Explanatory Memorandum to COM(2024)148 - - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2024)148 - . |
|---|---|
| source | COM(2024)148 |
| date | 22-03-2024 |
1. CONTEXT OF THE PROPOSAL
• Reasons for and objectives of the proposal
The purpose of the present proposal for a Regulation is to modify Annex I to Council Regulation (EEC) No 2658/871 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff, in order to increase the customs duties applicable to imports of cereals, oilseeds and derived products that are currently classified under Chapters 10, 12, 14, 15 and 23 of the Combined Nomenclature (CN), originating in or exported from the Russian Federation or the Republic of Belarus. The proposal increases import tariffs for those cereals, oilseeds and derived products from the Russian Federation or the Republic of Belarus for which, at present, importers pay no or low tariffs. In addition, those goods originating in or exported from the Russian Federation or the Republic of Belarus would be barred from access to the Union’s tariff rate quotas.
Last year, EU imports of cereals, oilseeds and derived products from the Russian Federation reached 4.2 million tonnes, worth EUR 1.32 billion, according to Eurostat data. While today the Russian Federation is a relatively small supplier of cereals, oilseeds and derived products to the European Union (EU) market directly2, the Russian Federation is a very large producer of those products and a leading exporter at the global level, with about 55 million tonnes exported to the world in the period 2020-20223. The EU’s erga omnes tariffs – i.e. the currently applied most-favoured-nation (MFN) tariffs on cereals, oilseeds and derived products – differ widely. Depending on the product, they are either set at zero or they are very low; or they are already high and no trade takes place. Therefore, importers of cereals, oilseeds and derived products from the Russian Federation currently pay either no MFN tariffs, or pay low MFN tariffs to enter the EU market and those tariffs do not represent a significant hindrance for the products to enter the EU.
Considering that the Russian Federation is producing very large volumes of cereals, oilseeds and derived products, at present, exporters from the Russian Federation could easily and quickly re-orient significant volumes of supplies to the EU, thereby generating important export revenue for the Russian Federation’s economy while disrupting the Union’s market for those products. Moreover, the Russian Federation is currently illegally appropriating large portions of cereals and oilseeds produced in the territories of Ukraine, which it currently illegally occupies, and is routing these supplies to its export markets as allegedly “Russian” products. These exports, while illegal to import into the EU4, are often first brought into the Russian Federation and given false documentation, making it very difficult to subsequently determine their origin. It is therefore necessary to take appropriate tariff measures to prevent cereals, oilseeds and derived products from the Russian Federation from continuing to enter in the EU market on terms that are equally favourable to those applied to those products from other non-preferential origins.
Such tariff measures should help to prevent the Russian Federation from instrumentalising its exports of cereals, oilseeds and derived products to politically and economically weaken the EU by disturbing the EU market creating tensions and frictions within the EU and also threatening the proper functioning of the Customs Union. Furthermore these tariff measures would ensure that the Russian Federation would not benefit commercially from such exports to the EU. Such effects would run directly counter to the EU’s interests and are not consistent with the EU’s law and policies.
The Republic of Belarus exports limited quantities of cereals, oilseeds and derived products to the EU – 610 000 tonnes in 2023, with a value of EUR 246 million – and is not an important producer or exporter of those products. However, the proposed Regulation also covers the Republic of Belarus in view of its close political and economic ties with Russia and in order to prevent the illegal channelling of imports from the Russian Federation through the Republic of Belarus should the EU tariffs on imports of relevant goods originating in or exported from the Republic of Belarus remain unchanged. Given the continuous rapprochement and increasing trade between Belarus and Russia, it is appropriate to apply to products from the Republic of Belarus the same treatment as products from the Russian Federation.
The proposed Regulation establishes new tariffs for cereals, oilseeds and derived products originating in or exported from the Russian Federation or the Republic of Belarus at a level high enough to suppress current imports. In nearly all cases tariffs on Russian and Belarussian exports to the EU would increase to either EUR 95 per tonne or to an ad valorem duty of 50%, depending on the product. They would affect EU imports from the Russian Federation and the Republic of Belarus of goods that in 2023 represented 4.8 million tonnes of imports, with a commercial value of EUR 1.6 billion in the same year. To avoid the entering of cereals, oilseeds and derived products originating in or exported from the Russian Federation or the Republic of Belarus into the EU market at the low rates provided for under EU tariff rate quotas, it is also necessary to exclude the Russian Federation and the Republic of Belarus from those quotas, for the products that fall within the scope of this Regulation.
The proposed Regulation is not expected to negatively affect global food security. First of all, the increase in EU tariffs would not affect the transit of the Russian and Belarussian products concerned through the EU territory to third countries. Secondly, the historical trade flows of cereals, oilseeds and derived products from the Russian Federation to the EU are very modest compared to the size of the world’s market exchanges and will not have any appreciable impact on the EU food processing industry and livestock farming when it comes to feed supplies. Finally, the increase in the EU’s import duties is expected to substantially reduce these flows of imports into the EU, thereby actually increasing the available quantities of cereals, oilseeds and derived products for exportation to third countries, notably to developing countries.
• Consistency with existing policy provisions in the policy area
Currently, Ukraine is the third largest supplier to the EU of the products subject to the proposed tariff increase. Those exports occur under the preferential terms of the EU-Ukraine Association Agreement and in particular its Title IV establishing a Deep and Comprehensive Free Trade Area (DCFTA), and reinforced with the temporary trade-liberalising measures adopted by the EU following the Russian Federation’s illegal and unprovoked invasion of Ukraine. As the Russian Federation’s illegal war of aggression against Ukraine severed significantly the ability of Ukraine to continue exporting to the world what was previously its main source of economic revenues – cereals, oilseeds and derived products – the EU market remained the main accessible export outlet to goods from Ukraine due to the disturbance of other export routes. Increasing substantially the customs duties applicable to goods originating in or being exported from the Russian Federation, which is a key competitor of Ukraine in the EU market, is consistent with the paramount market access opportunities that the Union offered to Ukrainian exports of cereals, oilseeds and derived products in the Union market. Other significant third country suppliers exporting cereals, oilseeds and derived products to the EU are Brazil, Argentina, the United States and Canada.
• Consistency with other Union policies
The increases in customs duties on cereals, oilseeds and derived products from the Russian Federation and the Republic of Belarus that are set out in this proposal ensure that the Union’s Customs policy, as expressed in this Regulation through the applied rates of the Union’s Common Customs Tariff, is conducted consistently with the principles and objectives of the Union’s external action as set out in Article 21(3) of the Treaty on European Union, which provides that the Union is to ensure consistency between the different areas of its external action and between these and its other policies. Therefore, it is considered appropriate to impose increased tariffs on cereals, oilseeds and derived products originating in or exported from the Russian Federation and the Republic of Belarus as such an increase would be consistent with the restrictive measures taken by the Union against these countries following the Russian Federation’s unprovoked and unjustified military aggression against Ukraine and the support the Republic of Belarus continues to provide to the Russian aggression.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
• Legal basis
This Regulation amends Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff.
The amendment is based on Article 31 of the Treaty on the Functioning of the European Union (TFEU), which provides that the Common Customs Tariff duties is to be fixed by the Council on a proposal from the Commission.
• Subsidiarity (for non-exclusive competence)
The subsidiarity principle does not apply, as the proposal falls under the exclusive competence of the Union.
• Proportionality
The proposal is consistent with the principle of proportionality and does not go beyond what is necessary to meet the objectives of the Treaties, in particular the need to ensure that cereals, oilseeds and derived products from the Russian Federation and the Republic of Belarus do not disturb the EU market for those products and the proper functioning of the Customs Union. Therefore, those products should not have access to the EU market on terms equally favourably to those terms that apply to imports of grain from other third countries and origins. Proportionality is ensured by the fact that the proposal provides for raising the Common Customs Tariff duties applicable to imports from the Russian Federation and the Republic of Belarus for the tariff lines of cereals, oilseeds and derived products where those tariffs are currently set at zero, or are low. Simultaneously, the increase is expected to reduce the ability of the Russian Federation and the Republic of Belarus to disrupt the correct functioning of EU food markets. The proposed increase of tariffs and barring the access to the Union’s tariff rate quotas limits fundamental rights only to the extent necessary to achieve its objectives.
• Choice of the instrument
This proposal provides for amending Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
• Ex-post evaluations/fitness checks of existing legislation
Not applicable.
• Stakeholder consultations
Not applicable.
• Collection and use of expertise
Not applicable.
• Impact assessment
In light of the ongoing invasion of Ukraine by the Russian Federation and the current ability of the Russian Federation to use its export of cereals, oilseeds and derived products in order to undermine the EU’s unity in supporting Ukraine and to destabilise the EU market of those products, as well as in light of the Republic of Belarus’ support to the Russian Federation’s actions, it is important for the Regulation to enter into force urgently in order to increase as soon as possible the duty rates applicable to concerned products from the Russian Federation and the Republic of Belarus. Therefore, no impact assessment was carried out for this Regulation. However, it is expected that the proposed measure will significantly reduce the importation into the EU of the concerned products originating in or exported from the Russian Federation and the Republic of Belarus and that this will result in further diversification away from the Russian Federation and the Republic of Belarus when it comes to the importation of those products.
• Regulatory fitness and simplification
The measure does not disproportionately increase the regulatory burden of companies.
• Fundamental rights
The proposal is coherent with the Union’s human rights policy and consistent with the Charter of Fundamental Rights. Where the imposition of import duties affects, in the Union, the freedom to engage in international trade as part of the freedom of professional activity, the right of property or other fundamental rights including equal treatment, this is considered a legitimate action by the Union under the Charter of Fundamental Rights. This is because this action is taken in conformity with the requirements that the action is to be taken on the basis of a proper legal basis, by the competent authorities, in pursuit of a legitimate objective of placing at a commercial disadvantage imports of certain products from the Russian Federation and the Republic of Belarus to avoid serious disturbances of the relevant markets and to ensure the proper functioning of the Customs Union consistent with current measures of the Union’s external action, and in line with the principle of proportionality. Specifically, with regard to equal treatment, increased import duties are imposed on importers of cereals, oilseeds and derived products originating in or exported from the Russian Federation or the Republic of Belarus, but not on importers of products that neither originate in nor are exported from the Russian Federation or the Republic of Belarus. This responds to a legitimate policy objective of the Union of protecting the Union markets against a possible use of the trade in concerned products by the Russian Federation and the Republic of Belarus to destabilise the EU.
4. BUDGETARY IMPLICATIONS
This proposal has no financial impact on expenditure and has a very limited financial impact on revenue. The collection of increased customs duties corresponding to the proposed increases are expected to be minimal, close to zero. This is because current imports of cereals, oilseeds and derived products from the Russian Federation and the Republic of Belarus are to a very large extent concentrated on products with zero or very low MFN duty, whilst the proposed increase in duties is likely to reduce the import flows from the Russian Federation and the Republic of Belarus to negligible volumes.
Conversely, some losses can be expected compared to the most recent own resources generated to the EU budget – EUR 15.77 million, in 2023. The exact value of budget losses will depend on how the imports from the Russian Federation will be replaced. Namely, the imports replaced by EU domestic production or by preferential imports, notably from Ukraine, will result in own resources losses, whereas the imports replaced by increased imports from third countries other than the Russian Federation or the Republic of Belarus that are not preferential partners, will continue to generate the same level of Common Customs Tariffs as those currently generated by imports from the Russian Federation and the Republic of Belarus, and thus will not result in a loss of own resources. Therefore, the effect on the EU budget’s traditional own resources is estimated at a loss of maximum EUR 15.77 million (i.e. 75 % of the total tariff revenue of EUR 21 million) in the scenario of full replacement of existing EU imports from the Russian Federation and the Republic of Belarus by the EU’s domestic production and imports from preferential partners. The loss of revenue in traditional own resources will be compensated by Member States’ Gross National Income (GNI) based on resource contributions.
The legislative financial statement sets out the budgetary implications of the proposal in a greater detail.
5. OTHER ELEMENTS
• Implementation plans and monitoring, evaluation and reporting arrangements
On-line reporting on the evolution of EU imports of cereals, oil seeds and derived products from the Russian Federation and the Republic of Belarus is available via dedicated websites of the European Commission (Eurostat).
• Explanatory documents (for directives)
Not applicable.
• Detailed explanation of the specific provisions of the proposal
The proposed Regulation prevents cereals, oilseeds and derived products from the Russian Federation and the Republic of Belarus from accessing the EU market on equally favourable terms as products from other origins, by raising import duties on all those cereals, oilseeds and derived products for which today EU imports tariffs are set at zero or are very low, to a higher level of either EUR 95/t or an ad valorem duty of 50%, depending on the nature of the product (EUR 95/t for cereals; an ad valorem duty of 50% for oilseeds and for derived products which are a result of a concentration of the basic product). In addition, those goods originating in or exported from the Russian Federation and the Republic of Belarus would also be barred from access to the Union’s tariff rate quotas. Those tariff rate quotas provide access to the EU market at a lower tariff level than the proposed new tariffs.