2019 Report

COMMISSION STAFF WORKING DOCUMENT Serbia 2019 Report Accompanying the document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions 2019 Communication on EU Enlargement Policy

1.2. Summary of the report

As regards its ability to assume the obligations of membership, Serbia has continued to work towards aligning its legislation with the EU acquis across the board. Adequate financial and human resources and sound strategic frameworks will be crucial for the pace of reforms. Serbia has a good level of preparation in some areas such as company law, intellectual property, transport policy, science and research, education and culture, and customs.

Regarding the normalisation of relations with Kosovo, Serbia has remained engaged in the dialogue and showed restraint in its response to the introduction of the customs tariffs. Serbia has yet to address the issue of re-located Serbian administrative customs structures with Kosovo denomination that operate from within Serbia, and to cease the issuance of documentation or affixing of stamps with denomination that contravenes the related agreement.

Chapter 7: Intellectual property law

Serbia has a good level of preparation on intellectual property rights. There has been some
progress with the adoption of the amendments to the law on patents and adoption of a new strategic framework for 2018-2022, focusing on enforcement. The Commission recommendations from 2018 were not fully implemented and remain valid.

In the coming year, Serbia should in particular:

→ strengthen enforcement, by improving capacities and coordination of different stakeholders.
In 2018, the number of counterfeit and pirated goods confiscated by the Market Inspectorate increased, as well as the number of requests submitted to it by economic operators. The number of the customs officers specialised in intellectual property protection decreased slightly to 14. The number of items detained by the customs administration decreased while the number of items destroyed increased. In April 2018, the customs administration put into operation the electronic database regarding the protection of IPR at the borders, in accordance with the new customs law.

In October 2018, the government adopted a new strategic framework for intellectual property rights (IPR) for the period 2018-2022, which focuses on enforcement. IPR legislation has yet to be aligned with the EU Directive on the enforcement of intellectual property rights. The permanent coordination body for the enforcement of IPR did not meet in 2018. Its working groups were only active as regards the new strategic framework. They did not carry out any awareness raising activities or information exchange for IPR enforcement. Coordination among different institutions involved in IPR enforcement requires further strengthening, notably through adequate IT infrastructure.

Chapter 16: Taxation

Serbia is moderately prepared in the area of taxation. Some progress was made on legislative alignment, while the reform of the tax administration has slowly moved forward. Last year’s recommendations were not implemented and remain valid. In the coming year, Serbia should in particular:

® remove discrimination in the application of excise duties on imported spirits;
Legislation on indirect taxation was adopted in April 2018 and entered into force in January 2019, introducing value-added tax (VAT) reimbursement to non-established taxable persons. Based on the rulebook on the form, content and method of keeping VAT records, a new system for keeping records was introduced in July 2018. There has been no further legislative alignment with the acquis in the area of direct taxation. Despite some limited progress, public consultations carried out before the adoption of tax legislation have again been insufficient, not providing the business associations with enough time to comment and thus failing to strengthen predictability.

Chapter 23: Judiciary and fundamental rights

Serbia has some level of preparation to apply the acquis and European standards in this area. Serbia made limited progress.

In the coming year, Serbia needs in particular to make significant progress on:

® adopting and implementing a human resources strategy for the entire judiciary and establishing a uniform and centralised case management system, which in combination should lead to a measurable improvement in efficiency and effectiveness of the justice system.

Fight against corruption

Serbia has some level of preparation in the fight against corruption. Limited progress has been made.
Serbia should in particular:

® implement legislation on the Anti-Corruption Agency that needs to be compliant with the
acquis, international agreements and GRECO recommendations, in order to strengthen the
Agency’s role as a key institution in a more effective fight against corruption;

® conduct an impact assessment on its anti-corruption policy with a view to adopting a new ambitious strategy and action plan.

Institutional framework

Prevention of corruption

…Serbia’s institutions for preventing corruption broadly meet international standards. As regards the revision of the law on the Anti-Corruption Agency, enabling it to better assume its role as the key institution in this area, a first draft was prepared by a Ministry of Justice working group in July 2018. This draft did not fully comply with the GRECO recommendations. A second draft was published on the Ministry’s website in February 2019 further to consultations with a GRECO-affiliated expert. The government submitted a draft to parliament in early May 2019 under urgent procedure (see under Parliament on the use of urgent procedures). Parliament adopted the law on 21 May 2019. The law needs to comply with the acquis, international agreements and GRECO recommendations. Efforts are needed to empower the Agency to step up data collection in an accountable manner and its data analysis, including access to relevant databases. The Anti-Corruption Agency’s budget has increased for 2019, and the new ‘staff systematisation’ allows for 123 workplaces, as well as the contracting of 157 employees (compared to 92 workplaces and 139 employees previously).

Law enforcement

…The new Law on the organisation and jurisdiction of government authorities in suppression of organised crime, terrorism and corruption, which entered into force in March 2018, provides for specialised authorities to investigate and prosecute corruption cases. While the impact of these new structures has yet to be fully assessed, so far the institutional and technical capacity of police, prosecutors and judges remains insufficient overall and needs improvement. Internal control departments in line ministries continue to lack equipment, resources and human capacity.

Legal framework

...The legal framework for the fight against corruption is broadly in place.

Strategic framework

…The Anti-corruption Agency monitored the implementation of Serbia’s anti-corruption strategy and action plan for 2013-2018. Out of 177 measures to be completed by the end of 2017, the Agency found that 26% were implemented in accordance with the indicators, while 61% were deemed not implemented at all (while the remaining measures were deemed to be partially implemented). A number of steps to effectively implement and monitor this strategy and its follow-up strategy, as well as the relevant sections in the action plan for Chapter 23, have been seriously delayed.

Chapter 24: Justice, freedom and security

Serbia has some level of preparation to implement the acquis on justice, freedom and security….
In the coming period, Serbia should in particular:

® refrain from further diverging from the EU visa policy and take concrete steps to fully align with it, starting with those nationalities that are heavily prone to irregular migration to the EU;

…Serbia is implementing an action plan which was adopted prior to the opening of the accession negotiations on this chapter in July 2016. Serbia is in the process of revising its action plan with measures oriented towards meeting the interim benchmarks of the EU Common Position.

Schengen and external borders
Institutional set-up and legal alignment

Since the new Law on state border control entered into force in spring 2018, 11 pieces of secondary legislation have been adopted. The new law assigns the responsibility for the management of border crossing points to the Directorate for Property and thus clarifies a longstanding issue on responsibilities for planning, maintenance, and construction of border crossing points. A document on standardisation and management of border crossing points as well as staffing needs has been prepared but still needs to be adopted. Serbia also needs to step up efforts in preparing a Schengen action plan.

Implementation and enforcement capacity

….Some progress has been observed in the implementation of the integrated border management (IBM) strategy 2017-2020 and the related action plan. Inter-agency cooperation for border management (border police, customs, phytosanitary and veterinary inspections) has gained momentum with the establishment of an IBM coordination mechanism. A new agreement of all IBM agencies on joint risk analysis and an early warning system is being prepared. Instructions on information exchange between the Operational Centre of the Border Police Department and the Command Centre of the Customs Administration were adopted in October 2018. An electronic information exchange platform to be used by all IBM agencies needs to be developed.
All aspects of customs cooperation are now covered under Chapter 29 – Customs Union.

Chapter 29: Customs union

Serbia is at a good level of preparation in the area of customs union. Some progress was
made with the adoption of the customs law and the law on customs services.

In the coming year, Serbia should in particular:

→ further upgrade the customs processing system by integrating risk management;

® further invest into the IT system of the national customs to enable integration with the EU system.

As regards customs legislation, there is a high level of alignment with the acquis. A new customs law was adopted in December 2018 to ensure further alignment with the EU Customs Code. A new law on customs service was also adopted in December 2018, aiming to modernise the work of the Serbian customs administration. Serbia is a party to the Common Transit Convention, applying EU rules on transit movements. Rules on customs enforcement of intellectual property rights are broadly in line with the EU acquis. The Regional Convention on Pan-Euro-Mediterranean preferential rules of origin is applied in Serbia. The customs tariff nomenclature was aligned with the 2018 EU Combined Nomenclature in November 2017 and was amended twice in February and July 2018. The customs tariff nomenclature for 2019 was aligned with the EU Combined Nomenclature in November 2018. However, legislation on duty relief, drug precursors, cultural goods, free zones, and security aspects still needs to be aligned with the acquis. Moreover, fees charged on lorries entering customs terminals to discharge customs obligations are not in line with the acquis. The customs administration continued to strengthen its administrative and operational capacity. Customs duty collection continued to increase by 10in the first 9 months of 2018. The customs administration’s IT strategy needs to be updated in line with the new business strategy and the accompanying action plan for 2017-2020. Strategic and modern management techniques, including quality assurance and change management, are lacking. Work on setting up a functional, interconnected IT system progressed, but the IT division continues to lose qualified staff. A system for retaining qualified IT engineers should be established. Significant effort and investment are needed to ensure interconnectivity and interoperability with EU IT systems. This investment needs to be appropriately budgeted over the coming years. The risk management system needs to be strengthened. Pre-arrival/pre-departure risk analysis should be conducted consistently and across the board and harmonised with the EU Customs Code. Work on strengthening the capacity of the customs laboratory is underway, but the laboratory remains under-equipped. In terms of fight against tobacco smuggling, Serbia is a party to the Protocol to Eliminate Illicit Trade in Tobacco Products since 2017.

Chapter 30: External relations

Serbia is moderately prepared in the area of external relations. Some progress was made during the reporting period, but the capacity to pursue key challenges in trade policy needs to be strengthened further. Serbia ratified the Central European Free Trade Agreement (CEFTA) Additional Protocol 5 on trade facilitation.
In the coming year, Serbia should in particular:

® complete its World Trade Organisation (WTO) accession by adopting an amended law on genetically modified organisms and complete remaining bilateral market access negotiations;

® strengthen administrative capacity in the Ministry of Trade, Tourism and Telecommunications for dealing with trade with the EU, CEFTA and WTO accession;

® implement actions under the multiannual action plan to develop a Regional Economic Area, in particular implement CEFTA Protocol 5 on Trade Facilitation, adopt and implement the pending CEFTA Protocol 6 on Trade in Services and negotiate and ensure a swift adoption of CEFTA Protocol 7 on Dispute Settlement.
….In May 2018, Serbia aligned its national control list of dual-use goods with the 2017 EU regime on exports, transfer, brokering and transit of these items. Serbia also aligned its national control list of arms and military equipment with the Common Military List in May 2018. Serbia’s 2009 application to join the Wassenaar Arrangement is still ongoing. Concerning implementation of the Regional Economic Area (REA) multiannual action plan, Serbia ratified the Additional Protocol 5 on Trade Facilitation to the CEFTA Agreement in September 2018. It is important that Serbia plays a constructive role within CEFTA to allow for the timely and smooth implementation of the REA Multiannual Action Plan.
….With regard to bilateral agreements with third countries, Serbia ratified a new bilateral investment treaty with Turkey in September 2018. In March 2019, Serbia announced the completion of its Free Trade Agreement (FTA) negotiations with the Eurasian Economic Union. Serbia is also negotiating a free trade agreement with Ukraine. Serbia needs to ensure compatibility of all its agreements on trade, investment and economic cooperation and other relevant agreements with the EU acquis.

Chapter 33: Financial and budgetary provisions

Serbia has some level of preparation concerning the specific administrative conditions for own resources, as laid down in the own resources regulations. Some progress was made in the underlying policy areas affecting the correct functioning of the own resources system.

In the coming year, Serbia should, in particular:

→ take further steps to boost the administrative capacity of the coordination group and the various institutions involved in the own resources system;

→ develop the organisational and procedural links between these institutions;

→ step up preparations to meet the specific administrative conditions for own resources, as laid down in the own resources regulations.

…There was some progress in the underlying policy areas indirectly affecting the own resources system (for progress in these areas, see Chapters 16 – Taxation, 18 – Statistics, 29 – Customs
union, and 32 – Financial control). After formally establishing the coordinating structure, there was some progress towards meeting the specific administrative conditions for own resources.

Regarding traditional own resources (TOR, mainly customs duties), a new customs law was adopted in December 2018 in line with the EU Customs Code.

….Regarding administrative infrastructure, the capacity of the institutions in charge in the relevant policy areas needs to be further strengthened. The group for the coordination and management of own resources of the EU tasked with ensuring correct calculation, accounting, forecasting, collection, payment, control and reporting on implementation of the EU’s own resources policy and rules needs to be better staffed and supported to fulfil its coordination tasks.

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