EUROPEAN COMMISSION Brussels, 20.5.2022 COM(2022) 242 final 2022/0166(COD) Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) No 1305/2013 as regards a specific measure to provide exceptional temporary support under the European Agricultural Fund for Rural Development (EAFRD) in response to the impact of Russia’s invasion of Ukraine



EXPLANATORY MEMORANDUM 1.CONTEXT OF THE PROPOSAL •Reasons for and objectives of the proposal As stated in the Commission Communication on safeguarding food security and reinforcing the resilience of food systems of 23 March 2022 (COM(2022)133 final), the unprovoked Russia’s invasion of Ukraine has further destabilised already fragile agricultural markets. Before the invasion, commodity markets were witnessing a significant price surge, which agricultural markets felt through the increases in energy, fertiliser and animal feed costs. Now the costs for farmers and small and medium enterprises (SMEs) active in processing, marketing or development of agricultural products further increases and affects the price of food, which exposes the vulnerabilities of the European food system, notably the dependence on imports and raising concerns as regards the income of farmers and producers in the agri-food chain. This adds to the pressure on European agriculture following the Covid-19 pandemic. Climate change and environmental challenges need also to be addressed. In the above-mentioned Communication, the Commission called “for addressing the deficiencies revealed by the developing crisis in ways that enhance the transition towards sustainable, resilient and fair food systems in the EU and globally”. The trade disruption raises serious concerns about global food security stemming from the short-term impact of the war and the longer-term uncertainties that surround it. While the stable food supply in the EU is not jeopardised, if the significantly higher production costs at farm level are not compensated by higher prices, this may impact supply certainties. The Common Agricultural Policy (CAP) provides for a range of measures, including a price safety net and the possibility to take exceptional measures. In its Communication of 23 March 2022 the Commission already presented a number of exceptional initiatives to safeguard food security and to reinforce the resilience of food systems. The current situation, however, is unprecedented and requires additional initiatives, as certain small businesses and farmers are in urgent need of emergency support in order to maintain their activities. The Commission therefore proposes an additional measure, funded by the European Agricultural Fund for Rural Development (EAFRD), which allows the Member States to provide liquidity support to farmers and agri-food businesses affected by significant increases in input costs, in particular to feed and fertiliser undertakings as well as energy-intensive undertakings in the processing industry which experience increased gas and electricity costs. By directly addressing the cash-flow challenges of such businesses, the support will contribute to global food security and address the market disturbance due to increased input costs. In order to achieve these goals, the support will take the form of a one-off lump sum for farmers and for SMEs active in processing, marketing or development of agricultural products. Payments by the Commission shall be made in accordance with budget appropriations and subject to available funding. With a view to ensuring the most efficient use of resources available under existing rural development programmes, Member States will be required to substantiate the targeting of the support to those most affected, based on objective and non-discriminatory criteria. Member States would need to include the measure in the rural development programmes via a programme modification. The Member States may start payments to the beneficiaries once they have submitted a programme modification introducing the new measure. This submission can take place after the adoption of this proposal, as well as the amendments of the related secondary legislation (Commission Implementing Regulations (EU) No 808/2014 and 809/2014). •Consistency with existing policy provisions in the policy area The proposal is consistent with the overall legal framework established for the Common Agricultural Policy and the European Structural and Investment Funds (ESIF) and is limited to a targeted amendment of Regulation (EU) No 1305/2013. The proposal complements all other measures aimed at addressing the current unprecedented situation taken by the Union, in particular those measures aimed at providing support to markets and ensuring food security. The proposal is without prejudice to the minimum spending requirements defined in paragraphs 5 and 6 of Article 59 of Regulation (EU) 1305/2013, as well as the “non-regression principle” laid down in Article 1(2) of Regulation (EU) 2020/2220. •Consistency with other Union policies The proposal is limited to targeted amendments of Regulation (EU) No 1305/2013 and maintains consistency with other Union policies. 2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY •Legal basis The proposal is based on Articles 42 and 43(2) of the Treaty on the Functioning of the European Union.

•Subsidiarity (for non-exclusive competence) The Treaty on the Functioning of the European Union provides that the competence for agriculture is shared between the Union and the Member States, while establishing a common agricultural policy with common objectives and a common implementation. The proposal aims at ensuring the common objectives and common implementation of a new Rural Development measure. •Proportionality The proposal comprises limited and targeted amendments that do not go beyond what is necessary to achieve the objective of providing exceptional and temporary relief to farmers and SMEs active in processing, marketing or development of agricultural products, who are particularly affected by the impact of Russia’s invasion of Ukraine. •Choice of the instrument A Regulation is the appropriate instrument to introduce the additional measure needed to address these unprecedented circumstances. 3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS •Ex-post evaluations/fitness checks of existing legislation N/A •Stakeholder consultations There was no consultation of external stakeholders. However, the proposal follows consultations with Member States and Members of the European Parliament over recent weeks. •Collection and use of expertise N/A •Impact assessment An impact assessment was carried out to prepare the proposal for Regulation (EU) No 1305/2013. These proposed limited amendments do not require a separate impact assessment. •Regulatory fitness and simplification N/A •Fundamental rights N/A 4.BUDGETARY IMPLICATIONS

The proposed modification does not imply any changes in the Multiannual Financial Framework annual ceilings for commitments and payments as per Annex I to Regulation (EU) No 2020/2093. The total annual breakdown of commitment appropriations under European Agricultural Fund for Rural Development (EAFRD) remains unchanged. Payments to beneficiaries will be made before 15 October 2023, and hence to be financed under the 2023 budget. The payment appropriations needed to finance this measure are to be accommodated within the appropriations for the EAFRD included in the Commission’s forthcoming Draft Budget 2023 and will be offset by a corresponding decrease in payment needs in subsequent years. 5.OTHER ELEMENTS •Implementation plans and monitoring, evaluation and reporting arrangements The implementation of the measures will be monitored and reported upon in the framework of the general reporting mechanisms established in Regulations (EU) No 1303/2013 and 1305/2013. •Explanatory documents (for directives) N/A •Detailed explanation of the specific provisions of the proposal It is proposed to amend Regulation (EU) No 1305/2013. 2022/0166 (COD) Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) No 1305/2013 as regards a specific measure to provide exceptional temporary support under the European Agricultural Fund for Rural Development (EAFRD) in response to the impact of Russia’s invasion of Ukraine 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 42 and Article 43(2) thereof, Having regard to the proposal from the European Commission, After transmission of the draft legislative act to the national parliaments, Having regard to the opinion of the European Economic and Social Committee, Having regard to the opinion of the Committee of the Regions, Acting in accordance with the ordinary legislative procedure, Whereas:

(1)Farmers and rural businesses have been affected by the consequences of Russia’s invasion of Ukraine in an unprecedented manner. Increasing input prices, notably for energy, fertiliser and animal feed, have created economic disruption to the agricultural sector and rural communities and led to liquidity problems for farmers and small rural businesses active in processing, marketing or development of agricultural products. This has created an exceptional situation which needs to be addressed. (2)In order to respond to the impact of Russia’s invasion of Ukraine, a new exceptional and temporary measure should address the liquidity problems that put at risk the continuity of farming activities and of small businesses active in processing, marketing or development of agricultural products. (3)The support, which aims to secure the agro-business competitiveness and farm viability, should, with a view to best concentrating the available resources on beneficiaries who are suffering most from the consequences of Russia’s invasion of Ukraine, be granted on the basis of objective and non-discriminatory criteria aiming to target the support to those most affected. In the case of farmers, such criteria may include production sectors, types of farming or farm structures and, in the case of SMEs, sectors, types of activity, type of regions or other specific constraints. (4)The current and dramatic crisis confirms the need to accelerate the transition towards sustainability to better prepare for future crises; the support for this measure should therefore not result in a reduction of the overall share of the EAFRD contribution reserved for the measures referred to in Article 59(6) of Regulation (EU) No 1305/2013. (5)Because of the urgency, temporary and exceptional character of this measure, a one-off payment and an end date for application of the measure should be set, while the principle that payments by the Commission shall be made in accordance with budget appropriations and subject to available funding needs to be recalled. (6)In order to give higher support where farmers or SMEs are most severely affected, it is appropriate to allow Member States to adjust the level of the lump-sums for certain categories of eligible beneficiaries for instance by fixing certain ranges or broad categories, based on objective and non-discriminatory criteria. (7)In order to ensure adequate funding of the new measure without jeopardising other objectives of the rural development programmes, a maximum share of the Union contribution to this measure should be fixed. (8)Regulation (EU) No 1305/2013 should therefore be amended accordingly. (9)In view of Russia’s invasion of Ukraine and the urgency to address its impact on the Union agri-food sector, it is considered necessary to use the exception to the eight-week period referred to in Article 4 of Protocol No 1 on the role of national Parliaments in the European Union, annexed to the Treaty on European Union, to the Treaty on the Functioning of the European Union and to the Treaty establishing the European Atomic Energy Community. (10)Given the urgency of the situation related to the impact of Russia’s invasion of Ukraine, it is appropriate that this Regulation enters into force on the date of its publication in the Official Journal of the European Union, HAVE ADOPTED THIS REGULATION: Article 1

Regulation (EU) No 1305/2013 is amended as follows: (1)the following Article is inserted: ‘Article 39c

Exceptional temporary support to farmers and SMEs particularly affected by the impact of Russia’s invasion of Ukraine 1.Support under this measure shall provide emergency assistance to farmers and SMEs particularly affected by the impact of Russia’s invasion of Ukraine, aiming at ensuring continuity of their business activity, subject to the conditions set out in this Article. 2.Support shall be granted to farmers or SMEs active in processing, marketing or development of agricultural products covered by Annex I to the TFEU or cotton, except fishery products. The output of the production process may be a product not covered by that Annex.

3.Member States shall target the support to beneficiaries who are most affected, by determining, on the basis of available evidence, eligibility conditions and, where considered appropriate, selection criteria, which shall be objective and non-discriminatory. The support provided by the Member States shall contribute to food security or address market imbalances and shall support farmers or SMEs who engage in one or more of the following activities pursuing these goals: a)circular economy; b)nutrient management; c)efficient use of resources; d)environmental and climate friendly production methods. 4.The support shall take the form of a lump sum payment to be paid by 15 October 2023, based on applications for support approved by the competent authority by 31 March 2023. The subsequent reimbursement by the Commission shall be made in accordance with budget appropriations and subject to available funding. The level of payment may be differentiated by categories of beneficiaries, according to objective and non-discriminatory criteria. 5.The maximum amount of support shall not exceed EUR 15 000 per farmer and EUR 100 000 per SME. 6.When granting support under this Article, Member States shall take into account the support granted under other national or Union support instruments or private schemes to respond to the impact of Russia’s invasion of Ukraine.’; (2)in Article 49, paragraph 2 is replaced by the following: ‘2. The Member State authority responsible for the selection of operations shall ensure that operations, with the exception of operations under Article 18(1), point (b), Article 24(1), point (d), and Articles 28 to 31, 33, 34 and 36 to 39c, are selected in accordance with the selection criteria referred to in paragraph 1 of this Article and according to a transparent and well documented procedure.’; (3)in Article 59, the following paragraph is inserted: ‘6b. The EAFRD support provided under Article 39c shall not exceed 5 % of the total EAFRD contribution to the rural development programme for the years 2021-2022 as provided for in Part Two of Annex I.’. Article 2 This Regulation shall enter into force on the day of its publication in the Official Journal of the European Union.

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 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 amending Regulation (EU) No 1305/2013 as regards a specific measure to provide exceptional temporary support under EAFRD in response to the impact of Russia’s invasion of Ukraine 1.2.The proposal/initiative relates to: ◻ a new action ◻ a new action following a pilot project/preparatory action ◻ the extension of an existing action X a merger or redirection of one or more actions towards another/a new action 1.3.Objective(s) 1.3.1.General objective(s) Provide for a new exceptional and temporary measure to address the liquidity problems that put at risk the continuity of farming activities and of small businesses that process agricultural products 1.3.2.Specific objective(s) Specific objective No N/A 1.3.3.Expected result(s) and impact

Specify the effects which the proposal/initiative should have on the beneficiaries/groups targeted. N/A 1.3.4.Indicators of performance Specify the indicators for monitoring progress and achievements. N/A 1.4.Grounds for the proposal/initiative 1.4.1.Requirement(s) to be met in the short or long term including a detailed timeline for roll-out of the implementation of the initiative N/A 1.4.2.Added value of Union involvement (it may result from different factors, e.g. coordination gains, legal certainty, greater effectiveness or complementarities). For the purposes of this point 'added value of Union involvement' is the value resulting from Union intervention which is additional to the value that would have been otherwise created by Member States alone. N/A 1.4.3.Lessons learned from similar experiences in the past N/A 1.4.4.Compatibility with the Multiannual Financial Framework and possible synergies with other appropriate instruments N/A 1.4.5.Assessment of the different available financing options, including scope for redeployment N/A 1.5.Duration and financial impact of the proposal/initiative X limited duration –◻ in effect from [DD/MM]YYYY to [DD/MM]YYYY

–X No overall financial impact for commitment and payment appropriations. ◻ unlimited duration –Implementation with a start-up period from YYYY to YYYY, –followed by full-scale operation. 1.6.Management mode(s) planned ◻ Direct management by the Commission –◻ by its departments, including by its staff in the Union delegations; –◻ by the executive agencies X Shared management with the Member States ◻ Indirect management by entrusting budget implementation tasks to: –◻ third countries or the bodies they have designated; –◻ international organisations and their agencies (to be specified); –◻ the EIB and the European Investment Fund; –◻ bodies referred to in Articles 70 and 71 of the Financial Regulation; –◻ public law bodies; –◻ bodies governed by private law with a public service mission to the extent that they provide adequate financial guarantees; –◻ bodies governed by the private law of a Member State that are entrusted with the implementation of a public-private partnership and that provide adequate financial guarantees; –◻ persons entrusted with the implementation of specific actions in the CFSP pursuant to Title V of the TEU, and identified in the relevant basic act. –If more than one management mode is indicated, please provide details in the ‘Comments’ section. Comments

This new proposal does not imply any changes in the Multiannual Financial Framework annual ceilings for commitments and payments as per Annex I of Regulation (EU) No 2020/2093. The annual breakdown of commitment appropriations for the European Agricultural Fund for Rural Development remains unchanged. Overall, this measure does not imply the need for extra payment appropriations. The 2023 payment appropriations needed to finance this measure, will be offset by lower payment needs in subsequent years. 2.MANAGEMENT MEASURES 2.1.Monitoring and reporting rules Specify frequency and conditions. N/A 2.2.Management and control system(s) 2.2.1.Justification of the management mode(s), the funding implementation mechanism(s), the payment modalities and the control strategy proposed N/A 2.2.2.Information concerning the risks identified and the internal control system(s) set up to mitigate them N/A 2.2.3.Estimation and justification of the cost-effectiveness of the controls (ratio of "control costs ÷ value of the related funds managed"), and assessment of the expected levels of risk of error (at payment & at closure) N/A 2.3.Measures to prevent fraud and irregularities Specify existing or envisaged prevention and protection measures, e.g. from the Anti-Fraud Strategy. N/A 3.ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE 3.1.Heading(s) of the multiannual financial framework and expenditure budget line(s) affected ·Existing budget lines In order of multiannual financial framework headings and budget lines.

Heading of multiannual financial framework Budget line Type of

expenditure Contribution Number

Diff./Non-diff. from EFTA countries from candidate countries from third countries within the meaning of Article 21(2)(b) of the Financial Regulation 3 08.030102 Diff. NO NO NO NO ·New budget lines requested In order of multiannual financial framework headings and budget lines. Heading of multiannual financial framework Budget line Type of

expenditure Contribution Number

Diff./Non-diff. from EFTA countries from candidate countries from third countries within the meaning of Article 21(2)(b) of the Financial Regulation N/A /NO /NO /NO /NO 3.2.Estimated financial impact of the proposal on appropriations 3.2.1.Summary of 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: EUR million (to three decimal places) Heading of multiannual financial

framework Number 3 Natural resources and Environment There is no impact on commitment appropriations. As this modification will be financed through amendments of Member States’ rural development programmes within the agreed envelopes, no extra payment appropriations will be needed overall, with any payments for this measure to be compensated by lower payments on other rural development measures. It is assumed that the proposal has no impact on EAFRD payment appropriations for the 2022 budget. Taking into account time needed for Member States to implement this new measure, it is anticipated that the related expenditure will be declared in the third quarter of 2023, thereby impacting budget 2023. The corresponding impact on payment appropriations, estimated at around EUR 450 million, will be accommodated within the level of payment appropriations requested in the Draft Budget 2023 and will be offset by a corresponding decrease in payment needs in subsequent years, as estimated below. DG AGRI Year

2022 Year

2023 Year

2024 Year

2025 Enter as many years as necessary to show the duration of the impact (see point 1.6) TOTAL • Operational appropriations 08.030102 Commitments (1a) 0 0 0 0 0 Payments (2a) 0 + 450 -225 -225 0 Appropriations of an administrative nature financed from the envelope of specific programmes N/A (3) TOTAL appropriations

for DG AGRI Commitments =1a+1b +3 0 0 0 0 0 Payments =2a+2b +3 0 +450 -225 -225 0



• TOTAL operational appropriations Commitments (4) 0 0 0 0 0 Payments (5) 0 0 0 0 0 • TOTAL appropriations of an administrative nature financed from the envelope for specific programmes (6) TOTAL appropriations

under HEADING 3

of the multiannual financial framework Commitments =4+ 6 0 0 0 0 0 Payments =5+ 6 0 +450 -225 -225 0







Heading of multiannual financial

framework 7 ‘European Public Administration

This section should be filled in using the 'budget data of an administrative nature' to be firstly introduced in the Annex to the Legislative Financial Statement (Annex V to the internal rules), which is uploaded to DECIDE for interservice consultation purposes. EUR million (to three decimal places) Year

N 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 DG: <…….> • Human resources • Other administrative expenditure TOTAL DG <…….> Appropriations TOTAL appropriations

under HEADING 5

of the multiannual financial framework (Total commitments = Total payments) EUR million (to three decimal places) Year

2022 Year

2023 Year

2024 Year

2025 Enter as many years as necessary to show the duration of the impact (see point 1.6) TOTAL TOTAL appropriations

under HEADINGS 1 to 7

of the multiannual financial framework Commitments 0 0 0 0 Payments 0 +450 -225 -225 3.2.2.Estimated output funded with operational appropriations Commitment appropriations in EUR million (to three decimal places) Indicate objectives and outputs ⇩ Year

N 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 OUTPUTS Type Average cost No Cost No Cost No Cost No Cost No Cost No Cost No Cost Total No Total cost SPECIFIC OBJECTIVE No 1… 0 Output 0 Output 0 Output Subtotal for specific objective No 1 SPECIFIC OBJECTIVE No 2 ... 0 Output Subtotal for specific objective No 2 TOTALS 3.2.3.Summary of estimated impact on administrative appropriations –X The proposal/initiative does not require the use of appropriations of an administrative nature –◻ The proposal/initiative requires the use of appropriations of an administrative nature, as explained below: EUR million (to three decimal places) Year

N 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 HEADING 7

of the multiannual financial framework Human resources Other administrative expenditure Subtotal HEADING

of the multiannual financial framework Outside HEADING

of the multiannual financial framework Human resources Other expenditure

of an administrative nature Subtotal

outside HEADING

of the multiannual financial framework

TOTAL The appropriations required for human resources and other expenditure of an administrative nature will be met by appropriations from the DG that 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. 3.2.3.1.Estimated requirements of human resources –X The proposal/initiative does not require the use of human resources. –◻ The proposal/initiative requires the use of human resources, as explained below: Estimate to be expressed in full time equivalent units Year

N 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) • Establishment plan posts (officials and temporary staff) XX 01 01 01 (Headquarters and Commission’s Representation Offices) XX 01 01 02 (Delegations) XX 01 05 01/11/21 (Indirect research) 10 01 05 01/11 (Direct research) • External staff (in Full Time Equivalent unit: FTE) XX 01 02 01 (AC, END, INT from the ‘global envelope’) XX 01 02 02 (AC, AL, END, INT and JPD in the delegations) XX 01 04 yy 0 at Headquarters 0 in Delegations XX 01 05 02/12/22 (AC, END, INT 0 Indirect research) 10 01 05 02/12 (AC, END, INT 0 Direct research) Other budget lines (specify) TOTAL 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 staff External staff 3.2.4.Compatibility with the current multiannual financial framework The proposal/initiative: –X can be fully financed through redeployment within the relevant heading of the Multiannual Financial Framework (MFF). Explain what reprogramming is required, specifying the budget lines concerned and the corresponding amounts. Please provide an excel table in the case of major reprogramming. –◻ requires use of the unallocated margin under the relevant heading of the MFF and/or use of the special instruments as defined in the MFF Regulation. Explain what is required, specifying the headings and budget lines concerned, the corresponding amounts, and the instruments proposed to be used. –◻ requires a revision of the MFF. Explain what is required, specifying the headings and budget lines concerned and the corresponding amounts.