EUROPEAN LIVESTOCK AND MEAT TRADING UNION / EUROPÄISCHE VIEH- UND FLEISCHHANDELSUNION

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1 EUROPEAN LIVESTOCK AND MEAT TRADING UNION / EUROPÄISCHE VIEH- UND FLEISCHHANDELSUNION Brussels, 5 th September 2006 O/REF: note N EN RE: ANALYSIS OF THE LIVESTOCK SECTOR IN BULGARIA AND ROMANIA FROM THE PERSPECTIVE OF THEIR EU MEMBERSHIP The European Commission adopted on 16 May 2006 its monitoring reports on Bulgaria's 1 and Romania's 2 preparedness for EU accession (see UECBV note N EN). In the light of its findings, the Commission considers that Bulgaria and Romania should be prepared for EU membership on 1 January 2007, provided that they address a number of outstanding issues. With a view to the accession of these two countries, it is interesting to analyse the state of play of the livestock sector in Bulgaria and Romania. During the last years, Bulgarian and Romanian livestock industries continued their restructuring and preparations for EU accession, notably by the introduction of EU harmonized food safety, veterinary and sanitary norms. Moreover, like when 10 new member states acceded to the European Union on 1 May 2004, the European Union will likely adopt transitional measures for the accession of Bulgaria and Romania. These measures will be adopted in order to avoid the risk of deflection of trade, affecting the common organisation of agricultural markets. Finally, the European Union will have to comply after this new membership with paragraph 6 of Article XXIV of the GATT (General Agreement on Tariff and Trade) which establishes the procedure to be followed when a Member of this Agreement forming a customs union proposes to increase a bound rate of duty. SECRÉTARIAT & CORRESPONDANCE: 81A rue de la Loi (bte 9) BRUXELLES, Belgique Tel: 32 (0) Fax: 32 (0) info@uecbv.eu

2 BULGARIA The major challenges for the livestock farms and meat processing industry in Bulgaria were related to active investment, changes of breeds, and introduction of EU harmonized food safety, veterinary and sanitary norms. Most small livestock farms and many of middle-size farms, however, were not able to introduce new EU veterinary requirements in the area of animal health, animal welfare etc., and were either shut down by authorities, or decided to terminate their own business in In February 2006 the total number of the enterprises operating in the meat sector amounted to 336, and in comparison with December 2004, where their number was 594, the reduction is by 44%. For this 14 month period 258 enterprises have been closed from total 594 enterprises operating. In addition, meat prices increased as a result of consumer demand exceeding meat supply and stimulated slaughter by smaller farms. As a result, livestock numbers were down and no revitalization in the meat sector was expected before the process of adjustment to the EU requirements in terms of introduction of animal health, veterinary and food safety standards, and in terms of market competitiveness, takes place. A new, very serious challenge is the termination of vaccination against classical swine fever (CSF), which may lead to a dramatic drop in swine numbers and pork production. In , the livestock and meat industries continued with further restructuring related to investment in improved breeds; better meat quality; adoption of stringent hygiene practices and food safety standards; and development of new marketing strategies. Most likely results by are fewer farms and livestock but at a higher economic and commercial agribusiness level. As of August 2006, Bulgaria has several EU approved meat facilities: - 8 slaughterhouses for export of lamb meat (Rodopa Shumen, Mecom Ltd, Mesokombinat Svishtov, Mesodobivina Kompania Vraca Ltd, Mesokombinat Razgrad Ltd, Baidano Commerce Ltd, Debelt Industries Ltd, Mesocentrala Montana); - 4 slaughterhouses for export of bovine meat (Mesodobivna Kompania Vraca Ltd, Mecom Ltd, Mesokombinat Razgrad Ltd, Rodopa Shumen Ltd); - 3 slaughterhouses for export of pork meat (Mecom Ltd, Rodopa Shumen, Mesokombinat Razgrad Ltd); - 7 approved companies for export of meat products (Mecom Ltd Silistra, Tandem-V Ltd, Nikas Bulgaria Ltd, Rodopa Shumen, Dil-TurPlovdid Ltd, Europimel Ltd, Mesocentrala Montana). The EU sanitary and hygiene requirements for the meat processing facilities became mandatory for the Bulgarian industry in The HACCP (Hazard Analysis Critical Control Points) also is a required food safety system from 1 January 2006 for industrial facilities and from 1 January 2007 for smaller facilities. All meat facilities which have no chance to meet the EU requirements were shut down in 2004 and were being closed in 2005, so that by January 2006, only those which have the potential and ability to introduce these standards continue to operate. Beef and Cattle sector: Beef production is traditionally lower than consumption. Thus, Bulgaria is a net importer of beef. An increasing number of farms are trying to develop their dairy specialization as a priority but at the same time, are allocating small herds to develop the meat breeds as well. These farmers are motivated mainly by upcoming EU subsidies for the beef sector which is not developed in Bulgaria. Since this process is at its very early stage, it is not expected that Bulgaria will be able to produce beef sufficient to meet its local demand and for exports soon. In the next 3-5 years, the country will produce beef mainly from the slaughtered dairy breeds calves and will be a net importer of beef. The attractive beef prices in 2005 as a result of red meats shortage, combined with restructuring of the sector and orientation of commercial farms to milk production, resulted in continuing higher slaughter rates for cattle. Thus, the total number of cattle as of January, 2006 was 7.4% lower than in 2005, however, the reduction was slower compared to the previous year. The number of dairy cows has dropped 5.3%, but their relative share has increased from 52% of total cattle numbers at end- 2004, to 57% by end-2005 and 58% in The share is likely to be 57.5% by Since the

3 above trends continue in 2006/2007, it is expected that the number of cows will likely stabilize, and the total cattle numbers may only slightly decline. Unlike poultry and pork, no significant changes in the total volume of beef consumption are expected in the near future. Beef meat produced in Bulgaria is not from meat breeds, it is obtained from slaughtered dairy cattle. Therefore, its quality is not high and it is used mainly for processing. A relatively small portion of beef is destined for direct consumption as fresh meat in retail and food service outlets. There are not any established commercial supply farms of beef for direct consumption. Future changes are expected mainly in the structure of beef market with the developing and increasing share of higher value cuts at the expense of beef for processing and edible offal which tend to be substituted with turkey and sometimes with pork. However, this forecast is highly dependent on the future trade policy after Bulgaria s accession to the EU. Currently, most beef is supplied by Brazil and Argentina. If Bulgaria will not be able to import at competitive prices from the global market, this will significantly change beef consumption pattern and may force consumers to seek for other alternatives. Over the last two-three years, there has been a tendency of increased consumer interest in beef meat for direct consumption. Swine sector: In 2004 and in 2005, the pork sector continued to struggle with inefficiencies, restructuring, changes and improvement in genetics, and lower pork production compared to demand. The sector continued to enjoy high protection in the trade policy but it did not help it to revitalize. The biggest challenge to the pork sector is the eradication of CSF in 2006 due to Bulgarian commitments for the EU accession. Until Bulgaria will not terminate vaccination, the country will not be able to export pork to the EU. According to the negotiations with the EU, Bulgaria stopped mandatory vaccination as of 1 January All experts believe that eradication efforts will take years, during which a pork shortage is inevitable. A realistic picture shows that at the beginning swine in small private farms, with 1-3 pigs per farm, will suffer the most. Currently, swine in this sub-sector is estimated at about half of the animal numbers. In addition to the major challenge with CSF eradication, pork farms have to continue with restructuring in order to introduce improved breeds in line with the EU requirements, and in order to meet carcass classification SEUROP. Bulgaria increased its pigmeat imports of almost a quarter in the first quarter 2006 compared to the same period of During the last five years, the national production covered only two thirds of consumption. If the consumption is currently low, 14 kg per capita, it will continue to be stimulated by the increased incomes. The processed products containing frozen pig and poultry meat are very appreciated by the Bulgarians. Thus, the processing industry s needs will likely increase the imports. The estimate for 2006 and 2007 is for stabilization and revitalization in pork consumption to 104, ,000 MT. SAPARD Investment In , the EU-SAPARD program was intensively used for investment at meat processing facilities, livestock commercial operations, slaughterhouses, and for infrastructure in the meat trade (warehouses, refrigerators etc.). As of May 2005, the official records show that SAPARD has approved investment in 89 meat farms (including white meat as well) of which 32 projects have been completed for Leva 26 million (Euro 13 million); in the meat processing sector, the number of approved projects is 91 of which 63 have been completed for Leva 108 million (Euro 54 million). In July 2006, 30 new projects in the meat sector were approved. Meat Trade In 2005, the European Union exported tons of pigmeat and tons of meat offals and fats/greases to Bulgaria. Within the framework of the negotiations preceding membership, the EU can, into , export without customs duties: tons of pigmeat, tons of frozen fats/greases and 100 tons of processed products.

4 In 2004, the Bulgarian Ministry of Agriculture decided to subsidize exports of certain agricultural products but beef meat was not among them. Concerning exports of live cattle to the EU, there are restrictions because of the bluetongue which erupted in parts of the country. Nevertheless the EU imports live cattle from Bulgaria. Beef quotas for the EU are not filled since Bulgarian beef is not competitive in terms of quality and price on the EU market. Bulgaria also softened its import restrictions for BSE-affected countries in the EU. On 3 June 2004, it lifted the ban on imports of reproductive materials originating from BSE-affected countries (bovine semen, ova and embryos). Beef imports are almost entirely in a form of frozen, boneless meat, mainly beef trimmings and beef edible offal for processing (90 percent of total imports); and direct consumption (10 percent). The average import price in 2004 was $813/MT. Imports of carcass meat from the EU were banned due to BSE. In 2004, only a few EU countries were allowed entry. Major suppliers of beef to Bulgaria are Argentina, Brazil, Uruguay and most recently Greece. On August 22, 2006, the Bulgarian Ministry of Agriculture issued a temporary ban on imports of livestock from the Netherlands, Luxemburg, a number of provinces in Germany and two provinces of Belgium due to Blue Tongue disease. Moreover, the EU has the largest portion in beef import quotas. Imports of cattle offal for pharmaceutical industry are duty free. Live cattle imports are duty free. In the period 1 July June 2004, the EU had a TRQ for ready meat products made of beef MT at 0% duty and annual increase of 10 MT. Export of meat and meat products from Bulgaria in the period / in tons Meat, fresh, chilled, frozen Beef and veal Pork meat fresh, chilled, frozen smoked and salted pork fat Lamb meat Poultry meat Meat products * - Sausages, frankfurters Prepared and canned meat Source: MAF, Marketing Department at the Economic policy Directorate * - the data is for the period January-September 2005 Import of meat and meat products into Bulgaria in the period / in tons Meat, fresh, chilled, frozen Beef and veal Pork meat fresh, chilled, frozen smoked and salted pork fat Mutton Poultry meat Meat products * - Sausages, frankfurters Prepared and canned meat Source: MAF, Marketing Department at the Economic policy Directorate * - the data is for the period January-September 2005

5 Meat consumption Consumption of meat and meat products per household member / in kg Meat Meat products Source: National Statistical Institute /NSI/, Household Budgets in Bulgaria, 2005 Average purchasing power of households per member (quantity of goods that may be purchased with the total income average per member for the year concerned) - in kg Pork meat Poultry meat Perishable sausages Non-perishable sausages Source: NSI, Statistical Yearbook, 2004 Domestic meat consumption in the period consumption of different kind of meat per capita in kg Beef and veal in tons Pork meat in tons Lamb and Mutton in tons Poultry meat in tons Total meat in tons Number of population Total domestic meat consumption per capita in kg Source: Association of Meat Processors in Bulgaria /AMB/-calculated on the basis of official statistical data Agricultural Policy In Bulgaria, there are not any specific programmes for the pork industry as well as for cattle/beef industries. The State Fund Agriculture soft credit lines are for purchasing of breeding stocks and construction of farms. In 2005, Bulgaria introduced the classification system SEUROP and a new regulation for labelling of beef and veal meat. In October 2005, the Bulgarian authorities passed the key Veterinary Law. The size and complexity of this new legislation along with the pressure for new investment, safety and quality standards led to bankruptcy of a number of small businesses and further consolidation, acquisitions and mergers in the meat industry. Trade Policy The United States Department of Agriculture (USDA) estimates that the Bulgarian protectionist trade policy did not allow imports of necessary meat for the meat processing industry in a volume demanded by the market 3. As a result, pork consumption declined. Thus, the USDA considers that this policy for the last 15 years did not help the pork or poultry production sectors and currently these two sectors are inefficient and not competitive. As a result, 3

6 they will not be able to survive on the common EU market after accession to the EU. Over the last several years, two parallel markets developed, one for fresh local meat for direct consumption, and one for frozen imported meat for processing. As a result, the protectionist trade policy did not help local meat farmers but ruined the competitiveness of the meat processors and put extra burden on local consumers. ROMANIA Livestock production structure According to the National Plan for Agriculture and Rural Development for Romania ( ) 4, the average yields in livestock sector in Romania are far from the technical and technological progress recorded in the West- European countries. Between Romania and European Union countries, there are significant disparities, which indicate the necessity of radical measures in the field of genetic breeding and livestock feeding. If the average yields obtained in EU countries preserved the genetic and technological rhythm, we cannot say the same thing about Romania. Cattle sector: Regarding the evolution of cattle numbers and of the output of this specie, from the existing statistic data it comes out that between they decreased or were highly influenced by the dismantling of the production agricultural co-operative (named PAC) units and also by the massive cattle slaughtering of the cattle belonging to these units, without taking measures for holding this slaughtering. The farmers did not take over the cattle from these units because they did not have either necessary accommodation or the fodder. Another cause of the cattle number plummeting was represented by the dramatic state of animal health at the end of 1999 the majority of animals were tarred, unproductive, suffering from tuberculosis or leucosis. In this sector (PAC) the lowest milk and meat yields of Europe (under 1,800 litres cow s milk) were recorded, but many units had productions under 1,800 litres cow s milk. The slaughtering represented necessity slaughtering in a percentage of more than 60%, and the weight was under 250 kg/head. After 1989 the numbers of cows and heifers were kept at an acceptable level which linked with an adequate breeding practice in the private led to the increase of average yield exceeding that obtained in the PAC units. This situation led to rather good insurance, in the last years, of the domestic needs of milk and milk products. The development of the cattle sector will be achieved by increasing the average milk yields and the average weight at slaughter, these being performed in small and medium sized specialised farms. Romania s cattle herds remained quasi-constant throughout 2004 and a similar trend was anticipated further into Recovery in this sector is very slow, due to both the long production cycle and the structural deficiencies that are characteristic to the Romanian agriculture, even though GOR launched various subsidy schemes for bovine growers. Pork sector: The causes that determined the decrease in hog numbers were due especially to the problems that the huge complexes for pig raising fattening had faced. As these complexes belonged to the State, the delivery prices were not liberalised for many years; the prices were kept at levels under the production expenditure (financially unbearable). The activity of pig raising and fattening in huge industrial units supposes the existence of an outlet, of a competitive management finding out of viable economic solutions apt to complete the pig rising in individual holdings. The industrial complexes of pig rising and fattening have to become suppliers of 4

7 piglets for fattening by the individual farmers and by the small and medium-sized farms. These complexes, having to face problems related to pollution, equipment repair and of the shelters and again having an oversized administrative structure, big supplying costs and financial problems, will hardly become competitive in the conditions in which they make use of wage labour, without major investment. In early 2005, Romania s swine stocks hit a trough at 4.89 million head, a downward scenario mainly attributed to the severe decrease in sow numbers and in particular in the reproduction stock in In 2005, only about 21 percent of domestic pork supply was delivered to processors, while the share of self-consumption increased to 63 percent (from 60 percent in 2004), with the balance directly sold on the retail market. An additional problem relating to the domestically supplied hog meat is the wide variability in quality, often unacceptable for the processing industry. Sheep and goat sector: The evolution of sheep and goat numbers in Romania has permanently shown a downward trend, but the dramatic decrease took place until The decrease in sheep numbers had the same cause as for cattle. The slaughtering and the exports of live sheep, without any restriction, were the causes that led to this situation. The private sector maintained the animal numbers, especially for milk and meat production. As far as wool production is concerned, it is to be emphasized that it was not entirely traded and the prices obtained are not satisfactory for the sheep breeders. NUMBERS OF OVINE ANIMALS EXPORTED IN 2002, 2003 AND 2004 No Country Greece Italy France Germany Netherlands Spain Austria Portugal Hungary Source : The Patronate of the Romanian Breeders and Exporters of Ovines Poultry sector: The evolution of poultry numbers and poultry production in the last ten years is characterized by a dramatic decrease in poultry numbers until 1996, a trend that went on after 1997 as well, but after that date measures for liquidating the inefficient units were taken. In the latest period we noticed an improvement of the situation which is also due to the improvement of the market demand for poultry products. The decrease in poultry numbers took place in industrial complexes, the main cause being lack of compliance with the market requirements, bad management, delayed privatisation, maintenance of prices by order of the authorities, decapitalisation of the units, increase in costs of liberalised in-puts, import of poultry products at prices lower than those obtained in the complexes. It is generally assessed that after Romania will become an EU member, only the few farms currently equipped with competitive technologies will remain operational. The accession preparations relating to food safety along the production chain (primary production, production of animal feed, and consumer safety) are being given a special emphasis, as the EU food industry is subject to strict sanitary regulations. Romania has been granted a transition period until 31 December 2009 for modernizing and re vamping its slaughtering and meat processing units, in compliance with the Community requirements,

8 while products from establishments subjected to transitional arrangements will not be sold to other Member States and will be clearly identified. Meat consumption The important growth potential in beef domestic consumption is expected to be met soon by the industry that acknowledged recently that there is a number of priorities to be addressed: introduction of specialized beef production breeds, improvement in feed and forage practices at farm level, advanced techniques for animal husbandry, introduction of carcass grades and standards. As regards meat consumption, per capita consumption in Romania is about 45kg, representing half the EU average. The Romanians show a strong preference for pork (about 50 percent of the total), though chicken meat s share in the average diet is increasing. According to a recent market survey, consumers base their decisions to buy on the following criteria: tasty fresh products (53 percent), affordable price, reduced additive and preservative content (24 percent), reduced fat content (20 percent), reliable producer/brand (18 percent), no use of mechanically de-boned meat (17 percent), attractive look/colour (15 percent). Also, domestic products are preferred to the imported ones. Overall, there is a trend towards buying more expensive, higher quality, branded products, though more than half the meat-processed products is still sold in bulk. A good distribution through supermarkets and smaller points of sale plus an acceptable price/quality ratio are factors that influence consumption of a certain brand. Packaging has also been a very dynamic aspect in the Romanian food industry, reason for which companies continuously diversify the presentation of their products on the shelves. Large domestic companies are struggling to strengthen their brand names in an attempt to differentiate themselves. Meat trade With relation to trade, one of the top Romanian agricultural exports continued in 2004 and 2005 to be live animals, especially sheep and cattle. Over 172,000 bovine animals, mainly fattening calves to be finished in the country of destination, were shipped in 2004 to Croatia, Greece, Syria, Italy and Middle East countries. In the first half of 2005, live cattle exports totalled 67,000 head, shipped primarily to the same destinations plus other EU member states. Romania and the EU reciprocally granted customs duty exemptions for beef, under the double zero agreement. In 2004, Romania imported almost 4,200 MT of beef (PWE), mostly from EU member states, while this amount more than doubled only in the first half of 2005, with Brazil becoming the top supplier. Beef and veal exports from Romania remained insignificant even within the TRQ granted by the EU, especially because of the very reduced number of plants approved to ship to EU destinations.

9 Meat trade in Romania (December 2000) Product Local Import Import/ Export Export/ Import Export production* 2ooo 1999 production 2ooo 1999 production 2ooo/ 1999% 2ooo/ 1999% Thousands Vol. (t) Vol. (t) (th) $ Vol. (t) th $ % Vol. (t) th $ (t) th $ % Vol. (t) th $ Vol. (t) th $ Beef , ,7 41,4 32,7 68,6 94,3 Pork , ,2 121,5 135,8 10,1 18,1 Sheep meat , ,8 84,0 84,9 24,8 24,2 Poultry meat , ,3 110,0 105,2 95,9 91,8 Meat products , ,4 96,0 252,7 215,1 Offals ,8 258,6 33,8 28,6 Fat ,7 845,7 20,3 24,3 *Local production= industrial production in approved establishments, excluding "on farm" killings, selfconsumption, black market. Source: Romanian Meat Association Meat trade in Romania (December 2002) Import Export Local Import/ Export/ Import Ex port Product production 2oo2 2oo1 production 2oo2 2oo1 production 2oo2/ 2oo1% 2oo2/ 2oo1% Thousands (t) Vol. (t) (th) $ Vol. (t) th $ % Vol. (t) th $ Vol. (t) th $ % Vol. (t) th $ Vol. (t) th $ Beef , ,8 64,7 71,1 99,0 98,2 Pork , ,3 173,5 136,9 85,7 90,8 Sheep meat 500 0, ,8 45,2 29,3 Poultry meat , ,2 138,7 98,4 135,9 114,8 Meat products , ,4 49,3 41,4 49,5 Offals , ,5 135,2 11,1 17,4 Fat ,1 99,0 Source: Romanian Meat Association

10 Meat trade in Romania (2005) Local Import Import/ Export Export/ Import Export Product production 2oo5 2oo4 production 2oo5 2oo4 production 2oo5/2oo4% 2oo5/2oo4% Thousands (t) Vol. (t) (th) euro Vol. (t) th euro % Vol. (t) th euro Vol. (t) th euro % Vol. (t) th euro Vol. (t) th euro Beef , ,0 3708,7 2387,0 125,2 150,5 Pork , ,5 140,6 176,0 128,7 175,2 Sheep meat , ,7 340,4 240,6 153,8 156,4 Poultry meat , ,5 123,9 151,8 68,2 69,6 Meat products , ,6 85,6 102,8 122,8 116,1 Offals , ,3 240,2 304,9 Fat , ,5 180,2 152,6 Source: Romanian Meat Association

11 TRANSITIONAL MEASURES In the perspective of the accession of 10 new member States to the European Union on 1 May 2004, the European Union adopted transitional measures notably to avoid the deflection of trade. The European Union will adopt the same provisions for the accession of Bulgaria and Romania to the European Union. So, during the next joint meeting of the Trade Mechanisms Management Committee on 19 September 2006 in Brussels, a draft Commission Regulation on transitional measures to be adopted concerning the exchange of agricultural produce due to the accession of these two countries will be discussed. Commission Regulation (EC) No 1972/2003 of 10 November 2003 on transitional measures to be adopted in respect of trade in agricultural products on account of the accession of the ten new Member States 5. Transitional measures have been adopted in order to avoid the risk of deflection of trade, affecting the common organisation of agricultural markets due to the accession of 10 new States to the European Union on 1 May This regulation indicates that trade deflections liable to disrupt the market organisations often involve products moved artificially with a view to enlargement and do not form part of the normal stocks of the State concerned. Surplus stocks may also result from national production. Provisions should, therefore, be made for deterrent charges to be levied on surplus stocks in the new Member States. Where, for the products intended for export from the Community of Fifteen to one of the new Member States for which an export declaration has been accepted by 30 April 2004 at the latest, the conditions set out in Article 3 of Regulation (EC) No 800/1999 have not been complied with by that date, the beneficiary should reimburse any refund received in accordance with Article 52 of that Regulation. Furthermore, Article 3 of Regulation (EC) No 800/1999 indicates that entitlement to the refund is acquired: - on leaving the customs territory of the Community, when a single refund rate applies for all third countries, - on importation into a specific third country, when a differentiated refund applies for that third country. Commission Regulation (EC) No 662/2004 of 7 April 2004 laying down transitional measures as regards import licence applications providing for the administration of certain tariff quotas for beef and veal products, by reason of the accession of the ten new Member States 6. The European Union considered that tariff quotas opened for beef and veal products should be made available to operators established in those countries on the date of their accession. Thus, in order to qualify under those import quotas, licence applicants established in the new Member States should prove that they carried out a minimum activity in trade with third countries. Article 1 of this regulation refers that in order to be considered applicants for import licences within the meaning of Article 4(a) of Regulation (EC) No 936/97 and Article 3(1)(a) of Regulation (EC) No 1279/98, applicants established in the new Member States shall be natural or legal persons who are registered for VAT purposes in a Member State of the Community as constituted on the date of entry into force of the Treaty of Accession of 2003 and who shall prove, at the time their applications are submitted, to the satisfaction of the competent authority of the Member State concerned: (a) for the purposes of Regulation (EC) No 936/97, that they have been engaged for at least 12 months in trade in beef and veal with other countries; (b) for the purposes of Regulation (EC) No 1279/98, that they have traded in beef and veal at least once during the previous 12 months with other countries. 5 OJ L 293, , p. 3 6 OJ L 104, , p. 103

12 Commission Decision No 280/2004 of 19 March 2004 laying down transitional measures for the marketing of certain products of animal origin obtained in the ten new Member States 7. According to this decision, products of animal origin obtained in the new Member States before the date of Accession may be in stocks after the date of accession. However, those products of animal origin may not comply with all the Community veterinary requirements. The EU considered that in order to facilitate the transition from the existing regime in the Member States to that resulting from the application of the Community veterinary legislation, it was appropriate to lay down transitional measures for the marketing of those products. Those measures should take account of the origin of those products of animal origin and the stocks of packaging and packing and labels material bearing printed marks. Products referred to in Article 1 may from 1 May to 31 December 2004 be placed on the market in the new Member State of origin provided that they bear the national mark prescribed in that new Member State before 1 May 2004 for products of animal origin fit for human consumption. By way of derogation from Article 2(1), Member States should from 1 May to 31 August 2004 authorize the trade in products referred to in Article 1 which are obtained in establishments authorize to export to the Community provided that the products: (a) bear the Community export health mark of the establishments concerned; (b) are accompanied by a document as set out in the Directives referred to in Article 1 in which the competent authority of the new Member States of origin certifies the following: "Produced before 1 May 2004, in conformity with Commission Decision 2004/280/EC." NEGOTIATIONS UNDER ARTICLE XXIV:6 OF THE GATT IN THE COURSE OF THE ACCESSIONS TO THE EUROPEAN UNION OF NEW MEMBER STATES Paragraph 6 of Article XXIV of the GATT (General Agreement on Tariff and Trade) establishes the procedure to be followed when a Member forming a customs union proposes to increase a bound rate of duty. Moreover, this paragraph indicates that, due account shall be taken of reductions of duties on the same tariff line made by other constituents of the customs union upon its formation. Should such reductions not be sufficient to provide the necessary compensatory adjustment, the customs union would offer compensation, which may take the form of reductions of duties on other tariff lines. On 22 March 2004 the Council authorized the Commission to open negotiations with certain other Members of the WTO under Article XXIV:6 of the General Agreement on Tariffs and Trade (GATT) 1994, in the course of the accessions to the European Union of the ten new Member States. Therefore, following the accession of ten new Member States, the European Community (EC) and the United States of America (USA) have agreed as follows (Council Decision 2006/333/EC 8 ): No later than 1 April 2006, the EC should incorporate and bind in its schedule for the customs territory of the European Community of 25 Countries the concessions. The EC should also reduce tariffs and adjust tariff rate quotas as soon as possible and no later than 1 July In the same way as above, an agreement took place between the EC and Australia (Council Decision 2006/106/EC 9 ). According to this decision, the EC agreed to incorporate in its schedule for the customs territory of EC 25, the concessions that were included in its previsions schedule. Moreover, the EC agreed that it would incorporate in its schedule for the EC 25 the concessions contained in the annex of this agreement. 7 OJ L 87, , p OJ L 124, , p OJ L 47, , p

13 A similar agreement was concluded between the EU and New Zealand (Council Decision 2005/959/EC 10 ). Accordingly, for the accession of Bulgaria and Romania to the European Union, the same procedure will be followed between the EC and other countries. In this case, the main third countries concerned will be Argentina, Brazil and the USA. 10 OJ L 347, , p