By Aaron Parke LLB; LEC;MSc. A-Z Information Jamaica Limited November 12, 2013 LEGAL ASPECTS OF THE OCTROI DE MER (OM)

Structure of Presentation Background on the FCORs Legal Basis of the FCORs Basic features of the OM Legal Basis of the OM Practical Applications Imports Domestic Production Variation in each Territory

Background on the FCORs The status of the FCORS The French Caribbean Outermost Regions of Martinique, Guadeloupe and French Guyana are three of the seven ultra-peripheral regions of the European Union referred to as Outermost Regions. These territories were once colonized by France and are of strategic value to the European metropolis. For historical, geographical or political reasons these territories are closely related to the EU

Background on the FCORs Contd. Note that St. Maarten and Saint Barthélemy are referred to as OCTs. The Overseas Countries and Territories (OCTs) are countries that have a special relationship with one of the Member States of the European Community. OCTs are constitutionally linked to four EU Member States (Denmark, France, the Netherlands and the United Kingdom) and they are not independent states as is the case with members of the ACP.

Background on the FCORs Contd. The FCORs like the other Outermost Regions have different aspects which make them a unique part of the European Union requiring special development assistance Their remoteness, insularity and relatively small sized territory with difficult topography and climate limit their economic development and independence, with the economy reliant on a small number of products. They have major assets and the potential not only to contribute to their own development, but also to that of Europe as a whole.

Legal basis of the Outermost Regions In 1997, the Treaty of Amsterdam first introduced the legal basis of the concept of Outermost Regions. The recognition of their special status in Article 299(2) of the Treaty of Amsterdam is based on the principles of equality and proportionality which allow differing treatment to take account of the distinct situation of those regions. Under that status, the European Union adapts Community measures so that those living in the Outermost Regions can enjoy the same opportunities as those in the European Union as a whole.

Legal basis of the Outermost Regions Contd. Measures are reinforced by the treaty of Lisbon and the Treaty on the Functioning of the European Union In the Treaty on the Functioning of the European Union, the outermost regions are covered in Articles 349 and 355 respectively which require that EU policies must be adjusted to their special circumstances Since 1989, these regions have benefited from a specific programme to boost socio-economic measures aimed at achieving greater convergence with the rest of EU

Legal basis of the Outermost Regions Contd. Governed by the same ever evolving rules and regulations that govern France and its regions, in addition to those laws that govern the EU. FCORs conduct most of their business with mainland France due to longstanding colonial ties. There is a high preference for French culture and French influence dominates their way of life Quality and to a lesser extent, price are the two main factors driving sales in these markets.

Legal basis of the Outermost Regions Contd. Most important requirements for exporting are to meet quality standard requirements and to offer a price competitive product

The OCTROI DE MER (OM) Basic Features The Octroi de Mer is applied to imports from the EU and the rest of the world; A rate of 2.5 % (some products have a rate of 1.5 % especially where there is low production) is applicable to products that are produced locally in the FCORs however the CARIFORUM products are charged rates that are often above the local manufacturers rate ; The rate applicable to CARIFORUM products vary by product however the maximum rate applied is 30%;

The OCTROI DE MER (OM) Basic Features Contd. The rates are not consistent between Regions. Therefore a product entering Martinique may face a different rate than what is applicable in Guadeloupe; Rates are subject to change periodically and after consultation between the FCORs and the EU, a review will be carried out in 2014 Authorities from the FCORs have indicated that the imposition of this tax was grandfathered in the EPA and is necessary to carry out a number of developmental programmes in those territories

Legal Basis Under a French National law dating from 1946, a charge termed Octroi de Mer was levied in the French overseas departments on all goods, irrespective of their origin (including those from metropolitan France and, in principle, those from other overseas departments), by reason of their introduction into the overseas department in question Products of the overseas department itself were, however, exempted from the old OM or any equivalent internal levy. The revenue from the old OM went essentially to finance local authority budgets according to the rules governing autonomous regions

Legal Basis Contd. Decision 89/688/EEC was adopted on the basis of Articles 227(2) and 235 of the EEC Treaty, establishing a programme of options specific to the remote and insular nature of the French overseas departments. Decision 89/688/EEC authorized France to exempt, wholly or partially, local production according to economic needs for a period of ten years. On 17 July 1992, the French Republic adopted Law No , which reflected the Council Decision 89/688/EEC of 22 December 1989 concerning the dock dues in the French overseas departments

Legal Basis Council Decision 2004/162/EC of 10 February 2004, adopted on the basis of Article 299(2) of the EC Treaty, authorises France, up to 1 July 2014, to apply exemptions from or reductions in the tax known as "dock dues" to certain products manufactured in the DOMs Decision 2004/162/EC sets out the reasons for adopting the specific measures, which include isolation, raw material and energy dependence, the obligation to build up stocks, the small size of the local market and the low level of export activity

Legal Basis Contd. Law No of August 1984 imposed an additional duty (Regional Sea (2.5 % statutory maximum), with the setting of the rates coming under the jurisdiction of the regional council for the benefit of the region.

Practical Application In the regions of Guadeloupe, Guyane, Martinique, the following transactions are subject to octroi de mer: (1) imports of goods; (2) deliveries for value by persons engaged in production activities there; "production activities" means the manufacture, processing or renovation of corporeal movable goods, together with agricultural, mining and quarrying operations; (3) deliveries for value by persons who buy with a view to export or to resale to other persons liable to octroi de mer and who fulfill the conditions laid down in Article 3(2).

Practical Application Contd. Law No of August 1984 imposed an additional duty (Regional Sea (2.5 % statutory maximum), with the setting of the rates coming under the jurisdiction of the regional council for the benefit of the region.

Practical Applicaton Contd. Article 2(1) (Law No ) provides for exemption from octroi de mer for exports out of the regions of Réunion, Guadeloupe and Martinique; for exports out of the region of Guyane with the exception of exports to Guadeloupe or Martinique and for imports into the regions of Guadeloupe or Martinique of products on which octroi de mer has been charged in Guyane. The law provides a general scheme and three appendices lists of products that have a specific taxation. These lists are unique to each region and are classified according to three letters, A, B and C listing the products classified according to the common customs tariff nomenclature and for which the tax differential may not exceed 10, 20 and 30 percentage points

Practical Application Contd. The tax base consists of the following elements: For imported goods, the customs value for the purposes of Community law; For the supply of locally produced goods, the price excluding value added tax and excise off. Dock dues and the granting of regional sea are payable: For imported goods, upon entry or when the product is utilized in case of investment goods when entering a customs or tax suspension arrangement; For the supply of goods at the time of delivery.

Practical Application Contd. For the sake of consistency, the planned exemption from dock dues on locally manufactured products not listed in the Annex for firms with an annual turnover of less than EUR , should be such that the tax differential for such products depends on whether or not such products are locally manufactured.

Merci Beaucoup La Fin! Au revoir