic Community

Sir,

In your letter of today's date you inform me as follows:

'I have the honour to confirm that the Government of Denmark and the Home Government of the Faroe Islands are prepared to conclude an Agreement with the European Economic Community on mutual administrative assistance in customs matters as soon as such an Agreement has been concluded with one or more of the Member States of the European Free Trade Association. I also confirm the the Agreement on mutual administrative assistance in customs matters to be concluded between the European Economic Community and the Government of Denmark and the Home Government of the Faroe Islands shall be based upon the Agreement or Agreements concluded between the European Economic Community and one or more of the Member States of the European Free Trade Association.`

I have the honour to acknowledge receipt of your letter.

Please accept, Sir, the assurance of my highest consideration.

. . . . . . . .

Head of the Delegation of the

European Economic Community

(1) For example: import documents, movement certificates, invoices, manufacturer's declarations, etc., referring to the products used in manufacture or to the goods re-exported in the same state.

(2) Insert the countries, groups of countries or territories concerned.

(3) Refer to any verification already carried out by the appropriate authorities.

(4) The term 'country of origin' means country, group of countries or territory where the goods are considered to be originating.

(5) The term 'country' means country, group of countries or territory of destination.

(6*) Subsequent verifications of forms EUR. 2 shall be carried out at random or whenever the customs authorities of the importing State have reasonable doubt as to the accuracy of the information regarding the authenticity of the forms and the true origin of the goods in question.

(7) See page 2 of this Official Journal.