Discussion Document to Be Discussed in the Trade Mechanisms Committee

Brussels,

AGRI D.3/AD-fv D(2006) 27245

06.09.2006

Discussion Document To be discussed in the Trade Mechanisms Committee

Subject:Proof of importation in third countries. Articles 16 and 17 of Regulation (EC) No 800/1999

This document is a synthesis of the documents D(2005)26577 (Tracking & tracing), D(2006) 3130 (Peru model and direct verification), D(2006)10135 (extension Article 17) and the various reactions received on them.

Content

I.Electronic proof of importation- direct verification.

public verification websites, like the Peru case

(in)direct accessible customs data in a third country

II.Article 16(3) of Regulation (EC) No 800/1999: the transport document.

Conditions

Legal aspects

Control aspects

III. Article 17 of Regulation (EC) No 800/1999, exemption from proof of import

III.1Application of the present derogation.

III.2Extension of the present derogations

III.3Parallelism with DG ENTR draft article 54 (3-6) of Regulation (EC) No 1043/2005

III.4Authorisation.

III.5Control

III.6High financial threshold when diversion of products to other nearby third countries is less likely - Products packaged for retail sale

III. 7Linking the amount of refunds per export declaration to the transport costs of the products

III.8Linking the amount of refunds to one full container load, bound for a remote country which does not border a lower-refund, zero-refund or non-refund country

III.9Taking account of geographic/economic situations for remote countries: hinterland rule

I.Electronic proof of importation- direct verification.

As mentioned in Discussion Document D(2006)3130, electronic customs information could replace stamped and signed paper import documents under Article 16(1) of Regulation (EC) No 800/1999, if this information is directly verifiable for paying agencies. This refers to the Peruvian customs web site and to bilateral agreements like between Denmark and Norway. Member States are invited to notify whether other third countries have similar verification opportunities.

The following conditions apply.

For public verification websites, like the Peru case

1.The exporter submits to the paying agency a screen print-out of the import document which must have the finalised status;

2.The exporter requests the paying agency to verify the unstamped document by the information provided by the official web-site;

3.As it is not known how long individual information will stay available on the third country's web-site, the paying agency must store the verified information as is described under paragraph II of this note.

For (in)direct accessible customs data in a third country

1.Although the paying agency may have (in)direct access to the third country's customs data base, the exporter stays responsible for submission of the import information.

2.The paying agency shall establish to its satisfaction that the third country's system is officially approved, preferably according to the norms mentioned under paragraph II of this note, or equal norms.

3.The paying agency has the right to direct access to the relevant customs data in the third country concerned, suited to verify the requirements of Articles 15 and 16 of Regulation (EC) No 800/1999.

4.If the paying agency has a cooperation agreement with the third country concerned, but it has only right to access in the third country's customs data via an official of that third country, the paying agency shall ensure that this intermediate is officially appointed for this function by its own administration and that his/her operations are covered by organisational and integrity norms, or equal norms, as mentioned in paragraph II of this note.

The aforementioned would lead to modification of Article 16. Although certified screen print-outs were already accepted pursuant to common practice and the “rules to observe”, this now will be explicitly mentioned in Article 16(1)(a). Furthermore it will be added that on-line verification may apply both for documentary and for electronic generated information:

Article 16

1. Proof that customs formalities for importation have been completed shall, as the exporter chooses, be furnished by one of the following documents:

(a) the customs document, a copy or photocopy thereof, or a printout of equivalent information recorded electronically by the relevant customs authority; such copy, photocopy or printout shall be certified as being a true copy or printout by:

-the body which endorsed the original document or the body which electronically recorded the equivalent information,

-an official agency of the third country concerned,

-an official agency of a Member State in the third country concerned, or

-an agency responsible for paying the refund.

At the request of the exporter, a Member State may waive the certification requirement where it is able to verify that customs formalities for importation have been completed by accessing electronically recorded information held by oron behalf of the competentauthorities of the third country.

II.Article 16(3) of Regulation (EC) No 800/1999: the transport document.

Discussion document D(2005) 26577 deals with the proposal to accept the electronic information in container carrier's Tracking & Tracing systems as an alternative for the paper version of the transport document in sea transport.

The electronic container T&T system

• Could give on-line up-dated information on the bill of lading;
• Could give information on the container number and the dates the container was offered for transport, loaded on board of the ship, transhipped, discharged in the port, transported out of the port-site in loaded condition, returned to the port side in unloaded condition.

Therefore, such T&T systems give at least similar information as

• the paper transport document as meant in Article 16(3) and Article 17 of Regulation (EC) No 800/1999, like the Bill of Lading. In correct functioning T&T systems this information is updated to the real situation if during transport information has to be modified, which is a better control position than under the paper system;

• alternative means of proof as meant in Article 49(3)(a) first indent of Regulation (EC) No 800/1999 (problems with control copies T-5);
• the means to prove the respecting of the 28 days transhipment period as meant in Article 9(1) of Regulation (EC) No 800/1999.

Data processing and security issues in this respect have been given a position in Commission Regulation (EC) No885/2006 of 21June 2006 laying down detailed rules for the application of Council Regulation (EC) No1290/2005 as regards the accreditation of paying agencies and other bodies and the clearance of the accounts of the EAGF and of the EAFRD[1]. Based on this regulation and based on new information from some Member States, it may be assumed that electronic information retrieved from container carrier's Tracking & Tracing systems could be accepted as a substitute for the information in sea transport documents under Article 16(3) and 17 of Regulation (EC) No 800/1999 on the following conditions.

1. The exporter, the container carrier and the paying agency agree on voluntary basis that the T&T system will be accessible for the paying agency on equal footing as accession is given to the exporter.

1. The T&T system operates under international norms which should safeguard independent and trustworthy processing of information wherever the information input took place. Examples of such norms are mentioned in the Annex I point 3 (B) of Regulation (EC) No885/2006 (— International Standards Organisation 17799/British Standard 7799: Code of practice for Information Security Management (BS ISO/IEC 17799); Bundesamt für Sicherheit in der Informationstechnik: ITGrundschutzhandbuch/ IT Baseline Protection Manual (BSI); — Information Systems Audit and Control Foundation: Control Objectives for Information and related Technology (COBIT)).
2. The paying agency has to approve the T&T system on the appropriate aforementioned conditions. Therefore, the container carrier, or at least its department legally responsible for the correct functioning of the T&T system, shall have its regulatory seat in the approving Member State. If a certified independent organisation or an independent chartered accountant established that the safeguards (see point 2) guaranteeing correct information on the transport document and the whereabouts of the container (or cargo) are respected, the paying agency may accept a declaration of approval of such third party as its own approval. The validity period for the approval follows the periodicity of the independent third party's approval, or it is valid for three years, or shorter if events affecting the container carrier's T&T system urge for a new assessment and approval.
3. If an approval under point 3 took place in one Member State, the Paying Agency concerned communicates this to the Commission (name, address, and regulatory seat of the container carrier, T&T system concerned, accession rights, date and number of approval, contact persons). The Commission keeps a list of such approvals. The list is communicated to the Trade Mechanisms Committee.
4. Other Member States respect the existing approval. If other Member States negotiate access rights with subsidiaries operating under the responsibility of the same container carrier in their country, or with legal right holders operating under the same T&T system, the system will not be assessed again on the elements which were approved already by the first Member State. In order to enable an adequate assessment in the second Member State, the second Member State has the right to ask and receive copies of the approval documentation of the first Member State. Translations are arranged on bilateral basis.
5. The exporter stays responsible for submission of the transport information, even if the paying agency convened with the exporter that it will actively retrieve the information itself.
6. The electronic information per payment application must be stored in

• either the electronic payment dossier available at the paying agency
• or in the paper payment dossier of the paying agency as a screen print-out
• which was submitted by the exporter and, after verification, by annotation or stamp approved by the paying agency as a true copy of the electronic information, or
• which the paying agency downloaded and screen-printed from the T&T system, annotated or stamped as being a true copy.
• The electronic information must be retrievable for the same period as the payment dossier has to be kept. Paying agencies may convene with the container carrier that the information will be stored in their back-up files, provided these are accessible for the paying agency or any other competent control authority in the framework of export refunds for the aforementioned period.

1. Like in the paper version, the electronic bill of lading may be accepted as a valid document under Article 16(3) or 17 of Regulation (EC) No 800/1999 if the information in it can be linked to the information in the export declaration. Evident information in this respect is the container number and the country of destination, but also elements like product description, net weight, or dates may be relevant.

Legal aspects

The aforementioned norms are meant to facilitate harmonised application. When notified in final version to the Trade Mechanisms Committee, they will have the status of an administrative arrangement from the day the related legislation has entered into force. The use of T&T systems is based on voluntary arrangements; hence the abovementioned norms do not have the status of legal obligations under Regulation (EC) No 800/1999. However, when T&T systems are approved and used as an alternative for paper documents, the norms are binding according to national law in the arrangement between paying agency, exporter and container carrier. The Member State stays responsible for correct application in the framework of Regulation (EC) No885/2006.

Control aspects

Annex to the modernisations proposed, some Member States stated that it could be envisaged to change the "100% control / 4 eyes principle" at the paying agencies to a more differentiated control system under application of risk management principles. The Trade Mechanisms Committee however is not competent in control policy under Regulation (EC) No 885/2006.

The aforementioned could be reflected in a modification of Article 16(3) of Regulation (EC) No 800/1999. In the examples the IT systems concern container sea transport, but the proposed text is neutral in this respect in order to open opportunities for other transport modalities. As article 17 refers directly to the transport document under Article 16, the modification has direct impact on Article 17 as well.

Article 16

"3.Exporters shall in all cases produce a copy or photocopy of the transport documents, which shall relate to the transport of the products for which the export declaration was made.

At an exporter's request a Member State may accept information equivalent to that contained in transport documents which is generated by an information system which is managed by a third party responsible for the transport provided that the information system security is approved by the Member State as meeting the criteria laid down in the version applicable in the period concerned of one of the internationally accepted standards set out in point 3(B) of Annex I to Regulation (EC) No 885/2006.

III.Article 17 of Regulation (EC) No 800/1999, exemption from proof of import

In the system of differentiated export refunds, final payment of the refunds is only allowed when exporters deliver proof of importation into the third country declared (Articles 14 and 15 of Regulation (EC) No 800/1999). Article 17 gives Member States the option to waive this requirement for refunds up to certain thresholds, depending on the destination: €2400 for nearby destinations and €12000 for remote destinations. In that case only a transport document is required.

III.1Application of the present derogation.

According to Article 17 and under the principle of shared management of the Community budget, it is at the decision of the Member State whether the present derogation will be granted ("may apply"). Therefore, the Member State assesses whether to its own opinion risks for abuses are likely covered when derogations are to be granted in concrete situations. As a consequence Member States could for instance, based on objective norms and under the principles of risk management

• Grant the derogation for some product sectors, while other sectors could not benefit.
• Grant the derogation for some countries of destination, while others could be excluded.
• Grant the derogation to certain exporters, while others could not qualify.

However, although the legislation allows the above variations, maximum harmonised application should also be pursued. Therefore, Member States are requested to notify to the Trade Mechanisms Committee whether they differentiate in the present Article 17 and to motivate their differentiations. The delegates in the TMC in turn will be invited to assess whether the notified differentiation should be applied by their paying agencies as well.

III. 2Extension of the present derogations

In order to meet practical problems, it could be discussed whether Article 17 could cover more situations, provided the risks to own resources are on a similar level to the risks inherent in today’s refund thresholds of €2400 and €12000. If more parameters were added to Article 17 the legislation itself would become more complex, which basically does not tally with the Council’s call for simplification. On the other hand, exporters entitled to refunds would be better served by more flexible application.

III.3Parallelism with DG ENTR draft article 54 (3-6) of Regulation (EC) No 1043/2005

DG ENTR envisages introducing differentiation in the NA-I sector export refunds, while at the same time it reflects on introducing some extra derogation in Regulation (EC) No 1043/2005 next to those of Article 17 of Regulation (EC) No 800/1999. The timing of the DG ENTR initiative depends on international obligations and, therefore, it is independent of the timing of the modifications to be reflected on in this discussion document. However, as Regulation (EC) No 800/1999 regulates the horizontal aspects of refunds, the provisions in this document, when adopted, will also apply for the Non Annex –I sector.

III.4Authorisation.

The present Article 17 leaves it open how the Member States decide on derogations of Article 17. This principle will not be affected. However, for the new derogations the under mentioned regime will apply.

Extension to new derogations will only be feasible when there is a system in which exporters have a direct interest to respect the legal provisions and in which paying agencies have tailored means of controlling this. Therefore, the right to extended derogations is bound to a personal authorisation for the exporter:

• As every exporter has different export processes, the information he has to supply and the conditions he has to respect will be different as well. It is not useful to subject exporters to all existing conditions; hence authorisations with tailored conditions give the least administrative burden and the best control effect. The application for and the granting of an authorisation should be a light procedure. A suggestion to discuss is done in annex 1 to this document;
• Authorisations can be renewed when situations change. Moreover, they can be repealed when exporters do not respect the conditions, thus providing a mechanism of checks and balances in which exporter and paying agency have mutual interest in correct application of the authorisation.
• The process for requesting and issuing an authorisation includes the obligation for authorities to preliminary assess whether the exporter qualifies for it. The information from such assessment enables to identify weak spots in the exporter's organisation and consequently to designate special conditions in the authorisation or special control measures for the exporter concerned. As a result correct budget expenditure will be better enforced.
• The application for an authorisation including all annexes is kept by the paying agency as part of the payment dossier.
• The facilitations under Article 17 should be enforced by legal provisions. Exporters who abuse one of the facilitations should be excluded by law from further facilitation under Article 17 for [2] years and, if no genuine proof of import is supplied for the exports concerned within the period laid down in Article49(1), Article 51 will apply.
• The Trade Mechanisms Committee could discuss total exclusions of the extended derogations system. The Commission services already warned for possible sensitive diversions in the sugar sector. White sugar of refund codes 1701 1190 9100 -1701 9100 9990 9100 therefore, should be excluded.
• When an exporter uses derogation, he has to mention this in the payment application by referring to his authorisation number. By this the paying agency is alerted that the payment dossier will be finalised differently from the normal Article 16 routine. However, if an exporter finds retro actively that the export did not meet the conditions of the authorisation, he is free to override the authorisation by supplying the normal documents under Article 16 of the Regulation.

III.5Control