# EUR-Lex - 52011PC0628 - EN

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# 52011PC0628

**Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the financing, management and monitoring of the common agricultural policy /* COM/2011/0628 final - 2011/0288 (COD) */**

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EXPLANATORY
MEMORANDUM

1.           CONTEXT
OF THE PROPOSAL

The Commission proposal for the Multiannual
Financial Framework (MFF) for 2014-2020 (the MFF proposal)[1] sets the budgetary framework
and main orientations for the Common Agricultural Policy (CAP). On this basis,
the Commission presents a set of regulations laying down the legislative
framework for the CAP in the period 2014-2020, together with an impact
assessment of alternative scenarios for the evolution of the policy.

The current reform proposals are based on
the Communication on the CAP towards 2020[2]
that outlined broad policy options in order to respond to the future challenges
for agriculture and rural areas and to meet the objectives set for the CAP,
namely 1) viable food production; 2) sustainable management of natural
resources and climate action; and 3) balanced territorial development. The
reform orientations in the Communication have since been broadly supported both
in the inter-institutional debate[3]
and in the stakeholder consultation that took place in the framework of the
impact assessment.

A common theme that has emerged throughout
this process is the need to promote resource efficiency with a view to smart,
sustainable and inclusive growth for EU agriculture and rural areas in line
with the Europe 2020 strategy, keeping the structure of the CAP around two
pillars that use complementary instruments in pursuit of the same objectives.
Pillar I covers direct payments and market measures providing a basic annual
income support to EU farmers and support in case of specific market
disturbances, while Pillar II covers rural development where Member States draw
up and co-finance multiannual programmes under a common framework.[4]

Through successive reforms the CAP has
increased market orientation for agriculture while providing income support to
producers, improved the integration of environmental requirements and
reinforced support for rural development as an integrated policy for the
development of rural areas across the EU. However, the same reform process has
raised demands for a better distribution of support among and within Member
States, as well as calls for a better targeting of measures aiming at
addressing environmental challenges and better addressing increased market
volatility.

In the past, reforms mainly responded to
endogenous challenges, from huge surpluses to food safety crises; they have
served the EU well both on the domestic and the international front. However,
most of today's challenges are driven by factors that are external to agriculture
and would thus require a broader policy response.

The pressure on agricultural income is
expected to continue as farmers are facing more risks, a slowdown in
productivity and a margin squeeze due to rising input prices; there is
therefore a need to maintain income support and to reinforce instruments to
better manage risks and respond to crisis situations. A strong agriculture is
vital for the EU food industry and global food security.

At the same time, agriculture and rural
areas are being called upon to step up their efforts to meet the ambitious
climate and energy targets and biodiversity strategy that are part of the
Europe 2020 agenda. Farmers, who are together with foresters the main land
managers, will need to be supported in adopting and maintaining farming systems
and practices that are particularly favourable to environmental and climate
objectives because market prices do not reflect the provision of such public
goods. It will also be essential to best harness the diverse potential of rural
areas and thus contribute to inclusive growth and cohesion.

The future CAP will not, therefore, be a
policy that caters only for a small, albeit essential, part of the EU economy,
but also a policy of strategic importance for food security, the environment
and territorial balance. Therein lies the EU added value of a truly common
policy that makes the most efficient use of limited budgetary resources in
maintaining a sustainable agriculture throughout the EU, addressing important
cross-border issues such as climate change and reinforcing solidarity among
Member States, while also allowing flexibility in implementation to cater for
local needs.

The framework set out in the MFF proposal
foresees that the CAP should maintain its two-pillar structure with the budget
for each pillar maintained in nominal terms at its 2013 level and with a clear
focus on delivering results on the key EU priorities. Direct payments should
promote sustainable production by assigning 30 % of their budgetary
envelope to mandatory measures that are beneficial to climate and the
environment. Payment levels should progressively converge and payments to large
beneficiaries be subject to progressive capping. Rural development should be
included in a Common Strategic Framework with other EU shared management funds
with a reinforced outcome-orientated approach and subject to clearer, improved
ex-ante conditionalities. Finally, on market measures the financing of the CAP
should be reinforced with two instruments outside the MFF: 1) an emergency
reserve to react to crisis situations; and 2) the extension of the scope of the
European Globalization Adjustment Fund.

On this basis, the main elements of the
legislative framework for the CAP during the period 2014-2020 are set out in
the following regulations:

–
Proposal for a Regulation of the European
Parliament and of the Council establishing rules for
direct payments to farmers under support schemes within the framework of the
common agricultural policy ('the
direct payments regulation');

–
Proposal for a Regulation of the European
Parliament and of the Council establishing a common organisation of the markets
in agricultural products (Single CMO Regulation) ('the Single CMO regulation');

–
Proposal for a Regulation of the European
Parliament and of the Council on support for rural development by the European
Agricultural Fund for Rural Development (EAFRD) ('the rural development
regulation');

–
Proposal for a Regulation of the European
Parliament and of the Council on the financing, management and monitoring of
the common agricultural policy ('the horizontal regulation');

–
Proposal for a Council regulation determining
measures on fixing certain aids and refunds related to the common organisation
of the markets in agricultural products;

–
Proposal for a Regulation of the European
Parliament and of the Council amending Council Regulation (EC) No 73/2009 as
regards the application of direct payments to farmers in respect of the year
2013;

–
Proposal for a Regulation of the European
Parliament and of the Council amending Council Regulation (EC) No 1234/2007 as
regards the regime of the single payment scheme and support to vine-growers.

The rural development regulation builds on
the proposal presented by the Commission on 6 October 2011 that sets out common
rules for all funds operating under a Common Strategic Framework[5]. A regulation will follow on
the scheme for most deprived persons, for which funding is now placed under a
different heading of the MFF.

In addition, new rules on the publication
of information on beneficiaries taking account of the objections expressed by
the Court of Justice of the European Union are also under preparation with a
view to finding the most appropriate way to reconcile beneficiaries' right to
protection of personal data with the principle of transparency.

2.           RESULTS
OF CONSULTATIONS WITH THE INTERESTED PARTIES AND IMPACT ASSESSMENT

On the basis of the evaluation of the
current policy framework and an analysis of future challenges and needs, the
impact assessment assesses and compares the impact of three alternative
scenarios. This is the result of a long process started in April 2010 and
steered by an inter-service group that brought together extensive quantitative
and qualitative analysis, including setting a baseline in the form of medium-term
projections for agricultural markets and income up to 2020 and modelling the
impact of the different policy scenarios on the economics of the sector.

The three scenarios elaborated in the
impact assessment are: 1) an adjustment scenario that continues with the
current policy framework while addressing its most important shortcomings, such
as the distribution of direct payments; 2) an integration scenario that entails
major policy changes in the form of enhanced targeting and greening of direct payments
and reinforced strategic targeting for rural development policy in better
coordination with other EU policies, as well as extending the legal base for a
broader scope of producer cooperation; and 3) a refocus scenario that reorients
the policy exclusively towards the environment with a progressive phasing out
of direct payments, assuming that productive capacity can be maintained without
support and that the socio-economic needs of rural areas can be served by other
policies.

Against the background of the economic
crisis and the pressure on public finances, to which the EU has responded with
the Europe 2020 strategy and the MFF proposal, all three scenarios attach
different weight to each of the three policy objectives of the future CAP which
aims at a more competitive and sustainable agriculture in vibrant rural areas.
With a view to a better alignment with the Europe 2020 strategy, notably in
terms of resource efficiency, it will be increasingly essential to improve
agricultural productivity through research, knowledge transfer and promoting
cooperation and innovation (including through the European Innovation
Partnership on agricultural productivity and sustainability). Whereas EU
agricultural policy does not any more operate within a trade distorting policy
environment, additional pressure on the sector is expected from further
liberalization, notably in the framework of the DDA or the FTA with Mercosur.

The three policy scenarios were drawn up
taking into account the preferences expressed in the consultation which was
conducted in the context of the impact assessment. Interested parties were
invited to submit contributions between 23.11.2010 and 25.1.2011 and an
advisory committee was organised on 12.1.2011. The main points are summarized
below:[6]

–
There is broad agreement among stakeholders on
the need for a strong CAP based on a two-pillar-structure in order to address
the challenges of food security, sustainable management of natural resources
and territorial development.

–
Most respondents find that the CAP should play a
role in stabilizing markets and prices.

–
Stakeholders have diverse opinions concerning
the targeting of support (especially redistribution of direct aid and capping
payments).

–
There is agreement that both pillars can play an
important role in stepping up climate action and increasing environmental
performance for the benefit of EU society. Whereas many farmers believe that
this already takes place today, the wider public argues that Pillar I payments
can be more efficiently used.

–
The respondents want all parts of the EU,
including less favoured areas, to be part of future growth and development.

–
The integration of the CAP with other policies,
such as environmental, health, trade, development, was emphasised by many
respondents.

–
Innovation, development of competitive
businesses and provision of public goods to EU citizens are seen as ways to
align the CAP with the Europe 2020 strategy.

The impact assessment thus compared the
three alternative policy scenarios:

The refocus scenario would accelerate
structural adjustment in the agricultural sector, shifting production to the
most cost efficient areas and profitable sectors. While significantly
increasing funding for the environment, it would also expose the sector to
greater risks due to limited scope for market intervention. Furthermore, it
would come at a significant social and environmental cost as the less
competitive areas would face a considerable income loss and environmental
degradation, since the policy would lose the leverage of direct payments
coupled with the cross compliance requirements.

At the other end of the spectrum, the
adjustment scenario would best allow for policy continuity with limited but
tangible improvements both in agricultural competitiveness and environmental
performance. There are however serious doubts as to whether this scenario could
adequately address the important climate and environmental challenges of the
future, which also underpin the long-term sustainability of agriculture.

The integration scenario breaks new ground
with enhanced targeting and greening of direct payments. The analysis shows
that greening is possible at a reasonable cost to farmers although some
administrative burden cannot be avoided. Similarly, a new impetus in rural
development is possible provided that the new possibilities are efficiently
used by Member States and regions and that the common strategic framework with
the other EU funds does not remove synergies with Pillar I or weaken rural
development's distinctive strengths. If the right balance is struck, this
scenario would best address the long term sustainability of agriculture and
rural areas.

On this basis the impact assessment
concludes that the integration scenario is the most balanced in progressively
aligning the CAP with the EU's strategic objectives and this balance is also
found in the implementation of the different elements in the legislative
proposals. It will also be essential to develop an evaluation framework to
measure the performance of the CAP with a common set of indicators linked to
policy objectives.

Simplification has been an important
consideration throughout the process and should be enhanced in a variety of
ways, for instance in the streamlining of cross compliance and market
instruments, or the design of the small farmers scheme. In addition, the
greening of direct payments should be designed in such a way as to minimize
administrative burden including the costs of controls.

3.           LEGAL
ELEMENTS OF THE PROPOSAL

It is proposed to maintain the current
structure of the CAP in two pillars with annual mandatory measures of general
application in Pillar I complemented by voluntary measures better tailored to
national and regional specificities under a multi-annual programming approach
in Pillar II. However, the new design of direct payments seeks to better
exploit synergies with Pillar II, which is in turn placed under a Common
Strategic Framework to better coordinate with other EU shared management funds.

On this basis, the current structure of
four basic legal instruments is also maintained, albeit with the scope of the
financing regulation enlarged to bring together common provisions into what is
now called the horizontal regulation.

The proposals comply with the principle of
subsidiarity. The CAP is a truly common policy: it is an area of shared
competence between the EU and the Member States that is being handled at EU
level with a view to maintaining a sustainable and diverse agriculture
throughout the EU, addressing important cross-border issues such as climate
change and reinforcing solidarity among Member States. In the light of the
importance of future challenges for food security, the environment and
territorial balance, the CAP remains a policy of strategic importance to ensure
the most effective response to the policy challenges and the most efficient use
of budgetary resources. In addition, it is proposed to maintain the current
structure of instruments in two pillars where Member States have more leeway to
tailor solutions to their local specificities and also co-finance Pillar II.
The new European Innovation Partnership and risk management toolkit are also
placed within Pillar II. At the same time the policy will be better aligned
with the Europe 2020 strategy (including a common framework with other EU
funds) and a number of improvements and simplification elements introduced.
Finally, the analysis carried out in the framework of the impact assessment
clearly shows the cost of no action in terms of negative economic,
environmental and social consequences.

In addition to financing provisions, the
horizontal regulation brings together relevant rules for all instruments, such
as provisions on cross compliance, checks and penalties. As a result, the
regulation now lays down rules on financing, the farm advisory system,
management and control systems, cross compliance and clearance of accounts.

The aim is to adjust financing rules on the
basis of experience to date, to streamline and enhance cross compliance and to
strengthen the farm advisory system.

In relation to cross compliance in
particular, the current rules were reviewed with a view to simplification,
strengthening the climate change dimension within GAEC and ensuring consistency
with the provisions of greening and of relevant environmental measures offered
under rural development.

Finally, the regulation provides the basis
for a common monitoring and evaluation framework to measure the performance of
the CAP during the next period.

This regulation includes various
simplification elements. First of all, it regroups all cross-compliance rules
in one single legislative act, thereby improving their readability.

Furthermore, it foresees reducing the
number of paying agencies and reinforcing the role of the coordinating body.
This will render the system more transparent and less burdensome for both
national administrations and the Commission services. There will be fewer
accreditations and declarations of assurance required at Member State level and
the number of Commission audits can be reduced.

The rules on management and controls will
be aligned, as far as possible, for the two pillars of the CAP so as to bring
legal clarity and harmonised procedures. Moreover, the regulation foresees
empowering the Commission to allow for a reduction of the number of on-the-spot
checks for Member States with properly functioning control systems and low
error rates. This could reduce the administrative burdens for both farmers and
national administrations.

4.           BUDGETARY
IMPLICATION

The MFF proposal provides that a significant
part of the EU budget should continue to be dedicated to agriculture, which is
a common policy of strategic importance. Thus, in current prices, it is
proposed that the CAP should focus on its core activities with EUR 317.2
billion allocated to Pillar I and EUR 101.2 billion to Pillar II over the
2014-2020 period.

The Pillar I and Pillar II funding is
complemented by additional funding of EUR 17.1 billion consisting of EUR 5.1
billion for research and innovation, EUR 2.5 billion for food safety and EUR
2.8 billion for food support for the most deprived persons in other headings of
the MFF, as well as of EUR 3.9 billion in a new reserve for crises in the
agricultural sector and up to EUR 2.8 billion in the European Globalization Adjustment
Fund outside the MFF, thus bringing the total budget to EUR 435.6 billion over
the 2014-2020 period.

As regards distribution of support among
Member States, it is proposed that all Member States with direct payments below
90% of the EU average will see one third of this gap closed. The national
ceilings in the direct payments regulation are calculated on this basis.

The distribution of rural development
support is based on objective criteria linked to the policy objectives taking
into account the current distribution. As is the case today, less developed
regions should continue to benefit from higher co-financing rates, which will
also apply to certain measures such as knowledge transfer, producer groups,
cooperation and Leader.

Some flexibility for transfers between
pillars is introduced (up to 5% of direct payments): from Pillar I to Pillar II
to allow Member States to reinforce their rural development policy, and from
Pillar II to Pillar I for those Member States where the level of direct
payments remains below 90% of the EU average.

Details on the financial impact of the CAP
reform proposals are set out in the financial statement accompanying the
proposals.

2011/0288 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT
AND OF THE COUNCIL

on the financing, management and
monitoring of the common agricultural policy

THE EUROPEAN PARLIAMENT AND THE
COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union, and in particular Article 43(2) thereof,

Having regard to the proposal from the
European Commission[7],

After transmission of the draft legislative
act to the national parliaments,

Having regard to the opinion of the
European Economic and Social Committee[8],

Having consulted the European Data
Protection Supervisor[9],

Acting in accordance with the ordinary
legislative procedure,

Whereas:

(1)
The Communication from the Commission to the
European Parliament, the Council, the European Economic and Social Committee
and the Committee of the Regions on "The CAP towards 2020: Meeting the
food, natural resources and territorial challenges of the future"[10] set out potential challenges,
objectives and orientations for the Common Agricultural Policy (CAP) after
2013. In the light of the debate on that Communication, the CAP should be
reformed with effect from 1 January 2014. That reform should cover all the main
instruments of the CAP, including Council Regulation (EC) No 1290/2005 of 21
June 2005 on the financing of the common agricultural policy[11] as amended by Regulation of the European Parliament and Council [COM(2010)...(Lisbon
alignement)][12].
Experience drawn from the implementation of that Regulation shows that certain
elements of the financing and monitoring mechanism need to be adjusted. In view
of the scope of the reform, it is appropriate to repeal Regulation (EC) No 1290/2005
and to replace it with a new text. The reform should also, as far as possible,
harmonise, streamline and simplify provisions.

(2)
Since the objectives of this Regulation cannot
be achieved sufficiently by Member States given the links between it and the
other instruments of the CAP, the limits on the financial resources of the
Member States in an enlarged Union, and can therefore be better achieved at
Union level through the multiannual guarantee of Union finance and by
concentrating on its priorities, the Union may adopt measures, in accordance
with the principle of subsidiarity as set out in Article 5(3) of the Treaty on
European Union. In accordance with the principle of proportionality as set out
in Article 5(4) of that Treaty, this Regulation does not go beyond what is
necessary in order to achieve that objective.

(3)
In order to supplement or amend certain
non-essential elements of this Regulation, the power to adopt delegated acts in
accordance with Article 290 of the Treaty should be delegated to the Commission
in respect of the accreditation of the paying agencies and coordinating bodies,
the content of the Farm Advisory System, the measures to be financed by Union
budget under public intervention and the valuation of the operations in
connection with public intervention, the reductions and suspension of the
reimbursements to the Member States, the compensation between expenditure and
revenues under the Funds, the recovery of debts, the penalties applied to
beneficiaries in case of non-compliance with the eligibility conditions, in
respect of rules on securities, on the functioning of the integrated administration
and control system, of the measures excluded from the scrutiny of transactions,
the penalties applied under cross compliance, the rules on maintenance of
permanent grassland, the rules on the operative event and the exchange rate to
be used by the Member States not using the euro and in respect of the content
of the common evaluation framework of the measures adopted under the CAP. It is
of particular importance that the Commission carry out appropriate
consultations during its preparatory work, including at expert level. The
Commission, when preparing and drawing-up delegated acts, should ensure a
simultaneous, timely and appropriate transmission of relevant documents to the
European Parliament and Council.

(4)
The CAP consists of a series of measures, some
of which relate to rural development. It is important that financing be
provided for those measures in order to contribute to the achievement of the
objectives of the CAP. Since the measures have certain elements in common but do
also differ in a number of respects, their financing should be combined in the
same set of provisions which allows for different treatment where necessary. Regulation
(EC) No 1290/2005 created two European agricultural funds, namely the European
Agricultural Guarantee Fund (hereinafter ‘EAGF’), and the European Agricultural
Fund for Rural Development (hereinafter ‘EAFRD’). Those two Funds should be
maintained.

(5)
Regulation (EU) No [FR]/xxx of the European
Parliament and of the Council of [...] on the financial rules applicable to the
annual budget of the Union[13]
and the provisions adopted pursuant to it should apply to the measures set out
in this Regulation. In particular the Regulation lays down provisions related
to the shared management with Member States based on the principles of sound
financial management, transparency and non-discrimination, as well as
provisions on the function of accredited bodies, the budgetary principles, provisions
which should be respected in the framework of this Regulation.

(6)
The Union budget should finance CAP expenditure,
including that on rural development, through both Funds either directly or in
the context of shared management with the Member States. The types of measures
that can be financed using those Funds should be specified.

(7)
Provision should be made for the accreditation
of paying agencies by Member States, for the establishment of procedures for
obtaining the requisite management declarations of assurance, and the
certification of management and monitoring systems, as well as the
certification of annual accounts by independent bodies. Moreover, in order to
ensure the transparency of national checks, in particular as regards
authorisation, validation and payment procedures, to reduce the administrative
and audit burden for the Commission services as well as for the Member States
where accreditation of each individual paying agency is required, the number of
authorities and bodies to which those responsibilities are delegated should be
restricted taking account of the constitutional arrangements of each Member
State.

(8)
Where a Member State accredits more than one
paying agency, it is important that it designates a single coordinating body to
ensure consistency in the management of the funds, to provide liaison between
the Commission and the various accredited paying agencies and to ensure that
the information requested by the Commission concerning the operations of
several paying agencies is made rapidly available. The coordinating body should
also be responsible for ensuring that remedial action is taken and that the
Commission is kept informed of the follow-up and it should ensure homogeneous
application of common rules and standards.

(9)
Only paying agencies accredited by the Member
States offer reasonable assurance that the necessary checks have been carried
out before granting Union aid to beneficiaries. It should therefore be
explicitly laid down that only expenditure effected by accredited paying
agencies can be reimbursed from the Union budget.

(10)
In order to help beneficiaries to become more
aware of the relationship between agricultural practices and management of
farms on the one hand, and standards relating to the environment, climate
change, good agricultural condition of land, food safety, public health, animal
health, plant health and animal welfare on the other, it is necessary that
Member States establish a comprehensive farm advisory system offering advice to
beneficiaries. That farm advisory system should in any way not affect the
obligation and responsibility of beneficiaries to respect those standards. Also
a clear separation between advice and checks should be ensured by the Member
States.

(11)
The farm advisory system should cover at least
the requirements and standards forming the scope of cross compliance. That
system should also cover the requirements to be respected in relation to the agricultural practices beneficial for the climate and the environment
for direct payments, as well as the maintenance of the
agricultural area under Regulation (EU) No DP/xxx of the European Parliament
and of the Council of xxx establishing rules for direct payment to farmers
under support schemes within the framework of the common agricultural policy[14]. That system should finally
cover certain elements related to climate change mitigation and adaptation,
biodiversity, protection of water, animal and plant disease notification and
innovation as well as the sustainable development of the economical activity of
the small farms.

(12)
Entry into the farm advisory system should be on
a voluntary basis for beneficiaries. All beneficiaries, even if not receiving
support under the CAP, should be allowed to participate in the system. However
priority criteria may be set by the Member States. Due to the nature of the
system, it is appropriate for the information obtained in the course of the
advisory activity to be treated as confidential, except in case of serious
infringements of Union or national law. In order to ensure the efficiency of
the system, advisors should be suitably qualified and regularly trained.

(13)
The financial resources required to cover the
expenditure effected by the accredited paying agencies in respect of the EAGF,
are to be made available to the Member States by the Commission in the form of
reimbursements against the booking of the expenditure effected by those
agencies. Until such reimbursements, in the form of monthly payments, have been
paid, financial resources are to be mobilised by the Member States in
accordance with the needs of their accredited paying agencies. The personnel
costs and the administrative costs of the Member States and the beneficiaries
involved in the execution of the CAP should be borne by themselves.

(14)
The use of the agro-meteorological system and
the acquisition and improvement of satellite images should provide the Commission
with the means to manage the agricultural markets and to facilitate the
monitoring of agricultural expenditure.

(15)
In the context of respecting budget discipline,
it is necessary to define the annual ceiling for the expenditure financed by
the EAGF by taking into account the maximum amounts laid down for that Fund
under the multiannual financial framework provided for in the Council Regulation
(EU) No xxx/xxx of [...] laying down the multiannual financial framework for the
years 2014-2020[15]
[MFF].

(16)
Budget discipline also requires that the annual
ceiling for expenditure financed by the EAGF to be respected under all
circumstances and at all stages of the budget procedure and the execution of
the budget. This requires that the national ceiling for the direct payments per
Member State set out in Regulation (EU) No xxx/xxx[DP] be regarded as a
financial ceiling for such direct payments for the Member State concerned and
that the reimbursement of those payments remain within this financial ceiling.
Furthermore, budget discipline requires that all acts proposed by the
Commission or adopted by the legislator or by the Commission under the CAP and
financed by the EAGF comply with the annual ceiling for the expenditure
financed by that Fund.

(17)
With a view to ensuring that the amounts for the
financing of the CAP comply with the annual ceilings, the financial mechanism
referred to in Council Regulation (EC) No 73/2009 of 19 January 2009
establishing common rules for direct support schemes for farmers under the
common agricultural policy and establishing certain support schemes for
farmers, amending Regulations (EC) No 1290/2005, (EC) No 247/2006, (EC) No
378/2007 and repealing Regulation (EC) No 1782/2003[16] whereby the level of direct
support is adjusted, should be maintained. In the same context, it is necessary
to authorise the Commission to set those adjustments where the Council do not
fix them before 30 June of the calendar year in respect of which they apply.

(18)
The measures taken to determine the financial
contribution from the EAGF and the EAFRD in respect of the calculation of
financial ceilings do not affect the powers of the budgetary authority
designated by the Treaty. Those measures should therefore be based on the
reference amounts fixed in accordance with the Interinstitutional Agreement of
[...] between the European Parliament, the Council and the Commission on cooperation
in budgetary matters and on sound financial management[17] and Regulation (EU) No xxx/xxx
[MFF].

(19)
Budget discipline also demands a continuous
examination of the medium-term budget situation. The Commission, when
submitting the draft budget for a given year, should therefore present its
forecasts and analyses to the European Parliament and the Council and propose,
if necessary, appropriate measures to the legislator. Furthermore, the
Commission should make full use of its management powers at all times to ensure
compliance with the annual ceiling and, if necessary, propose appropriate
measures to the European Parliament and to the Council or to the Council to
redress the budget situation. If, at the end of a budget year, the annual
ceiling cannot be complied with as a result of the reimbursements requested by
the Member States, the Commission should be able to take measures allowing
provisional distribution of the available budget among the Member States in
proportion to their requests for reimbursement not yet paid, as well as compliance
with the ceiling fixed for the year concerned. Payments for that year should be
charged to the following budget year and the total amount of Union financing
per Member State should be definitively established, as should compensation
between Member States in order to comply with the established amount.

(20)
When implementing the budget, the Commission
should operate a monthly early-warning and monitoring system for agricultural
expenditure, so that, if there is a risk of the annual ceiling being exceeded, the
Commission may at the earliest opportunity take the appropriate measures under
the management powers at its disposal and propose other measures if those
measures appear to be insufficient. A periodic report by the Commission to the
European Parliament and the Council should compare the evolution of the
expenditure effected in relation to the profiles so far and give an assessment
of the foreseeable implementation for the remainder of the budget year.

(21)
The exchange rate used by the Commission in
drawing up the budget documents should, while making allowances for the time
lag between drafting and submission reflect the most recent information
available.

(22)
Regulation (EU) No CR/xxx of the European
Parliament and of the Council of [...] laying down common provisions common
provisions on the European Regional Development Fund, the European Social Fund,
the Cohesion Fund, the European Agricultural Fund for Rural Development and the
European Maritime and Fisheries Fund covered by the Common Strategic Framework
and laying down general provisions on the European Regional Development Fund,
the European Social Fund and the Cohesion Fund and repealing Regulation (EC) No
1083/2006[18]
provides rules applying to the financial support from the Funds covered by that
Regulation, including the EAFRD. Those provisions also include certain rules on
the eligibility of expenditure, on financial management as well as the
management and control systems. As regards the financial management of the
EAFRD, for sake of legal clarity and coherence between the agricultural Funds, reference
should be made to the relevant provisions on the budget commitments, payment
deadlines and decommitment of Regulation (EU) No CR/xxx.

(23)
The rural development programmes are financed
from the Union budget on the basis of commitments in annual instalments. Member
States should be able to draw on the Union funds provided for as soon as they
begin the programmes. A suitably restricted prefinancing system ensuring a
steady flow of funds so that payments to beneficiaries under the programmes are
made at the appropriate time is therefore needed.

(24)
Prefinancing apart, a distinction should be
drawn between payments by the Commission to the accredited paying agencies.
Interim payments and payment of balances, and rules on their payment should be
set. The automatic decommitment rule should help speed up execution of
programmes and contribute to sound financial management.

(25)
Union aid should be paid to beneficiaries in
good time so that they may use it efficiently. A failure by the Member States
to comply with the payment deadlines laid down in Union legislation could
create serious difficulties for the beneficiaries and could jeopardise the
Union's yearly budgeting. Therefore, expenditure made without respecting
deadlines for payments should be excluded from Union financing. In order to
respect the principle of proportionality, the Commission should be able to
provide for exceptions to this general rule. This principle, laid down in
Regulation (EC) No 1290/2005 should be maintained and apply to both the EAGF
and the EAFRD. If Member States pay late, they should add interests on the
principal amount at their own cost to compensate the beneficiaries. Such a
provision could create an incentive to Member States to better respect payment deadlines,
and could give more assurance to beneficiaries to be paid in time, or at least
to be compensated in case of late payment.

(26)
Regulation (EC) No 1290/2005 provides for
reductions and suspensions of monthly or interim payments for the EAGF and the EAFRD.
Despite the rather broad wording of those provisions, it is noticed that in
practice those provisions are used essentially to reduce payments for
non-respect of payment deadlines, ceilings and similar "accounting
issues" which can readily be detected in the declarations of expenditure.
Those provisions also allow reductions and suspensions in case of serious and
persistent deficiencies in national control systems, but including rather
restrictive substantive conditions for doing so and providing for a special,
two-step procedure to be followed. The budgetary authority has repeatedly asked
the Commission to suspend payments to non-compliant Member States. Against this
background, it is necessary to clarify the system provided for in Regulation
(EC) No 1290/2005 and to merge the rules on reductions
and suspensions for both the EAGF and the EAFRD into one single Article. The
system of reductions for "accounting issues" should be maintained
with a clearer wording in line with the existing administrative practice. The
possibility for reducing or suspending payments in case of significant and
persistent deficiencies in national control systems should be extended by
including negligence in the recovery of irregular payments, while maintaining
the two-step procedure for such reductions or suspensions.

(27)
Sectoral agricultural legislation requires
Member States to send information on the numbers of checks carried out and
their outcome within specified deadlines. Those control statistics are used to
determine the level of error at Member State level and, more generally, for the
purposes of checking the management of the EAGF and the EAFRD. They are an
important source for the Commission to satisfy itself as to the correct
management of funds and are an essential element for the annual declaration of
assurance. Given the vital nature of this statistical information and in order
to ensure that Member States respect their obligation to send it in time, it is
necessary to provide a deterrent to late provision of the data required in a
manner proportionate to the extent of the data deficit. Therefore, provisions
should be put in place whereby the Commission can suspend part of the monthly
or interim payments for which the relevant statistical information has not been
sent in time.

(28)
In order to allow reuse of EAGF and EAFRD funds,
rules are needed on the assignment of specific sums. The list contained in
Regulation (EC) No 1290/2005 should be completed with the sums relating to late
payments and to the clearance of accounts as regards expenditure under the
EAGF. Also Council Regulation (EEC) No 352/78 of 20 February 1978 on the
crediting of securities, deposits and guarantees furnished under the common
agricultural policy and subsequently forfeited[19]
laid down rules on the destinations of the sums resulting from forfeited
securities. Those provisions should be harmonised and merged with the existing
provisions on assigned revenue. Regulation (EEC) No 352/78 should therefore be
repealed.

(29)
Council Regulation (EC) No 814/2000 of 17 April
2000 on information measures relating to the common agricultural policy[20] and its implementing rules
define the information measures relating to the CAP which may be financed under
point (c) of Article 5 of Regulation (EC) No 1290/2005. Regulation (EC) No
814/2000 contains a list of those measures and their objectives and fixes the
rules of their financing and the implementation of the corresponding projects.
Since the adoption of that Regulation, rules have been adopted by Regulation
(EU) No xxx/xxx[FR] as regards grants and procurement. Those rules should apply
also to the information measures under the CAP. For reasons of simplification
and coherence, Regulation (EC) No 814/2000 should be repealed while maintaining
the specific provisions relating to the objectives and types of measures to be
financed. Those measures should also take into account the need to ensure more
efficiency in communication to the public at large and stronger synergies
between the communication activities undertaken at the initiative of the
Commission and to ensure that the Union's political priorities are communicated
effectively. Therefore they should also cover information measures relevant to
CAP in the framework of the corporate communication as referred to in the
Communication from the Commission to the European Parliament, the Council, the
European Economic and Social Committee and the Committee of the Regions: A
Budget for Europe 2020 - Part II: Policy fiches[21].

(30)
The financing of measures and operations under
the CAP will in part involve shared management. To ensure that Union funds are
soundly managed, the Commission should perform checks on the management of the
Funds by the Member State authorities responsible for making payments. It is
appropriate to define the nature of the checks to be made by the Commission, to
specify the terms of its responsibilities for implementing the budget and to
clarify the Member States' cooperation obligations.

(31)
In order to allow the Commission to fulfil its
obligation to check the existence and proper functioning of management and
inspection systems for Union expenditure in the Member States, provision should
be made, irrespective of the inspection carried out by Member States
themselves, for checks by persons delegated by the Commission who should be
able to request assistance from the Member States in their work.

(32)
Information technology needs to be used as fully
as possible for producing the information to be sent to the Commission. When
carrying out checks, the Commission should have full and immediate access to
expenditure information recorded both in paper form and in electronic files.

(33)
In order to establish the financial relationship
between the accredited paying agencies and the Union budget, the Commission
should clear the accounts of these paying agencies annually. The clearance of
accounts decision should cover the completeness, accuracy and veracity of the
accounts but not the conformity of the expenditure with Union legislation.

(34)
The Commission, which is responsible for the
proper application of Union law under Article 17 of the Treaty on European
Union, should decide whether the expenditure incurred by the Member States
complies with Union legislation. Member States should be given the right to
justify their decisions to make payments and should have recourse to
conciliation where there is no common agreement between them and the
Commission. In order to give Member States legal and financial assurances as to
expenditure effected in the past, a maximum period should be set for the
Commission to decide which financial consequences should follow from
non-compliance. The conformity clearance procedure should be , as regards
EAFRD, in line with the provisions on the financial corrections by the
Commission as laid down in Part 2 of Regulation (EU) No CR/xxx .

(35)
As regards the EAGF, sums recovered should be
paid back to that Fund where the expenditure is not in conformity with Union
legislation and no entitlement existed. Provision should be made for a system
of financial responsibility for irregularities in the absence of total
recovery. In this respect a procedure should be established permitting the
Commission to safeguard the interests of the Union budget by deciding on the
charging to the Member State concerned of the sums lost as a result of irregularities
and not recovered within reasonable deadlines. The rules should apply to all
sums not yet recovered by the time of the entry into force of this Regulation. In
certain cases of negligence on the part of the Member State, it is also
justified to charge the full sum to the Member State concerned. Same rules should
apply to the EAFRD, keeping however the specificity that sums recovered or
cancelled following irregularities should remain available to the approved
rural development programmes of the Member State concerned as those sums have
been allocated to that Member State. Provisions on the reporting obligation for
Member States should be set also.

(36)
The recovery procedures used by the Member
States may have the effect of delaying recovery for a number of years, with no
guarantee that the outcome will actually be successful. The cost of
implementing those procedures may also be out of proportion to the amounts
which are or may be collected. Consequently, Member States should be permitted
to halt recovery procedures in certain cases.

(37)
In order to protect the financial interests of
the Union budget, measures should be taken by Member States to satisfy
themselves that transactions financed by the EAGF and the EAFRD are actually
carried out and are executed correctly. Member States should also prevent,
detect and deal effectively with any irregularities or non-compliance with
obligations committed by beneficiaries. To this end, Council Regulation (EC,
Euratom) No 2988/95 of 18 December 1995 on the protection of the European
Communities financial interests[22]
should apply.

(38)
Provisions relating to general principles on
checks, withdrawals, reductions or exclusions from payments and to the
imposition of penalties are contained in various sectoral agricultural regulations.
Those rules should be gathered in the same legal framework at a horizontal
level. They should cover the obligations of the Member States as regards
administrative and on-the-spot checks, the rules on the recovery, reduction and
exclusions of aid. Rules on checks of obligations not necessarily linked to the
payment of an aid should be laid down as well.

(39)
Various provisions of the sectoral agricultural
legislation require that a security be lodged to ensure the payment of a sum
due if an obligation is not met. To all those provisions a single horizontal
rule should apply so as to strengthen the framework for securities.

(40)
Member State should operate an integrated
administration and control system for certain payments provided for in
Regulation (EU) No xxx/xxx [DP] and in Regulation (EU) No RD/xxx of the
European Parliament and of the Council of Xxx on support for rural development
by the European Agricultural Fund for Rural Development (EAFRD)[23]. In order to improve the
effectiveness and monitoring of Union support, Member States should be
authorised to make use of that integrated system also for other Union support
schemes.

(41)
The main elements of that integrated system and,
in particular, the provisions concerning a computerised database, an
identification system for agricultural parcels, aid applications or payment
claims and a system for the identification and recording of payment
entitlements should be maintained.

(42)
Payments provided for in Union support schemes
covered by the integrated system should be made by the competent national
authorities to beneficiaries in full, subject to any reductions provided for in
this Regulation, and within prescribed periods. In order to render the
management of direct payments more flexible, Member States should be allowed to
pay payments covered by the integrated system in up to two instalments per
year.

(43)
Scrutiny of the commercial documents of
undertakings receiving or making payments can be a very effective means of
surveillance of transactions forming part of the system of financing by the
EAGF. The provisions on the scrutiny of the commercial documents are laid down
in Council Regulation (EC) No 485/2008 of 26 May 2008 on scrutiny by Member
States of transactions forming part of the system of financing by the European
Agricultural Guarantee Fund[24].
That scrutiny supplements other checks already carried out by the Member States.
Furthermore, national provisions relating to scrutiny which are more extensive
than those provided for in that Regulation are not affected by it.

(44)
Under Regulation (EC) No 485/2008, Member States
are to take the measures necessary to ensure effective protection of the
financial interests of the Union budget, and particularly in order to check the
genuineness and compliance of operations financed by the EAGF. In the interests
of clarity and rationality, the relevant provisions should be integrated into
the same act. Regulation (EC) No 485/2008 should therefore be repealed.

(45)
The documents used as a basis for such scrutiny
should be determined in such a way as to enable a full scrutiny to be carried
out. The undertakings to be scrutinised should be selected on the basis of the
nature of the transactions carried out on their responsibility and the
breakdown per sector of the undertakings receiving or making payments according
to their financial importance in the system of financing by the EAGF.

(46)
The powers of the officials responsible for
scrutiny and the obligations on undertakings to make commercial documents
available to such officials for a specified period and to supply such
information as may be requested by them should be defined. Provision should be
made allowing commercial documents to be seized in certain cases.

(47)
Having regard to the international structure of
agricultural trade and in the interest of the functioning of the internal
market, it is necessary to organise cooperation among the Member States. It is
also necessary to set up a centralised documentation system at Union level
concerning undertakings receiving or making payments established in third
countries.

(48)
While it is the responsibility of the Member
States to adopt their scrutiny programmes, it is necessary that those
programmes be communicated to the Commission so that it can assume its
supervisory and coordinating role, in order to ensure that the programmes are
adopted on the basis of appropriate criteria and to guarantee that the scrutiny
is concentrated on sectors or undertakings where the risk of fraud is high.

(49)
It is essential that each Member State has a
special department responsible for monitoring the scrutiny of commercial
documents provided for in this Regulation or for coordinating that scrutiny.
Those special departments should be organised independently of the departments
carrying out scrutiny prior to payment. Information collected during that
scrutiny should be protected by professional secrecy.

(50)
Council Regulation (EC) No 1782/2003 of 29
September 2003 establishing common rules for direct support schemes under the
common agricultural policy and establishing certain support schemes for farmers
and amending Regulations (EEC) No 2019/93, (EC) No 1452/2001, (EC) No
1453/2001, (EC) No 1454/2001, (EC) 1868/94, (EC) No 1251/1999, (EC) No
1254/1999, (EC) No 1673/2000, (EEC) No 2358/71 and (EC) No 2529/2001[25], which was replaced by
Regulation (EC) No 73/2009, established the principle that the full payment to
beneficiaries of some supports under the CAP should be linked to compliance
with rules relating to land management, agricultural production and
agricultural activity. That principle was subsequently reflected in Council
Regulation (EC) No 1698/2005 of 20 September 2005 on support for rural
development by the European Agricultural Fund for Rural Development (EAFRD)[26] and Council Regulation (EC) No
1234/2007 of 22 October 2007 establishing a common organisation of agricultural
markets and on specific provisions for certain agricultural products (Single
CMO Regulation)[27].
Under this so-called 'cross compliance' system Member States are to impose penalties
in the form of reduction or exclusion of support received under the CAP in
whole or in part.

(51)
The cross compliance system incorporates in the
CAP basic standards for the environment, climate change, good agricultural and environmental
condition of land, public health, animal health, plant health and animal
welfare. This link aims at contributing to the development of a sustainable
agriculture through a better awareness of beneficiaries of the need to respect
those basic standards. It aims also at contributing to make the CAP more
compatible with the expectation of the society through a better consistency of
that policy with the environment, public health, animal health, plant health
and animal welfare policies.

(52)
The cross compliance system
forms an integral part of the CAP and should therefore be maintained. However,
its scope, which consists so far in separate lists of statutory management
requirements and standards of good agricultural and environmental condition of
land should be streamlined so that its consistency is ensured and made more visible.
For this purpose the requirements and standards should be organised in a single
list and grouped by areas and issues. Experience has also shown that a number
of the requirements within the scope of cross compliance are not sufficiently
relevant to farming activity or the area of the holding or concern national
authorities rather than beneficiaries. It is therefore appropriate to adjust
this scope in this respect. Provision should
furthermore be made for the maintenance of permanent grassland in 2014 and
2015.

(53)
Statutory management
requirements need to be fully implemented by Member States in order to become
operational at farm level and ensure the necessary equal treatment between
farmers.

(54)
As regards Directive 2000/60/EC of the European
Parliament and of the Council of 23 October 2000 establishing a framework for
Community action in the field of water policy[28]
the provisions will only be operational under cross compliance when all Member
States will have fully implemented them in particular with clear obligations
for farmers. According to the Directive the requirements at farm level will be
applied at the latest by 1 January 2013.

(55)
As regards Directive
2009/128/EC of the European Parliament and of the Council of 21 October 2009 establishing
a framework for Community action to achieve the sustainable use of pesticides[29] the provisions
will only be operational under cross compliance when all Member States will
have fully implemented them in particular with clear obligations for farmers.
According to the Directive the requirements at farm level will be progressively
applied following a time schedule and in particular the general principles of
integrated pest management will be applied at the latest by 1 January 2014.

(56)
According to Article 22 of Directive 2000/60/EC,
Council Directive 80/68/EEC of 17 December 1979 on the protection of
groundwater against pollution caused by certain dangerous substances[30] shall be repealed on 23 December
2013. In order to maintain the rules under cross compliance related to
protection of groundwater, it is appropriate, while awaiting the inclusion of Directive
2000/60/EC in cross compliance, to adjust the scope of cross-compliance and to
define a standard of good agricultural and environnemental condition
encompassing the requirements of Articles 4 and 5 of the Directive 80/68/EEC.

(57)
The cross compliance system implies certain
administrative constraints for both beneficiaries and national administrations
since record keeping must be ensured, checks must be carried out and penalties have
to be applied where necessary. Those penalties should be proportionate, effective
and dissuasive. Such penalties should be without prejudice to other penalties
laid down under other provisions of Union or national law. For the sake of
consistency, it is appropriate to merge the relevant Union provisions into one
single legal instrument. For farmers participating in the small farmers scheme
referred to in Title V of Regulation (EU) No xxx/xxx[DP], the efforts to be
made under the cross compliance system may be considered as exceeding the
benefit of keeping those farmers under that system. For reasons of
simplification, those farmers should therefore be exempted from cross
compliance and in particular from its control system and from the risk of cross
compliance penalties. However, that exemption should be without prejudice to
the obligation to respect the applicable provisions of the sectoral legislation
and to the possibility to be checked and to be imposed penalties under that
legislation.

(58)
Regulation (EC) No 1782/2003 established a
framework of standards of good agricultural and environmental condition of the
land within which Member States are to adopt national standards taking account
of the specific characteristics of the areas concerned, including soil and climatic
conditions and existing farming systems (land use, crop rotation, farming
practices) and farm structures. Those standards of good agricultural and
environmental condition of the land aim at contributing to prevent soil
erosion, maintain soil organic matter and soil structure, ensure a minimum
level of maintenance, avoid the deterioration of habitats and protect and
manage water. The wider scope of the cross compliance system as laid down in
this Regulation should therefore include a framework within which Member States
should adopt national standards of good agricultural and environmental
condition. The Union framework should also include rules to better address
water, soil, carbon stock, biodiversity and landscape issues as well as minimum
level of maintenance of the land.

(59)
Beneficiaries should know clearly what they have
to comply with in relation to the rules on cross compliance. For that purpose,
all requirements and standards forming part of those rules should be
communicated by Member States in an exhaustive, understandable and explanatory
way, including, where possible, by electronic means.

(60)
An effective implementation of cross compliance
requires verification at beneficiaries' level that obligations are respected. Where
a Member State decides to make use of the option not to apply a reduction or
exclusion where the amount concerned is less than EUR 100, the competent
control authority should, for a sample of beneficiaries in the following year, verify
that the findings of the non-compliance concerned have been remedied.

(61)
To ensure harmonious cooperation between the
Commission and the Member States regarding the financing of CAP expenditure
and, more particularly, to allow the Commission to monitor the financial
management by the Member States and clear the accounts of the accredited paying
agencies, certain information has to be communicated by the Member States or to
be kept available to the Commission.

(62)
For the purposes of compiling the data to be
sent to the Commission, and to allow the Commission to have full immediate
access to expenditure data in both paper and electronic form, suitable rules on
the presentation and transmission of data, including rules on time limits, need
to be laid down.

(63)
As personal data or business secrets might be
involved in the application of the national control systems and the conformity
clearance, the Member States and the Commission should guarantee the
confidentiality of the information received in that context.

(64)
In the interests of sound financial management
of the Union budget and impartiality of treatment at both Member State and
beneficiary level, rules on the use of the euro should be laid down.

(65)
The rate of exchange of the euro into national
currency may vary in the course of the period during which an operation is
carried out. Therefore the rate applicable to the amounts concerned should be
determined taking into account the event through which the economic objective
of the operation is achieved. The rate of exchange applied should be that of
the date on which this event occurs. It is necessary to specify this operative
event or to waive its application, observing certain criteria and in particular
the rapidity with which currency movements are passed on. Those rules are laid
down in Council Regulation (EC) No 2799/98 of 15 December 1998 establishing
agrimonetary arrangements for the euro[31]
and they complete similar provisions of Regulation (EC) No 1290/2005. In the
interests of clarity and rationality the relevant provisions should be
integrated into the same act. Regulation (EC) No 2799/98 should therefore be
repealed.

(66)
Special rules should be laid down for dealing
with exceptional monetary situations arising either within the Union or on the
world market and requiring immediate action to ensure that the arrangements established
under the CAP operate effectively.

(67)
Member States not having adopted the euro should
have the option of making payments for expenditure resulting from the CAP
legislation in euro rather than in national currency. Specific rules are needed
to ensure that this option does not lead to any unjustified advantage for
parties making or receiving payment.

(68)
Each measure under the CAP should be subject to monitoring
and evaluation in order to improve its quality and demonstrate its
achievements. In this context a list of indicators should be determined and the
impact of the CAP policy assessed by the Commission in relation to policy
objectives. The Commission should set up a framework for a common monitoring
and evaluation ensuring among others that relevant data, including information
from Member States is available on a timely manner. In so doing it should take
into account the data needs and synergies between potential data sources. Moreover,
the Communication from the Commission to the European Parliament, the Council,
the European Economic and Social Committee and the Committee of the Regions: A
Budget for Europe 2020 - Part II stated that the climate related expenditure in
the overall Union budget should increase to at least 20%, with contribution
from different policies. The Commission should therefore be able to assess the
impact of the Union's support in the framework of the CAP to climate
objectives.

(69)
Union legislation concerning the protection of
individuals with regard to the processing of personal data and on the free
movement of such data, in particular Directive 95/46/EC of the European
Parliament and of the Council of 24 October 1995 on the protection of
individuals with regard to the processing of personal data and on the free
movement of such data[32]
and Regulation (EC) No 45/2001 of the European Parliament and of the Council of
18 December 2000 on the protection of individuals with regard to the processing
of personal data by the Community institutions and bodies and on the free
movement of such data[33]
are applicable.

(70)
In its judgment in Joined Cases C-92/09 and
93/09[34]
the Court of Justice of the European Union declared the relevant provisions in
Regulation (EC) No 1290/2005 concerning the obligation of Member States to
publish information on natural persons benefiting from the European
agricultural funds invalid. Since it is in the interest of natural persons that
their personal data are protected, and with a view to reconciling the different
objectives underlying the obligation to publish information on the
beneficiaries of funds, as provided for in Commission Regulation (EC) No
259/2008 laying down detailed rules for the application of Council Regulation
(EC) No 1290/2005 as regards the publication of information on the
beneficiaries of funds deriving from the European Agricultural Guarantee Fund
(EAGF) and the European Agricultural Fund for Rural Development (EAFRD)[35], that Regulation was amended
in order to lay down explicitly that this obligation does not apply to natural
persons. The adoption by the European Parliament and the Council of new rules
taking account of the objections expressed by the Court should be preceded by
in depth analysis and assessment in order to find the most appropriate way to
reconcile the right to protection of personal data of the beneficiaries with
the need for transparency. Pending that analysis and assessment, the current
provisions on the publication of information on beneficiaries of the European
agricultural funds should be maintained.

(71)
In order to ensure uniform conditions for the
implementation of this Regulation, implementing powers should be conferred on
the Commission. Those powers should be exercised in accordance with Regulation
(EU) No 182/2011 of the European Parliament and of the Council of 16 February
2011 laying down the rules and general principles concerning mechanisms for
control by Member States of the Commission's exercise of implementing powers[36].

(72)
The advisory procedure should be used for the
adoption of certain implementing acts. With regard to the implementing acts
involving the calculations of amounts by the Commission the advisory procedure enables
the Commission to fully assume its responsibility of managing the budget and aims
at increased efficiency, predictability and rapidity, taking into account the
time limits and the budgetary procedures. With regard to the implementing acts
within the framework of the payments made to the Member States and the
operation of the clearance of accounts procedure, the advisory procedure
enables the Commission to fully assume its responsibility of managing the
budget and verifying the annual accounts of the national paying agencies with a
view to accepting such accounts or, in the case of expenditure not effected in
compliance with Union rules, to excluding such expenditure from Union
financing. In other cases, the examination procedure should be used for the
adoption of implementing acts.

(73)
The Commission should further be empowered to
carry out certain administrative or management tasks, in particular concerning
the setting of the net balance available for EAGF
expenditure. To those empowerments Regulation (EU) No
182/2011 should not apply.

(74)
The transition from the provisions of the
Regulations repealed by this Regulation to those in this Regulation could give
rise to practical and specific difficulties. In order to deal with those
possible difficulties, provision should be made for the Commission to adopt the
necessary and duly justified measures.

(75)
As the programming period for the rural
development programmes financed on the basis of this Regulation runs from 1
January 2014, this Regulation should be applicable as from that date. However,
certain provisions related in particular to the financial management of the
funds should apply as from an earlier date corresponding to the beginning of
the financial year,

HAVE ADOPTED THIS REGULATION:

TABLE OF CONTENTS

EXPLANATORY MEMORANDUM......................................................................................... 2

1........... CONTEXT OF THE PROPOSAL................................................................................ 2

2........... RESULTS OF CONSULTATIONS WITH
THE INTERESTED PARTIES AND IMPACT ASSESSMENT...................................................................................................................................... 4

3........... LEGAL ELEMENTS OF THE PROPOSAL................................................................. 6

4........... BUDGETARY IMPLICATION.................................................................................... 7

REGULATION OF THE EUROPEAN PARLIAMENT AND OF
THE COUNCIL on the financing, management and monitoring of the common
agricultural policy.................................. Error!
Bookmark not defined.

TITLE I SCOPE AND DEFINITIONS..................................................................................... 11

TITLE II GENERAL PROVISIONS ON AGRICULTURAL
FUNDS...................................... 11

Chapter I Agricultural Funds....................................................................................................... 11

Chapter II Paying agencies and other bodies................................................................................ 11

TITLE III FARM ADVISORY SYSTEM.................................................................................. 11

TITLE IV FINANCIAL MANAGEMENT OF THE FUNDS................................................... 11

Chapter I EAGF......................................................................................................................... 11

Section 1 Financing of Expenditure.............................................................................................. 11

Section 2 Budget discipline.......................................................................................................... 11

Chapter II EAFRD..................................................................................................................... 11

Section 1 General provisions for EAFRD.................................................................................... 11

Section 2 Financing of rural development
programmes................................................................. 11

Section 3 Financial Contribution to rural
development programmes.............................................. 11

Section 4 Financing of the Prize for
innovative, local cooperation.................................................. 11

Chapter III Common Provisions.................................................................................................. 11

Chapter IV Clearance of accounts............................................................................................... 11

Section I General provisions........................................................................................................ 11

Section II Clearance................................................................................................................... 11

Section III Irregularities............................................................................................................... 11

TITLE V CONTROL SYSTEMS AND PENALTIES............................................................... 11

Chapter I General rules............................................................................................................... 11

Chapter II Integrated Administration and
Control System............................................................. 11

Chapter III Scrutiny of transactions............................................................................................. 11

Chapter IV Other provisions on checks....................................................................................... 11

TITLE VI CROSS COMPLIANCE........................................................................................... 11

Chapter I Scope......................................................................................................................... 11

Chapter II Control system and penalties in
relation to cross compliance........................................ 11

TITLE VII COMMON PROVISIONS...................................................................................... 11

Chapter I Communication........................................................................................................... 11

CHAPTER II Use of the euro..................................................................................................... 11

CHAPTER III  Report and evaluation......................................................................................... 11

TITLE VIII FINAL PROVISIONS............................................................................................ 11

ANNEX I.................................................................................................................................. 11

ANNEX II................................................................................................................................. 11

ANNEX III................................................................................................................................ 11

LEGISLATIVE FINANCIAL STATEMENT............................................................................ 11

TITLE I
SCOPE AND DEFINITIONS

Article 1
Scope

This
Regulation lays down the rules on:

(a)          the
financing of expenditure under the common agricultural
policy, including expenditure on rural development;

(b)          the farm advisory system;

(c)          the management and control
systems to be put in place by the Member States;

(d)          the cross-compliance system;

(e)          clearance of accounts.

Article 2
Terms used in this
Regulation

1.           The definitions of
"farmer", "agricultural activity", "agricultural area",
"holding" laid down in Article 4 of Regulation (EU) xxx/xxx[DP] shall
apply for the purposes of this Regulation, save as otherwise provided for in
this Regulation.

The terms "direct payments" referred
to in Article 1 of Regulation (EU) xxx/xxx[DP] shall apply for the purposes of
this Regulation.

2.           Force majeure and
exceptional circumstances as used in this Regulation in
relation to Regulation (EU) xxx/xxx[DP], Regulation (EU) xxx/xxx[sCMO] and
Regulation (EU) xxx/xxx[RD] may in particular be
recognised in cases such as:

(a)     the death of the beneficiary;

(b)     long-term professional incapacity of
beneficiary;

(c)     a severe natural disaster gravely
affecting the holding;

(d)     the accidental destruction of
livestock buildings on the holding;

(e)     an epizootic affecting part or all of
the beneficiary's livestock;

(f)      expropriation of a large part of the
holding if that could not have been anticipated on the day of lodging the
application.

TITLE II
GENERAL PROVISIONS ON AGRICULTURAL FUNDS

Chapter I
Agricultural Funds

Article 3
Funds financing
agricultural expenditure

1.           In order to achieve the
objectives of the common agricultural policy defined by the Treaty, the
financing of the various measures falling under it, including rural development shall be made by:

(a)     the European Agricultural Guarantee
Fund, hereinafter referred to as the ‘EAGF’;

(b)     the European Agricultural Fund for
Rural Development, hereinafter referred to as the ‘EAFRD’.

2.           The EAGF and the EAFRD
shall come under the general budget of the European Union.

Article 4
EAGF expenditure

1.           The EAGF shall be
implemented in shared management between the Member States and the Union and
shall finance the following expenditure, which shall be effected in accordance
with Union legislation:

(a)     measures regulating or supporting agricultural
markets;

(b)     direct payments to farmers under the
common agricultural policy;

(c)   the Union's financial contribution to information and promotion
measures for agricultural products on the internal market of the Union and in
third countries, undertaken by Member States on the basis of programmes other
than those referred to in Article 5 and selected by the Commission;

(d)     the
Union’s financial contribution to the Union School Fruit Scheme and to the
measures in relation to animal diseases and loss of consumer confidence referred
to in Articles 21 and 155 of Regulation (EU) No xxx/xxx [sCMO] respectively.

2.           The EAGF shall finance the
following expenditure in a direct manner and in accordance with Union
legislation:

(a)     promotion
of agricultural products, undertaken either directly by the Commission or via
international organisations;

(b)     measures,
undertaken in accordance with Union legislation, to ensure
the conservation, characterisation, collection and utilisation of genetic
resources in agriculture;

(c)     establishment and maintenance of
agricultural accounting information
systems;

(d)     agricultural survey systems, including
surveys on the structure of agricultural
holdings.

Article 5
EAFRD expenditure

The EAFRD
shall be implemented in shared management between the
Member States and the Union and shall finance the Union's financial contribution
to rural development programmes implemented
in accordance with the Union legislation on support for rural development,
as well as the expenditure related to the Prize for innovative, local cooperation
referred to in Chapter IV of Title III of Regulation (EU) No RD/xxx..

Article 6
Other expenditure,
including technical assistance

The EAGF and the EAFRD may each
respectively finance on a direct manner, on the initiative of the Commission
and/or on its behalf, the preparatory, monitoring, administrative and technical
support, as well as evaluation, audit and inspection
measures required to implement the common agricultural policy. Those measures shall include in
particular:

(a)
measures required for the analysis, management,
monitoring, information
exchange and implementation of the common agricultural policy, as well as measures relating to the implementation of control systems
and technical and administrative assistance;

(b)
the acquisition by the Commission of the
satellite images required for the checks in accordance with Article 21;

(c)
the measures taken by the Commission via
remote-sensing applications used for the monitoring of agricultural resources in
accordance with Article 22;

(d)
measures required to maintain and develop methods
and technical means
for information, interconnection, monitoring and control of the financial management of the funds used to
finance the common agricultural policy;

(e)
provision of information on the common
agricultural policy in accordance with Article 47;

(f)
studies on the common agricultural policy
and evaluation of measures financed by the EAGF and the EAFRD, including
improvement of evaluation methods and exchange of information on practices;

(g)
where relevant, executive agencies set up
in accordance with Council Regulation (EC) No 58/2003[37], acting in connection with the
common
agricultural policy;

(h)
measures relating to dissemination of information, raising awareness,
promoting cooperation and exchanging experience at Union level, undertaken in
the context of rural development, including networking of the parties concerned;

(i)
measures required for the development,
registration and protection of logos within the framework of the Union quality
policies and for the protection of intellectual property rights linked to it,
as well as the necessary information technology (IT) developments.

Chapter II
Paying agencies and other bodies

Article 7
Accreditation and withdrawal
of accreditation of paying agencies
and coordinating bodies

1.           Paying agencies shall be
dedicated departments or bodies of the Member States responsible for the
management and control of expenditure referred to in Article 4(1) and Article 5.

With the exception of payment, the execution of
those tasks may be delegated.

2.           Member States shall
accredit as paying agencies departments or bodies which fulfil the accreditation
criteria to be laid down by the Commission pursuant to Article 8(a).

Each Member State shall, taking into account
its constitutional provisions, restrict the number of its accredited paying agencies
to one per Member State or one per region, where applicable. However, where
paying agencies are established at regional level, Member States shall, in
addition, accredit a paying agency at national level for aid schemes which, by
their nature, have to be managed at national level.

3.           By [1 February] of the year following the financial year concerned,
the person in charge of the accredited paying agency shall draw up:

(a)     the annual
accounts for the expenditure made in the execution of the tasks entrusted to
their accredited paying agencies, accompanied by the requisite information for
their clearance in accordance with Article 53;

(b)     a management declaration of assurance
as to the completeness, accuracy and veracity of the accounts, the proper
functioning of the internal control systems as well as to the legality and
regularity of the underlying transactions and the respect of the principle of
sound financial management;

(c)     a summary of the results of all
available audits and checks carried out, including an analysis of systematic or
recurrent weaknesses as well as corrective actions taken or planned.

4.           Where more than one paying
agency is accredited, the Member State shall designate a body, hereinafter
referred to as the "coordinating body", to which it assigns the
following tasks:

(a)     to collect the information to be made
available to the Commission and to send that information to the Commission;

(b)     to establish a synthesis report providing
an overview at national level of all management declarations of assurance
referred to in point (b) of paragraph 3 and the audit opinions thereon referred
to in Article 9;

(c)     to ensure that remedial action is
taken as regards any deficiencies of a common nature and that the Commission is
kept informed of the follow-up;

(d)     to promote and ensure harmonised
application of the Union rules.

The coordinating body shall be subject to
specific accreditation by the Member States as
regards the processing of the financial information referred to in point (a)
of the first subparagraph.

5.           Where an accredited paying agency does not meet or no longer meets
one or more of the accreditation criteria referred to in paragraph 2, the
Member State shall withdraw its accreditation unless the paying agency makes
the necessary changes within a period to be determined according to the
severity of the problem.

6.           The
paying agencies shall manage and ensure control of the operations linked to
public intervention for which they are responsible and they shall retain
overall responsibility in that field.

Article 8
Commission powers

1.           To ensure the sound
operation of the system provided for in Article 7, the Commission shall be empowered
to adopt delegated acts in accordance with Article 111 concerning:

(a)     minimum conditions for the
accreditation of paying agencies with regard to the internal environment, control
activities, information and communication, and monitoring, as well as rules on
the procedure for issuing and withdrawing accreditation;

(b)     rules relating to supervision and the
procedure for reviewing accreditation of paying agencies;

(c)     minimum conditions for the
accreditation of coordination bodies as well as rules on the procedure for
issuing and withdrawing accreditation.

2            The Commission shall lay
down, by means of implementing acts, rules on:

(a)     the obligations of the paying agencies
as regards public intervention, as well as on the content of their management
and control responsibilities.

(b)     the functioning of the coordinating
body and the notification of information to the Commission as referred to in
Article 7(4).

The implementing acts provided for in the first
subparagraph shall be adopted in accordance with the examination procedure
referred to in Article 112(3).

Article 9
Certification bodies

1.           The certification
body shall be a public or private audit body designated by the Member State which shall provide an opinion on the management
declaration of assurance covering the completeness, accuracy and veracity of
the annual accounts of the paying agency, the proper functioning of its internal
control system, the legality and regularity of the underlying transactions, as
well as the respect of the principle of sound financial management.

It shall be operationally independent from both
the paying agency concerned and the authority which has accredited that agency.

2.           The Commission shall, by
means of implementing acts, lay down rules
concerning the status of the certification bodies, the specific tasks,
including the checks, which they have to carry out as well as the certificates
and the reports, together with the documents accompanying them, to be drawn up
by those bodies. Those implementing acts shall be adopted in accordance with
the examination procedure referred to in Article 112(3).

Article 10
Admissibility of payments
made by the paying agencies

The expenditure referred to in Article 4(1)
and in Article 5 may be covered by Union
financing only if it has been effected by accredited paying agencies.

Article 11
Payment in full to
beneficiaries

Save explicitly
provided otherwise in the Union legislation, payments relating to the financing provided for in this
Regulation shall be disbursed in full to the beneficiaries.

TITLE III
FARM ADVISORY SYSTEM

Article 12
Principle and scope

1.           Member States shall establish
a system of advising beneficiaries on land and farm management (hereinafter
referred to as the ‘farm advisory system’) operated by one or more designated bodies.
The designated bodies may be public or private.

2.           The farm advisory system shall
cover at least:

(a)     the statutory management requirements
and the standards for good agricultural and environmental condition of land as
laid down in Chapter I of Title VI;

(b)     the agricultural practices beneficial
for the climate and the environment as laid down in Chapter 2 of Title III of
Regulation (EU) No xxx/xxx [DP] and the maintenance of the agricultural area as
referred to in Article 4(1)(c) of Regulation (EU) No xxx/xxx [DP];

(c)     the requirements or actions related to
climate change mitigation and adaptation, biodiversity,
protection of water, animal and plant disease notification and innovation at minimum
as laid down in Annex I to this Regulation;

(d)     the sustainable
development of the economical activity of the small farms as defined by the
Member States and at least of the farms participating
in the small farmers scheme referred to in Title V of Regulation (EU) No
xxx/xxx[DP].

3.           The farm advisory system may
also cover in particular:

(a)     the sustainable development of the
economical activity of holdings other than those referred to in paragraph
(2)(d);

(b)     the minimum requirements
established by national legislation, as referred to in Article 29(3) and 30(2)
of Regulation (EU) No xxx/xxx [RD]

Article 13
Specific requirements
relating to the farm advisory system

1.           Member States shall ensure
that the advisors within the farm advisory system are suitably qualified and
regularly trained.

2.           Member States shall ensure
the separation between advice and control. In this respect and without
prejudice to national legislation concerning public access to documents, Member
States shall ensure that the designated bodies referred to in Article 12 do not disclose personal or individual
information and data they obtain in their advisory activity to persons other
than the beneficiary managing the holding concerned, with the exception of any
irregularity or infringement found during their activity which is covered by an
obligation laid down in Union or national law to inform a public authority, in
particular in the case of criminal offences.

3.           The competent national
authority shall provide the beneficiary, where appropriate by the use of
electronic means, with the appropriate list of designated bodies.

Article 14
Access to the farm advisory system

Beneficiaries, whether or not they receive
support under the common agricultural policy, including rural development, may use
the farm advisory system on a voluntary basis.

However Member States may determine, in
accordance with objective criteria, the categories of beneficiaries that have priority
access to the farm advisory system. Member States shall nevertheless ensure
that priority is given to farmers whose access to an advisory service other
than the farm advisory system is most limited.

The farm advisory system shall ensure that
beneficiaries have access to advice reflecting the specific situation of their
holding.

Article 15
Commission powers

1.           In order to guarantee the
proper functioning of the farm advisory system, the Commission shall be
empowered to adopt delegated acts in accordance with Article 111 concerning
provisions aiming at rendering that system fully operational. Those
provisions may relate, amongst others, to the accessibility criteria for
farmers.

2.           The Commission may, by
means of implementing acts, adopt rules for the uniform implementation of the
farm advisory system. Those implementing acts shall be adopted in accordance
with the examination procedure referred to in Article 112(3).

TITLE IV
FINANCIAL MANAGEMENT OF THE FUNDS

Chapter I
EAGF

Section 1
Financing of Expenditure

Article 16
Budget ceiling

1.           The
annual ceiling for EAGF expenditure shall be constituted by the maximum amounts set for it under Regulation (EU) No xxx/xxx [MFF].

2.           In the event that the
Union legislation provides for sums to be reduced from the amount referred to
in paragraph 1, the Commission shall, by means of implementing acts, set
the net balance available for EAGF expenditure on the basis of the data referred
to in that legislation.

Article 17
Monthly payments

1.                The appropriations necessary to finance
the expenditure referred to in Article 4(1) shall be made available to Member
States by the Commission in the form of monthly payments, on the basis of the
expenditure effected by the accredited paying agencies during a reference period.

2.                Until
transfer of the monthly payments by the Commission, the resources required to
undertake expenditure shall be mobilised by the Member States according to the
needs of their accredited paying agencies.

Article 18
Procedure for monthly
payments

1.           Monthly
payments shall be made by the Commission, without prejudice to the implementing
acts referred to in Articles 53 and 54, for expenditure effected by accredited paying agencies during the reference
month.

2.           Monthly payments shall be
made to each Member State at the latest on the third working day of the second
month following that in which the expenditure is effected.

Expenditure effected by Member States between 1
and 15 October shall count as being made in the month of October. Expenditure
effected between 16 and 31 October shall count as being made in the month of
November.

3.           The Commission shall, by
means of implementing acts, determine the monthly payments which it makes, on
the basis of a declaration of expenditure from the Member States and the
information supplied in accordance with Article 102(1), taking account
reductions or suspensions applied under Article 43 or any other corrections.
Those implementing acts shall be adopted in accordance with the advisory
procedure referred to in Article 112(2).

4.           The Commission may, by
means of implementing acts, decide to make supplementary payments or
deductions. In such cases, the Committee referred to in Article 112(1) shall be
informed at its next meeting.

Article 19
Administrative and
personnel costs

Expenditure
relating to administrative and personnel costs incurred by Member States and by beneficiaries of aid from the EAGF shall not be
borne by the Fund.

Article 20
Public intervention
expenditure

1.           Where, within the
framework of the common organisation of the markets, a sum per unit is not
determined in respect of a public intervention, the EAGF shall finance the
measure concerned on the basis of standard amounts uniform throughout the
Union, in particular for funds originating in the Member States used for
buying-in products, for material operations arising from storage and, where
appropriate, for processing of intervention products.

2.           In order to ensure the
funding by the EAGF of the public intervention expenditure the Commission shall
be empowered to adopt delegated act in accordance with Article 111 concerning:

(a)     the type of measures eligible for
Union financing and the reimbursement conditions;

(b)     the eligibility conditions and
calculation methods on the basis of the information actually observed by the
paying agencies or on the basis of flat-rates determined by the Commission, or
on the basis of flat-rate or non-flat-rate amounts provided for by the sectoral
agricultural legislation.

3.           The amounts referred to in
the paragraph 1 shall be set by the Commission by means of implementing acts.
Those implementing acts shall be adopted in accordance with the advisory
procedure referred to in Article 112(2).

Article 21
Acquisition of satellite
images

The list of the satellite images required
for checks shall be agreed by the Commission and the Member States in
accordance with the specification prepared by each Member State.

The Commission shall supply those satellite
images free of charge to the control bodies or to suppliers of services authorised
by those bodies to represent them.

The Commission shall remain the owner of
the images and shall recover them on completion of the work. It may also
provide that work is carried out on enhancing techniques and working methods in
connection with the inspection of agricultural areas by remote sensing.

Article 22
Monitoring of agricultural
resources

The measures financed pursuant to point (c)
of Article 6 shall aim to give the Commission the means to manage Union
agricultural markets in a global context, to ensure agri-economic monitoring of
agricultural land and of the condition of crops so as to enable estimates to be
made, in particular as regards yields and agricultural production, to share the
access to such estimates in an international context, such as initiatives
coordinated by United Nations organisations or other international agencies, to
contribute to transparency of world markets, and to ensure technological
follow-up of the agri-meteorological system.

The measures financed pursuant to point (c)
of Article 6 concern the collection or purchase of data needed to implement and
monitor the common agricultural policy, including satellite data and meteorological
data, the creation of a spatial data infrastructure and a website, the carrying
out of specific studies on climatic conditions and the updating of
agri-meteorological and econometric models. Where necessary, those measures
shall be carried out in collaboration with national laboratories and bodies.

Article 23
Implementing powers

The Commission may, by means of
implementing acts, adopt rules relating to the financing pursuant to points (b)
and (c) of Article 6, the procedure under which the measures referred to in
Articles 21 and 22 shall be carried out in order to meet the objectives
assigned, the framework governing the acquisition, enhancing and utilisation of
satellite images and meteorological data, and the applicable deadlines. Those
implementing acts shall be adopted in accordance with the examination procedure
referred to in Article 112(3).

Section 2
Budget discipline

Article 24
Compliance with the
ceiling

1.           Throughout
the budget procedure and the implementation of the budget, appropriations relating
to EAGF expenditure shall not exceed the amount referred to in Article 16.

All legislative
instruments proposed by the Commission and adopted by the European Parliament
and the Council, the Council or the Commission and having an influence on the
EAGF budget shall comply with the amount referred to in Article 16.

2.           Where Union legislation provides for
a financial ceiling in euro for agricultural expenditure in respect of a Member State, such
expenditure shall be reimbursed subject to that limit set in euro, with any necessary adjustments being made if Article 43
applies.

3.           National ceilings for
direct payments referred to in Article 7 of Regulation (EU) No xxx/xxx[DP],
corrected by the adjustments laid down in Article
25 of this Regulation, shall be deemed to be financial ceilings in euro.

Article 25
Financial discipline

1.           With
a view to ensuring that the annual ceilings set out in the Regulation (EU) No
xxx/xxx [MFF] for the financing of the market related expenditure and
direct payments are respected, an adjustment rate of the direct payments shall
be determined when the forecasts for the financing of
the measures financed under that subceiling for a given financial year
indicate that the applicable annual ceilings will be exceeded.

2.           The Council, acting on a
proposal from the Commission presented no later than 31 March of the calendar
year in respect of which the adjustment referred to in paragraph 1 applies,
shall determine the adjustment no later than 30 June of the same calendar year.

3.           If by 30 June in any year the
adjustment rate has not been set, the Commission shall set it by means of an implementing
act and shall inform the Council immediately. Such implementing act shall be
adopted in accordance with the advisory procedure referred to in Article 112(2).

4.           Until 1 December, on a proposal by
the Commission, on the basis of new information in its possession, the Council may adapt the
adjustment rate for direct payments set in accordance with paragraphs 2 or 3.

5.           The Commission may by means
of implementing act  adopt the terms and conditions applicable to
appropriations carried over in accordance with Article [149(3)] of Regulation (EU)
No FR/xxx in order to finance the expenditure referred to in Article 4(1)(b) of
this Regulation. Those implementing acts shall be adopted in accordance with
the advisory procedure referred to in Article 112(2).

6.           Before applying this
Article, account shall first be taken of the amount authorised by the budget
authority for the Reserve for crises in the agricultural sector referred to in point
14 of the Interinstitutional Agreement between the European Parliament, the
Council and the Commission on cooperation in budgetary matters and on sound
financial management.

Article 26
Budget discipline
procedure

1.           The Commission shall
present to the European Parliament and to the Council, at the same time as the
draft budget for financial year N, its forecasts for financial years N - 1, N
and N + 1.

2.           If, on drawing up the
draft budget for financial year N, there appears to be a risk that the amount
referred to in Article 16 for financial year N will be exceeded, the Commission
shall propose to the European Parliament and the Council or to the Council the
measures necessary to ensure compliance with that amount.

3.           At any time, if the
Commission considers that there is a risk of the amount referred to in Article
16 being exceeded and that it cannot take adequate measures to remedy the situation
under its powers, it shall propose other measures to ensure compliance with
that amount. These measures shall be adopted by the Council on the basis of Article 43(3) of the Treaty
or by the European Parliament and the Council on the
basis of Article 43(2) of the Treaty.

4.           If, at the end of financial year N,
reimbursement requests from the Member States exceed or are likely to exceed the amount referred to
in Article 16, the Commission shall:

(a)     consider the requests presented by
Member States pro rata and within the limit
of the available budget, and shall, by means of implementing acts, set provisionally the amount of the payments for
the month concerned;

(b)     determine, for all Member States, at
the latest by 28 February of the following
year, their situation with regard to Union financing for the previous
financial year;

(c)     set, by means of implementing act the
total amount of Union financing broken down by Member State, on the basis of a
single rate of Union financing, within the limit of the budget which was available
for the monthly payments;

(d)     effect, at the latest when the monthly
payments are made for March of year N+1, any compensations to be carried out
with respect to Member States.

The implementing acts provided for in points
(a) and (c) of the first subparagraph shall be adopted in accordance with the
advisory procedure referred to in Article 112(2).

Article 27
Early-warning system

In order to
ensure that the budget ceiling referred to in Article 16 will not be exceeded,
the Commission shall implement a monthly
early-warning and monitoring system in respect of EAGF expenditure.

Before the
beginning of each financial year, the Commission shall determine for that
purpose monthly expenditure profiles based, where appropriate, on average
monthly expenditure during the previous three years.

The Commission
shall present periodically to the European Parliament and to the Council a
report examining the development of expenditure effected in relation to the
profiles and containing an assessment of the foreseeable implementation for the
current financial year.

Article 28
Reference exchange rates

1.           When adopting the draft
budget, or a letter of amendment to the draft budget which concerns
agricultural expenditure, the Commission shall use for EAGF budget estimates
the average euro/US dollar exchange rate recorded on the market during the
latest quarter ending at least 20 days before adoption of the budget document
by the Commission.

2.           When adopting a draft
amending and supplementary budget or a letter of amendment thereto, in so far
as those documents concern appropriations relating to the measures referred to
in Article 4(1)(a), the Commission shall use:

(a)     firstly, the average euro/US dollar
exchange rate actually recorded on the
market from 1 August of the previous financial year until the end of the
latest quarter ending at least 20 days before adoption of the budget document
by the Commission and at the latest on 31 July of the current financial year,
and

(b)     secondly, as a forecast for the
remainder of the financial year, the average exchange rate actually recorded
during the latest quarter ending at least 20
days before adoption of the budget document by the Commission.

Chapter II
EAFRD

Section 1
General provisions for EAFRD

Article 29
No double funding

Without prejudice to the eligibility for
support under Article 30(2) of Regulation (EU) No RD/xxx, expenditure financed
under the EAFRD shall not be subject of any other financing under the EU
budget.

Article 30
Provisions applying to all
payments

1.           In accordance with Article
67(1) of Regulation (EU) No CR/xxx payments by the Commission of the EAFRD
contribution as referred to in Article 5 shall not exceed the budget
commitments.

They shall be assigned to the earliest open
budget commitment.

2.           Article [81] of Regulation (EU) No FR/xxx shall apply.

Section 2
Financing of rural development programmes

Article 31
Financial contribution
from the EAFRD

The financial
contribution from the EAFRD towards expenditure under rural development
programmes shall be determined for each programme, within the ceilings
established by Union legislation concerning support for rural development by
the EAFRD.

Article 32
Budget commitments

As regards the Union's budget commitments
for rural development programmes, Article 66 of Regulation (EU) No CR/xxx shall
apply.

Section 3
Financial Contribution to rural development programmes

Article 33
Provisions applying to
payments for rural development programmes

1.           The
appropriations necessary to finance the expenditure
referred to in Article 5 shall be made available to Member States in the form
of prefinancing, interim payments and the payment
of a balance, as described in this Section.

2.           The
combined total of prefinancing and interim payments shall not exceed 95 % of the EAFRD's contribution to each rural development
programme.

In accordance with Article 70(2) of Regulation
(EU) No CR/xxx, when the ceiling of 95 % is reached, the Member States shall
continue transmitting request for payments to the Commission.

Article 34
Prefinancing arrangements

1.           Following the Commission decision
approving the programme, an initial prefinancing amount for the whole
programming period shall be paid by the Commission. This initial
pre-financing amount shall represent 4% of the EAFRD contribution to the programme concerned. It may be
split into a maximum of three instalments depending on budget availability. The
first instalment shall represent 2% of the EAFRD contribution to the programme
concerned.

2.           The total amount paid as
prefinancing shall be reimbursed to the Commission if no expenditure is
incurred and no declaration of expenditure for
the rural development programme is sent within 24 months of the date on which
the Commission pays the first instalment of the prefinancing amount.

3.           Interest generated on the
prefinancing shall be posted to the rural development programme concerned and
deducted from the amount of public expenditure indicated on the final
declaration of expenditure.

4.           The total prefinancing
amount shall be cleared in accordance with the procedure referred to in Article
53 before the rural development programme is closed.

Article 35
Interim payments

1.           Interim payments shall be made for
each rural development programme. They shall be calculated by
applying the co-financing rate for each measure to the incurred public expenditure pertaining to
it.

2.           Subject to resource availability, the
Commission shall make interim payments in order to reimburse the expenditure incurred by
accredited paying agencies in implementing the programmes.

3.           Each
interim payment shall be made subject to compliance with
the following requirements:

(a)     transmission to the Commission of a
declaration of expenditure signed by the accredited paying agency, in
accordance with Article 102(1)(c);

(b)     no overrun of the total EAFRD
contribution to each measure for the entire period covered by the programme
concerned;

(c)     transmission to the Commission of the
last annual progress report on the implementation of the rural development
programme.

4.           If
one of the requirements laid down in paragraph 3 is not met, the Commission shall forthwith inform the accredited
paying agency or the coordinating body, where one has been appointed. If one of
the requirements laid down in point (a) or (c) of paragraph 3 is not respected,
the declaration of expenditure shall be inadmissible.

5.           The
Commission shall make interim payments within 45 days of registering a
declaration of expenditure for which the requirements set out in paragraph 3 of
this Article are met, without prejudice to the Article 39 and to the implementing
acts referred to in Articles 53 and 54.

6.           Accredited
paying agencies shall establish and forward, either
directly or via the intermediary of the coordinating body, where one has been
appointed, intermediate declarations of expenditure relating to rural
development programmes to the Commission, within periods set by the Commission
by means of implementing acts adopted in accordance with the examination
procedure referred to in Article 112(3).

Declarations of expenditure shall cover
expenditure that the paying agencies have incurred during each of the periods concerned. However, in cases where
expenditure referred to in Article 55(7) of Regulation (EU) No CR/xxx cannot be
declared to the Commission in the period concerned due to pending approval of
the program modification by the Commission, it may be declared in subsequent
periods.

Intermediate
declarations of expenditure in respect of expenditure incurred from 16 October
onwards shall be booked to the following year's budget.

7.           Article 74 of Regulation (EU) No CR/xxx shall apply.

Article 36
Payment of the balance and
closure of the programme

1.           After
receiving the last annual progress report on the
implementation of a rural development programme, the Commission shall pay the
balance, subject to resource availability, on the basis of the financial plan
in force, the annual accounts for the last execution year for the relevant
rural development programme and of the corresponding clearance decision. Those
accounts shall be presented to the Commission no later than 6 months after the
final eligibility date of expenditure as referred to in Article 55(2) of Regulation (EU) No xxx/xxx[CR] and shall
cover the expenditure incurred by the paying agency up to the last eligibility
date of expenditure.

2.                The
balance shall be paid not later than six months after the information and
documents referred to in paragraph 1 of this Article are considered receivable
by the Commission and the last annual account have been cleared. The amounts
still committed after the balance is paid shall be decommitted by the
Commission within a period of six months, without prejudice to Article 37(5).

3.           If
by the time limit set out in paragraph 1 the Commission has not been sent the
last annual progress report and the
documents needed for clearance of the accounts
of the last execution year for the programme the balance shall be
automatically decommitted in accordance with Article 37.

Article 37
Automatic decommitment for
rural development programmes

1.           The
Commission shall automatically decommit any portion of a budget commitment for
a rural development programme that has not been used for the purpose of
prefinancing or making interim payments or for
which no declaration of expenditure fulfilling the requirements laid down in
Article 35(3) has been presented to it in relation to expenditure incurred by 31 December of the second year following that of the
budget commitment.

2.           That
part of budget commitments still open on the last eligibility date of
expenditure as referred to in Article 55(2) of Regulation (EU) No xxx/xxx[CR]
for which a declaration of expenditure has not been made by within 6 months
after that date shall be automatically decommitted.

3.           In
the event of any legal proceedings or an
administrative appeal having suspensory effect, the period for automatic
decommitment referred to in paragraph 1 or paragraph 2 shall be interrupted, in
respect of the amount relating to the operations concerned, for the duration of
those proceedings or that administrative appeal, provided that the Commission
receives substantiated notification from the Member State by 31 December of
year N + 2.

4.           The following shall be
disregarded in calculating the automatic decommitment:

(a)     that part of the budget commitments
for which a declaration of expenditure has been made but reimbursement of which
has been reduced or suspended by the
Commission at 31 December of year N + 2;

(b)     that part of the budget commitments
which a paying agency has been unable to disburse for reasons of force
majeure seriously affecting implementation of the rural development programme.
National authorities claiming force majeure must demonstrate the direct
consequences on the implementation of all or part of the programme.

The Member State shall send the Commission
information on the exceptions referred to in the first subparagraph by 31
January for the amount to be declared by the end of the preceding year.

5.           The
Commission shall inform Member States in good
time if there is a risk of automatic decommitment. It shall inform them of the
amount involved as indicated by the information in its possession. The Member
States shall have two months from receiving this information to agree to the
amount in question or present observations. The Commission shall carry out the
automatic decommitment not later than nine months after the last time-limit
resulting from the application of paragraphs 1 to 3.

6.           In the event of automatic decommitment, the EAFRD contribution to the rural
development programme concerned shall be reduced, for the year in question, by
the amount automatically decommitted. The Member State shall produce a revised
financing plan splitting the reduction of the aid between the measures for
approval by the Commission. If it does not do so, the Commission shall reduce
the amounts allocated to each measure pro rata.

Section 4
Financing of the Prize for innovative, local cooperation

Article 38
Budget commitments

The Commission Decision adopting the list
of the projects to which the Prize for innovative, local cooperation is
awarded, as referred to in Article 58(4) of Regulation (EU) No RD/xxx shall
constitute a financing decision within the meaning of Article [75(2)] of
Regulation (EU) No FR/xxx.

Following the adoption of the Decision
referred to in the first paragraph, the Commission shall made a budget
commitment by Member State for the total amount of the prizes granted to
projects in that Member State within the limit referred to in Article 51(2) of
Regulation (EU) No RD/xxx.

Article 39
Payments to the Member
States

1.           Within the framework of
the interim payments referred to in Article 35, the Commission shall make
payments in order to reimburse the expenditure incurred by accredited paying
agencies in awarding the Prizes referred to in this Section in the limits of
the available budget commitments for the Member States concerned.

2.           Each payment shall be
subject to the transmission to the Commission of a declaration of expenditure
signed by the accredited paying agency, in accordance with Article 102(1)(c).

3.           Accredited paying agencies
shall establish and forward, either directly or via the intermediary of the
coordinating body, where one has been appointed, declarations of expenditure
relating to the Prize for innovative, local cooperation to the Commission,
within periods set by the Commission by means of implementing acts adopted in
accordance with the examination procedure referred to in Article 112(3).

Declarations of expenditure shall cover
expenditure that the paying agencies have incurred during each of the periods
concerned.

Article 40
Automatic decommitment for
the Prize for innovative, local cooperation

The Commission shall automatically decommit
the amounts referred to in the second subparagraph of Article 38 that have not
been used for reimbursing the Member States as laid down in Article 39 or for
which no declaration of expenditure meeting the conditions laid down in that
Article has been presented to it in relation to expenditure incurred by 31
December of the second year following that of the budget commitment.

Article 37(3), (4) and (5) shall apply mutatis
mutandis.

Chapter III
Common Provisions

Article 41
Agricultural financial
year

Without prejudice to the special provisions
on declarations of expenditure and revenue relating to public intervention laid
down by the Commission pursuant to Article 48(7)(a), the agricultural financial
year shall cover expenditure paid and revenue received and entered in the
accounts of the EAGF and EAFRD budget by the paying agencies in respect of
financial year «N» beginning on 16 October of year «N-1» and ending on 15
October of year «N».

Article 42
Compliance with payment
deadlines

1.           Where payment deadlines are laid down
by Union legislation, any payment made by the paying agencies to the beneficiaries before the
earliest possible date of payment and after the latest possible date of payment
shall make the payments ineligible for Union financing, except in the cases,
conditions and limits to be determined taking into account the principle of
proportionality.

In order to make the financial impact
proportional to the payment delay observed, the Commission shall be empowered
to adopt delegated acts in accordance with Article 111 concerning rules on the
reduction of payments in relation to the non-respect of the payment period.

2.           Where the latest possible
date of payment is not respected by the Member States, they shall pay the beneficiaries
default interests, supported from the national budget.

Article 43
Reduction and suspension
of monthly and interim payments

1.           Where
the declarations of expenditure or the information referred to in Article 102 enable
the Commission to establish that expenditure has been effected by bodies which
are not accredited paying agencies, that payment periods or financial ceilings
set by Union legislation have not been respected or that expenditure has otherwise
not been effected in accordance with Union rules, the Commission may reduce or
suspend the monthly or interim payments to the Member State concerned under the
decision on monthly payments referred to in Article 18(3) or in the framework
of the interim payments referred to in Article 35, after giving the Member
State an opportunity to submit its comments.

Where the declarations of expenditure or the
information referred to in Article 102 do not enable the Commission to
establish that the expenditure has been effected in accordance with Union
rules, the Commission shall ask the Member State concerned to supply further
information and submit its comments within a period which may not be less than
30 days. If the Member State fails to respond to the Commission request within
the period determined or if the response is considered unsatisfactory or
demonstrates that the expenditure has not been effected in accordance with
Union rules, the Commission may reduce or suspend the monthly or interim
payments to the Member State concerned under the decision on monthly payments
referred to in Article 18(3) or in the framework of the interim payments
referred to in Article 35.

2.           The Commission may, by way
of implementing acts, reduce or suspend the monthly or interim payments to a
Member State if all of the following conditions are met:

(a)     one or more of the key components of
the national control system in question do not exist or are not effective due
to the gravity or persistence of the deficiencies found, or irregular payments
are not being recovered with the necessary diligence;

(b)     the deficiencies referred to in point
(a) are of a continuous nature and have been the reason for at least two
implementing acts pursuant to Article 54, excluding from Union financing expenditure
from the Member State concerned; and

(c)     the Commission concludes that the
Member State concerned is not in a position to implement the necessary measures
to remedy the situation in the immediate future.

The implementing acts provided for in the first
subparagraph shall be adopted in accordance with the advisory procedure
referred to in Article 112(2).

The reduction or suspension shall be applied to
the relevant expenditure effected by the paying agency where the deficiencies
exist for a period to be determined in the implementing acts referred to in the
first subparagraph, which shall not exceed twelve months but which may
be prolonged for further periods not exceeding twelve months if the conditions for
the reduction or suspension continue to be met. It shall not be continued if those
conditions are no longer met.

Before adopting the implementing acts referred
to in the first subparagraph, the Commission shall inform the Member State
concerned of its intention and shall ask it to react within a period which may
not be less than 30 days.

The decisions on the monthly payments referred
to in Article 18(3) or on the interim payments referred to in Article 35 shall
take account of the implementing acts adopted under this paragraph.

3.           Reductions and suspensions
under this Article shall be applied in accordance with the principle of
proportionality and are without prejudice to the implementing acts referred to in
Articles 53 and 54.

4.           Reductions and suspensions
under this Article shall be without prejudice to Articles 17,  20 and 21 of
Regulation (EU) No CR/xxx.

The suspensions referred to in Articles 17 and 20
of Regulation (EU) No CR/xxx shall be applied following the procedure laid down
in paragraph 2 of this Article.

Article 44
Suspension of payments in
case of late submission

When sectoral agricultural legislation
requires Member States to submit, within a specific period of time, information
on the numbers of checks carried out and their outcome and the Member States
overrun that period, the Commission may suspend the monthly payments referred
to in Article 18 or the interim payments referred to in Article 35 for which
the relevant statistical information has not been sent in time.

Article 45
Assignment of revenue

1.           The following shall be
regarded as assigned revenue within the meaning of Article [18] of Regulation (EU)
No FR/xxx:

(a)     sums which, under Articles 42, Article
53 as regards expenditure under EAGF, 54 and 56, must be paid to the Union
budget, including interest thereon;

(b)     sums which are collected or recovered
under Chapter III of Title I of Part II of Regulation (EU) No sCMO align/xxx
of European parliament and of the Council[38];

(c)     sums which have been collected as a
consequence of penalties in accordance with the specific rules laid down in
sectoral agricultural legislation, save if that legislation explicitly provides
that those amounts may be retained by the Member States;

(d)     amounts corresponding to penalties
applied in accordance with the rules on cross-compliance laid down in Chapter II
of Title VI, as regards expenditure under EAGF;

(e)     any security, deposit or guarantee
furnished pursuant to Union legislation adopted within the framework of Common Agricultural
Policy, excluding rural development, which is forfeited. However, forfeited
securities lodged when issuing export or import licences or under a tendering
procedure for the sole purpose of ensuring the submission by tenderers of
genuine tenders shall be retained by the Member States.

2.            The sums referred to in paragraph 1 shall be paid to the Union
budget and, in the event of reuse, shall be used exclusively to finance EAGF or
EAFRD expenditure.

3.           This Regulation shall
apply mutatis mutandis to assigned revenue referred to in paragraph 1.

4.           As regards the EAGF, Articles
[150 and 151] of Regulation (EU) No FR/xxx shall apply mutatis mutandis
to the keeping of accounts on assigned revenue referred to in this Regulation.

Article 46
Keeping of separate
accounts

Each paying agency shall keep a set of
separate accounts for the appropriations entered in the budget of the Union for
the EAGF and the EAFRD.

Article 47
Financing of information
measures

1.           The provision of
information financed pursuant to point (e) of Article 6 shall aim, in
particular, at helping to explain, implement and develop the common
agricultural policy and raising public awareness of the content and objectives
of that policy, at reinstating consumer confidence following crises through
information campaigns, at informing farmers and other parties active in rural
areas and promoting the European model of agriculture and helping people
understand it.

It shall supply coherent, objective and
comprehensive information, both inside and outside the Union, in order to give
an overall picture of that policy.

2.           The measures referred to
in paragraph 1 may be:

(a)     annual work programmes or other
specific measures presented by third parties;

(b)     activities implemented at the
Commission's initiative.

The measures which are
required by law or the measures already receiving financing under another Union
action shall be excluded.

In order to implement activities as referred to
in point (b) the Commission may be assisted by external experts.

The measures referred to in the first
subparagraph shall also contribute to covering the corporate communication of the Union's
political priorities provided that  they are related to the general objectives
of this Regulation.

3.           The Commission shall
publish by 31 October of each year a call of proposal respecting the conditions
laid down in Regulation (EU) No FR/xxx.

4.           The Committee referred to
in Article 112(1) shall be notified of measures envisaged and taken pursuant to
this Article.

5.           The Commission shall
present a report on the implementation of this Article to the European
Parliament and the Council every two years.

Article 48
Commission powers

1.           In order to take account
of revenue collected by paying agencies for the Union's budget when making
payments on the basis of the expenditure declarations submitted by Member
States, the Commission shall be empowered to adopt delegated act in accordance
with Article 111 concerning the conditions under which certain types of
expenditure and revenue under the EAGF and the EAFRD are to be compensated.

2.           In order to ensure the
proper management of the appropriations entered in the budget of the Union for
the EAGF and the EAFRD, the Commission shall be empowered to adopt delegated
acts in accordance with Article 111 containing rules pertaining to the
valuation of operations in connection with public intervention and the measures
to be taken in case of loss or deterioration of products under the public
intervention and the determination of amounts to be financed.

3.           In order to enable the
equitable distribution of the appropriations available between the Member
States, if the Union's budget has not been adopted by the beginning of the
financial year or if the total amount of the commitments scheduled exceeds the
threshold laid down in Article [150(3)] of Regulation (EU) No FR/xxx, the Commission
shall be empowered to adopt delegated act in accordance with Article 111 of
this Regulation on the provisions for the method applicable to the commitments
and the payment of the amounts.

4.           In order to verify the
consistency of the data notified by the Member States in relation to the
expenditure or other information provided for in this Regulation, and to ensure
compliance with the obligation to notify pursuant to Article 102, the
Commission shall be empowered to adopt delegated acts in accordance with
Article 111 on the conditions governing the reduction and suspension of payment
to Member States, with regard to expenditure under the EAGF and the EAFRD
respectively.

5.           In order to ensure the
respect of the proportionality principle when applying Article 44, the Commission
shall be empowered to adopt delegated acts in accordance with Article 111 pertaining
to rules on:

(a)     the list of measures which fall under Article
44;

(b)     the rate and period of suspension of
payments referred to in that Article;

(c)     the conditions for lifting the
suspension.

6.           The Commission may lay
down, by means of implementing acts, further details on the obligation laid
down in Article 46 as well as the specific conditions applying to the
information to be booked in the accounts kept by the paying agencies. Those
implementing acts shall be adopted in accordance with the examination procedure
referred to in Article 112(3).

7.           The Commission may, by means
of implementing acts, adopt rules pertaining to:

(a)     rules on the financing and accounting
of intervention measures in the form of public storage, and other expenditure
financed by the EAGF and the EAFRD;

(b)     the terms and conditions governing the
implementation of the automatic decommitment procedure;

(c)     rules on the payment by the Member
States of default interests to the beneficiaries as referred to in Article 42(2).

The implementing acts provided for in the first
subparagraph shall be adopted in accordance with the examination procedure
referred to in Article 112(3).

Chapter IV
Clearance of accounts

Section I
General provisions

Article 49
On-the-spot checks by the
Commission

1.                Without prejudice to the checks carried out by Member States under
national laws, regulations and administrative provisions or Article 287 of the
Treaty or any check organised under Article 322 of the Treaty or based on
Council Regulation (EC) No 2185/96[39],
the Commission may organise on-the-spot checks in Member States with a view to
verifying in particular:

(a)     compliance of administrative practices
with Union rules;

(b)     the existence of the requisite
supporting documents and their correlation with the operations financed by the
EAGF or the EAFRD;

(c)     the terms on which the operations
financed by the EAGF or the EAFRD have been undertaken and checked.

Persons delegated by the Commission to carry
out on-the-spot checks or Commission agents acting within the scope of the
powers conferred upon them shall have access to the books and all other
documents, including documents and metadata drawn up or received and recorded
on an electronic medium, relating to expenditure financed by the EAGF or the
EAFRD.

The powers to carry out on-the-spot checks shall not affect the
application of national provisions which reserve certain acts for agents
specifically designated by national legislation. Without prejudice to the
specific provisions of Regulations (EC) No 1073/1999[40] and (EC) No 2185/96, persons
delegated by the Commission shall not take part, inter alia, in home visits or
the formal questioning of persons on the basis of legislation of the Member State concerned. However, they shall have access
to information thus obtained.

2.           The Commission
shall give sufficient prior notice of an on-the-spot check to the Member State
concerned or the Member State within whose
territory the check is to take place. Agents from the Member State concerned may take part in such checks.

At the request of the Commission and with the
agreement of the Member State, additional checks or inquiries into the
operations covered by this Regulation shall be undertaken by the competent
bodies of that Member State. Commission agents or persons delegated by the
Commission may take part in such checks.

In order to improve checks, the Commission may,
with the agreement of the Member States concerned, request the assistance of
the authorities of those Member States for certain checks or inquiries.

Article 50
Access to information

1.           Member
States shall make available to the Commission all information necessary for the
smooth operation of the EAGF and the EAFRD and shall take all appropriate
measures to facilitate the checks which the Commission deems appropriate in
connection with the management of Union financing, including on-the-spot
checks.

2.           Member
States shall communicate to the Commission on request the laws, regulations and
administrative provisions which they have adopted for implementing the Union acts
relating to the common agricultural policy, where those acts have a financial
impact on the EAGF or the EAFRD.

3.           Member
States shall make available to the Commission all information about
irregularities and suspected fraud cases detected, and about the steps taken to
recover undue payments in connection with those irregularities and frauds pursuant
to Section III of this Chapter.

Article 51
Access to documents

The accredited paying agencies shall keep
supporting documents relating to payments made and documents relating to the
performance of the administrative and physical checks required by Union
legislation, and shall make the documents and information available to the
Commission.

Where those documents are kept by an
authority acting under delegation from a
paying agency and responsible for authorising expenditure, that authority
shall send reports to the accredited paying agency on the number of checks
made, their content and the measures taken in the light of their results.

Article 52
Implementing powers

The Commission may, by means of
implementing acts, lay down rules regarding:

(a)          the specific obligations which
the Member States have to comply with in relation to the checks provided for in
this Chapter;

(b)          the cooperation obligations to be
complied with by the Member States for the implementation of Articles 49 and 50;

(c)          the modalities for the reporting
obligation referred to in Article 50(3).

The implementing acts provided for in the
first paragraph shall be adopted in accordance with the examination procedure
referred to in Article 112(3).

Section II
Clearance

Article 53
Clearance of accounts

1.           Prior to 30 April of the
year following the budget year in question and on the basis of the information
transmitted in accordance with Article 102(1)(c), the Commission shall, by
means of implementing acts, decide on the clearance of the accounts of the
accredited paying agencies. Those implementing acts shall be adopted in
accordance with the advisory procedure referred to in Article 112(2).

2.           The clearance decision
referred to in paragraph 1 shall cover the completeness, accuracy and veracity
of the annual accounts submitted. The decision shall be adopted without prejudice
to decisions adopted subsequently pursuant to Article 54.

Article 54
Conformity clearance

1.           The Commission shall, by
means of implementing acts, decide on the amounts to be excluded from Union
financing when it finds that expenditure as indicated in Article 4(1) and
Article 5 has not been incurred in conformity with Union legislation and, for
EAFRD, with the applicable Union and national law referred to in Article 77 of
Regulation (EU) No CR/xxx. Those implementing acts shall be adopted in accordance
with the advisory procedure referred to in Article 112(2).

2.           The
Commission shall assess the amounts to be excluded on the basis of the gravity
of the non-conformity recorded. It shall take due account of the nature and gravity of the infringement and of the financial
damage caused to the Union.

3.           Before the adoption of any
decision to refuse financing, the findings from the Commission's inspection and
the Member State's replies shall be notified in writing, following which the
two parties shall attempt to reach agreement on the action to be taken.

If agreement is not reached, the Member State may request opening of a procedure
aimed at reconciling each party's position
within four months. A report of the outcome of the procedure shall be given to
the Commission, which shall examine it before deciding on any refusal of
financing.

4.           Financing may not be
refused for:

(a)     expenditure
as indicated in Article 4(1) which is incurred more than 24 months before the Commission notifies the Member State in writing
of its inspection findings;

(b)     expenditure on multiannual measures
falling within the scope of Article 4(1) or
within the scope of the programmes as indicated in Article 5, where the
final obligation on the recipient occurs more than 24 months before the
Commission notifies the Member State in writing of its inspection findings;

(c)     expenditure
on measures in programmes, as indicated in Article 5, other
than those referred to in point (b) of this paragraph, for which the payment
or, as the case may be, the final payment, by the paying agency, is made more
than 24 months before the Commission notifies the Member State in writing of
its inspection findings.

5.           Paragraph 4 shall not
apply in the case of:

(a)     irregularities covered by Section III of this Chapter;

(b)     national aids or infringements for
which the procedure laid down in Article 108 or Article 258 of the Treaty
respectively has begun;

(c)     infringements
by Member States of their obligations under Chapter III of Title V of this
Regulation, provided that the Commission notifies the
Member State in writing of its inspection findings within 12 months following
receipt of the Member State’s report on the results of its checks of the
expenditure concerned.

Article 55
Implementing powers

The Commission shall, by means of
implementing acts, lay down rules for the implementation of:

(a)          the clearance of accounts
provided for in Article 53 with regard to the measures to be taken in
connection with the adoption of the decision and its implementation, including the
information exchange betweeen the Commission and the Member States and the
deadlines to be respected;

(b)          the conformity clearance provided
for in Article 54 with regard to the measures to be taken in connection with
the adoption of the decision and its implementation, including the information
exchange between the Commission and the Member States and the deadlines to be
respected as well as the conciliation procedure provided for in that Article,
including the establishment, tasks, composition and working arrangements of the
conciliation body.

The implementing acts provided for in the
first paragraph shall be adopted in accordance with the examination procedure
referred to in Article 112(3).

Section III
Irregularities

Article 56
Common Provisions

1.           For any undue payment
following the occurrence of irregularity or negligence, Member States shall
request recovery from the beneficiary within one year of the first indication
that such an irregular has taken place and shall record the corresponding
amounts in the debtors' ledger of the paying agency.

2.           If
recovery has not taken place within four years
of the date of the recovery request, or within eight years where recovery is
taken in the national courts, the financial consequences of non-recovery shall
be borne by
the Member State concerned, without prejudice to the requirement that the
Member State concerned must pursue recovery procedures in compliance with Article
60.

Where, in the context of the recovery
procedure, the absence of any irregularity is recorded by an administrative or
legal instrument of a definitive nature, the Member State concerned shall
declare as expenditure to the EAGF and EAFRD the financial burden borne by it
under the first subparagraph.

3.           On
duly justified grounds, Member States may decide not to pursue recovery. A
decision to this effect may be taken only in the
following cases:

(a)     if the costs already and likely to be
incurred total more than the amount to be recovered, or

(b)     if recovery proves impossible owing to the insolvency, recorded
and recognised under
national law, of the debtor or the persons legally responsible for the
irregularity.

Where the decision
referred to in the first subparagraph of this paragraph is taken before the
outstanding amount has been subject to the rules referred to in paragraph 2,
the financial consequence of non-recovery is borne by the Union budget.

4.           Member
States shall enter in the annual accounts to be sent to the Commission under Article 102(1)(c)(iv) the amounts
to be borne by them under paragraph 2 of this Article. The Commission shall
check that this has been done and make any adjustments needed as part of
the implementing act specified in Article 53(1).

5.           The Commission may, by
means of implementing acts, decide to exclude from Union financing sums charged
to the Union budget in the following cases:

(a)     if the
Member State has not respected the time limits referred to in paragraph 1;

(b)     if it considers that the decision not
to pursue recovery taken by a Member State pursuant
to paragraph 3 is not justified;

(c)     if it considers that the irregularity or lack of recovery is the
outcome of irregularity or negligence attributable to the administrative
authorities or another official body of the Member
State.

The implementing acts provided for in the first
subparagraph shall be adopted in accordance with the advisory procedure
referred to in Article 112(2). Before the adoption of such implementing acts,
the procedure laid down in Article 54(3) shall apply.

Article 57
Provisions specific to the
EAGF

Sums recovered following the occurrence of
irregularity or negligence and the interest threon shall be made over to the
paying agency and booked by it as revenue assigned to the EAGF in the month in
which the money is actually received.

When the Union budget is credited as
referred in the first paragraph, the Member State may retain 10 % of the
corresponding amounts as flat rate recovery costs, except in cases of
irregularity or negligence attributable to its administrative authorities or
other official bodies.

Article 58
Provisions specific to the
EAFRD

Member States shall make financial
adjustments where irregularities or negligence are detected in rural
development operations or programmes by totally or partially cancelling the
Union financing concerned. Member States shall take into consideration the
nature and gravity of the irregularities detected and the level of the
financial loss to the EAFRD.

Amounts of the Union financing under the
EAFRD which are cancelled and amounts recovered, as well as the interest
thereon, shall be reallocated to the programme concerned. However, the
cancelled or recovered Union funds may be reused by Member States only for an
operation under the same rural development programme and provided the funds are
not reallocated to operations which have been the subject of a financial
adjustment. After the closure of a rural development programme, the Member
State shall refund the sums recovered to the Union budget.

Article 59
Delegated
powers

In order
to ensure correct and efficient application of the provisions relating to
recovery set out in this Section, the Commission shall be empowered to adopt
delegated act in accordance with Article 111 concerning specific obligations to
be complied with by the Member States.

TITLE V
CONTROL SYSTEMS AND PENALTIES

Chapter I
General rules

Article 60
Protection of the
financial interests of the Union

1.           Member States shall within
the framework of the common agricultural policy, adopt all legislative,
regulatory and administrative provisions and take any other measures necessary
to ensure effective protection of the financial interests of the Union and
particularly to:

(a)     check the legality and regularity of
operations financed by the EAGF and the EAFRD;

(b)     offer effective prevention against fraud,
especially as regards the areas with a higher level of risk, and which shall
act as a deterrent, having regard to the costs and benefits as well as the
proportionality of the measures;

(c)     prevent, detect and correct
irregularities and fraud;

(d)     impose penalties which are effective,
dissuasive and proportionate in accordance with Union legislation, or failing
this, national law, and bring legal proceedings to that effect, as necessary;

(e)     recover undue payments plus interest,
and bring legal proceedings to that effect as necessary.

2.           Member States shall set up
efficient management and control systems in order to ensure compliance with the
legislation governing Union support schemes.

3.           Member States shall inform
the Commission of the provisions adopted and measures taken under paragraphs 1
and 2.

Any conditions which the Member States
establish to supplement the conditions laid down by Union rules for receiving
support financed by the EAGF or the EAFRD shall be verifiable.

4.           The Commission may, by means
of implementing acts, adopt rules aiming at reaching a uniform application of
paragraphs 1 and 2 of this Article.

Those implementing acts shall be adopted in
accordance with the examination procedure referred to in Article 112(3).

Article 61
General principles of
checks

1.           The system set up by the Member
States in accordance with Article 60(2) shall include, except where otherwise
provided, systematic administrative checking of all aid applications and shall
be supplemented by on-the-spot checks.

2.           As regards the on-the-spot
checks, the authority responsible shall draw its check sample from the entire
population of applicants comprising, where appropriate, a random part and a
risk-based part in order to obtain a representative error rate, while targeting
also highest errors.

3.           The authority responsible shall
draw up a report on each on-the-spot check.

4.           Where appropriate, all
on-the-spot checks provided for in Union rules regarding agricultural subsidies
and rural development support shall be carried out at the same time.

Article 62
Circumvention clause

Without prejudice to specific provisions,
no advantage provided for under the sectoral agricultural legislation shall be
granted in favour of a natural or legal person in respect of whom it is
established that the conditions required for obtaining such advantages were
created artificially, contrary to the objectives of that legislation.

Article 63
Compatibility of support schemes
for the purposes of checks

For the purposes of applying the support schemes
in the wine sector as referred to in Regulation (EU) No xxx/xxx[sCMO], Member
States shall ensure that the administration and control procedures applied to
those schemes are compatible with the integrated system referred to in Chapter
II of this Title as regards the following elements:

(a)          the computerised database;

(b)          the identification systems for
agricultural parcels;

(c)          the administrative checks.

The procedures shall allow a common
functioning or the exchange of data with the integrated system.

Article 64
Commission powers as
regards checks

1.           In order to ensure correct
and efficient application of the checks and that the verification of the
eligibility conditions is carried out in an efficient, coherent and
non-discriminatory way which protects the financial interest of the Union, the
Commission shall be empowered to adopt delegated acts in accordance with Article
111 concerning the situations where beneficiaries or their representatives
prevent checks from being carried out.

2.           The Commission shall, by
means of implementing acts, adopt the necessary rules aiming at reaching a uniform
application of this Chapter in the Union. Those rules may, in particular,
relate to the following:

(a)     the rules concerning administrative
and on-the-spot checks to be conducted by the Member States with regard to the
respect of obligations, commitments and eligibility criteria resulting from the
application of Union legislation;

(b)     the rules on the minimum level of
on-the-spot checks necessary for an effective management of the risks, as well
as the conditions under which Member States have to increase such checks, or
may reduce them where the management and control systems function properly and
the error rates are at an acceptable level;

(c)     the rules and methods on the reporting
of the checks and verification carried out and their results;

(d)     the authorities responsible for
performing the checks for compliance as well as to the content, the frequency
and the marketing stage to which those checks shall apply;

(e)     where the specific needs for proper
management of the system so require, rules introducing additional requirements
with respect to customs procedures, in particular as laid down in Regulation
(EC) No 450/2008 of the European Parliament and of the Council[41];

(f)      with regard to hemp as referred to in
Article 38 of Regulation (EU) No xxx/xxx [DP], rules on the specific
control measures and methods for determining tetrahydrocannabinol levels ;

(g)     with regard to cotton as referred to
in Article 42 of Regulation (EU) No xxx/xxx [DP], a system for checks on the
approved interbranch organisations;

(h)     with regard to wine as referred to in
Regulation (EU) No sCMO/xxx, rules on the measurement of areas, as well as
relating to checks and rules governing the specific financial procedures for
the improvement of checks;

(i)      the tests and methods to be applied
for establishing the eligibility of products for public intervention and
private storage, as well as the use of tendering procedures, both for public intervention
and for private storage.

The implementing acts provided for in the first
subparagraph shall be adopted in accordance with the examination procedure
referred to in Article 112(3) or in the corresponding Article of Regulation
(EU) No xxx/xxx[DP], Regulation (EU) No xxx/xxx[RD] or Regulation (EU) No
xxx/xxx[sCMO] respectively.

Article 65
Withdrawals, reductions
and exclusions of aid

1.           Where it is found that a
beneficiary does not comply with the eligibility criteria or the commitments
relating to the conditions for granting the aid as provided for in the sectoral
agricultural legislation the aid shall be withdrawn in full or in part.

2.           Where Union law so
provides, Member States shall also impose penalties by way of reductions or
exclusions of the payment or part of the payment granted or to be granted in
respect of which the eligibility criteria or the commitments have been met.

The amount of the reduction of aid shall be
graduated according to the severity, extent, duration and reoccurrence of the
non compliance found and may go as far as total exclusion from one or several
aid schemes or support measures for one or more calendar years.

3.           The amounts concerned by
the withdrawal referred to in paragraph 1 and by the penalties referred to in
paragraph 2 shall be recovered in full.

Article 66
Commission powers as
regards penalties

1.           In order to strike a
balance between a deterrent effect of charges and penalties to be imposed for
non-compliance with any of the obligations resulting from the application of
the sectoral agricultural legislation on the one hand, and a flexible
application of the system on the other hand, the Commission shall be empowered
to adopt delegated acts in accordance with Article 111 concerning the rules and
conditions relating to the following:

(a)     the suspension of the right to
participate in an aid scheme, the exclusion and suspension of payment or a
reduction rate of aids, payments or refunds or any other penalty, in particular
in case time limits have not been respected, the product, size or quantity is
not in conformity with the application, the evaluation of a scheme or the
notification of information did not take place, is incorrect or is not notified
on time;

(b)     the reduction of the payment to the
Member States concerning their agricultural expenditure in case the time limits
established for the recovery of the contribution to payment of surplus levy
have not been met, or suspension of monthly payments in case Member States fail
to send or to send on time, or send incorrect information to the Commission;

(c)     the extra amount, additional charges
or interest rate to be applied in case of fraud, irregularity, absence of proof
that an obligation has been fulfilled or over-time declarations;

(d)     the conditions for lodging, releasing
and forfeiting of securities, as well as the rate of reduction to be applied on
release of securities for refunds, licences, offers, tenders or specific
applications when an obligation covered by that security has partially or
totally not been met;

(e)     the retention by Member States of the
amounts recovered as penalties;

(f)      the exclusion of an operator or an
applicant from public intervention and private storage, from the licence
application system or from the tariff quota systems in case of fraud or
submission of incorrect information;

(g)     the withdrawal or suspension of an
approval or a recognition, in particular when an operator, producer
organisation, association of producer organisations, producer group or
inter-branch organisation fails to respect or no longer meets the conditions
required, including failure to make notifications;

(h)     the application of appropriate
national penalties on operators involved in the production in excess of quotas;

(i)      obvious errors, force majeure and
exceptional circumstances.

2.           The Commission shall, by
means of implementing acts, adopt the following:

(a)     the procedures and technical criteria
related to the measures and penalties referred to in paragraph 1 where
non-compliance with any of the obligations resulting from the application of the
relevant legislation is found;

(b)     the rules and procedures regarding the
recovery of undue payments resulting from the application of the relevant legislation.

The implementing acts provided for in the first
subparagraph shall be adopted in accordance with the
examination procedure referred to in Article 112(3) or in the corresponding
Article of Regulation (EU) No xxx/xxx[DP], Regulation (EU) No xxx/xxx[RD] or
Regulation (EU) No xxx/xxx[sCMO] respectively.

Article 67
Securities

1.           The Member States shall,
when the sectoral agricultural legislation so provides, request the lodging of
a security guaranteeing that an obligation under sectoral agricultural
legislation is fulfilled.

2.           Except in cases of force
majeure, the security shall be forfeited in whole or in part where the
execution of a particular obligation is not carried out, or is carried out only
partially.

3.           In order to ensure a non
discriminatory treatment, equity and the respect of proportionality when
lodging a security, the Commission shall be empowered to adopt delegated acts
in accordance with Article 111 concerning rules on:

(a)     the meaning of terms for the
application of the first and second paragraphs;

(b)     the responsible party in the event
that an obligation is not met;

(c)     specific situations when the competent
authority may waive the requirement of a security;

(d)     the conditions applying to the
security to be lodged and the guarantor;

(e)     specific conditions related to the
security lodged in the framework of advance payments;

(f)      the primary, secondary or subordinate
requirements in relation to securities, as well as the consequences of
breaching those requirements;

4.           The Commission may adopt,
by means of implementing acts, rules on:

(a)     the form of the security to be lodged
and the procedure for lodging the security, for accepting it, and for replacing
the original security;

(b)     the procedures for the release of a
security;

(c)     the notifications to be made by Member
States and by the Commission.

The implementing acts referred to in the first
subparagraph shall be adopted in accordance with the examination procedure referred to in Article 112(3) or in the corresponding Article of
Regulation (EU) No xxx/xxx[DP], Regulation (EU) No xxx/xxx[RD] or Regulation
(EU) No xxx/xxx[sCMO] respectively.

Chapter II
Integrated Administration and Control System

Article 68
Scope

1.           Each Member State shall
set up and operate an integrated administration and control system (hereinafter
referred to as the ‘integrated system’).

2.           The integrated system shall
apply to the support schemes listed in Annex I of Regulation (EU) No xxx/xxx
[DP] and to the support granted in accordance with Articles 22(1)(a) and (b), 29
to 32, 34 and 35 of Regulation xxx/xxx [RD] and where applicable Article
28(1)(b) of regulation (EU) CR/xxx..

However, this Chapter shall not apply to
measures referred to in Article 29(9) of Regulation (EU) No xxx/xxx[RD],
as well as to measures under Article 22(1)(a) and (b) of that Regulation
as far as the establishment cost is concerned.

3.           To the extent necessary, the
integrated system shall also apply to the control of cross-compliance as laid
down in Title VI.

Article 69
Elements of the integrated
system

1.           The integrated system
shall comprise the following elements:

(a)     a computerised database;

(b)     an identification system for
agricultural parcels;

(c)     a system for the identification and
registration of payment entitlements;

(d)     aid applications;

(e)     an integrated control system;

(f)      a single system to record the identity
of each beneficiary of the support referred to in Article 68(2) who submits an aid
application or a payment claim.

2.           Where applicable, the
integrated system shall incorporate a system for the identification and
registration of animals set up in accordance with Regulations (EC) No 1760/2000
of the European Parliament and of the Council[42]
and Council Regulation (EC) No 21/2004[43].

3.           Without prejudice to the
responsibilities of the Member States for the implementation and application of
the integrated system, the Commission may seek the assistance of specialised
bodies or persons in order to facilitate the establishment, monitoring and
utilisation of the integrated system, in particular with a view to providing
the competent authorities of the Member States with technical advice, should
they request it.

Article 70
Computerised database

1.           The computerised database
shall record, for each beneficiary of the support referred to in Article 68(2),
the data obtained from aid applications and payment claims.

This database shall in particular allow
consultation through the competent authority of the Member State, of the data
relating to the calendar and/or marketing years, starting from 2000. It
shall also allow direct and immediate consultation of the data relating to at
least the previous five consecutive calendar years.

2.           Member States may set up
decentralised databases on condition that these, and the administrative
procedures for recording and accessing data, are designed homogeneously
throughout the territory of the Member State and are compatible with one
another in order to allow for cross-checks.

Article 71
Identification system for
agricultural parcels

The identification system for agricultural
parcels shall be established on the basis of maps or land registry documents or
other cartographic references. Use shall be made of computerised geographical
information system techniques, including aerial or spatial orthoimagery, with a
homogenous standard guaranteeing accuracy at least equivalent to cartography at
a scale of 1:5000.

Article 72
System for the
identification and registration of payment entitlements

1.           The system for the
identification and registration of payment entitlements shall allow for
verification of the entitlements and for cross-checks with the aid applications
and the identification system for agricultural parcels.

2.           The system referred to in
paragraph 1 shall allow direct and immediate consultation, through the
competent authority of the Member State, of the data relating to at least the
previous four consecutive calendar years.

Article 73
Aid applications and
payment claims

1.           Each year, a beneficiary of the support referred to in Article 68(2) shall submit an application for direct payments or a payment claim
respectively for the relevant area and animal-related rural development
measures indicating, where applicable:

(a)     all the agricultural parcels on the
holding, as well as the non-agricultural area for which support referred to in
Article 68(2) is claimed;

(b)     the payment entitlements declared for
activation;

(c)     any other information provided for in
this Regulation or required with a view to the implementation of the relevant
sectoral agricultural legislation or by the Member State concerned.

As regards the area-related payment, each
Member State shall determine the minimum size of agricultural parcels in
respect of which an application may be made. However, the minimum size may not
exceed 0,3 ha.

By way of derogation from point (a) of the
first subparagraph, Member States may decide that a farmer who does not apply
for any area-based direct payment does not have to declare his agricultural
parcels in the case where the total area does not exceed one hectare. That farmer
shall however indicate in his application that he has agricultural parcels at
his disposal and shall, at the request of the competent authorities, indicate
their location.

2.           Member States shall
provide, inter alia by the use of electronic means, pre-established forms based
on the areas determined in the previous year as well as graphic material indicating
the location of those areas. A Member State may decide that the aid application
needs to contain only changes with respect to the aid application submitted the
previous year. However, as concerns the small farmers scheme as provided for in
Title V of Regulation (EU) No DP/xxx this possibility shall be given to all
farmers concerned.

3.           A Member State may decide
that a single application shall cover several or all support schemes and
measures referred to in Article 68 or other support schemes and measures.

Article 74
System for the
identification of beneficiaries

The single system to record the identity of
each beneficiary of support referred to in Article 68(2)
shall guarantee that all aid applications and payment
claims submitted by the same beneficiary can be identified as such.

Article 75
Verification of
eligibility conditions and reductions

1.           In accordance with Article
61, Member States, through the paying agencies or the bodies delegated by them,
shall carry out administrative checks on the aid application to verify the
eligibility conditions for the aid. Those checks shall be supplemented by
on-the-spot checks.

2.           For the purpose of on the
spot checks Member States shall draw up a sampling plan of agricultural
holdings and/or beneficiaries.

3.           Member States may use
remote sensing and Global Navigation Satellite System (GNSS) techniques as a
means of carrying out on-the-spot checks on agricultural parcels.

4.           In case of non compliance
with the eligibility conditions Article 65 shall apply.

Article 76
Payment to beneficiaries

1.           The payments under the
support schemes and measures referred to in Article 68(2) shall be made within
the period from 1 December to 30 June of the following calendar year.

Payments shall be made in up to two instalments
within that period.

However Member States may pay advances up to 50
% as regards direct payments and 75% for the support granted under rural
development as referred to in Article 68(2) prior to 1 December and not before
16 October.

2.           Payments referred to in
the paragraph 1 shall not be made before the verification of eligibility
conditions, to be carried out by the Member States pursuant to Article 75, has
been finalised.

Article 77
Delegated powers

1.           In order to ensure that
the integrated system provided for in this Chapter is implemented in an
efficient, coherent and non-discriminatory way which protects the financial
interests of the Union, the Commission shall be empowered to adopt delegated
acts in accordance with Article 111 concerning:

(a)     specific definitions needed to ensure
a harmonised implementation of the integrated system;

(b)     rules on any further measures to be
taken by the Member States for the proper application of this Chapter as well
as arrangements for any mutual assistance needed between Member States.

2.           In order to ensure a
correct distribution of the funds resulting from the aid applications provided
for in Article 73 to the entitled beneficiaries and to allow for verification
of the fulfilment by them of the obligations related thereto, the Commission
shall, by means of delegated acts in accordance with Article 111, lay down the
following:

(a)     rules on the minimum size of
agricultural parcels to be declared in order to reduce the administrative
burden for the beneficiaries and authorities;

(b)     provisions required for a harmonised
definition of the basis for calculation of aid, including rules on how to deal
with certain cases where eligible areas contain landscape features or trees;

(c)     a derogation from Regulation (EEC,
Euratom) No 1182/71 of the Council [of 3 June 1971 determining the rules
applicable to periods, dates and time limits][44]
in order to safeguard the beneficiaries' rights to payments where the final
date for submission of applications or amendments is a public holiday, Saturday
or Sunday;

(d)     in the case of late application for
payment or for allocation of entitlements, the maximum delay and reductions in
case of such delay.

3.           In order to ensure that
the calculation and application of refusal, reductions, exclusions and recoveries
are carried out in accordance with the principle laid down in Article 65 and in
an efficient, coherent and non-discriminatory way which protects the financial
interests of the Union, the Commission shall be empowered to adopt delegated
acts in accordance with Article 111 concerning:

(a)
provisions on refusal, reductions, exclusions in
relation to the correctness and completeness of the information in the
application such as over-declarations of areas or animals or lacking
declaration of areas, as well as in relation to the non respect of the
eligibility criteria or the commitments relating to the conditions for granting
of the aid;

(b)
provisions to ensure a harmonised and
proportionate treatment of intentional irregularities, situations of minor
errors, accumulation of reductions and simultaneous application of different
reductions;

(c)
rules providing for the non-application of
refusal, reductions, exclusions in certain cases, ensuring proportionality when
applying reductions;

(d)
rules on the recovery of unduly paid amounts of
aid and unduly allocated payment entitlements.

Article 78
Implementing powers

The Commission shall, by means of
implementing acts, lay down the following:

(a)          the basic features, definitions
and quality requirements for the computerised database provided for in Article 70;

(b)          the basic features, definitions
and quality requirements for the identification system for agricultural parcels
provided for in Article 71 and for the identification of the beneficiaries as
provided for in Article 74;

(c)          the basic features, definitions
and quality requirements for the system for the identification and registration
of payment entitlements provided for in Article 72;

(d)          rules on the aid application and
payments claims provided for in Article 73, and the application for payment
entitlements, including the final date for submission of applications, the
requirements as to the minimum amount of information to be included in the
application, provisions for amendments to or the withdrawal of aid applications,
exemption from the requirement to submit an aid application and provisions
which allow Member States to apply simplified procedures or to correct obvious
errors;

(e)          rules on the carrying out of
checks in order to verify compliance with obligations, and the correctness and
completeness of the information provided in the aid application or payment
claim;

(f)           technical definitions needed for
the purpose of the uniform implementation of this Chapter;

(g)          rules on situations of transfer
of holdings accompanied by the transfer of any obligation concerning
eligibility in respect of the aid in question which still needs to be fulfilled;

(h)          rules on the payment of the
advances referred to in Article 76.

The implementing acts provided for in the
first paragraph shall be adopted in accordance with the examination procedure
referred to in Article 112(3) or in the corresponding Article of Regulation
(EU) No xxx/xxx[DP] or Regulation (EU) No xxx/xxx[RD] respectively.

Chapter III
Scrutiny of transactions

Article 79
Scope and definitions

1.           This Chapter sets specific
rules on the scrutiny of the commercial documents of those entities receiving
or making payments relating directly or indirectly to the system of financing
by the EAGF, or their representatives, hereinafter ‘undertakings’, in order to
ascertain whether transactions forming part of the system of financing by the
EAGF have actually been carried out and have been executed correctly.

2.           This Chapter shall not
apply to measures covered by the integrated system referred to in Chapter II of
this Title.

3.           For the purposes of this Chapter
the following definitions shall apply:

(a)     'commercial documents’ means all
books, registers, vouchers and supporting documents, accounts, production and
quality records, and correspondence relating to the undertaking’s business
activity, as well as commercial data, in whatever form they may take, including
electronically stored data, in so far as these documents or data relate
directly or indirectly to the transactions referred to in paragraph 1;

(b)     'third party’ means any natural or
legal person directly or indirectly connected with transactions carried out
within the financing system by the EAGF.

Article 80
Scrutiny by Member States

1.           Member States shall carry
out systematic scrutiny of the commercial documents of undertakings taking
account of the nature of the transactions to be scrutinised. Member States
shall ensure that the selection of undertakings for scrutiny gives the best
possible assurance of the effectiveness of the measures for preventing and
detecting irregularities. The selection shall take account inter alia of
the financial importance of the undertakings in that system and other risk
factors.

2.           In appropriate cases, the
scrutiny provided for in paragraph 1 shall be extended to natural and legal
persons with whom undertakings are associated and to such other natural or
legal persons as may be relevant for the pursuit of the objectives set out in
Article 81.

3.           The scrutiny carried out
pursuant to this Chapter shall not prejudice the checks undertaken pursuant to
Articles 49 and 50.

Article 81
Objectives of the scrutiny

1.           The accuracy of primary
data under scrutiny shall be verified by a number of cross-checks, including,
where necessary, the commercial documents of third parties, appropriate to the
degree of risk presented, including:

(a)     comparisons with the commercial
documents of suppliers, customers, carriers and other third parties;

(b)     physical checks, where appropriate,
upon the quantity and nature of stocks;

(c)     comparison with the records of
financial flows leading to or consequent upon the transactions carried out
within the financing system by the EAGF; and

(d)     checks, in relation to bookkeeping, or
records of financial movements showing, at the time of the scrutiny, that the
documents held by the paying agency as justification for the payment of aid to
the beneficiary are accurate.

2.           In particular, where
undertakings are required to keep particular book records of stock in
accordance with Union or national provisions, scrutiny of those records shall
in appropriate cases include a comparison with the commercial documents and,
where appropriate, with the actual quantities in stock.

3.           In the selection of
transactions to be checked, full account shall be taken of the degree of risk
presented.

Article 82
Access to commercial
documents

1.           The persons responsible
for the undertaking, or a third party, shall ensure that all commercial
documents and additional information are supplied to the officials responsible
for the scrutiny or to the persons empowered for that purpose. Electronically
stored data shall be provided on an appropriate data support medium.

2.           The officials responsible
for the scrutiny or the persons empowered for that purpose may require that
extracts or copies of the documents referred to in paragraph 1 be supplied to
them.

3.           Where, during scrutiny
carried out pursuant to this Chapter, the commercial documents maintained by the
undertaking are considered inadequate for scrutiny purposes, the undertaking
shall be directed to maintain in future such records as are required by the
Member State responsible for the scrutiny, without prejudice to obligations
laid down in other Regulations relating to the sector concerned.

Member States shall determine the date as of
which such records are to be established.

Where all or part of the commercial documents
required to be scrutinised pursuant to this Chapter are located with an
undertaking in the same commercial group, partnership or association of
undertakings managed on a unified basis as the undertaking scrutinised, whether
located inside or outside Union territory, the undertaking shall make those
commercial documents available to officials responsible for the scrutiny, at a
place and time to be determined by the Member States responsible for carrying
out the scrutiny.

4.           Member States shall ensure
that officials responsible for scrutiny are entitled to seize commercial
documents, or have them seized. This right shall be exercised with due regard to
the relevant national provisions and shall not affect the application of rules
governing proceedings in criminal matters concerning the seizure of documents.

Article 83
Mutual assistance

1.           Member States shall assist
each other for the purposes of carrying out the scrutiny provided for in this
Chapter in the following cases:

(a)     where an undertaking or third party is
established in a Member State other than that in which payment of the amount in
question has or should have been made or received;

(b)     where an undertaking or third party is
established in a Member State other than that in which the documents and
information required for scrutiny are to be found.

The Commission may coordinate joint actions
involving mutual assistance between two or more Member States.

2.           During the first three
months following the EAGF financial year of payment, Member States shall send
the Commission a list of undertakings established in a third country for which
payment of the amount in question has or should have been made or received in that
Member State.

4.           If additional information
is required in another Member State as part of the scrutiny of an undertaking
in accordance with Article 80, and in particular cross-checks in accordance
with Article 81, specific scrutiny requests may be made indicating the reasons
for the request. An overview of such specific requests shall be sent to the
Commission on a quarterly basis within one month after the end of each quarter.
The Commission may demand that a copy of individual requests be provided.

The scrutiny request shall be met not later
than six months after its receipt; the results of the scrutiny shall be
communicated without delay to the requesting Member State and to the
Commission. The communication to the Commission shall be on a quarterly basis
within one month after the end of each quarter.

Article 84
Programming

1.           Member States shall draw
up programmes for scrutinies to be carried out pursuant to Article 80 during
the subsequent scrutiny period.

2.           Each year, before 15
April, the Member States shall send the Commission their programme as referred
to in paragraph 1 and shall specify:

(a)     the number of undertakings to be
scrutinised and their breakdown by sector on the basis of the amounts relating
to them;

(b)     the criteria adopted for drawing up
the programme.

3.           The programmes established
by the Member States and forwarded to the Commission shall be implemented by
the Member States, if, within eight weeks, the Commission has not made known
its comments.

4.           Paragraph 3 shall aplly mutatis
mutandis to the amendments to the programme made by the Member States.

5.           At any stage, the
Commission may request the inclusion of a particular category of undertaking in
the programme of a Member States.

6.           Undertakings for which the
sum of the receipts or payments amounted to less than EUR 40000 shall be scrutinised
in accordance with this Chapter only for specific reasons to be indicated by
the Member States in their annual programme referred to in paragraph 1 or by
the Commission in any proposed amendment to that programme.

Article 85
Special departments

1.           In each Member State a
special department shall be responsible for monitoring the application of this Chapter.
Those departments shall in particular be responsible for:

(a)     the performance of the scrutiny
provided for in this Chapter by officials employed directly by that special
department; or

(b)     the coordination and general
surveillance of the scrutiny carried out by officials belonging to other
departments.

Member States may also provide that scrutiny to
be carried out pursuant to this Chapter is allocated between the special
departments and other national departments, provided that the former is
responsible for their coordination.

2.           The department or
departments responsible for the application of this Chapter shall be organised
in such a way as to be independent of the departments or branches of
departments responsible for the payments and the scrutiny carried out prior to
payment.

3.           In order to ensure that
this Chapter is properly applied, the special department referred to in
paragraph 1 shall take all the measures necessary and it shall be entrusted by
the Member State concerned with all the powers necessary to perform the tasks
referred to in this Chapter.

4.           Member States shall adopt
appropriate measures to penalise natural or legal persons who fail to fulfil
their obligations under this Chapter.

Article 86
Reports

1.           Before 1 January following
the scrutiny period Member States shall send the Commission a detailed report
on the application of this Chapter.

2.           The Member States and the
Commission shall have regular exchanges of views on the application of this Chapter.

Article 87
Access to information and
on-the-spot checks by the Commission

1.           In accordance with the
relevant national laws, Commission officials shall have access to all documents
prepared either with a view to or following the scrutiny organised under this Chapter
and to the data held, including those stored in the data-processing systems.
Those data shall be provided upon request on an appropriate data support
medium.

2.           The scrutinies referred to
in Article 80 shall be carried out by the officials of the Member States.
Officials of the Commission may participate in those scrutinies. They may not
themselves exercise the powers of scrutiny accorded to national officials. However,
they shall have access to the same premises and to the same documents as the
officials of the Member States.

3.           In the case of scrutinies
taking place under Article 83, officials of the requesting Member State may be
present, with the agreement of the requested Member State, at the scrutiny in
the requested Member State and have access to the same premises and the same
documents as the officials of that Member State.

Officials of the requesting Member State present
at scrutinies in the requested Member State shall at all time be able to
furnish proof of their official capacity. The scrutinies shall at all times be
carried out by officials of the requested Member State.

4.           Without prejudice to the
provisions of Regulations (EC) No 1073/99 and (EC) No 2185/96, where national
provisions concerning criminal procedure reserve certain acts for officials
specifically designated by the national law, neither the officials of the
Commission, nor the officials of the Member State referred to in paragraph 3,
shall take part in these acts. In any event, they shall not take part in, in
particular, visits to the home or the formal interrogation of persons in the
context of the criminal law of the Member State. They shall, however, have
access to information thus obtained.

Article 88
Commission powers

1.           In
order to exclude from the application of this Chapter those measures which are
by their nature unsuited for ex-post checks by way of scrutiny of commercial
documents, the Commission shall be empowered to adopt delegated acts in
accordance with Article 111 establishing a list of other measures to which this
Chapter does not apply, and modifying the threshold of 40000 euros referred to
in Article 84(6).

2.           The
Commission shall, where necessary, by means of implementing acts adopt the
provisions aiming at reaching a uniform application of this Regulation in the
Union, in particular relating to the following:

(a)     the performance of the scrutiny
referred to in Article 80 as regards the selection of undertakings, rate and
calendar of scrutiny;

(b)     conservation of commercial documents
and the types of documents to maintain or data to record;

(c)     the performance and coordination of
joint actions referred to in Article 83(1);

(d)     details and specifications regarding
the content, form and way of submission of requests, the content, form and way
of notification, submission and exchange of information required in the
framework of this Chapter;

(e)     conditions and means of publication or
specific rules and conditions for the diffusion or making available by the
Commission to the competent authorities of the Member States of the information
needed in the framework of this Regulation;

(f)      responsabilities of the special
department referred to in Article 85;

(g)     the content of reports referred to in
Article 86.

The implementing acts provided for in the first
subparagraph shall be adopted in accordance with the examination procedure
referred to in Article 112(3).

Chapter IV
Other provisions on checks

Article 89
Other checks related to
market measures

1.           Member States shall take
measures to ensure that the products referred to in Annex I to Regulation (EU)
xxx/xxx [sCMO] which are not labelled in conformity with the provisions of that
Regulation are not placed on, or is withdrawn from, the market.

2.           Without prejudice to any
specific provisions which may be adopted by the Commission, imports into the
Union of the products specified in paragraph 1(a) and (b) of Article 129 of
Regulation (EU) No xxx/xxx [sCMO] shall be subject to checks to determine
whether the conditions provided for in paragraph 1 of that Article are met.

3.           Member States shall carry
out checks, based on a risk analysis, in order to verify whether products referred
to in Annex I to Regulation (EU) xxx/xxx [sCMO] conform to the rules laid down
in Section I of Chapter I of Title II of Part II of Regulation (EU) No
xxx/xxx[sCMO] and shall apply administrative penalties as appropriate.

4.           In order to protect Union
funds and the identity, provenance and quality of Union wine, the Commission shall
be empowered to adopt delegated acts in accordance with Article 111 pertaining
to:

(a)     the establishment of an analytical
databank of isotopic data that will help detect fraud to be constructed on the
basis of samples collected by Member States; and for rules on the Member
States' own databanks;

(b)     rules on control bodies and the mutual
assistance between them;

(c)     rules on the common use of Member
States' findings;

(d)     rules on the application of penalties
in the case of exceptional circumstances.

Article 90
Checks related to
designation of origin and geographical indications

1.           Member States shall take
the necessary steps to stop unlawful use of protected designations of origin
and protected geographical indication referred to in Regulation (EU) No
xxx/xxx[sCMO].

2.           Member State shall
designate the competent authority responsible for checks in respect of the
obligations laid down in Section II of Chapter I of Title II of Part 2 of
Regulation (EU) No xxx/xxx[sCMO] in accordance with the criteria laid down in
Article 4 of Regulation (EC) No 882/2004 of the European parliament and of the
Council[45]
and shall ensure that any operator complying with those obligations is entitled
to be covered by a system of checks.

3.           Within the Union, annual
verification of compliance with the product specification, during the
production and during or after conditioning of the wine shall be ensured by the
competent authority referred to in paragraph 2 or by one or more control bodies
within the meaning of point 5 of the second subparagraph of Article 2 of
Regulation (EC) No 882/2004 operating as a product certification body in
accordance with the criteria laid down in Article 5 of that Regulation.

4.           The Commission shall, by
means of implementing acts, adopt the following:

(a)     the communications to be made by the
Member States to the Commission;

(b)     rules on the authority responsible for
the verification of compliance with the product specification, including where
the geographical area is in a third country;

(c)     the actions to be implemented by the
Member States to prevent the unlawful use of protected designations of origin
and protected geographical indications;

(d)     checks and verification to be carried
out by the Member States, including testing.

The implementing acts provided for in the first
subparagraph shall be adopted in accordance with the examination procedure
referred to in Article 112(3) or in the corresponding
Article of Regulation (EU) No xxx/xxx[sCMO].

TITLE VI
CROSS COMPLIANCE

Chapter I
Scope

Article 91
General principle

1.           When a beneficiary
referred to in Article 92 does not comply, on the holding, with the rules on
cross compliance as laid down in Article 93 a penalty shall be applied to that
beneficiary.

2.           The penalty referred to in
paragraph 1 shall apply only in so far as

(a)     the non-compliance is the result of an
act or omission directly attributable to the beneficiary concerned;

(b)     the non-compliance is related to the
agricultural activity of the beneficiary; and

(c)     the area of the holding of the beneficiary
is concerned.

However, for forest areas this penalty shall
not apply in so far as no support is claimed for the concerned area in
accordance with Articles 22(1)(a), 31 and 35 of Regulation (EU) No xxx/xxx[RD].

3.           For the purpose of this
Title 'holding' means all the production units and areas managed by the beneficiary
referred to in Article 92 situated within the territory of the same Member
State.

Article 92
Beneficiaries concerned

Article 91 shall apply to beneficiaries receiving
direct payments under Regulation (EU) No xxx/xxx[DP], payments under Articles 44
and 45 of Regulation (EU) No xxx/xxx[sCMO] and the annual premia under Articles
22(1)(a) and (b), 29 to 32, 34 and 35 of Regulation (EU) No xxx/xxx[RD].

However, Article 91 shall not apply to beneficiaries
participating in the small farmers scheme referred to in Title V of Regulation
(EU) No xxx/xxx[DP] and to the beneficiaries receiving aid under Article 29(9)
of Regulation (EU) No RD/xxx.

Article 93
Rules on cross compliance

The rules on cross compliance shall be the
statutory management requirements under Union legislation and the standards for
good agricultural and environmental condition of land established at national
level as listed in Annex II, relating to the following areas:

(a)          environment, climate change and
good agricultural condition of land;

(b)          public, animal and plant health;

(c)          animal welfare.

The acts referred to in Annex II in
relation to the statutory management requirements shall apply as in force and,
in case of Directives, as implemented by the Member States.

Directive 2000/60/EC of 23 October 2000
establishing a framework for Community action in the field of water policy will
be considered as being part of Annex II once this Directive is implemented by
all Member States and the obligations directly applicable to farmers have been
identified. In order to take account of those elements the Commission shall be
empowered to adopt delegated acts in accordance with Article 111 for the
purpose of amending the Annex II within 12 months starting at the moment the
last Member State has notified the implementation of the Directive to the
Commission.

Directive 2009/128/EC of the European
Parliament and of the Council of 21 October 2009 establishing a framework for
Community action to achieve the sustainable use of pesticides will be
considered as being part of Annex II once this Directive is implemented by all
Member States and the obligations directly applicable to farmers have been
identified. In order to take account of those elements the Commission shall be
empowered to adopt delegated acts in accordance with Article 111 for the
purpose of amending the Annex II within 12 months starting at the moment the
last Member State has notified the implementation of the Directive to the
Commission, including the obligations relating to integrated pest management.

In addition, as regards the years 2014 and
2015, the rules on cross compliance shall also comprise the maintenance of
permanent grassland. The Member States which were Member of the Union at 1
January 2004 shall ensure that land which was under permanent grassland at the
date provided for the area aid applications for 2003 is maintained under
permanent grassland within defined limits. The Member States which became
Member of the Union in 2004 shall ensure that land which was under permanent
grassland on 1 May 2004 is maintained under permanent grassland within defined
limits. Bulgaria and Romania shall ensure that land which was under permanent
grassland on 1 January 2007 is maintained under permanent grassland within
defined limits.

The preceding subparagraph shall not apply
to land under permanent grassland to be afforested, if such afforestation is
compatible with the environment and with the exclusion of plantations of
Christmas trees and fast growing species cultivated in the short term.

In order to take account of the elements in
the two preceding paragraphs the Commission shall be empowered to adopt
delegated acts in accordance with Article 111 containing the rules on
maintenance of permanent grassland, in particular to ensure that measures are
taken to maintain the land under permanent grassland at the level of farmers,
including individual obligations to be respected such as obligation to
reconvert areas into permanent grassland where it is established that the ratio
of land under permanent grassland is decreasing.

Furthermore, the Commission shall, by means
of implementing acts, adopt the methods for the determination of the ratio of
permanent grassland and agricultural land that has to be maintained. Those
implementing acts shall be adopted in accordance with the examination procedure referred to in
Article 112(3).

Article 94
Obligations of Member
States relating to good agricultural and environmental condition

Member States shall ensure that all
agricultural area, including land which is no longer used for production
purposes, is maintained in good agricultural and environmental condition.
Member States shall define, at national or regional level, minimum standards
for beneficiaries for good agricultural and environmental condition of land on
the basis of Annex II, taking into account the specific characteristics of the
areas concerned, including soil and climatic condition, existing farming
systems, land use, crop rotation, farming practices, and farm structures.
Member States shall not define minimum requirements which are not established
in Annex II.

Article 95
Information to
beneficiaries

Member States shall provide the beneficiaries
concerned, where appropriate by the use of electronic means, with the list of
and information on the rules on cross compliance to be respected.

Chapter II
Control system and penalties in relation to cross compliance

Article 96
Checks of cross compliance

1.           Member States shall make
use, where appropriate, of the integrated system laid down in Chapter II of
Title V and in particular of elements referred to in Article 69(1) points (a), (b), (d), (e) and (f).

Member States may make use of their existing
administration and control systems to ensure compliance with the rules on cross
compliance.

Those systems, and notably the system for the
identification and registration of animals set up in accordance with Council
Directive 2008/71/EC of 15 July 2008 on the identification and registration of
pigs[46]
and Regulations (EC) No 1760/2000 and (EC) No 21/2004, shall be compatible with
the integrated system referred to in Chapter II of Title V of this Regulation.

2.           Depending on the
requirements, standards, acts or areas of cross compliance in question, Member
States may decide to carry out administrative checks, in particular those
already provided for under the control systems applicable to the respective
requirement, standard, act or area of cross compliance.

3.           Member States shall carry
out on-the-spot checks to verify whether a beneficiary complies with the
obligations laid down in this Title.

4.           The Commission shall, by
means of implementing acts, adopt rules on the carrying out of checks in
order to verify compliance with the obligations referred to in this Title.

Those implementing acts shall be adopted in
accordance with the examination procedure referred to in Article 112(3).

Article 97
Application of the penalty

1.           The penalty provided for
in Article 91 shall be applied when the rules on cross compliance are not complied
with at any time in a given calendar year (hereinafter referred to as ‘the
calendar year concerned’), and the non-compliance in question is attributable
to the beneficiary who submitted the aid application or the payment claim in
the calendar year concerned.

The first subparagraph shall apply mutatis
mutandis to beneficiaries which are found not to have complied with the
rules on cross compliance, at any time during three years from 1 January of the
year following the calendar year in which the first payment was granted under
the support programmes for restructuring and conversion or at any time during
one year from 1 January of the year following the calendar year in which the
payment was granted under the support programmes for green harvesting referred
to in Regulation (EU) No [sCMO] (hereinafter referred to as ‘the years
concerned’).

2.           In case where the land is
transferred during the calendar year concerned or the years concerned, paragraph
1 shall also apply where the non-compliance in question is the result of an act
or omission directly attributable to the person to whom or from whom the
agricultural land was transferred. By way of derogation, where the person to
whom the act or omission is directly attributable has submitted an aid
application or a payment claim in the calendar year concerned or the years
concerned, the penalty shall be applied on the basis of the total amounts of the
payments referred to in Article 92 granted or to be granted to that person.

For the purpose of this paragraph, ‘transfer’
shall mean any type of transaction whereby the agricultural land ceases to be
at the disposal of the transferor.

3.           Notwithstanding
paragraph 1, Member States may decide not to apply a penalty per beneficiary
and per calendar year when the amount of the penalty is  EUR 100 or less subject
to the rules to be adopted pursuant to Article 101.

Where a Member State decides to make use of the
option provided for in the first subparagraph, the competent authority shall,
for a sample of beneficiaries, take in the following year the actions necessary
to verify that the beneficiary has remedied the findings of non-compliance
concerned. The finding and the obligation to take remedial action shall be
notified to the beneficiary.

4.           The penalty does not
affect the legality and regularity of the payments on which the reduction or
exclusion applies.

Article 98
Application of the penalty
in Bulgaria and Romania

For Bulgaria and Romania, the penalties
referred to in Article 91 shall be applied at the latest from 1 January 2016 as
regards the statutory management requirements in the area of animal welfare
referred to in Annex II.

Article 99
Calculation of the penalty

1.           The penalty provided for
in Article 91 shall be applied
by means of reduction or exclusion of the total amount of the payments listed
in Article 92 granted or to be
granted to that beneficiary related to the calendar year concerned or the years
concerned.

For the calculation of those reductions and
exclusions account shall be taken of the severity, extent, permanence and reoccurrence
of the non-compliance found as well as of the criteria set out in paragraphs 2,
3 and 4.

2.           In the case of non
compliance due to negligence, the percentage of reduction shall not exceed 5 %
and, in the case of repeated non-compliance, 15 %.

In duly justified cases Member States may
decide that no reduction shall be applied where, given its severity, extent and
duration, a case of non-compliance is to be considered as minor. However, cases
of non-compliance which constitute a direct risk to public or animal health
shall not be considered as minor. The finding and the obligation to take
remedial action shall be notified to the beneficiary.

3.           In the case of intentional
non-compliance, the percentage of reduction shall  in principle not be less
than 20 % and may go as far as total exclusion from one or several aid schemes
and apply for one or more calendar years.

4.           In any case, the total
amount of reductions and exclusions for one calendar year shall not be more
than the total amount referred to in the first subparagraph of paragraph 1.

Article 100
Amounts resulting from
cross compliance

Member States may retain 10% of the amounts
resulting from the application of the reductions and exclusions referred to in
Article 99.

Article 101
Delegated powers

1.           In order to ensure a
correct distribution of the funds to the entitled beneficiaries, the Commission
shall be empowered to adopt delegated acts in accordance with Article 111 to establish
a harmonised basis for calculation of penalties due to cross compliance,  taking
into account reductions due to financial discipline.

2.           In order to ensure that
cross compliance is carried out in an efficient, coherent and non discriminatory
way, the Commission shall be empowered to adopt delegated acts in accordance
with Article 111 concerning the calculation and application of penalties.

TITLE VII
COMMON PROVISIONS

Chapter I
Communication

Article 102
Communication of
information

1.           In addition to the
provisions laid down in the sectoral Regulations, Member States shall send to the Commission the following information, declarations
and documents:

(a)     for accredited paying agencies and
accredited coordinating bodies:

(i)      their accreditation document;

(ii)      their function (accredited paying
agency or accredited coordinating body);

(iii)     where relevant, the withdrawal of
their accreditation,

(b)     for certification bodies:

(i)      their name;

(ii)      their address details,

(c)     for measures relating to operations
financed by the EAGF and the EAFRD:

(i)      declarations of expenditure, which
also act as payment requests, signed by the accredited paying agency or the
accredited coordinating body and accompanied by the requisite information;

(ii)      estimates of their financial
requirements, with regard to the EAGF and, with regard to the EAFRD, an update
of estimated declarations of expenditure which will be submitted during the
year and estimated declarations of expenditure in respect of the following
financial year;

(iii)     by 15 February of the year following
the financial year concerned, when a Member State has accredited more than one
paying agency, a synthesis report consisting of an overview at national level
of all management declarations of assurances and the audit opinions thereon
from the certification bodies;

(iv)     the management declaration of
assurance and the annual accounts of the accredited paying agencies;

(v)     a summary of the results of all
available audits and checks carried out in accordance with the schedule and
detailed provisions laid down in the sector specific rules.

The annual accounts of accredited paying
agencies relating to EAFRD expenditure shall be submitted at the level of each
programme.

2.           Member States shall inform
the Commission in detail of the measures taken to implement the good
agricultural and environmental condition referred to in Article 94 and the
details of the farm advisory system referred to in Title III.

3.           Member State shall inform
the Commission regularly of the application of the integrated system referred
to in Chapter II of Title V. The Commission shall organise exchanges of views
on this subject with the Member States.

Article 103
Confidentiality

1.                Member
States and the Commission shall take all necessary steps to ensure the
confidentiality of the information communicated or obtained under inspection
and clearance of accounts measures implemented under this Regulation.

The rules laid down in Article 8 of Council Regulation (Euratom, EC) No
2185/96[47]shall
apply to that information.

2.           Without prejudice to
national provisions relating to legal proceedings, information collected in the
course of scrutiny as provided for in Chapter III of Title V shall be protected
by professional secrecy. It may not be communicated to any persons other than
those who, by reason of their duties in the Member States or in the
institutions of the Union, are required to have knowledge thereof for the
purposes of performing those duties.

Article 104
Commission powers

The Commission may, by means of
implementing acts, adopt rules pertaining to:

(a)          the form, content, intervals,
deadlines and arrangements for transmitting or making available to the
Commission:

(i)      declarations of expenditure and
estimates of expenditure and their updates, including assigned revenue;

(ii)     management
declaration of assurance and annual accounts of the
paying agencies, as well as the results of all available audits and controls
carried out;

(iii)     the account certification reports;

(iv)    the names and particulars of accredited
paying agencies, accredited coordinating bodies and certification bodies;

(v)     arrangements for taking account of and
paying expenditure financed by the EAGF and the EAFRD;

(vi)    notifications of financial adjustments
made by Member States in connection with rural development operations or
programmes, and summary reports on the recovery procedures undertaken by the
Member States in response to irregularities;

(vii)    information on the measures taken
pursuant to Article 60.

(b)          the arrangements governing
exchanges of information and documents between the Commission and the Member
States, and the implementation of information systems, including the type,
format and content of data to be processed by these systems and the corresponding
data storage rules;

(c)          the notification to the
Commission by Member States of information, documents, statistics and reports, as
well as the deadlines and methods for their notification.

The implementing acts provided for in the
first subparagraph shall be adopted in accordance with the examination procedure
referred to in Article 112(3).

CHAPTER II
Use of the euro

Article 105
General principles

1.           The amounts given in the Commission
decisions adopting rural development
programmes, the amounts of commitments and payments by the Commission and the amounts of expenditure
attested or certified and amounts in
declarations of expenditure by the Member States shall be expressed and
paid in euro.

2.           The prices and amounts
fixed in the sectoral agricultural legislation shall be expressed in euro.

They shall be granted or collected in euro in
the Member States which have adopted the euro and in the national currency in
the Member States which have not.

Article 106
Exchange rate and
operative event

1.           The prices and amounts
referred to in Article 105(2) shall be converted in the Member States which
have not adopted the euro into the national currency by means of an exchange
rate.

2.           The operative event for
the exchange rate shall be:

(a)     the completion of customs import or
export formalities in the case of amounts collected or granted in trade with
third countries;

(b)     the event whereby the economic
objective of the operation is attained in all other cases.

3.           Where a direct payment as
provided for in Regulation (EU) No DP/xxx is made to a beneficiary in a
currency other than the euro, Member States shall convert the amount of aid
expressed in euro into the national currency on the basis of the most recent
exchange rate set by the European Central Bank prior to 1 October of the year
for which the aid is granted.

4.           As regards EAGF, when
drawing up their declarations of expenditure, Member States which have not
adopted the euro shall apply the same exchange rate as that which they used to
make payments to beneficiaries or receive revenue, in accordance with the
provisions of this Chapter.

5.           In order to specify the
operative event referred to in paragraph 2 or to fix it for reasons peculiar to
the market organisation or the amount in question, the Commission shall be
empowered to adopt delegated acts in accordance with
Article 111 containing rules on those operative events and
the exchange rate to be used. The specific operative event shall be determined
taking account of the following criteria:

(a)     actual applicability as soon as
possible of adjustments to the exchange rate;

(b)     similarity of the operative events for
analogous operations carried out under the market organisation;

(c)     coherence in the operative events for
the various prices and amounts relating to the market organisation.

(d)     practicability and effectiveness of
checks on the application of suitable exchange rates.

6.           In order to avoid the application by the Member States which have not adopted
the euro of different exchange rates in accounts of revenue received or aid
paid to beneficiaries in a currency other than the euro, on the one hand, and
in the establishment of the declaration of expenditure drawn up by the paying
agency, on the other, the Commission shall be empowered to adopt delegated acts
in accordance with Article 111 containing rules on the exchange rate applicable
when declarations of expenditure are drawn up and public storage operations
recorded in the accounts of the paying agency.

Article 107
Safeguard measures and
derogations

1.           The Commission may, by
means of implementing acts, adopt measures in order to safeguard the
application of Union legislation if exceptional monetary practices related to
national currency are likely to jeopardise it. Those measures may, where
necessary, derogate from the existing rules.

Those implementing acts shall be adopted in
accordance with the examination procedure referred to in Article 112(3).

The European Parliament and the Council and the
Member States shall be notified forthwith of the measures referred to in the
first subparagraph.

2.           Where exceptional monetary
practices concerning a national currency are liable to jeopardise the
application of Union legislation, the Commission shall be empowered to adopt
delegated acts in accordance with Article 111 derogating from this Section, in
particular in the following cases:

(a)     where a country uses abnormal exchange
techniques such as multiple exchange rates or operates barter agreements;

(b)     where countries have currencies which
are not quoted on official foreign exchange markets or where the trend in such
currencies is likely to create distortion in trade.

Article 108
Use of the euro by
non-euro Member States

1.           If a Member State which
has not adopted the euro decides to pay the expenditure resulting from sectoral
agricultural legislation in euro rather than in its national currency, the
Member State shall take measures to ensure that the use of the euro does not
provide a systematic advantage compared with the use of national currency.

2.           The Member State shall
notify the Commission of the measures planned before they come into effect. The
measures may not take effect until the Commission has notified its agreement
thereto.

CHAPTER III
Report and evaluation

Article 109
Annual financial report

By end September of each year following the
budget year, the Commission shall draw up a financial report on the
administration of the
EAGF and the EAFRD during the previous financial year and shall submit
it to the European Parliament and the Council.

Article 110
Monitoring and evaluation of common agricultural policy

1.           A common monitoring and evaluation
framework shall be established with a view to measuring the performance of the
common agricultural policy. It shall include all instruments related to the
monitoring and evaluation of common agricultural
policy measures and in particular of the direct payments provided
for in Regulation (EU) No DP/xxx, the market measures provided for in
Regulation (EU) No CMO/xxx, the rural development measures provided for in
Regulation (EU) No RD/xxx and of the application of the cross compliance provided
for in this Regulation.

In order to ensure an effective performance
measurement the Commission shall be empowered to adopt delegated acts in
accordance with Article 111 regarding the content and construction of that
framework.

2.           The impact of the common agricultural policy measures
referred to in paragraph 1 shall be measured in relation to the following
objectives:

(a)     viable food production, with a focus
on agricultural income, agricultural productivity and price stability;

(b)     sustainable management of natural
resources and climate action, with a focus on greenhouse gas emissions,
biodiversity, soil and water;

(c)     balanced territorial development, with
a focus on rural employment, growth and poverty in rural areas.

The Commission shall define, by means of
implementing acts, the set of indicators specific to the objectives referred to
in the first subparagraph. Those implementing acts shall be adopted in
accordance with the examination procedure referred to in Article 112(3).

3.           Member States shall
provide the Commission with all the information necessary to permit the monitoring
and evaluation of the measures concerned.

The Commission shall take into account the data
needs and synergies between potential data sources, in particular their use for
statistical purposes when appropriate.

The Commission shall adopt, by means of
implementing acts, rules on the information to be sent by the Member States, as
well as on the data needs and synergies between potential data sources. Those
implementing acts shall be adopted in accordance with the examination procedure
referred to in Article 112(3).

4.           The
Commission shall present a report on the implementation of this Article to the
European Parliament and the Council every four years. The first report shall be
presented not later than 31 December 2017.

TITLE VIII
FINAL PROVISIONS

Article 111
Exercise of the delegation

1.           The power to adopt
delegated acts is conferred on the Commission subject to the conditions laid
down in this Article.

2.           The delegation of power
referred to in this Regulation shall be conferred on the Commission for an
indeterminate period of time from the entry into force of this Regulation.

3.           The delegation of powers
referred to in this Regulation may be revoked at any time by the European
Parliament or by the Council. A decision of revocation shall put an end to the
delegation of the power specified in that decision. It shall take effect the
day following the publication of the decision in the Official Journal of the
European Union or at a later date specified therein. It shall not affect
the validity of any delegated acts already in force.

4.           As soon as it adopts a
delegated act, the Commission shall notify it simultaneously to the European
Parliament and to the Council.

5.           A delegated act adopted
pursuant to this Regulation shall enter into force only if no objection has
been expressed either by the European Parliament or the Council within a period
of two months of notification of that act to the European Parliament and the
Council or if, before the expiry of that period, the European Parliament and
the Council have both informed the Commission that they will not object. That
period shall be extended by two months at the initiative of the European Parliament
or the Council.

Article 112
Committee procedure

1.           The Commission shall be
assisted by a Committee called "Committee on the Agricultural Funds".
That committee shall be a committee within the meaning of Regulation (EU) No 182/2011.

2.           Where reference is made to
this paragraph, Article 4 of Regulation (EU) No 182/2011 shall apply.

3.           Where reference is made to
this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.

Article 113
Repeal

1.           Regulations (EEC) No
352/78, (EC) No 2799/98, (EC) No 814/2000, (EC) No 1290/2005 and (EC) No
485/2008 are repealed.

However, Article 44a of Regulation (EC) No
1290/2005 shall continue to apply.

2.           References to the repealed
Regulations shall be construed as references to this Regulation and shall be
read in accordance with the correlation table set out in Annex III.

Article 114
Transitional measures

In order to ensure the smooth transition
from the arrangements provided for in the repealed Regulations referred to in
Article 113 to those laid down in this Regulation, the Commission shall be
empowered to adopt delegated acts in accordance with Article 111.

Article 115
Entry into force and
application

This Regulation shall enter into force on
the seventh day following that of its publication in the Official Journal of
the European Union.

It shall apply from 1 January 2014.

However, the following provisions shall
apply from 16 October 2013:

(a)          Articles 7, 8 and 9;

(b)          Articles 18, 42, 43 and 45 as
regards expenditure incurred from 16 October 2013.

This Regulation shall be binding
in its entirety and directly applicable in all Member States.

Done at Brussels,

For the European Parliament                       For
the Council

The President                                                 The
President

ANNEX I

Minimum scope of the farm advisory system in the field of climate
change mitigation and adaptation, biodiversity, the protection of water, animal
and plant disease notification and innovation, as laid down in Article 12(2)(c)

Requirements or actions and advices at the
level of beneficiaries as defined by Member States where appropriate under:

Climate change mitigation and adaptation:

–
Information on prospective impacts of climate
change in the relevant regions, of the green house gas emissions of the
relevant farming practices and on the contribution of the agricultural sector
to mitigation through improved farming and agroforestry practices and through
the development of renewable energy projects on farm and energy efficiency
improvement on farm..

–
Investments in physical assets as provided for
under Article 18(1) (c) of Regulation (EU) N° xx/xxx [RD].

–
Restoration of agricultural production potential
and introduction of appropriate prevention action as provided for under Article
19 of Regulation (EU) N° xx/xxx [RD].

–
Afforestation and creation of woodland as
provided for under Article 22(1)(a) of Regulation (EU) N° xx/xxx [RD].

–
Establishment of agro-forestry systems as
provide for under Article 22(1)(b) of Regulation (EU)
N° xx/xxx [RD].

–
Prevention and restoration of damages to forest
from forest fires and natural disasters as provided for under Article 22(1)(c) of
Regulation (EU) N° xx/xxx [RD].

–
Investments improving the resilience and
environmental value of forest ecosystems as provided for under Article 22(1)(d)
of Regulation (EU) N° xx/xxx [RD].

–
Investments in new forestry technologies and in
processing and marketing of forest products as provided for under Article 22(1)(e)
of Regulation (EU) N° xx/xxx [RD].

–
Agri-environment operations addressing climate
change mitigation and adaptation as provided for under Article 29 of Regulation
(EU) N° xx/xxx [RD].

–
Organic farming addressing
climate change mitigation and adaptation as provided for under Article 30 of
Regulation (EU) N° xx/xxx [RD].

–
Environmental services from forests and forest
conservation addressing climate change mitigation and
adaptation as provided for under Article 35 of Regulation (EU) N° xx/xxx [RD].

Biodiversity:

–
Directive 2009/147/EC of the European Parliament
and of the Council on the conservation of wild birds.

–
Council Directive 92/43/EEC on the conservation
of natural habitats and of wild fauna and flora.

–
Investments in physical assets as provided for
under Article 18(1) (d) of Regulation (EU) N° xx/xxx [RD].

–
Establishment of agro-forestry systems as
provided for under Article 22(1)(b) of Regulation (EU)
N° xx/xxx [RD].

–
Investments improving the resilience and
environmental value of forest ecosystems as provided for under Article 22(1)(d) of Regulation (EU) N° xx/xxx [RD].

–
Agri-environment operations addressing
biodiversity as provided for under Article 29 of Regulation (EU) N° xx/xxx [RD].

–
Organic farming addressing biodiversity as
provided for under Article 30 of Regulation (EU) N° xx/xxx [RD].

–
Environmental services from forests and forest
conservation addressing biodiversity as provided for under Article 35 of Regulation
(EU) N° xx/xxx [RD].

Protection of water:

–
Article 11 (3) of Directive 2000/60/EC
establishing a framework for Community action in the field of water policy.

–
Proper use of plant protection product as laid
down in Article 55 of Regulation (EC) No 1107/2009, in particular the
compliance with the general principles of integrated pest management as
referred to in Article 14 of Directive 2009/128/EC establishing a framework for
Community action to achieve the sustainable use of pesticide.

–
Investments in physical assets for water
management as provided for under Article 18(1)(c) of Regulation (EU) N° xx/xxx
[RD].

–
Agri-environment operations addressing water
management as provided for under Article 29 of Regulation (EU) N° xx/xxx [RD].

–
Organic farming addressing water management as
provided for under Article 30 of Regulation (EU) N° xx/xxx [RD].

Notification of animal and plant diseases:

–
Council Directive 2003/85/EC of 29 September
2003 on Community measures for the control of foot-and-mouth disease.

–
Council Directive 92/119/EEC of 17 December 1992
introducing general Community measures for the control of certain animal
diseases and specific measures relating to swine vesicular disease.

–
Council Directive 2000/75/EC of 20 November 2000
laying down specific provisions for the control and eradication of bluetongue.

–
Council Directive 2000/29/EC of 8 May 2000 on
protective measures against the introduction into the Community of organisms
harmful to plants or plant products and against their spread within the Community.

Innovation:

–
Information on actions targeted towards
innovation.

–
Dissemination of the activities in the framework
of the [European Innovation Partnership] Network provided for in Article 53 of
Regulation (EU) N° xx/xxx [RD].

–
Cooperation as provided for under Article 36 of
Regulation (EU) N° xx/xxx [RD].

ANNEX II

Rules
on cross compliance pursuant to Article 93

SMR:      Statutory
management requirement

GAEC:    Standards
for good agricultural and environmental condition of land

Area || Main Issue || Requirements and standards

Environment, climate change, good agricultural condition of land || Water || SMR 1 || Council Directive 91/676/EEC of 12 December 1991 concerning the protection of waters against pollution caused by nitrates from agricultural sources (OJ L 375, 31.12.1991, p. 1) || Articles 4 and 5

GAEC 1 || Establishment of buffer strips along water courses[48] ||

GAEC 2 || Where use of water for irrigation is subject to authorisation, compliance with authorisation procedures ||

GAEC 3 || Protection of ground water against pollution: prohibition of direct discharge into groundwater and measures to prevent indirect pollution of groundwater through discharge on the ground and percolation through the soil of dangerous substances, as listed in the Annex to the Directive 80/68/EEC ||

Soil and carbon stock || GAEC 4 || Minimum soil cover ||

GAEC 5 || Minimum land management reflecting site specific conditions to limit erosion ||

GAEC 6 || Maintenance of soil organic matter level including ban on burning arable stubble ||

GAEC 7 || Protection of wetland and carbon rich soils including a ban of first ploughing[49] ||

Biodiversity || SMR 2 || Directive 2009/147/EC of the European Parliament and of the Council of 30 November 2009 on the conservation of wild birds (OJ L 20, 26.1.2010, p. 7) || Article 3(1), Article 3(2)(b), Article 4 (1), (2) and (4)

SMR 3 || Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild flora and fauna (OJ L 206, 22.7.1992, p. 7) || Article 6 (1) and (2)

Landscape, minimum level of maintenance, || GAEC 8 || Retention of landscape features, including where appropriate, hedges, ponds, ditches, trees in line, in group or isolated, field margins and terraces, and including a ban on cutting hedges and trees during the bird breeding and rearing season and possible measures for avoiding invasive species and pests ||

Public health, animal health and plant health || Food safety || SMR 4 || Regulation (EC) No 178/2002 of the European Parliament and of the Council of 28 January 2002 laying down the general principles and requirements of food law, establishing the European Food Safety Authority and laying down procedures in matters of food safety (OJ L 31, 1.2.2002, p. 1) || Articles 14 and 15, Article 17(1) [50] and Articles 18, 19 and 20

SMR 5 || Council Directive 96/22/EC of 29 April 1996 concerning the prohibition on the use in stockfarming of certain substances having a hormonal or thyrostatic action and beta-agonists (OJ L125, 23.5.1996, p.3) || Article 3(a), (b), (d) and (e) and Articles 4, 5 and 7

Identification and registration of animals || SMR 6 || Council Directive 2008/71/EC of 15 July 2008 on identification and registration of pigs (OJ L 213, 8.8.2005, p. 31) || Articles 3, 4 and 5

SMR 7 || Regulation (EC) No 1760/2000 of the European Parliament and of the Council of 17 July 2000 establishing a system for the identification and registration of bovine animals and regarding the labelling of beef and beef products (OJ L 204, 11.8.2000, p. 1) || Articles 4 and 7

SMR 8 || Council Regulation (EC) No 21/2004 of 17 December 2003 establishing a system for the identification and registration of ovine and caprine animals (OJ L 5, 9.1.2004, p. 8) || Articles 3, 4 and 5

Animal diseases || SMR 9 || Regulation (EC) No 999/2001 of the European Parliament and of the Council of 22 May 2001 laying down rules for the prevention, control and eradication of certain transmissible spongiform encephalopathies (OJ L 147, 31.5.2001, p. 1) || Articles 7, 11, 12, 13 and 15

Plant protection products || SMR 10 || Regulation (EC) No 1107/2009 of the European Parliament and of the Council of 21 October 2009 concerning the placing of plant protection products on the market and repealing Council Directives 79/117/EEC and 91/414/EEC (OJ L 309, 24.11.2009, p.1) || Article 55, first and second sentence

Animal welfare || Animal welfare || SMR 11 || Council Directive 2008/119/EC of 18 December 2008 laying down minimum standards for the protection of calves (OJ L 10, 15.1.2009, p. 7) || Articles 3 and 4

SMR 12 || Council Directive 2008/120/EC of 18 December 2008 laying down minimum standards for the protection of pigs (OJ L 47, 18.2.2009, p. 5) || Article 3 and Article 4

SMR 13 || Council Directive 98/58/EC of 20 July 1998 concerning the protection of animals kept for farming purposes (OJ L 221, 8.8.1998, p. 23) || Article 4

ANNEX III

CORRELATION TABLE

1. Regulation (EEC) No 352/78

Regulation (EEC) No 352/78 || This Regulation

Article 1 || Article 45(1)(e)

Article 2 || Article 45(2)

Article 3 || Article 48(1)

Article 4 || -

Article 5 || -

Article 6 || -

2. Regulation (EC) No 2799/98

Regulation (EC) No 2799/98 || This Regulation

Article 1 || -

Article 2 || Article 105(2) and 106

Article 3 || Article 106

Article 4 || -

Article 5 || -

Article 6 || -

Article 7 || Article 107

Article 8 || Article 108

Article 9 || -

Article 10 || -

Article 11 || -

3. Regulation (EC) 814/2000

Regulation (EC) 814/2000 || This Regulation

Article 1 || Article 47(1)

Article 2 || Article 47(2)

Article 3 || -

Article 4 || -

Article 5 || -

Article 6 || -

Article 7 || -

Article 8 || Article 47(5)

Article 9 || -

Article 10 || Articles 47(4) and 112

Article 11 || -

4. Regulation (EC) No 1290/2005

Regulation (EC) No 1290/2005 || This Regulation

Article 1 || Article 1

Article 2 || Article 3

Article 3 || Article 4

Article 4 || Article 5

Article 5 || Article 6

Article 6 || Article 7

Article 7 || Article 9

Article 8 || Article 102

Article 9 || Article 60

Article 10 || Article 10

Article 11 || Article 11

Article 12 || Article 16

Article 13 || Article 19

Article 14 || Article 17

Article 15 || Article 18

Article 16 || Article 42

Article 17 || Article 43(1)

Article 17a || Article 43(2)

Article 18 || Article 24

Article 19 || Article 26

Article 20 || Article 27

Article 21 || Article 28

Article 22 || Article 31

Article 23 || Article 32

Article 24 || Article 33

Article 25 || Article 34

Article 26 || Article 35

Article 27 || Article 43(1)

Article 27a || Article 43(2)

Article 28 || Article 36

Article 29 || Article 37

Article 30 || Article 53

Article 31 || Article 54

Article 32 || Article 56 and 57

Article 33 || Article 56 and 58

Article 34 || Article 45

Article 35 || -

Article 36 || Article 50

Article 37 || Article 49

Article 38 || -

Article 39 || -

Article 40 || -

Article 41 || Article 112

Article 42 || -

Article 43 || Article 109

Article 44 || Article 103

Article 44a || Article 113(1)

Article 45 || Article 105(1) and 106(3) and (4)

Article 46 || -

Article 47 || Article 113

Article 48 || Article 114

Article 49 || Article 115

5. Regulation (EC) No 485/2008

Regulation (EC) No 485/2008 || This Regulation

Article 1 || Article 79

Article 2 || Article 80

Article 3 || Article 81

Article 4 || -

Article 5 || Article 82(1), (2) and (3)

Article 6 || Article 82(4)

Article 7 || Article 83

Article 8 || Article 103(2)

Article 9 || Article 86

Article 10 || Article 84

Article 11 || Article 85

Article 12 || Article 106(3)

Article 13 || -

Article 14 || -

Article 15 || Article 87

Article 16 || -

Article 17 || -

LEGISLATIVE
FINANCIAL STATEMENT

1.
FRAMEWORK OF THE PROPOSAL/INITIATIVE
1.1.
Title of the proposal/initiative

-        Proposal for a Regulation of the European Parliament and of
the Council establishing rules for direct payments to farmers under support
schemes within the framework of the common agricultural policy;

-        Proposal for a Regulation of the European Parliament and of
the Council establishing a common organisation of the markets in agricultural
products (Single CMO Regulation);

-        Proposal for a Regulation of the European Parliament and of
the Council on support for rural development by the European Agricultural Fund
for Rural Development (EAFRD);

-        Proposal for a Regulation of the European Parliament and of
the Council on the financing, management and monitoring of the common
agricultural policy;

-        Proposal for a Regulation of the European Parliament and of
the Council amending Council Regulation (EC) No 73/2009 as regards the
application of direct payments to farmers in respect of the year 2013;

-        Proposal for a Council Regulation determining measures on
fixing certain aids and refunds related to the common organisation of the
markets in agricultural products;

-        Proposal for a Regulation of the European Parliament and of
the Council amending Council Regulation (EC) No 1234/2007 as regards the regime
of the single payment scheme and support to vine-growers.

1.2.
Policy area(s) concerned in the ABM/ABB
structure[51]

Policy Area Title 05 of Heading 2

1.3.
Nature of the proposal/initiative (Legislative
framework for the CAP post 2013)

x The proposal/initiative relates to a new action

 ̈ The
proposal/initiative relates to a new action following a pilot
project/preparatory action[52]

x The proposal/initiative relates to the extension of
an existing action

x The proposal/initiative relates to an action
redirected towards a new action

1.4.
Objectives
1.4.1.
The Commission's multiannual strategic objective(s)
targeted by the proposal/initiative

In order to promote resource efficiency with a view to smart,
sustainable and inclusive growth for EU agriculture and rural development in
line with the Europe 2020 Strategy, the objectives of the CAP are:

- Viable food production;

- Sustainable management of natural resources and climate action;

- Balanced territorial development.

1.4.2.
Specific objective(s) and ABM/ABB activity(ies)
concerned

Specific objectives for Policy area 05:

Specific objective No 1:

To provide environmental public goods

Specific objective No 2:

To compensate for production difficulties in areas with specific
natural constraints

Specific objective No 3:

To pursue climate change mitigation and adaptation actions

Specific objective No 4:

To manage the EU budget (CAP) in accordance with high standards of
financial management

Specific objective for ABB 05 02 - Interventions in agricultural
markets:

Specific objective No 5:

To improve the competitiveness of the agricultural sector and
enhance its value share in the food chain

Specific objective for ABB 05 03 - Direct aids:

Specific objective No 6:

To contribute to farm incomes and limit farm income variability

Specific objectives for ABB 05 04 – Rural development:

Specific objective No 7

To foster green growth through innovation

Specific objective No 8:

To support rural employment and maintain the social fabric of rural
areas

Specific objective No 9

To improve the rural economy and promote diversification

Specific objective No 10

To allow for structural diversity in farming systems

1.4.3.
Expected result(s) and impact

It is not possible to set quantitative targets for impact indicators
at this stage. Although the policy can steer in a certain direction, the broad
economic, environmental and social outcomes measured by such indicators would
ultimately also depend on the impact from a range of external factors, which
recent experience indicates have become significant and unpredictable. Further
analysis is on-going, to be ready for the period post-2013.

As regards the direct payments, Member States will have the
possibility to decide, to a limited degree, on the implementation of certain
components of the direct payment schemes.

For rural development, the expected results and impact will depend
on the rural development programmes that Member States will submit to the
Commission. Member States will be asked to set targets in their programmes.

1.4.4.
Indicators of results and impact

The proposals provide for the establishment of a common monitoring
and evaluation framework with a view to measuring the performance of the Common
Agricultural Policy. That framework shall include all instruments related to
the monitoring and evaluation of CAP measures and in particular of the direct
payments, market measures, rural development measures and of the application of
cross compliance.

The impact of these CAP measures shall be measured in relation to
the following objectives:

(a)      viable food production, with a focus on
agricultural income, agricultural productivity and price stability;

(b)     sustainable management of natural
resources and climate action, with a focus on greenhouse gas emissions,
biodiversity, soil and water;

(c)      balanced territorial development, with a
focus on rural employment, growth and poverty in rural areas.

By means of implementing acts, the Commission shall define the set
of indicators specific to these objectives and areas.

Moreover, as regards rural development, a reinforced common
monitoring and evaluation system is proposed. That system aims (a) to
demonstrate the progress and achievements of rural development policy and
assess the impact, effectiveness, efficiency and relevance of rural development
policy interventions, (b)     to contribute to better targeted support for
rural development, and (c) to support a common learning process related to
monitoring and evaluation. The Commission will establish, by means of
implementing act, a list of common indicators linked to the policy priorities.

1.5.
Grounds for the proposal/initiative
1.5.1.
Requirement(s) to be met in the short or long
term

In order to meet the multi-annual strategic objectives of the CAP
which are a direct translation of the Europe 2020 strategy for European rural
areas and to fulfil the relevant requirements of the Treaty, the proposals aim
to lay down the legislative framework for the Common Agricultural Policy for
the period after 2013.

1.5.2.
Added value of EU involvement

The future CAP will not only be a policy that caters for a small,
albeit essential, part of the EU economy, but also a policy of strategic
importance for food security, the environment and territorial balance. Thus,
the CAP, as a truly common policy, makes the most efficient use of limited
budgetary resources in maintaining a sustainable agriculture throughout the EU,
addressing important cross-border issues such as climate change and reinforcing
solidarity among Member States.

As mentioned in the Commission communication "A Budget for
Europe 2020"[53],
the CAP is a genuinely European policy. Instead of operating 27 separate
agricultural policies and budgets, Member States pool resources to operate a
single European policy with a single European budget. This naturally means that
the CAP accounts for a significant proportion of the EU budget. However, this
approach is both more efficient and economical than an uncoordinated national
approach.

1.5.3.
Lessons learned from similar experiences in the
past

On the basis of the evaluation of the current policy framework, an
extensive consultation with stakeholders as well as an analysis of future
challenges and needs, a comprehensive impact assessment has been carried out.
More details can be found in the impact assessment and the explanatory
memorandum that are accompanying the legal proposals.

1.5.4.
Coherence and possible synergy with other
relevant instruments

The legislative proposals concerned by this financial statement
should be seen in the broader context of the proposal for a single framework
regulation with common rules for the common strategic framework funds (EAFRD,
ERDF, ESF, Cohesion Fund and EMFF). That framework regulation will make an
important contribution to reducing administrative burden, to spending EU funds
in an effective way, and to put simplification into practice. This also
underpins the new concepts of the common strategic framework for all these
funds and the upcoming Partnership Contracts which will also cover these funds.

The common strategic framework, which will be established, will
translate the objectives and priorities of the Europe 2020 Strategy into
priorities for the EAFRD together with the ERDF, ESF, Cohesion Fund and EMFF,
which will ensure an integrated use of the funds to deliver common objectives.

The common strategic framework will also set out coordination
mechanisms with other relevant Union policies and instruments.

Moreover, as regards the CAP, significant synergies and
simplification effects will be obtained by harmonising and aligning the
management and control rules for the first (EAGF) and second (EAFRD) pillar of
the CAP. The strong link between the EAGF and the EAFRD should be maintained
and the structures already in place in the Member States be sustained.

1.6.
Duration and financial impact

x Proposal/initiative of limited
duration (for the draft regulations on direct payment schemes, rural
development and transitional regulations)

–
x   Proposal/initiative in effect from
01/01/2014 to 31/12/2020

–
x   Financial impact for the period of the next
multi-annual financial framework. For rural development, impact on payments to
2023.

x Proposal/initiative of unlimited
duration (for the draft regulation on the single CMO and the horizontal
regulation)

–
Implementation from 2014.

1.7.
Management mode(s) envisaged[54]

x Centralised direct management
by the Commission

 ̈ Centralised indirect management with the delegation of implementation tasks to:

–
 ̈  executive agencies

–
 ̈  bodies set up by the Communities[55]

–
 ̈  national public-sector bodies/bodies with public-service mission

–
 ̈  persons entrusted with the implementation of specific actions
pursuant to Title V of the Treaty on European Union and identified in the
relevant basic act within the meaning of Article 49 of the Financial Regulation

x Shared management with the
Member States

 ̈ Decentralised management with third countries

 ̈ Joint management with international organisations (to be specified)

Comments

No
substantive change compared to the present situation, i.e. the bulk of
expenditure concerned by the legislative proposals on the CAP reform will be
managed by shared management with the Member States. However, a very minor part
will continue to fall under centralised direct management by the Commission.

2.
MANAGEMENT MEASURES
2.1.
Monitoring and reporting rules

In terms of monitoring and evaluation of the CAP, the Commission
will present a report to the European Parliament and the Council every 4 years,
with the first report to be presented not later than end 2017.

This is complemented by specific provisions in all areas of the CAP,
with various comprehensive reporting and notifications requirements to be
specified in the implementing rules.

As regards rural development, rules are also provided for monitoring
at programme level, which will be aligned with the other funds, and which will
be coupled with ex ante, on-going and ex post evaluations.

2.2.
Management and control system
2.2.1.
Risk(s) identified

There are more than seven million beneficiaries of the CAP,
receiving support under a large variety of different aid schemes, each of which
having detailed and sometimes complex eligibility criteria.

The reduction in the error rate in the domain of the common
agricultural policy can already be considered as a trend. Thus, most recently
an error rate close to 2% confirms the overall positive assessment of previous
years. It is the intention to continue the efforts in order to achieve an error
rate below 2%.

2.2.2.
Control method(s) envisaged

The legislative package, in particular the proposal for the
regulation on the financing, management and monitoring of the common
agricultural policy, envisages maintaining and reinforcing the current system
established by Regulation (EC) No 1290/2005. It provides for a compulsory
administrative structure at Member State level, centred around accredited
paying agencies, which are responsible for carrying out controls at final
beneficiary level in accordance with the principles set out under point 2.3.
Every year, the head of each paying agency is required to provide a management
declaration of assurance which covers the completeness, accuracy and veracity
of the accounts, the proper functioning of the internal control systems and the
legality and regularity of the underlying transactions. An independent audit
body is required to provide an opinion on all these three elements.

The Commission will continue to audit agricultural expenditure,
using a risk-based approach in order to ensure that its audits are targeted to
the areas of highest risk. Where these audits reveal that expenditure has been
incurred in breach of Union rules, it will exclude the amounts concerned from
Union financing under the conformity clearance system.

As regards the cost of controls, a detailed analysis is provided in
annex 8 to the impact assessment accompanying the legislative proposals.

2.3.
Measures to prevent fraud and irregularities

The legislative package, in particular the proposal for the
regulation on the financing, management and monitoring of the common
agricultural policy, envisages maintaining and reinforcing the current detailed
systems for controls and penalties to be applied by the paying agencies, with
common basis features and special rules tailored to the specificities of each
aid regime. The systems generally provide for exhaustive administrative
controls of 100% of the aid applications, cross-checks with other databases
where this is considered appropriate as well as pre-payment on-the-spot checks
of a minimum number of transactions, depending on the risk associated with the
regime in question. If these on-the-spot checks reveal a high number of
irregularities, additional checks must be carried out. In this context, the by
far most important system is the Integrated Administration and Control System
(IACS), which in financial year 2010 covered around 80% of total expenditure
under the EAGF and the EAFRD. For Member States with properly functioning
control systems and low error rates, the Commission will be empowered to allow
for a reduction of the number of on-the-spot checks.

The package further envisages that Member States shall prevent,
detect and correct irregularities and fraud, impose effective, dissuasive and
proportionate penalties as laid down in Union legislation or national law, and
recover any irregular payments plus interests. It includes an automatic
clearance mechanism for irregularity cases, which provides that if recovery has
not taken place within four years of the date of the recovery request, or
within eight years in the case of legal proceedings, the amounts not recovered
shall be borne by the Member State concerned. This mechanism will be a strong
incentive for Member States to recover irregular payments as quickly as
possible.

3.
ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE

The amounts indicated in this financial
statement are expressed in current prices and in commitments.

In addition to the changes resulting from the
legislative proposals as listed in the accompanying tables below, the
legislative proposals imply further changes which have no financial impact.

For any of the years in the period 2014-2020,
the application of financial discipline cannot be excluded at this stage.
However, this will not depend on the reform proposals as such, but on other
factors, such as the execution of direct aids or future developments in the
agricultural markets.

As concerns direct aids, the extended net
ceilings for 2014 (calendar year 2013) included in the proposal regarding
transition are higher than the amounts allocated to direct aids indicated in
the accompanying tables. The purpose of this extension is to ensure a
continuation of the existing legislation in a scenario in which all the other
elements would remain unchanged, without prejudice to the possible need for
applying the financial discipline mechanism.

The reform proposals contain provisions giving
Member States a set degree of flexibility in relation to their allocation of
direct aids respectively rural development. In case Member States decide to use
that flexibility, this will have financial consequences within the given
financial amounts, which cannot be quantified at this stage.

This financial statement does not take into
account the possible use of the crises reserve. It should be underlined that
the amounts taken into account for market-related expenditure are based on no
public intervention buying-in and other measures related to a crisis situation
in any sectors.

3.1.
Heading(s) of the multiannual financial
framework and expenditure budget line(s) affected

Table 1: Amounts for the CAP
including complementary amounts foreseen in the MFF proposals and the CAP
reform proposals

In million EUR (current prices)

Budget year || 2013 || 2013 adjusted (1) || 2014 || 2015 || 2016 || 2017 || 2018 || 2019 || 2020 || TOTAL 2014-2020

|| || || || || || || || || ||

Inside MFF || || || || || || || || || ||

Heading 2 || || || || || || || || || ||

Direct aids and market-related expenditure (2) (3) (4) || 44 939 || 45 304 || 44 830 || 45 054 || 45 299 || 45 519 || 45 508 || 45 497 || 45 485 || 317 193

Estimated assigned revenue || 672 || 672 || 672 || 672 || 672 || 672 || 672 || 672 || 672 || 4 704

P1 Direct aids and market-related expenditure (with assigned revenue) || 45 611 || 45 976 || 45 502 || 45 726 || 45 971 || 46 191 || 46 180 || 46 169 || 46 157 || 321 897

P2 Rural development (4) || 14 817 || 14 451 || 14 451 || 14 451 || 14 451 || 14 451 || 14 451 || 14 451 || 14 451 || 101 157

Total || 60 428 || 60 428 || 59 953 || 60 177 || 60 423 || 60 642 || 60 631 || 60 620 || 60 608 || 423 054

Heading 1 || || || || || || || || || ||

CSF Agricultural research and innovation || N.A. || N.A. || 682 || 696 || 710 || 724 || 738 || 753 || 768 || 5 072

Most deprived persons || N.A. || N.A. || 379 || 387 || 394 || 402 || 410 || 418 || 427 || 2 818

Total || N.A. || N.A. || 1 061 || 1 082 || 1 104 || 1 126 || 1 149 || 1 172 || 1 195 || 7 889

Heading 3 || || || || || || || || || ||

Food safety || N.A. || N.A. || 350 || 350 || 350 || 350 || 350 || 350 || 350 || 2 450

|| || || || || || || || || ||

Outside MFF || || || || || || || || || ||

Reserve for agricultural crises || N.A. || N.A. || 531 || 541 || 552 || 563 || 574 || 586 || 598 || 3 945

European Globalisation Fund (EGF) || || || || || || || || || ||

Of which maximum available for agriculture: (5) || N.A. || N.A. || 379 || 387 || 394 || 402 || 410 || 418 || 427 || 2 818

|| || || || || || || || || ||

TOTAL || || || || || || || || || ||

TOTAL Commission proposals (MFF + outside MFF) + assigned revenue || 60 428 || 60 428 || 62 274 || 62 537 || 62  823 || 63 084 || 63 114 || 63 146 || 63 177 || 440 156

TOTAL MFF proposals (i.e. excluding Reserve and EGF) + assigned revenue || 60 428 || 60 428 || 61 364 || 61 609 || 61 877 || 62 119 || 62 130 || 62 141 || 62 153 || 433 393

Notes:

(1)           Taking into account legislative changes
already agreed, i.e. voluntary modulation for the UK and Article 136
"unspent amounts" will cease to apply by the end of 2013.

(2)           The amounts
relate to the proposed annual ceiling for the first pillar. However, it should
also be noted that it is proposed to move negative expenditure from accounting
clearance (currently under budget item 05 07 01 06) to assigned revenue (under
item 67 03). For details, see estimated revenue table on the page below.

(3)           The 2013 figures include the amounts for
veterinary and phytosanitary measures as well as market measures for the
fisheries sector.

(4)           The amounts in
the table above are in line with those in the Commission communication "A
Budget for Europe 2020" (COM(2011)500 final of 29 June 2011). However, it
remains to be decided if the MFF will reflect the transfer that is proposed for
the envelope of one Member State of the cotton national restructuring programme
to rural development as from 2014, implying an adjustment (4 million EUR per
year) of the amounts for respectively the EAGF sub-ceiling and for pillar 2. In
the tables in the sections below, the amounts have been transferred,
irrespective of them being reflected in the MFF.

(5)           In accordance
with the Commission communication "A Budget for Europe 2020"
(COM(2011)500 final), a total amount of up to 2.5 billion EUR in 2011 prices
will be available under the European Globalisation Fund for providing
additional support to farmers suffering from effects of globalisation. In the
table above, the breakdown by year in current prices is only indicative.
The proposal for the inter-institutional agreement between the European
Parliament, the Council and the Commission on cooperation in budgetary matters
and on sound financial management (COM(2011)403 final of 29 June 2011) sets
out, for the EGF, an overall maximum annual amount of 429 million EUR in 2011
prices.

3.2.
Estimated impact on expenditure
3.2.1.
Summary of estimated impact on expenditure

Table 2: Estimated revenue as well as
expenditure for Policy Area 05 within Heading 2

In million EUR (current prices)

Budget year || 2013 || 2013 adjusted || 2014 || 2015 || 2016 || 2017 || 2018 || 2019 || 2020 || TOTAL 2014-2020

REVENUE || || || || || || || || || ||

123 – Sugar production charge (own resources) || 123 || 123 || 123 || 123 || || || || || || 246

|| || || || || || || || || ||

67 03 - Assigned revenue || 672 || 672 || 741 || 741 || 741 || 741 || 741 || 741 || 741 || 5 187

of which: ex 05 07 01 06 - Accounting clearance || 0 || 0 || 69 || 69 || 69 || 69 || 69 || 69 || 69 || 483

Total || 795 || 795 || 864 || 864 || 741 || 741 || 741 || 741 || 741 || 5 433

EXPENDITURE || || || || || || || || || ||

05 02 - Markets (1) || 3 311 || 3 311 || 2 622 || 2 641 || 2 670 || 2 699 || 2 722 || 2 710 || 2 699 || 18 764

05 03 - Direct aids (before capping) (2) || 42 170 || 42 535 || 42 876 || 43 081 || 43 297 || 43 488 || 43 454 || 43 454 || 43 454 || 303 105

05 03 – Direct aids (after capping) || 42 170 || 42 535 || 42 876 || 42 917 || 43 125 || 43 303 || 43 269 || 43 269 || 43 269 || 302 027

|| || || || || || || || || ||

05 04 - Rural development (before capping) || 14 817 || 14 451 || 14 455 || 14 455 || 14 455 || 14 455 || 14 455 || 14 455 || 14 455 || 101 185

05 04 - Rural development (after capping) || 14 817 || 14 451 || 14 455 || 14 619 || 14 627 || 14 640 || 14 641 || 14 641 || 14 641 || 102 263

|| || || || || || || || || ||

05 07 01 06 - Accounting clearance || -69 || -69 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0

Total || 60 229 || 60 229 || 59 953 || 60 177 || 60 423 || 60 642 || 60 631 || 60 620 || 60 608 || 423 054

NET BUDGET after assigned revenue || || || 59 212 || 59 436 || 59 682 || 59 901 || 59 890 || 59 879 || 59 867 || 417 867

Notes:

(1)           For 2013, preliminary
estimate based on Draft Budget 2012 taking into account legal adjustments
already agreed for 2013 (e.g. wine ceiling, abolition of potato starch premium,
dried fodder) as well as some foreseen developments. For all years, the
estimates assume that there will be no additional financing need for support
measures due to market disturbances or crises.

(2)           The
2013 amount includes an estimate of wine grubbing-up 2012.

Table 3: Calculation of the financial
impact by budget chapter of the CAP reform proposals as regards revenue and CAP
expenditure

In million EUR (current prices)

Budget year || 2013 || 2013 adjusted || || TOTAL 2014-2020

|| || 2014 || 2015 || 2016 || 2017 || 2018 || 2019 || 2020 ||

REVENUE || || || || || || || || || ||

123 – Sugar production charge (own resources) || 123 || 123 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0

|| || || || || || || || || ||

67 03 - Assigned revenue || 672 || 672 || 69 || 69 || 69 || 69 || 69 || 69 || 69 || 483

of which: ex 05 07 01 06 - Accounting clearance || 0 || 0 || 69 || 69 || 69 || 69 || 69 || 69 || 69 || 483

Total || 795 || 795 || 69 || 69 || 69 || 69 || 69 || 69 || 69 || 483

EXPENDITURE || || || || || || || || || ||

05 02 - Markets (1) || 3 311 || 3 311 || -689 || -670 || -641 || -612 || -589 || -601 || -612 || -4 413

05 03 - Direct aids (before capping) (2) || 42 170 || 42 535 || -460 || -492 || -534 || -577 || -617 || -617 || -617 || -3 913

05 03 - Direct aids – Estimated product of capping to be transferred to rural development || || || 0 || -164 || -172 || -185 || -186 || -186 || -186 || -1 078

05 04 - Rural development (before capping) || 14 817 || 14 451 || 4 || 4 || 4 || 4 || 4 || 4 || 4 || 28

05 04 - Rural development – Estimated product of capping to be transferred from direct aids || || || 0 || 164 || 172 || 185 || 186 || 186 || 186 || 1 078

05 07 01 06 - Accounting clearance || -69 || -69 || 69 || 69 || 69 || 69 || 69 || 69 || 69 || 483

Total || 60 229 || 60 229 || -1 076 || -1 089 || -1 102 || -1 115 || -1 133 || -1 144 || -1 156 || -7 815

NET BUDGET after assigned revenue || || || -1 145 || -1 158 || -1 171 || -1 184 || -1 202 || -1 213 || -1 225 || -8 298

Notes:

(1)           For 2013, preliminary
estimate based on Draft Budget 2012 taking into account legal adjustments
already agreed for 2013 (e.g. wine ceiling, abolition of potato starch premium,
dried fodder) as well as some foreseen developments. For all years, the
estimates assume that there will be no additional financing need for support
measures due to market disturbances or crises.

(2)           The
2013 amount includes an estimate of wine grubbing-up 2012.

Table 4: Calculation of the financial
impact of the CAP reform proposals as regards CAP market-related expenditure

In million EUR (current prices)

BUDGET YEAR || || Legal base || Estimated needs || Changes to 2013 ||

|| || || 2013 (1) || 2014 || 2015 || 2016 || 2017 || 2018 || 2019 || 2020 || TOTAL 2014-2020

Exceptional measures: streamlined and extended scope of legal base || || Art. 154, 155, 156 || pm || pm || pm || pm || pm || pm || pm || pm || pm

Removal of intervention for durum wheat and sorghum || || ex Art.10 || pm || - || - || - || - || - || - || - || -

Food programmes for most deprived || (2) || Ex-Art. 27 of Reg 1234/2007 || 500.0 || -500.0 || -500.0 || -500.0 || -500.0 || -500.0 || -500.0 || -500.0 || -3 500.0

Private storage (Flax fibre) || || Art. 16 || N.A. || pm || pm || pm || pm || pm || pm || pm || Pm

Aid for cotton - Restructuring || (3) || ex Art. 5 of Reg. 637/2008 || 10.0 || -4.0 || -4.0 || -4.0 || -4.0 || -4.0 || -4.0 || -4.0 || -28.0

Setting-up aid for F&V producer groups || || ex Art. 117 || 30.0 || 0.0 || 0.0 || 0.0 || -15.0 || -15.0 || -30.0 || -30.0 || -90.0

School fruit scheme || || Art. 21 || 90.0 || 60.0 || 60.0 || 60.0 || 60.0 || 60.0 || 60.0 || 60.0 || 420.0

Abolition hops PO || || ex Art. 111 || 2.3 || -2.3 || -2.3 || -2.3 || -2.3 || -2.3 || -2.3 || -2.3 || -15.9

Optional private storage for skimmed-milk powder || || Art. 16 || N.A. || pm || pm || pm || pm || pm || pm || pm || pm

Abolition aid for use of skimmed milk/SMP as feedingstuff/casein and use of casein || || ex Art. 101, 102 || pm || - || - || - || - || - || - || - || -

Optional private storage for butter || (4) || Art. 16 || 14.0 || [-1.0] || [-14.0] || [-14.0] || [-14.0] || [-14.0] || [-14.0] || [-14.0] || [-85.0]

Abolition milk promotional levy || || ex Art. 309 || pm || - || - || - || - || - || - || - || -

TOTAL 05 02 || || || || || || || || || || ||

Net effect of reform proposals (5) || || || || -446.3 || -446.3 || -446.3 || -461.3 || -461.3 || -476.3 || -476.3 || -3 213.9

Notes:

(1)           The 2013 needs are estimated
based on the Commission's Draft Budget 2012, except for (a) the fruit &
vegetables sectors where the needs are based on the financial statement of the
respective reforms and (b) any legal changes already agreed.

(2)           The
2013 amount corresponds to Commission proposal COM(2010)486. As from 2014, the
measure will be financed within Heading 1.

(3)           The envelope for the cotton
restructuring programme for Greece (4 million EUR/year) will be transferred to
rural development as from 2014. The envelope for Spain (6.1 million EUR/year)
will go to the Single Payment Scheme as from 2018 (already decided).

(4)           Estimated
effect in case of non-application of the measure.

(5)           In addition to expenditure
within chapters 05 02 and 05 03, it is anticipated that direct expenditure
within chapters 05 01, 05 07 and 05 08 will be financed by revenue that will be
assigned to the EAGF.

Table 5: Calculation of the financial
impact of the CAP reform proposals as regards direct aids

In million EUR (current prices)

BUDGET YEAR || || Legal base || Estimated needs || Changes to 2013 ||

|| || 2013 (1) || 2013 adjusted (2) || 2014 || 2015 || 2016 || 2017 || 2018 || 2019 || 2020 || TOTAL 2014-2020

|| || || || || || || || || || || ||

Direct aids || || || 42 169.9 || 42 535.4 || 341.0 || 381.1 || 589.6 || 768.0 || 733.2 || 733.2 || 733.2 || 4 279.3

- Changes already decided: || || || || || || || || || || || ||

Phasing-in EU 12 || || || || || 875.0 || 1 133.9 || 1 392.8 || 1 651.6 || 1 651.6 || 1 651.6 || 1 651.6 || 10 008.1

Cotton restructuring || || || || || 0.0 || 0.0 || 0.0 || 0.0 || 6.1 || 6.1 || 6.1 || 18.4

Health Check || || || || || -64.3 || -64.3 || -64.3 || -90.0 || -90.0 || -90.0 || -90.0 || -552.8

Previous reforms || || || || || -9.9 || -32.4 || -32.4 || -32.4 || -32.4 || -32.4 || -32.4 || -204.2

|| || || || || || || || || || || ||

- Changes due to new CAP reform proposals || || || -459.8 || -656.1 || -706.5 || -761.3 || -802.2 || -802.2 || -802.2 || -4 990.3

Of which: capping || || || || || 0.0 || -164.1 || -172.1 || -184.7 || -185.6 || -185.6 || -185.6 || -1 077.7

|| || || || || || || || || || || ||

TOTAL 05 03 || || || || || || || || || || || ||

Net effect of reform proposals || || || || || -459.8 || -656.1 || -706.5 || -761.3 || -802.2 || -802.2 || -802.2 || -4 990.3

TOTAL EXPENDITURE || || || 42 169.9 || 42 535.4 || 42 876.4 || 42 916.5 || 43 125.0 || 43 303.4 || 43 268.7 || 43 268.7 || 43 268.7 || 302 027.3

Notes:

(1)           The
2013 amount includes an estimate of wine grubbing-up 2012.

(2)           Taking
into account legislative changes already agreed, i.e. voluntary modulation for
the UK and Article 136 "unspent amounts" will cease to apply by the
end of 2013.

Table 6: Components of direct aids

In million EUR (current prices)

BUDGET YEAR || || || || || 2015 || 2016 || 2017 || 2018 || 2019 || 2020 || TOTAL 2014-2020

Annex II || || || || || 42 407.2 || 42 623.4 || 42 814.2 || 42 780.3 || 42 780.3 || 42 780.3 || 256 185.7

Payment for agricultural practices beneficial for the climate and environment (30%) || || || || || 12 866.5 || 12 855.3 || 12 844.3 || 12 834.1 || 12 834.1 || 12 834.1 || 77 068.4

Maximum that can be allocated to the Payment for young farmers (2%) || || || || || 857.8 || 857.0 || 856.3 || 855.6 || 855.6 || 855.6 || 5 137.9

Basic Payment Scheme, Payment for areas with Natural Constraints, Voluntary Coupled Support || || || || || 28 682.9 || 28 911.1 || 29 113.6 || 29 090.6 || 29 090.6 || 29 090.6 || 173 979.4

Maximum that can be taken from the above lines to finance the Small Farmer Scheme (10%) || || || || || 4 288.8 || 4 285.1 || 4 281.4 || 4 278.0 || 4 278.0 || 4 278.0 || 25 689.3

Wine transfers included in Annex II[56] || || || || || 159.9 || 159.9 || 159.9 || 159.9 || 159.9 || 159.9 || 959.1

Capping || || || || || -164.1 || -172.1 || -184.7 || -185.6 || -185.6 || -185.6 || -1 077.7

Cotton || || || || || 256.0 || 256.3 || 256.5 || 256.6 || 256.6 || 256.6 || 1 538.6

POSEI/Small Aegean Islands || || || || || 417.4 || 417.4 || 417.4 || 417.4 || 417.4 || 417.4 || 2 504.4

Table 7: Calculation of the financial
impact of the CAP reform proposals as regards transitional measures for
granting direct aids in 2014

In million EUR (current prices)

BUDGET YEAR || || Legal base || Estimated needs || Changes to 2013

|| || || 2013 (1) || 2013 adjusted || 2014 (2)

Annex IV to Council Regulation (EC) No 73/2009 || || || 40 165.0 || 40 530.5 || 541.9

Phasing-in EU 10 || || || || || 616.1

Health Check || || || || || -64.3

Previous reforms || || || || || -9.9

TOTAL 05 03 || || || || ||

TOTAL EXPENDITURE || || || 40 165.0 || 40 530.5 || 41 072.4

Notes:

(1)           The
2013 amount includes an estimate of wine grubbing-up 2012.

(2)           The
extended net ceilings include an
estimate of the wine transfers to SPS based on the decisions taken by the Member
States for 2013.

Table 8: Calculation of the financial
impact of the CAP reform proposals as regards rural development

In million EUR (current prices)

BUDGET YEAR || || Legal base || Rural development allocation || Changes to 2013 ||

|| || || 2013 || 2013 adjusted (1) || 2014 || 2015 || 2016 || 2017 || 2018 || 2019 || 2020 || TOTAL 2014-2020

Rural development programmes || || || 14 788.9 || 14 423.4 || || || || || || || ||

Aid for cotton - Restructuring || (2) || || || || 4.0 || 4.0 || 4.0 || 4.0 || 4.0 || 4.0 || 4.0 || 28.0

Product of capping of direct aids || || || || || || 164.1 || 172.1 || 184.7 || 185.6 || 185.6 || 185.6 || 1 077.7

RD envelope excluding technical assistance || (3) || || || || -8.5 || -8.5 || -8.5 || -8.5 || -8.5 || -8.5 || -8.5 || -59.4

Technical assistance || (3) || || 27.6 || 27.6 || 8.5 || 3.5 || 3.5 || 3.5 || 3.5 || 3.5 || 3.5 || 29.4

Prize for local innovative co-operation projects || (4) || || N.A. || N.A. || 0.0 || 5.0 || 5.0 || 5.0 || 5.0 || 5.0 || 5.0 || 30.0

TOTAL 05 04 || || || || || || || || || || || ||

Net effect of reform proposals || || || || || 4.0 || 168.1 || 176.1 || 188.7 || 189.6 || 189.6 || 189.6 || 1 105.7

TOTAL EXPENDITURE (before capping) || || || 14 816.6 || 14 451.1 || 14 455.1 || 14 455.1 || 14 455.1 || 14 455.1 || 14 455.1 || 14 455.1 || 14 455.1 || 101 185.5

TOTAL EXPENDITURE (after capping) || || || 14 816.6 || 14 451.1 || 14 455.1 || 14 619.2 || 14 627.2 || 14 639.8 || 14 640.7 || 14 640.7 || 14 640.7 || 102 263.2

Notes:

(1)           Adjustments
in line with the existing legislation only applicable until the end of
financial year 2013.

(2)           The amounts in table 1
(section 3.1) are in line with those in the Commission communication "A
Budget for Europe 2020" (COM(2011)500 final). However, it remains to be
decided if the MFF will reflect the transfer that is proposed for the envelope
of one Member State of the cotton national restructuring programme to rural
development as from 2014, implying an adjustment (4 million EUR per year) of
the amounts for respectively the EAGF sub-ceiling and for pillar 2. In table 8
above, the amounts have been transferred, irrespective of them being reflected
in the MFF.

(3)           The
2013 amount for technical assistance was fixed based on the initial rural
development envelope (transfers from pillar 1 not included).

Technical assistance for 2014-2020 is fixed at 0.25%
of the total rural development envelope.

(4)           Covered
by the amount available for technical assistance.

Heading of multiannual financial framework: || 5 || " Administrative expenditure "

EUR million (to 3 decimal places)

Note:     It is estimated that the
legislative proposals will have no impact on appropriations of an
administrative nature, i.e. it is the intention that the legislative framework
can be implemented with the present level of human resources and administrative
expenditure.

|| || || Year 2014 || Year 2015 || Year 2016 || Year 2017 || Year 2018 || Year 2019 || Year 2020 || TOTAL

DG: AGRI ||

Ÿ Human resources || 136.998 || 136.998 || 136.998 || 136.998 || 136.998 || 136.998 || 136.998 || 958.986

Ÿ Other administrative expenditure || 9.704 || 9.704 || 9.704 || 9.704 || 9.704 || 9.704 || 9.704 || 67.928

TOTAL DG AGRI || Appropriations || 146.702 || 146.702 || 146.702 || 146.702 || 146.702 || 146.702 || 146.702 || 1 026.914

TOTAL appropriations under HEADING 5 of the multiannual financial framework || (Total commitments = Total payments) || 146.702 || 146.702 || 146.702 || 146.702 || 146.702 || 146.702 || 146.702 || 1 026.914

EUR million (to 3 decimal places)

|| || || Year N[57] || Year N+1 || Year N+2 || Year N+3 || ... enter as many years as necessary to show the duration of the impact (see point 1.6) || TOTAL

TOTAL appropriations under HEADINGS 1 to 5 of the multiannual financial framework || Commitments || || || || || || || ||

Payments || || || || || || || ||

3.2.2.
Estimated impact on operational appropriations

–
 ̈  The proposal/initiative does not require the use of operational
appropriations

–
x   The proposal/initiative requires the use of
operational appropriations, as explained below:

Commitment appropriations in EUR million (to 3 decimal
places)

Indicate objectives and outputs ò || || || Year 2014 || Year 2015 || Year 2016 || Year 2017 || Year 2018 || Year 2019 || Year 2020 || TOTAL

OUTPUTS

Type of output || Average cost of the output || Number of outputs || Cost || Number of outputs || Cost || Number of outputs || Cost || Number of outputs || Cost || Number of outputs || Cost || Number of outputs || Cost || Number of outputs || Cost || Total number of outputs || Total cost

SPECIFIC OBJECTIVE No 5: To improve the competitiveness of the agricultural sector and enhance its value share in the food chain || || || || || || || || || || || || || || || ||

- Fruit & vegetables: Marketing through producer organisations (POs)[58] || Propor-tion of the value of produc-tion marke-ted through POs in value of the total produc-tion || || || 830.0 || || 830.0 || || 830.0 || || 830.0 || || 830.0 || || 830.0 || || 830.0 || || 5 810.0

- Wine: National envelope – Restructuring58 || Number of hectares || || 54 326 || 475.1 || 54 326 || 475.1 || 54 326 || 475.1 || 54 326 || 475.1 || 54 326 || 475.1 || 54 326 || 475.1 || 54 326 || 475.1 || || 3 326.0

- Wine: National envelope – Investments58 || || || 1 147 || 178.9 || 1 147 || 178.9 || 1 147 || 178.9 || 1 147 || 178.9 || 1 147 || 178.9 || 1 147 || 178.9 || 1 147 || 178.9 || || 1 252.6

- Wine: National envelope – By-product distillation58 || Hecto-litres || || 700 000 || 98.1 || 700 000 || 98.1 || 700 000 || 98.1 || 700 000 || 98.1 || 700 000 || 98.1 || 700 000 || 98.1 || 700 000 || 98.1 || || 686.4

- Wine: National envelope – Potable alcohol58 || Number of hectares || || 32 754 || 14.2 || 32 754 || 14.2 || 32 754 || 14.2 || 32 754 || 14.2 || 32 754 || 14.2 || 32 754 || 14.2 || 32 754 || 14.2 || || 14.2

- Wine: National envelope – Use of concentrated must58 || Hecto-litres || || 9 || 37.4 || 9 || 37.4 || 9 || 37.4 || 9 || 37.4 || 9 || 37.4 || 9 || 37.4 || 9 || 37.4 || || 261.8

- Wine: National envelope – promotion58 || || || || 267.9 || || 267.9 || || 267.9 || || 267.9 || || 267.9 || || 267.9 || || 267.9 || || 1 875.3

- Other || || || || 720.2 || || 739.6 || || 768.7 || || 797.7 || || 820.3 || || 808.8 || || 797.1 || || 5 452.3

Sub-total for specific objective N°5 || || 2 621.8 || || 2 641.2 || || 2 670.3 || || 2 699.3 || || 2 721.9 || || 2 710.4 || || 2 698.7 || || 18 763.5

SPECIFIC OBJECTIVE No 6: To contribute to farm incomes and limit farm income variability || || || || || || || || || || || || || || || ||

- Direct income support[59] || Number of hectares paid (in million) || || 161.014 || 42 876.4 || 161.014 || 43 080.6 || 161.014 || 43 297.1 || 161.014 || 43 488.1 || 161.014 || 43 454.3 || 161.014 || 43 454.3 || 161.014 || 43 454.3 || 161.014 || 303 105.0

Sub-total for specific objective N°6 || || 42 876.4 || || 43 080.6 || || 43 297.1 || || 43 488.1 || || 43 454.3 || || 43 454.3 || || 43 454.3 || || 303 105.0

TOTAL COST || || || || || || || || || || || || || || || ||

Note: For specific objectives 1 to 4 and 7
to 10, the outputs are still to be determined (see section 1.4.2 above).

3.2.3.
Estimated impact on appropriations of an
administrative nature
3.2.3.1.
Summary

–
 ̈  The proposal/initiative does not require the use of administrative
appropriations

–
x   The proposal/initiative requires the use of
administrative appropriations, as explained below:

EUR million (to 3 decimal places)

|| Year 2014 || Year 2015 || Year 2016 || Year 2017 || Year 2018 || Year 2019 || Year 2020 || TOTAL

HEADING 5 of the multiannual financial framework || || || || || || || ||

Human resources [60] || 136.998 || 136.998 || 136.998 || 136.998 || 136.998 || 136.998 || 136.998 || 958.986

Other administrative expenditure || 9.704 || 9.704 || 9.704 || 9.704 || 9.704 || 9.704 || 9.704 || 67.928

Subtotal HEADING 5 of the multiannual financial framework || || || || || || || ||

Outside HEADING 5 of the multiannual financial framework || || || || || || || ||

Human resources || || || || || || || ||

Other expenditure of an administrative nature || || || || || || || ||

Subtotal outside HEADING 5 of the multiannual financial framework || || || || || || || ||

TOTAL || 146.702 || 146.702 || 146.702 || 146.702 || 146.702 || 146.702 || 146.702 || 1 026.914

3.2.3.2.
 Estimated requirements
of human resources

–
 ̈  The proposal/initiative does not require the use of human
resources

–
x   The proposal/initiative requires the use of
human resources, as explained below:

Note: It is estimated that the legislative
proposals will have no impact on appropriations of an administrative nature,
i.e. it is the intention that the legislative framework can be implemented with
the present level of human resources and administrative expenditure. The
figures for the period 2014-2020 are based on the situation for 2011.

Estimate to be expressed in full amounts
(or at most to one decimal place)

|| Year 2014 || Year 2015 || Year 2016 || Year 2017 || Year 2018 || Year 2019 || Year 2020

Ÿ Establishment plan posts (officials and temporary agents) ||

XX 01 01 01 (Headquarters and Commission’s Representation Offices) || 1 034 || 1 034 || 1 034 || 1 034 || 1 034 || 1 034 || 1 034

XX 01 01 02 (Delegations) || 3 || 3 || 3 || 3 || 3 || 3 || 3

XX 01 05 01 (Indirect research) || || || || || || ||

10 01 05 01 (Direct research) || || || || || || ||

Ÿ External personnel (in Full Time Equivalent unit: FTE)[61] ||

XX 01 02 01 (CA, INT, SNE from the "global envelope") || 78 || 78 || 78 || 78 || 78 || 78 || 78

XX 01 02 02 (CA, INT, JED, LA and SNE in the delegations) || || || || || || ||

XX 01 04 yy || - at Headquarters || || || || || || ||

- in delegations || || || || || || ||

XX 01 05 02 (CA, INT, SNE - Indirect research) || || || || || || ||

10 01 05 02 (CA, INT, SNE - Direct research) || || || || || || ||

Other budget lines (specify) || || || || || || ||

TOTAL[62] || 1 115 || 1 115 || 1 115 || 1 115 || 1 115 || 1 115 || 1 115

XX is the
policy area or budget title concerned.

The human resources required
will be met by staff from the DG who are already assigned to management of the action
and/or have been redeployed within the DG, together if necessary with any
additional allocation which may be granted to the managing DG under the annual
allocation procedure and in the light of budgetary constraints.

Description of
tasks to be carried out:

Officials and temporary agents ||

External personnel ||

3.2.4.
Compatibility with the current multiannual
financial framework

–
x   Proposal/initiative is compatible with the PROPOSALS
FOR THE 2014-2020 multiannual financial framework.

–
 ̈  Proposal/initiative will entail reprogramming of the relevant
heading in the multiannual financial framework.

–
 ̈  Proposal/initiative requires application of the flexibility
instrument or revision of the multiannual financial framework.

3.2.5.
Third-party contributions

–
The proposal/initiative does not provide for
co-financing by third parties

–
X  The proposal regarding rural development
(EAFRD) provides for the co-financing estimated below:

Appropriations in EUR million (to 3 decimal places)

|| Year 2014 || Year 2015 || Year 2016 || Year 2017 || Year 2018 || Year 2019 || Year 2020 || Total

Specify the co-financing body || MS || MS || MS || MS || MS || MS || MS || MS

TOTAL appropriations cofinanced [63] || To be determined || To be determined || To be determined || To be determined || To be determined || To be determined || To be determined || To be determined

3.3.
Estimated impact on revenue

–
x   Proposal/initiative has no financial impact
on revenue.

–
 ̈  Proposal/initiative has the following financial impact:

–
x   on own resources

–
x   on miscellaneous revenue

EUR million (to 3 decimal places)

Budget revenue line: || Appropriations available for the ongoing budget year || Impact of the proposal/initiative[64]

Year N || Year N+1 || Year N+2 || Year N+3 || ... insert as many columns as necessary in order to reflect the duration of the impact (see point 1.6)

|| || || || || || || ||

For miscellaneous
assigned revenue, specify the budget expenditure line(s) affected.

See tables 2 and 3 in section 3.2.1.

[1]               Communication from the Commission to the European
Parliament, the Council, the European Economic and Social Committee and the
Committee of the Regions A budget for Europe 2020, COM(2011)500 final,
29.6.2011.

[2]               Communication from the Commission to the European
Parliament, the Council, the European Economic and Social Committee and the
Committee of the Regions The CAP towards 2020: meeting the food, natural
resources and territorial challenges of the future, COM(2010)672 final,
18.11.2010.

[3]               See in particular the European Parliament resolution
of 23 June 2011, 2011/2015(INI), and the Presidency conclusions of 18.3.2011.

[4]               The current legislative framework comprises Council
Regulation (EC) No 73/2009 (direct payments), Council Regulation (EC) No 1234/2007
(market instruments), Council Regulation (EC) No 1698/2005 (rural development)
and Council Regulation (EC) No 1290/2005 (financing).

[5]               Proposal for a Regulation of
the European Parliament and of the Council laying down common provisions on the
European Regional Development Fund, the European Social Fund, the Cohesion
Fund, the European Agricultural Fund for Rural Development and the European
Maritime and Fisheries Fund covered by the Common Strategic Framework and
laying down general provisions on the European Regional Development Fund, the
European Social Fund and the Cohesion Fund and repealing Regulation (EC) No
1083/2006, COM(2011)615 of 6.10.2011.

[6]               See Annex 9 of the impact assessment for an overview
of the 517 contributions received.

[7]               OJ C , , p. .

[8]               OJ C , , p. .

[9]               OJ C , , p. .

[10]             COM(2010) 672 final, 18.11.2010.

[11]             OJ L 209, 11.8.2005, p. 1.

[12]             OJ L , , p .

[13]             OJ L , P. .

[14]             OJ L , , p. .

[15]             OJ L , , p. .

[16]             OJ L 30, 31.1.2009, p. 16

[17]             OJ L , , p. .

[18]             OJ L,  , p. .

[19]             OJ L 50, 22.2.1978, p. 1.

[20]             OJ L 100, 20.04.2000, p. 7.

[21]             COM(2011) 500 final, p. 7.

[22]             OJ L 312, 23.12.1995, p.1.

[23]             OJ L , , p. .

[24]             OJ L 143, 3.6.2008, p. 1.

[25]             OJ L 270, 21.10.2003, p. 1.

[26]             OJ L 277, 21.10.2005, p. 1.

[27]             OJ L 299, 16.11.2007, p. 1.

[28]             OJ L 327, 22.12.2000, p. 1.

[29]             OJ L 309, 24.11.2009, p. 71.

[30]             OJ L 20, 26.1.1980, p. 43.

[31]             OJ L 349, 24.12.1998, p. 1.

[32]             OJ
L 281, 23.11.1995, p. 31.

[33]             OJ
L 8, 12.1.2001, p. 1.

[34]             Judgement in joined cases C-92/09 and C-93/09, Volker
und Markus Schecke GbR and Hartmut Eifert/Land Hessen, [2010] ECR
I-0000

[35]             OJ L 76, 19.3.2008, p. 28.

[36]             OJ L 55, 28.2.2011, p. 13.

[37]             OJ L 11, 16.1.2003, p. 1.

[38]             OJ L [...], [...], p. [...].

[39]             OJ
L 292, 15.11.1996, p. 2.

[40]             OJ
L 136, 31.5.1999, p. 1.

[41]             OJ L 145, 4.6.2008, p. 1.

[42]             OJ L 204, 11.8.2000, p. 1.

[43]             OJ L 5, 9.1.2004, p. 8.

[44]             OJ L 124, 8.6.1971, p. 1.

[45]             OJ
L 165, 30.4.2004, p.1.

[46]             OJ L 213, 8.8.2008, p. 31.

[47]             OJ L 292, 15.11.1996, p. 2.

[48]             The GAEC buffer strips must respect, both within and
outside vulnerable zones designated pursuant to Article 3(2) of Directive
91/676/EEC, at least the requirements relating to the conditions for land
application of fertiliser near water courses, referred to in point A.4 of Annex
II to Directive 91/676/EEC to be applied in accordance with the action
programmes of Member States established under Article 5(4) of Directive
91/676/EEC.

[49]             Ploughing of wetland and carbon rich land which has
been defined in 2011 at the latest as arable land in accordance with Article 2
point (a) of Regulation (EC) No 1120/2009 and which complies with the
definition of arable land as laid down in Article 4 point (f) of the Regulation
(EU) No DP/xxx shall not be considered as first ploughing.

[50]             As implemented in particular by:

— Regulation (EEC) No 2377/90:
Articles 2, 4 and 5,

— Regulation (EC) No 852/2004:
Article 4(1) and Annex I part A (II 4 (g, h, j), 5 (f, h), 6; III 8 (a, b, d,
e), 9 (a, c)),

— Regulation (EC) No 853/2004:
Article 3(1) and Annex III Section IX Chapter 1 (I-1 b, c, d, e; I-2 a (i, ii,
iii), b (i, ii), c; I-3; I-4; I-5; II-A 1, 2, 3, 4; II-B 1(a, d), 2, 4 (a, b)),
Annex III Section X Chapter 1(1),

— Regulation (EC) No 183/2005:
Article 5(1) and Annex I, part A (I-4 e, g; II-2 a, b, e), Article 5(5) and
Annex III (1, 2), Article 5(6), and

— Regulation (EC) No 396/2005:
Article 18.

[51]             ABM: Activity-Based Management – ABB: Activity-Based
Budgeting.

[52]             As referred to in Article 49(6)(a) or (b) of the
Financial Regulation.

[53]             COM(2011)500 final of 29 June 2011.

[54]             Details of management modes and references to the
Financial Regulation may be found on the BudgWeb site: http://www.cc.cec/budg/man/budgmanag/budgmanag_en.html

[55]             As referred to in Article 185 of the Financial
Regulation.

[56]             Direct aids for the period
2014-2020 include an estimate of the wine transfers to SPS based on the
decisions taken by the Member States for 2013.

[57]             Year N is the year in which implementation of the
proposal/initiative starts.

[58]             Based on past execution and estimates in the 2012 Draft
Budget. For the producer organisations in the fruit & vegetables sector,
the amounts are in line with the reform of that sector and, as already
indicated in the activity statements of the 2012 Draft Budget, outputs will
only be known in late 2011.

[59]             Based on potentially eligible areas for 2009.

[60]             Based on an average cost of 127 000 EUR for
establishment plan post of officials and temporary agents.

[61]             CA= Contract Agent; INT= agency staff ("Intérimaire");
JED= "Jeune Expert en Délégation" (Young Experts in
Delegations); LA= Local Agent; SNE= Seconded National Expert;

[62]             This does not include the sub-ceiling on budget line
05.010404.

[63]             This will be set out in the rural development
programmes to be submitted by the Member States.

[64]             As regards traditional own resources (customs duties,
sugar levies), the amounts indicated must be net amounts, i.e. gross amounts
after deduction of 25% for collection costs.