The proposal of the European Commission ("Commission") for a regulation on the apportionment of the tariff rate quotas ("TRQs") in the EU's WTO schedule of commitments, following Brexit ("Commission proposal") [1] is making its way through the EU ordinary legislative process.

The apportionment of TRQs in the WTO, albeit a very technical issue, is important for EU and UK traders, as it will determine the quantities of agricultural, fish and industrial products that will be imported into the EU and the UK respectively duty-free or at lower duty range. In light of the different trade flows of agricultural products coming into the EU and the UK, EU and UK importers have a great interest in the final TRQs for each product, as this will determine the level of duties they will have to pay for imports following Brexit.

Background

TRQs determine the quantities of goods that may be imported in the EU tariff-free or at lower tariffs. Once such quantities have been exhausted, higher tariffs apply. TRQs are common in agricultural products (see our previous blog post on this topic here).

The UK's withdrawal from the EU will affect the commitments for goods that the EU has undertaken vis-à-vis the other WTO Members, which currently cover the UK as well. As from Brexit date (30 March 2019), those commitments will no longer be applicable to the UK. An apportionment of the existing quantities between the EU and the UK will have to be made. For this purpose, the EU will need to conduct negotiations with other WTO Members that will be affected by such apportionment (i.e., Members that have been identified as having relevant market access interest in accordance with the GATT under the individual TRQs), in order to agree on the TRQ volumes for each product concerned.

In October 2017, the EU and the UK submitted a joint letter to the WTO, outlining the principles that they intend to follow in their approach to apportioning the existing EU TRQs.[2]

In May 2018, the Commission submitted a proposal for a regulation authorising the opening of negotiations with other WTO Members on the apportionment of existing TRQs, along with negotiating directives. However, given the tight time frame within which this task must be completed and the risk that such negotiations are not completed before Brexit date, the Commission proposal aims to outline the procedure for the unilateral apportionment of the TRQs in the absence of an agreement with the other WTO Members.

On 5 September 2008, the Commission proposal was discussed in the European Parliament's Committee on International Trade ("INTA"), which published a draft report proposing certain changes to the Commission proposal ("draft INTA report").[3]

Procedure

The Commission proposal was submitted on 22 May 2018 and will be adopted through the ordinary legislative procedure, which requires the participation of the Council of the EU ("Council") and the European Parliament ("Parliament"). Once the two latter adopt their respective position on the Commission's proposal, the "trilogue" negotiations between the three institutions may commence towards the adoption of the regulation.

The recently published draft INTA report contains the position of INTA as the responsible Committee in the Parliament and, once voted by INTA and the Parliament, it will form the latter's position in the trilogue negotiations.

Proposed changes

The draft INTA report favours three main changes in the Commission's proposal:

1. The methodology used as basis for the apportionment of the existing TRQs between the EU and the UK should be explicitly included in the Commission proposal: The apportionment would be based on the EU's usage share of imports, in percentages, for each individual TRQ over a period of 3 years applied to the entire TRQ volume in order to arrive at the EU share of each TRQ. As explained in the explanatory memorandum to the INTA draft report, an explicit reference to this methodology would increase legal certainty. As notified by the two parties in their joint letter to the WTO, their intention is to "maintain existing levels of market access available to other WTO Members."

2. The scope of delegation powers to the Commission should be clarified: Article 3 of the Commission proposal empowers the Commission to amend Annex I to Regulation (EC) 32/2000.[1] The latter contains the list of EU TRQs bound in the WTO General Agreement on Tariffs and Trade ("GATT") through delegated acts. INTA has proposed to further clarify the scope of such delegation powers. The proposed changes by INTA include increasing the time during which the Commission can adopt delegated acts for the amendment of Annex I to Regulation (EC) 32/2000 from 4 to 5 years. It also proposes making such power renewable for a period of another 5 years, unless the Parliament or the Council oppose such extension.

3. Incorporating in the regulation the alignment to delegated and implementing acts of Regulation (EC) 32/2000: Regulation (EC) 32/2000 concerns the administration of TRQs bound by the EU in the GATT and establishes detailed rules for adjusting those TRQs. According to the INTA draft report, the Commission's proposal will effectively modify Annex I to Regulation (EC) 32/2000 through delegated acts. The draft INTA report therefore proposes incorporating in the Commission proposal all amendments that will need to be made to Regulation (EC) 32/2000, in line with the EU Treaties.

What does it mean for you?

A vote of the draft report in the INTA Committee has been scheduled on 5 November 2018. Once adopted, the report will be voted by the Plenary of the Parliament and, upon adoption, it will constitute the latter's position in the trilogue negotiations with the Commission and the Council.

Meanwhile in Geneva, the negotiations between the EU and the other WTO Members on the apportionment of the EU's existing TRQs are ongoing. However, a number of WTO Members have expressed concerns on the proposed EU-UK approach.