Agreement

Preparatory Period before Agreement Negotiations

 

The preparatory process for the DCFTA began in 2009. The commission’s fact-finding trade mission visit to Tbilisi on 13-14 October 2008 laid the groundwork for the preparatory process to start DCFTA negotiations.

 

Following the visit, in March 2009, the EU Commission delivered its recommendations to the Government of Georgia regarding Georgia’s preparedness for the DCFTA negotiations, outlining four priority fields: technical barriers to trade, sanitary and phytosanitary measures (food safety), intellectual property rights, and competition.

 

According to EU requirements, the Government of Georgia developed comprehensive strategies for the recommended fields (excluding intellectual property rights):

 

 

 

Regarding the protection of intellectual property rights, study was conducted on the infringement of intellectual property rights and the state of piracy, supported by UNDP. Prior to the talks, the government of Georgia also adopted a market surveillance strategy for industrial products.

 

 

Process for Agreement Approval and Subsequent Stages

The DCFTA Agreement talks officially began in December 2011 and ended in July 2013, after six discussion rounds. The initialization of the Association Agreement was conducted on 28-29 November 2013, under the confines of the “Eastern Partnership Summit” in Vilnius.

 

On 27 June 2014, the Prime Minister of Georgia signed the Association Agreement in Brussels, subsequently ratified by the Georgian Parliament on 18 July 2016.

 

On 1 September 2014, the DCFTA part of the Association Agreement entered into force, with the remaining part of the Association Agreement entering into force in July 2016.

Chapters
  • Trade in goods

    Brief Chapter Overview

    The DCFTA regulates the conditions and the elimination of customs duties for bilateral trade in goods. According to the Agreement, neither Party can adopt or maintain customs or similar duties for export of goods. Import of products adheres to the following conditions:

     

    Import into Georgia (Obligation)

    At the time when the Agreement enters into force, all customs duties levied on imported products originating in the EU shall be eliminated.

     

    Import into the European Union (Benefit)

    At the time when the Agreement enters into force, all customs duties levied on imported goods originating in Georgia shall be eliminated (excluding garlic, which will be subject to annual duty free tariff rate quotas).

     

    The following arrangements apply for certain products exported from Georgia to the EU:

     

    • The EU “Entry Price” – Ad Valorem fee and/or Ad Valorem free on 28 tariff lines (0.3% [9383] of the full tariff list) will be in effect (i.e. fixed fee on imports). In such cases, when importing into the EU, if a product originating in Georgia carries a lower invoice price than the EU-enacted fixed fee, the importer will pay the difference between the fixed and the invoice prices. However, if the product carries a matching or higher price than the EU-enacted fixed fee, the product will be absolved of the “Entry Price” mechanism. Additionally, Ad Valorem customs duties do not apply on products originating in Georgia, that applies to aforementioned 28 types of products during ordinary trade regimes.
    • Anti-circumvention Mechanism – 277 tariff lines (3% of the full tariff list [nomenclature]) of agricultural and processed agricultural products are subject to the anti-circumvention mechanism. The mechanism works the following way. During each calendar year, once the import volume of one or more products subject to the anti-circumvention mechanism reaches 70% of the fixed threshold, the EU will notify Georgia about the exact volume of the imported products. Georgia may then present the EU with arguments (e.g. growth of production, harvest abundance, etc.) on the possible grounds for exceeding the import limit. In this case Georgia will be able to proceed with importing products exceeding the quantity of the anti-circumvention mechanism without EU customs duties.
    • Tariff rate quota – the tariff rate quota (termination of customs duties within the limits of a fixed amount) applies only to garlic and amounts to 220 tons. During each calendar year, garlic originating in Georgia can be imported up to this set amount without customs duties.

     

    Rules of Origin

    Please see the information about Rules of Origin at the following link.

     

    * On 20 March, 2018 Customs Sub-committee under Association Agreement between Georgia and EU adopted the decision according to which the Protocol I to the Association Agreement between Georgia and EU concerning the definition of the concept of “originating products” and methods of administrative cooperation was replaced by the respective annex of the Pan-Euro-Mediterranean Convention on Preferential Rules of Origin. 

  • Trade Remedies

    Trade Remedies Chapter Overview

     

    The Agreement regulates the terms of global safeguard, anti-dumping, subsidies and countervailing measures use in trading. In case of using protective measures in trading, the parties will utilize relevant agreements from the World Trade Organization (WTO).

     

    The Agreement defines that in cases of dumping import,  exceeded and subsidized, the parties retain the right to implement protective measures as outlined under the relevant WTO agreements.

     

    The Agreement also ensures maximum transparency in trade remedies; additionally, the DCFTA dispute settlement part does not extend to the articles in this chapter.

  • Technical Barriers to Trade, Standardization, Metrology, Accreditation and Conformity Assessment

    Brief Chapter Overview

    This part of the Agreement considers the approximation of Georgian standards, technical regulation, metrology, market surveillance, accreditation and conformity assessment systems with relevant EU systems, which entails both legislative and institutional approximation.

    At this stage, Georgia has adopted 6 European Directives. The remaining 15 directives will be approximated gradually, within eight years after the entry into force of the Agreement, and each of them will be subject to a transitional period in order to give local businesses sufficient time to meet the new norms.

     

    Commitments

    The annexes cover gradual approximation on horizontal and sectorial level. Approximation of horizontal legislation covers the transfer of the institutional and functional arrangements in the above-mentioned fields into Georgian legislation, while sectorial approximation covers approximation of Georgian legislation with new and global EU approach directives, including 21 EU directives related to industrial products.

     

    At this stage, Georgia has approximated its legislation with six European directives. The remaining 15 directives will be approximated gradually, within 8 years from the moment the agreement comes into force, and each of them will provide for overlapping time periods before the law enters into force, in order to provide space for local business to adapt to the requirements for fulfilling the new norms.

     

    According to the agreement, an efficient system of market surveillance of industrial products will be implemented, leading to delivery of safe products on the domestic market, which will strengthen environmental protection and safeguard human health.

  • Sanitary and Phytosanitary Measures

    Brief Chapter Overview

    The Agreement covers measures related to products falling under sanitary and phytosanitary arrangements, as well as the arrangements for protecting the health of people, animals and plants:

     

    • Ensuring full transparency of trade-related sanitary and phytosanitary measures;
    • Approximating Georgian legislation with relevant EU legislation;
    • Recognizing the health status of animals and plants, and implementing the principles of regionalization;
    • Deepening the partnership between Georgia and the EU in implementing sanitary and phytosanitary measures.

     

    The Agreement also facilitates the development of the same standard and approach to animal welfare in Georgia and the European Union.

     

     

    Commitments

    According the Agreement, the Georgian side committed to approximate its legislation with the relevant European sanitary and phytosanitary legislations. Six months after the Agreement enters into force, Georgia has to develop a list of the approximation-applicable European legislative acts, which must be divided by priorities and set within a timeline, set to benefit both single and multi-product trading between the Parties.

     

    The legislative approximation is the cornerstone of trade relations between Georgia and the EU, creating the basis for establishing regulatory equivalence. Establishing equivalence will be made possible through one arrangement, a number of arrangements, or the system which relate to a sector, subsector, specific product or product group. Following the formal recognition of equivalence, it will be implemented within the trade between the parties. The decision on recognition of regulatory equivalence can be reflected through lessened physical inspection measures on items at customs checkpoints, along with simplified procedures for including certificates and manufacturing plants in export lists.

     

    Fulfilment of the commitments under the Agreement will enable Georgia to improve its legislation in sanitary and phytosanitary measures, safeguard animal welfare, retain veterinary reliability, protect the country against the spread of harmful species, achieve a sufficient level of regulatory equivalence with the EU, enabling Georgian to trade animal and plant products with the EU under simplified arrangements.

     

    Improving the sanitary and phytosanitary system, as well as approximation to European standards, will improve the safety of Georgian produce and raise its trustworthiness on the global market, bolstering the growth of Georgian export. Additional benefits include:

    • Georgian consumers enjoy access to safe and high-quality produce;
    • Georgian exporters enjoy reduced expenses for exporting to the EU;
    • Agriculture and food processing plants are modernized;
    • The competitiveness of Georgian agriculture produce is raised.

     

  • Customs and Trade Facilitation

    Brief Chapter Overview

    The Agreement deals with transparency in cooperation and procedures regarding customs.

     

    Commitments

    Within four years from the entry into force of the Agreement, the Georgian side is obliged to approximate the Georgian legislative framework to that of the EU Council regulation of 12 October 1992 (the EU Customs Code), which includes the process of implementing European Union operative procedures into the Georgian customs system, in order to create equal customs regulatory environment for Georgian and EU businesses. This will allow possibility to implement higher standards of private sector optional law obedience (authorized economic operator), and improving the efficiency of customs control. The modernization of the customs administration system will need to be accelerated, and the associated infrastructure will need to be improved and adequately equipped.

    In addition, within four years from entry into force of the Agreement, the Georgian side has the commitment to join the Convention of 20 May 1987 on the Simplification of Formalities in Trade in Goods and the Convention of 20 May 1987 on a common transit procedure.

    Georgia, will also approximate regulations on customs enforcement of intellectual property rights with existing relevant EU regulations and directives.

     

    Benefits

    Georgian customs regulations will be approximated with European progress regulations. Close cooperation will be established between Georgia and the EU, to support the simplification of import/export procedures.

    The legislative approximation process will enable the private sector to minimize expenses for import/export of goods due to different legal obligations in Georgia and the EU. It is notable that the Georgian documentations and guarantee will be valid across the EU (as well as Switzerland, Norway, and Turkey) and transporters will not be obliged to obtain repeat guarantees or to prepare additional documents for customs in transit countries. This will be another saving for entrepreneurs and exporters, operating in Georgia and will positively affect the competitiveness of Georgian products.

    The purpose of approximating legislation in protection of intellectual property rights is to facilitate favourable conditions for both local individuals holding intellectual rights, as well those who consume them. Minimalizing copyright infringement and import of falsified products will ensure the accessibility of high quality products and improve consumer rights protection, while contributing to the competitiveness and attracting investments.

  • Establishment, Trade in Services and Electronic Commerce

    Brief Chapter Overview

    The Agreement defines the conditions for establishment of enterprises and cross-border supply of services, their treatment standards, as well as the general terms for operating electronic commerce. It includes provisions according to which the Parties have to use National Treatment and Most Favored Nation Treatment for establishment and for cross-border supply of the services.

    The Agreement defines general exceptions covering the protection of public order, security, health and cultural heritage. The Agreement also regulates entry and temporary stay of different natural persons for business purposes.

     

    Commitment

    The Agreement contains parts on financial, postal and courier services, e-commerce and maritime transport services, and defines conditions for providing these services. This chapter comes with an annex containing the list of EU directives that Georgia needs to implement out over multiple stages:

    • Financial directives: Banking and insurance, securities market, market infrastructure, payment systems, and arrangements against money laundering. The transition period for adopting the directives is 2–8 years after the Agreement’s entry into force.
    • Telecommunication directives: Framework legislation regulating electronic communication networks and providers, access and inter-connection regulation in electronic communications, universal service terms, personal data protection terms and radio frequency policy regulations. The transition period for adopting the directives is 3–5 years after the Agreement’s entry into force.
    • Postal and courier service directives: Regulations for postal market development and for bolstering competitiveness in this field. The transition period for adopting the directives is 5 years after the Agreement’s entry into force.
    • International maritime transport directives: Maritime safety, flag usage conditions, ports regulation, vessel traffic monitoring, accident investigation, liability of carriers of passengers, and technical and operational rules. Transition period for adopting the directives is 3–5 years after the Agreement’s entry into force.

    This Agreement defines that in case of Georgia’s successful legislative approximation in financial, postal, telecommunications and maritime transport fields, further liberalization of the relevant EU market for Georgia’s service providers will be accessible. According to the annex on services market liberalization, Georgia receives better access to the EU market than it is accorded by the EU’s obligations under World Trade Organization. As a result, once the Agreement comes into force, it will be substantially easier to export services from Georgia into the EU. Georgian service provider companies will have the right to:

    • Establish branches in EU countries and provide services to European customers through them;
    • Employ Georgian managers and specialists and train them in their European branches;
    • Send their sales representatives to the EU in order to negotiate their product trades;
    • Provide the EU market with services without opening a branch in the EU;
    • Georgian specialists, individually or with a signed contract between companies, will have the opportunity to provide services to the EU.

     

    The Agreement also includes mechanisms for recognizing professional qualifications Following this, providing services by Georgian specialists to in EU countries will become significantly easier.

     

  • Current Payments and Movement of Capital

    Brief Chapter Overview

     

    Through the given Agreement, the parties committed to ensure free movement of capital, including profit repatriation and direct investments. The Agreement also covers protective measures in cases of free movement of capital threatening the balance of payments in the country. The Parties also agree to use EU rules for free movement of capital.

  • Public Procurement

    Brief Chapter Overview

    The agreement envisages a gradual opening of the public procurement market, bilaterally. The agreement covers public procurements within the monetary limits set in the agreement, (minimum of EUR 130,000).

     

    The Agreement also considers the approximation requirements of the Georgian public procurement legislation to the relevant EU acquis, in particular approximation with four main directives concerning to:

    • The Procedure of coordination of revealing the winner for signing on to the public service contract, providing work and delivery of goods.
    • The coordination of procurement procedures made by organizations working in the field of water, energy, transportation and postal service sectors;
    • The coordination of administrative procedures related to regulatory activities related to delivery of goods and the management of disputes concerning to public contracts.
    • The coordination of the administrative processes of regulatory activities, regarding to use the EU rules on procurement concerning the water, energy, transport and telecommunications sectors.

     

    Prior to the legislative approximation process, the Georgian side elaborated a roadmap and presented it to the Association Trade Committee. One of the commitments in the Agreement is the setup of an institutional mechanism regarding the formulation and enforcement of procurement policy and dispute resolution.

    After the agreement enters into force, Georgian companies will be granted access to the EU public procurement market in a gradual and continuous manner, dependent on the progress made in the legislative approximation process. The annex included by this chapter contains the timeline for legislative approximation and market access.

  • Intellectual Property Rights

    Brief Chapter Overview

    The Agreement defines the parties’ commitments of adequate and effective implementation of international agreements in the field of intellectual property, signed by Georgia and EU, including the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Moreover, the Agreement requirements fill in and additionally specify the rights and commitments of the Parties in the TRIPS agreement.

    The Parties also reinforce their commitments to effectively implement the international agreements administered by World Intellectual Property Organization (WIPO), to which both Parties are parties.

    The agreement defines the obligatory standards related to intellectual property rights to be met by all the intellectual property categories provided in the articles of the Agreement, such as copyrights and related rights, trademarks, geographical indications (on this issue an agreement is already signed with the EU, which entered into force in 2012), design, patents, the norms related to data protection, obtaining authorization for medicinal products and plant protection products, and others.

    The Agreement also regulates the procedural norms related to the enforcement of intellectual property rights and determines the competencies of judicial authorities and measures that they can implement.

    The Agreement also deals with customs cooperation and exchange of information in regard to intellectual property rights. The commitment on approximation to the EU legislation regarding customs is included in the chapter of customs and relevant attachment.

     

    Commitments

    According to the Agreement changes need to be made in the following laws:

    • The “Law of Georgia on Copyright and Related Rights” – mainly focused on increasing the term of protection of rights of performers and producers of phonograms (70 years).
    • The “Patent Law of Georgia” – the term of validation of paediatric researched medical products will be prolonged for 6 months, following the conditions of the agreement; the opportunity of releasing supplementary protection certificates should comprise the plant protection products as well.
    • In other legislative acts that will create a comprehensive system that safeguards the privacy and disuse of information for a given timeframe (6 years for medical products, 10 years for plant protection products), which is presented in the medical products market in order to attain the permission of placement. It is notable that the data protection timetable will be counted from any side’s territory (EU or Georgia) just after the registration of medicine.

    Regarding enforcement, the Agreement of Civil Enforcement of Intellectual Property Rights establishes the procedural norms that should be reflected in the related legislation (or a related instruction should be introduced into Georgian procedural legislation). Georgia will accede to the TRIPS amendment defined in the “Doha Declaration”.

    Once approximation is complete, Georgian legislation will be in line with the EU legislation and will guarantee the protection of intellectual property rights. An effective system of intellectual property rights protection and enforcement will encourages production and commercialization of innovative and creative products.

     

  • Competition

    Brief Chapter Overview

    The Agreement provisions contain commitments from parties to adopt legislation regulating competition, and the necessary executive body.

    The Agreement does not limit the parties, per the local legislation, to form or maintain state monopolies, state enterprises and entrust enterprises with special or exclusive rights.

    Disputes related to the agreement provisions do not fall under the dispute settlement mechanism provided in the Agreement.

     

    Commitments

    Per the Agreement, the Georgian side adopts the following commitments:

    • Maintaining and implementing anti-competitive and mergers regulations;
    • Maintaining the entity responsible for legislation enforcement;
    • Ensuring transparency of subsidies, specifically: every 2 years Georgia shall provide the EU with a detailed report regarding the subsidy granted by the Government or a public institution for production of goods. The report is deemed fully presented if all relevant information is placed on a publically accessible internet webpage. Reports detailing separately issued subsidies for service deliveries must be provided to the EU as per request.

     

    Benefits

    Implementing EU approximated Georgian legislation will enable Georgia to develop a free, competitive and EU-compatible market.

  • Trade-Related Energy Provisions

    Brief Chapter Overview

    The chapter details commitments to ensure both free trade of energy resources, as well as free transit between parties.

    Trade of energy resources differs from other fields in that it includes transfer of energy through a predefined infrastructure of transport from providers to its destination, hence falling under a monopoly. Free transit is a mandatory condition for safe energy transport.

    In order to ensure transparency in energy transfer (transit), non-discrimination, and access as a service for energy transfer (transit) to all interested parties under competitive conditions, the Agreement obligates the parties to:

    • Protect and ensure free transit of energy products on their territories;
    • Adopt all necessary measures for avoiding any and all kinds of unlawful appropriation of energy products in process of transit;
    • Bolster the role of the independent regulation entity which ensures facilitation of transparent tariff methodologies in order to ensure regulation for aforementioned monopoly driven work.

    The aforementioned will assist the growth of service quality on the competitive market and, subsequently, the safety of this service for agreeing Parties.

     

    Benefits

    Georgia has a large hydro generation potential, and its development requires investments and new export market openings, where energy produced in Georgia will be sold, further developing trade. For this reason, the Government of Georgia initiated the construction of the Black Sea Energy Transit Line, enabling the country to join in the unified energy system and supply EU member states with electric energy. As a result, the Deep and Comprehensive Free Trade Area agreement between Georgia and the European Union, one of the primary goals of which is to contribute in free energy resource trade between the parties, will play a significant role in fulfilling this aim. Adopting and executing this commitment towards the EU will serve as a guarantee for European investors to initiate projects on our market and assist in encouraging investment in the energy sector.

    It is worth noting that Georgia is an important and trustworthy transit country in the region, accommodating such projects like the Baku–Tbilisi–Ceyhan pipeline, the Baku–Tbilisi–Erzurum Pipeline, etc. These projects turn Georgia into a connective bridge between the Caspian region and western states, as well as being one of the most prominent transit countries related to the development of the Southern Energy Corridor, which falls within the strategic energy safety interests of both Georgia and the EU.

    The DCFTA will be an additional pillar of support bolstering similar projects and investments in Georgia.

  • Transparency

    Brief Chapter Overview

    The Agreement ensures the transparency of trade-related regulation systems by way of legislative and normative acts and public accessibility to their projects. Additionally, it facilitates an efficient communication mechanism between the Parties.

    Additionally, the provisions of the Agreement ensure the existence of legal, administrative and arbitration organs, which will enable appeals towards taken actions.

     

    Benefits

    The primary benefit of the Agreement is ensuring a transparent and predictable legal and regulatory system in the country.

  • Trade and Sustainable Development

    Brief Chapter Overview

     

    The goal of the Agreement is to develop international trade in a way that ensures fulfilment of primary tasks towards sustainable development. The basic principles and rights of labour will need to be upheld in order to ensure decent work conditions.

    Labour standards cover all employments and decent work condition guarantees. Additionally, as per the International Labour Organization (ILO) Declaration, the legislation must reflect the primary standards, including:

    • The freedom of association and recognition of the right to collective bargaining;
    • Elimination of all forms of forced labour;
    • Abolition of child labour;
    • Abolition of all forms discrimination in respect of employment and labour.

    According to the primary principles of sustainable development (economic growth, social development and environmental protection), advances in trade or internal investment must not be at the expense of local labour or environmental legislation.

     

    Commitments

    Commitments undertaken under this Agreement:

    • Reflect and practically implement fundamental, priority, and ILO conventions in legislation. Account for the ratification of remaining priority conventions and regularly exchange information on the state of affairs and developments in this regard.
    • Reflect and practically implement multilateral environmental agreements in legislation. Regularly exchange information regarding the current state of affairs and achievements. Attain primary goals of the UN Climate Change Framework Convention and the Kyoto Protocol.
    • Conserve biodiversity in the country and ensure its sustainable utilization per the Convention on Biological Diversity and other relevant international instruments.
    • Conservation and sustainable utilization of forests, sustainable management of fish supplies.
    • Transparent implementation of any arrangement pertaining to environmental and labour condition protection (through timely communication and consultation with public discussions and the NGO sector).
    • Institutional development – creation of Trade and Sustainable Development Subcommittee (which will answer to the Association Committee in Trade Configuration), supervising association issues in trade and sustainable development;
    • Organize an annual public discussion forum with the participation of civil societies, local consultation groups, and the public at large.
    • Conduct state consultation on any matters related to the trade and sustainable development chapter.
    • Any issues discovered during the state consultation process may be followed by organizing an expert panel for resolving matters of dispute.

     

    Benefits

    Implementation of European and international principles will assist Georgia’s sustainable development.

  • Dispute Settlement

    Chapter Overview

    The Agreement regulates dispute settlements. Specifically, the dispute settlement agreement provisions in this Agreement regulate disputes related to trade or trade matter explanation/usage in the frame of the Agreement. A special dispute settlement mechanism is implemented for such goals, which is analogous to an existing dispute settlement mechanism within the WTO in terms of structure and stages.

    The dispute settlement process in frames of the Agreement has several stages:

    • At the first stage, the Parties need to exhaust all possibilities for consultation-driven talks, which, even if unsuccessful, will transfer the dispute to an arbitration panel comprised of three members.
    • The arbitration contains several steps: the formation of the panel, dispute assessment, ruling of the final decision, execution.
    • Apart from these two obligatory steps, the dispute settlement agreement also provides the possibility to settle disputes between the Parties by way of mediation. This procedure differs from the first two as it is not mandatory for the settlement process, and its implementation fully rests on the decision of the parties.

    The Agreement contains a detailed description of the arbitration competency, its rules of formation, and function. The chapter comes with three annexes that regulate he arbitration and mediation procedures, and define the rules of conduct for the arbiters and mediators.

  • General Provisions on Approximation

    Brief Chapter Overview

    The Agreement covers assessment mechanisms for legislative approximation between Georgia and the EU, as well as exchange of information pertaining to the process.

     

    Commitments

    Commitments taken by Georgia under the Agreement:

    • Based on information received from Georgia, the EU assesses the approximation process;
    • Georgia takes obligation to dissolve the local legislation or administrative practice that is in dispute with EU legislation;
    • Georgia takes the obligation to efficiently implement approximated legislation.

     

    Benefits

    On the basis of legislative approximation assessment, EU will enable market liberalization, granting additional benefits to Georgia.

State agencies