Proposal for a COUNCIL REGULATION amending Regulation (EC) No 2200/96 on the common organisation of the market in fruit and vegetables, Regulation (EC) No 2201/96 on the common organisation of the market in processed fruit and vegetables and Regulation (EC) No 2202/96 introducing a Community aid scheme for producers of certain citrus fruits

(presented by the Commission)

EXPLANATORY MEMORANDUM

Introduction

The 1996 reform of the fruit and vegetable CMO was implemented from January 1997 onwards. The Commission is to submit a report to the Council on the operation of the CMO by end 2000 (for fresh produce / citrus). This report is in progress and its finalisation is dependent on the submission of information from Member States.

However, four important issues have arisen which need addressing urgently. These are the rigidity of the current arrangement for processed tomatoes, the level of the guarantee quantities (quotas or thresholds) for processed tomatoes, pears and citrus fruit, a simplification of the operational fund system and an improvement of the export refunds management for fresh products. At the same time, the two other existing regimes (processed peaches/pears and citrus) can be adapted in line with the new arrangement for tomatoes.

For processed tomatoes, the arrangement needs to be rationalised and simplified, taking the most effective elements from the existing systems for tomatoes, peaches and pears:

1. Use thresholds instead of quotas (as in the current peaches/pears and citrus regime);

2. Express thresholds in raw materials (as in the present tomato quota regime) instead of in processed products;

3. Sub-divide Community thresholds into national thresholds (as in the present tomato quota regime);

4. Pay aid directly to the producer organisations (as in the citrus regime);

5. Fix the aid by the Council on a permanent basis (as in the citrus regime).

Since tomato plantings take place in the first quarter of the year, a new arrangement has to be in place at the latest at the beginning of 2001.

For operational funds, the current administrative procedure is complicated and cumbersome. A simplification is therefore required.

For export refunds, the current management systems do not take fully into account the precise needs of the individual operators. It must therefore be improved.

Therefore, based on the above, the following amendments are proposed:

1. Rationalisation of the arrangements for processed tomatoes, peaches/pears and citrus fruit;

2. Adaptation of the thresholds for processed tomatoes, pears and citrus regimes, within a budgetary neutrality;

3. Simplification of the financing system of operational funds;

4. Improvement of the management of export refunds for fresh fruit and vegetables.

The amendments 1, 2 and 4 would be applicable from the 2001/2002 marketing years of each product. As far as processed products are concerned, that means from June, July or October 2001 according to the products.

The amendment 3 would be applicable for assistance paid in respect of operational funds from 2001 onwards.

These amendments greatly simplify current regulations, and in particular in the processed tomato sector. At the same time, the different regimes are brought into line with each other. These amendments will benefit growers who, via their organisations, will manage better the marketing of their production. A more flexible processing arrangement will enable market operators to adapt better their production to market developments. Planning by producer organisations of operational programme expenditure will be greatly simplified, since the amount of aid available now will be known to all producer organisations when drawing up their operational programmes.

1. Rationalisation of the arrangement for processed tomatoes, peaches/pears and citrus fruit

The Community system of aid for the processing of fruit and vegetables, except citrus fruit (Regulation n° 2201/96), is based on the principle of a minimum price to the producer paid by the processor and of compensatory aid granted to the processor for the obtained finished products, for 3 groups of products:

- processed tomatoes subject to a Community quota, allocated by Member State and revised every year. Aid is granted only within the limits of these quotas,

- peaches and pears in syrup, subject to a Community threshold. Aid is decreased uniformly in each Member State in the event of Community overrun of threshold.

The 1996 reform of the Community system of aid for the processing of citrus fruit (Council Regulation (EC) No 2202/96) provides:

- that processors must conclude contracts with producer organisations,

- for aid for producer organisations for the quantities delivered for processing. The level of this aid is laid down in the Council Regulation and is therefore no longer linked to the cost of the raw material in third countries,

- a system of Community thresholds for each product or product group (oranges, lemons, grapefruits and small citrus fruits), the volumes of which did not change,

- the free negotiation of the purchase price for the raw material between producer organisations and processors in accordance with supply and demand.

In 1999, as decided in the 1998 price package in response to a problem identified earlier, the marketing year to which the reduction of aid applies following an overrun of the threshold was changed.

Rather than applying in the marketing year in which the overrun takes place, the reduction of aid applies in the following marketing year. This has the benefit of greater simplicity, improved cash flow for producers and costs no more than the previous arrangement. This amendment applies from the 1999/2000 marketing year.

In the light of the above, the following amendments are proposed for these regimes:

1.1. Generalisation of Community arrangements into national thresholds

1.1.1. Tomatoes

Experience has shown that the current mechanism of 'mobile' quotas, applied to tomatoes leads to the transfer of quotas to those Member States which exceed their quotas the most, to the detriment of the other Member States.

An urgent solution is needed to correct this while avoiding the rigidity of a fixed quota system.

It is proposed to replace the current arrangement by the processing threshold already applied for peaches and pears.

1.1.2. Tomatoes, peaches/pears and citrus fruit

To take account of variable production trends between Member States the Community thresholds will be divided into national thresholds, for peaches/pears and citrus fruit on the basis of the quantities processed with aid during the last 3 marketing years, and for tomatoes on the basis of the current quota allocation.

In case of an overrun of the Community threshold, the reduction of aid will only occur in those Member States for which the national threshold has been overrun.

The thresholds for peaches and pears, currently expressed in finished product, are converted into raw material, as is the case for tomatoes and citrus fruit.

For peaches and pears, mixtures of these fruit in syrup are added to Annex 1 (processed products for which aid is given for raw material used), in order to clarify existing arrangements.

1.2. Direct payment of aid to producer organisations

It appears necessary to simplify the arrangement for paying aid for tomatoes and peaches/pears and to introduce more flexibility into the relation between producers and processors, as is the case for citrus.

It seems therefore to be advisable to grant Community aid directly to the producers, via producer organisations as is presently the case for citrus fruit. Aid will be fixed for the quantity of raw material intended for processing. In this context, the fixing of a minimum price becomes obsolete.

For tomatoes, this results in a simplification in that a single amount of aid will be fixed (instead of current 16 different amounts for finished products).

1.3. Fixing of aid by the Council on a permanent basis

The amount of aid for tomatoes, peaches and pears is currently fixed by the Commission, for each marketing year, mainly on the basis of trends in world costs of raw material.

This project sets aid for the processing of tomatoes, peaches and pears on the basis of the aid granted during the 2000/2001 marketing year, for an indefinite period. The Commission would intervene only to reduce aid in a given marketing year if thresholds were overrun.

For 2000/2001, the aid was reduced by one third for peaches compared with the previous marketing year, and by 50% compared with the average aid granted in the mid-90s. This can be explained by the increase in world raw material prices, and for the 2000/2001 marketing year also by the decrease in the euro exchange rate.

This phenomenon has also occurred in pears but to a lesser extent.

For tomatoes, for the first campaign of application, aid is reduced by 9,1% in anticipation of a possible overrun of the threshold during this campaign. This is in order to prevent a budgetary overshoot. If there were a lower overshoot, the aid would be automatically re-established in proportion.

2. Adaptation of the thresholds for processed tomatoes, pears and citrus fruit within budgetary neutrality

2.1. Tomatoes and pears

To take account of increasing demand, the thresholds are increased by 10% for tomatoes and pears. There is a corresponding decrease in aid to ensure budget neutrality.

2.2. Citrus fruit

There has been a strong increase in demand in recent years in particular for juice not made from concentrate. This is a competitive sector into which Community production should be encouraged to focus, compared with other sectors of more doubtful market potential (e.g., juice from concentrate for which Brazil has a significant technical advantage).

This has stimulated an increase in production, an overshoot of the threshold and consequently a substantial decrease in the level of aid.

However, a side effect of this decrease in the level of aid is an increase of the difference between the aid and the Community withdrawal compensation, making intervention more attractive. Under the existing rules the maximum percentage that can be withdrawn by each producer organisation will be 10% at the end of the transitional period (2002). It is judged that the decrease in aid will create a real risk that withdrawals will reach this maximum of 10%.

In the face of this, 2 measures are foreseen:

- to take account of the increased demand, the threshold should be increased,

- to avoid high levels of withdrawals, the maximum permitted quantity of withdrawals should be reduced.

The result of these measures would be to maintain budget neutrality and reduce the quantities of withdrawn product. This will affect those POs mainly producing for withdrawal, whereas the dynamic POs (using withdrawal only marginally) remain practically unaffected. This solution therefore reinforces the trend for efficient marketing of the production, instead of withdrawals.

This draft proposes to:

- increase the thresholds by 10% for oranges, lemons and small citrus fruits,

- reduce the quantity of each citrus fruit, which can be withdrawn from the market to 10% of the marketed production of each producer organisation for the 2001/02 marketing year and to 5% of that marketed production from the 2002/03 marketing year onwards. The CWC will be maintained at its current level.

3. Simplification of the financing system of operational funds

Under Regulation (EC) n° 2200/96, financial assistance to producer organisations is subject to 2 ceilings. The first ceiling limits assistance to a maximum of 4,5% of the value of marketed production of each individual producer organisation (4,0% for 1997 and 1998). The second ceiling limits the total amount of assistance to a maximum of 2,5% (2,0% for 1997 and 1998) of the sum of value of marketed production of all producer organisations.

On the basis of these 2 ceilings, a final ceiling can be calculated each year, which applies to individual producer organisations.

The final ceilings applied to date were 2,92% (1998) and 3,61% (1999). In 1997, the total assistance requested was below the 2% overall ceiling, and the maximum individual ceiling of 4% therefore could apply.

Real expenditure is dependent on the level of organisation of producers and the level of assistance requested by each producer organisation. The level of organisation, currently at 40%, is considerably lower than the level of 60% previously forecast. Currently there is no sign of a significant increase in the level of organisation.

Real expenditure (aid applications) has been 199 Mio EUR (1997), 238 Mio EUR (1998) and 311 Mio EUR (1999). The increase in assistance in 1999 is mainly due to the 0,5% increase of the overall ceiling.

Experience to date has shown that the second ceiling introduces a degree of complication and inconsistency for the implementation of operational funds and programmes. In the light of this experience, procedures could be simplified for producer organisations, national administrations and Commission services by setting a single ceiling.

Budgetary neutrality would be maintained as experience has shown that the spread of aid applications is roughly linear from 0,1 to 4,5% and does not appear to be sensitive to the 2,5% ceiling. Those producer organisations currently requesting no aid, or aid under 2,5% (43% of the 1368 recognised producer organisations) will continue to be able to request aid up to the ceiling. Those requesting aid above the ceiling would continue to be limited by the ceiling.

Expenditure increases are only likely to occur as a result of an increase in the level of organisation, which currently is rather low, as indicated above. This in itself represents a significant budgetary saving compared with forecasts.

This draft limits assistance to 3,25 % of the value of marketed production of each producer organisation.

4. Management of export refunds for fresh products

Under the present management regime of export refunds for fresh fruit and vegetables, the levels of the refunds granted within a given issuing system are the same for all operators. However, from the experience gained from the A2 system it appears that the needs are different from one operator to another. In order to take this situation into account, it is advisable to lay down provisions allowing the Commission to fix the level of these refunds by way of a tender system, in addition to the current range of issuing systems.

Summary table of proposed adjustments for processed products and citrus

>TABLE POSITION>

(*) existing national quotas.

2000/0191 (CNS)

Proposal for a COUNCIL REGULATION amending Regulation (EC) No 2200/96 on the common organisation of the market in fruit and vegetables, Regulation (EC) No 2201/96 on the common organisation of the market in processed fruit and vegetables and Regulation (EC) No 2202/96 introducing a Community aid scheme for producers of certain citrus fruits

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Articles 36 and 37 thereof,

Having regard to the proposal from the Commission, [1]

[1] OJ C

Having regard to the opinion of the European Parliament [2],

[2] OJ C

Having regard to the opinion of the Economic and Social Committee [3],

[3] OJ C

Whereas:

(1) The third subparagraph of Article 15(5) of Regulation (EC) No 2200/96 [4] caps the amount of Community financial assistance granted to any individual producer organisation, and also sets a limit on the total granted to all producer organisations. The application of that limit introduces a variable factor into the scheme, thus complicating the task of producer organisations in developing and implementing operational programmes, and creating some uncertainty as to their financing. Experience has shown that this limit may be dispensed with while continuing to ensure proper financial management. In view of the results of past programmes, the limit for individual organisations can be set at 3% of the value of the marketed production of each producer organisation.

[4] OJ L 297, 21.11.1996, p. 29. Regulation as last amended by Regulation (EC) No 1257/1999 (OJ L 160, 26.6.1999, p. 80).

(2) For citrus fruit, the divergence, due in particular to overrunning of the processing threshold, between Community withdrawal compensation and Community processing aid may in the future lead to unjustified diversion into withdrawal of products that should properly have been processed. To avoid this risk, the ceiling fixed in Articles 23 and 24 of Regulation (EC) No 2200/96 as a percentage of marketed quantity on eligibility for the Community withdrawal compensation should be reduced to 10% for the 2001/02 marketing year and to 5% from the 2002/03 marketing year onwards. This amendment makes it possible to simplify the wording of Articles 23 and 26 of that Regulation.

(3) Experience has shown that the administration of export refunds on fresh fruit and vegetables could be improved and simplified, at least in some cases, by using a tender procedure. Provision should therefore be made for the possibility of holding such invitations to tender.

(4) Experience of applying the Community aid scheme for tomato processing governed by Regulation (EC) No 2201/96 [5] has shown that the quota mechanism introduces rigidity in the sector, preventing the processing industries concerned from adapting rapidly to market demand. To correct this rigidity, the quota system should be replaced by a system of processing thresholds, with aid for the following marketing year being reduced if the thresholds are overrun. To ensure that these arrangements are sufficiently flexible, a single Community threshold should be fixed, expressed in tonnes of fresh tomatoes intended for processing. To allow for expanding demand for these products, the threshold should be fixed above the level corresponding to the present quota scheme.

[5] OJ L 297, 21.11.1996, p. 29. Regulation as last amended by Regulation (EC) No 2701/1999 (OJ L 327, 21.12.1999, p. 5).

(5) The quantities of tomatoes, peaches and pears going for processing under the aid scheme governed by Regulation (EC) No 2201/96 have developed differently from one Member State to another. As a result, and to ensure that operators in each Member State assume greater responsibility, Community processing thresholds should be split between the Member States on an equitable basis, and any reduction in Community aid resulting from an overrun of the Community threshold should apply only in those Member States in which the threshold is exceeded. In this case, account must be taken of quantities that have not been processed in the Member States where the threshold was not overrun.

(6) At present, processing aid for tomatoes, peaches and pears is granted under Regulation (EC) No 2201/96 to processors who have paid producers for their raw materials a price not less than a certain minimum price. Aid is fixed by unit of weight of the processed product. The management of this scheme should be simplified, introducing more flexibility in trade relations between producer organisations and processors and contributing to the adjustment of supply to consumer demand at reasonable prices. To this end, aid should be granted to producer organisations that deliver fresh products to processors, this aid should be fixed in terms of the weight of raw materials irrespective of the weight of the processed product, and the minimum price should be discontinued.

(7) The amount of aid for processing tomatoes, peaches and pears should be fixed on the basis of the aid granted in the most recent marketing years preceding this amendment to the scheme.

(8) As a result of this amendment to Title I of Regulation (EC) No 2201/96, the provisions governing processing aid for prunes derived from dried "d'Ente" plums and for dried figs must be adapted, although without any change of substance.

(9) Article 5 of Regulation (EC) No 2202/96 [6] lays down Community processing thresholds for lemons, oranges and grapefruit separately, and for mandarins, clementines and satsumas, hereinafter referred to as "small citrus fruit", taken together. Since the introduction of this regime, those thresholds have been largely exceeded each marketing year in the case of lemons and oranges, and to a lesser extent in the 1998/99 and 1999/2000 marketing years in the case of small citrus fruit. The thresholds for grapefruit have been complied with. Under the rules, those overruns have resulted in major reductions in processing aid. The continued existence of such a situation could lead in future to products usually intended for processing being diverted into withdrawals. As a result, the thresholds for lemons, oranges and small citrus fruit should be raised.

[6] OJ L 297, 21.11.1996, p. 49. Regulation amended by Regulation (EC) No 858/1999 (OJ L 108, 27.4.1999, p. 8).

(10) The quantities going for processing have evolved differently from one Member State to another. As a result, and to ensure that operators in each Member State assume greater responsibility, the Community processing thresholds should be split between the Member States on an equitable basis, and any reduction in Community aid resulting from an overrun of the Community threshold should apply only in those Member States in which the threshold is exceeded. In this case, account must be taken of quantities that have not been processed in the Member States where the threshold was not overrun.

(11) Changes in the numbering of the Annexes to Regulation (EC) No 2202/96 require an amendment to the wording of Article 3 of that Regulation.

(12) Since the measures necessary for the implementation of Regulation (EC) No 2200/96 and Regulation (EC) No 2201/96 are management measures within the meaning of Article 2 of Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission [7], they should be adopted by use of the management procedure provided for in Article 4 of that Decision.

[7] OJ L 184, 17.7.1999, p. 23.

(13) These amendments to Regulations (EC) Nos 2200/96, 2201/96 and 2202/96 should be applied from the 2001/02 marketing year. However, as the operational funds are managed on a calendar-year basis, the amendment to the third subparagraph of Article 15(5) of Regulation (EC) No 2200/96 should apply from 2001,

HAS ADOPTED THIS REGULATION:

Article 1

Regulation (EC) No 2200/96 is amended as follows:

1. The third subparagraph of Article 15(5) is replaced by the following:

"However, the financial assistance shall be capped at 3% of the value of the marketed production of each producer organisation."

2. Article 23(3), (4), (5) and (6) is replaced by the following:

"3. Where paragraph 1 is applied to any one of the products listed in Annex II which meet the relevant standards, producer organisations and their associations shall pay their producer members the Community withdrawal compensation indicated in Annex V, up to a limit:

- for citrus fruit, of 5%,

- for apples and pears, of 8.5%, and

- for other products, of 10%,

of the marketed quantity.

The limits set in the first subparagraph shall apply to the marketed quantity of each product, as defined in accordance with the procedure laid down in Article 46, of only the members of the producer organisation concerned, or of another organisation where Article 11(1)(c) applies.

4. The ceilings fixed in paragraph 3 shall apply from the 2002/03 marketing year. For the 2001/02 marketing year, the ceilings shall be 10% for citrus fruit, melons and water melons, and 20% for other products.

The second subparagraph of paragraph 3 shall apply to the ceilings set in this paragraph.

5. The percentages in paragraphs 3 and 4 shall be annual averages over a three-year period, with a 3% annual margin of overrun."

3. Article 24 is replaced by the following:

"Article 24

In connection with the products listed in Annex II, producer organisations shall allow the benefits of Article 23 to growers who are not members of any of the collective structures provided for in this Regulation, if they so request. However, the Community withdrawal compensation shall be reduced by 10%. In addition, the amount paid shall take account, on scrutiny of the evidence, of the overall withdrawal costs borne by the members. The compensation may not be granted on a volume greater than that share of the grower's marketed production corresponding to the percentages given in Article 23(3)."

4. Article 26 is replaced by the following:

"Article 26

The Community withdrawal compensation shall be a single amount valid throughout the Community."

5. The third subparagraph of Article 35(3) is replaced by the following:

"Refunds shall be fixed in accordance with the procedure laid down in Article 46. Refunds shall be fixed periodically or by tender."

6. Article 45 is repealed.

7. Article 46 is replaced by the following:

"Article 46

1. The Commission shall be assisted by a committee, the management committee for fresh fruit and vegetables, composed of representatives of the Member States and chaired by the representative of the Commission.

2. Where reference is made to this paragraph, the management procedure laid down in Article 4 of Decision 1999/468/EC shall apply, in compliance with Article 7 (3) thereof.

3. The period provided for in Article 4 (3) of Decision 1999/468/EC shall be one month."

Article 2

Regulation (EC) No 2201/96 is amended as follows:

1. Articles 2 to 6 are replaced by the following:

"Article 2

A Community aid scheme is hereby introduced to assist producer organisations supplying tomatoes, peaches and pears harvested in the Community for the production of the processed products listed in Annex I.

Article 3

1. The scheme referred to in Article 2 shall be based on contracts between, on the one hand, producer organisations recognised or provisionally authorised under Regulation (EC) No 2200/96 and, on the other, processors approved by the competent authorities in the Member States. However, in the course of the 2001/02 marketing year, contracts between processors and individual producers shall also be eligible, for a quantity not exceeding 25% of the total quantity contracted for by any processor.

2. Contracts shall be concluded by a specific date, to be defined in accordance with the procedure laid down in Article 29. In particular, they shall specify the quantities they cover, the schedule of supply to the processor and the price to be paid to the producer organisations, and shall require the processor to process the products covered. As soon as they have been signed, the contracts shall be forwarded to the competent authorities in the Member States.

3. The producer organisations shall extend the benefit of the provisions of this Article to operators not affiliated to any of the collective structures provided for in Regulation (EC) No 2200/96, who undertake to market through such structures all their output of tomatoes, peaches and pears for processing and who pay a contribution towards the overall management costs of this system borne by the organisation.

Article 4

1. Aid shall be granted to producer organisations for the quantities of raw materials supplied for processing under the contracts referred to in Article 3.

2 The amount of aid shall be: EUR 29.84/tonne for tomatoes, EUR 47.7/tonne for peaches, EUR 161.7/tonne for pears.

3. Without prejudice to the application of Article 5, aid shall be paid by the Member States to the producer organisations upon request, as soon as the control authorities in the Member State in which processing is carried out have established that the products covered by the contracts have been supplied to the processing industry. The amount of aid received by the producer organisation shall be paid to its members.

Article 5

1. For each of the products referred to in Article 2, Community and national processing thresholds shall be established as indicated in Annex II.

2. Whenever a Community processing threshold is overrun, the aid fixed for the product in question in accordance with Article 4(2) shall be reduced in all the Member States in which the corresponding threshold has been overrun. For the purposes of applying the first subparagraph, threshold overruns shall be calculated by comparing the threshold with the average quantity processed with aid under this Regulation over the three marketing years preceding that for which aid must be set. However, to calculate the overrun of the thresholds fixed for each Member State, any quantities still available below the threshold of a Member State but not processed shall be allocated to the other Member States, in proportion to their respective thresholds. The reduction in aid shall be proportional to the volume of overrun relative to the relevant threshold.

3. For tomatoes, the following arrangements shall apply to the marketing years immediately following implementation of this Regulation:

(a) For the first marketing year:

- overrun of the processing threshold shall be calculated on the basis of the quantity supplied for processing with aid during the year, and

- the aid fixed in Article 4(2) shall be reduced to EUR 27,13/tonne. However, in the Member States where the threshold has not been overrun, or where it has been overrun by less than 10%, and in all Member States concerned if the Community threshold has not been overrun, a supplement shall be paid after the end of the marketing year. The supplement shall be fixed on the basis of the actual overrun of the threshold concerned.

(b) For the second marketing year, overrun of the processing threshold shall be calculated on the basis of the quantity supplied for processing with aid during the first year.

(c) For the third marketing year, overrun of the processing threshold shall be calculated on the basis of the average quantity supplied for processing with aid during the first and second years.

Article 6

1. Detailed rules for the application of Articles 2 to 5, and in particular rules governing approval of processors, conclusion of processing contracts, payment of aid, control measures and sanctions, marketing years, minimum characteristics of the raw material supplied for processing, minimum quality requirements for finished products and the financial consequences of overrunning thresholds, shall be adopted in accordance with the procedure laid down in Article 29.

2. Quality and quantity checks shall also be adopted in accordance with that procedure to verify:

- that the products supplied to processors by producer organisations meet requirements, and

- that the products supplied have actually been processed into products listed in Annex I."

2. The following Articles are inserted after Article 6:

"Article 6a

1. A production aid scheme shall be applied:

(a) to dried figs falling within CN code 0804 20 90,

(b) to prunes derived from dried "d'Ente" plums falling within CN code ex 0813 20 00,

obtained from fruit harvested in the Community.

2. Production aid shall be granted to processors who have paid producers for their raw materials a price not less than the minimum price under contracts between, on the one hand, producer organisations recognised or provisionally authorised under Regulation (EC) No 2200/96 and, on the other, processors. However, in the course of the 2001/02 marketing year, contracts between processors and individual producers shall also be eligible, for a quantity not exceeding 25% of the quantity giving entitlement to production aid. The producer organisations shall extend the benefit of the provisions of this Article to operators not affiliated to any of the collective structures provided for in Regulation (EC) No 2200/96, who undertake to market through such structures all their output intended for the manufacture of the products referred to in paragraph 1 and who pay a contribution towards the overall management costs of this system borne by the organisation. Contracts must be signed before the start of the marketing year.

Article 6b

1. The minimum price to be paid to producers shall be calculated on the basis of:

(a) the minimum price applying during the previous marketing year;

(b) the movement of market prices in the fruit and vegetables sector;

(c) the need to ensure normal market disposal of basic fresh products for the various uses, including supply to the processing industry.

2. Minimum prices shall be fixed before the start of each marketing year.

3. Minimum prices and detailed rules for the application of this Article shall be adopted in accordance with the procedure laid down in Article 29.

Article 6c

1. The production aid may not exceed the difference between the minimum price paid to the producer in the Community and the price of the raw material in the main producing and exporting third countries.

2. The amount of production aid shall be so fixed as to enable the Community product to be disposed of, within the limit set in paragraph 1. To establish this amount, account shall be taken in particular:

(a) of the difference between the cost of the raw material in the Community and that in the major competing third countries;

(b) of the amount of aid fixed for the previous marketing year

and

(c) where Community output of a product accounts for a substantial share of the market, movements in external trade volumes and in the prices obtaining in such trade, where the latter criterion results in a reduction in the amount of the aid.

3. The production aid shall be fixed in terms of the net weight of the processed product. The coefficients expressing the relationship between the weight of raw material used and the net weight of the processed product shall be defined on a standardised basis. They shall be regularly updated on the basis of experience.

4. Production aid shall be granted to processors only for processed products which:

(a) have been produced from raw materials harvested in the Community, for which the applicant has paid at least the minimum price referred to in Article 6a(2);

(b) meet minimum quality requirements.

5. The price of the raw material in the main competing third countries shall be determined mainly on the basis of the prices actually applying at the farm-gate stage for fresh products of a comparable quality used for processing, weighted on the basis of the quantities of finished products exported by those third countries.

6. Where Community production accounts for at least 50% of the quantities of a product making up the Community consumption market, movements in volumes and prices of imports and exports shall be assessed by comparing the data for the calendar year preceding the start of the marketing year with the data for the previous calendar year.

7. The Commission shall fix the amount of the production aid before the start of each marketing year, in accordance with the procedure laid down in Article 29. The coefficients referred to in paragraph 3, the minimum quality requirements and the other detailed rules for the application of this Article shall be adopted in accordance with the same procedure."

3. Article 28 is repealed.

4. Article 29 is replaced by the following:

"Article 29

1. The Commission shall be assisted by a committee, the management committee for processed fruit and vegetables, composed of representatives of the Member States and chaired by the representative of the Commission.

2. Where reference is made to this paragraph, the management procedure laid down in Article 4 of Decision 1999/468/EC shall apply, in compliance with Article 7 (3) thereof.

3. The period provided for in Article 4 (3) of Decision 1999/468/EC shall be one month."

5. Annex I is replaced by Annex I to this Regulation.

6. Annex III is replaced by the content of Annex II to this Regulation.

Article 3

Regulation (EC) No 2202/96 is amended as follows:

1. Article 3 is replaced by the following:

"Article 3

1. Aid shall be granted to producer organisations for the quantities delivered for processing under the contracts referred to in Article 2.

2. The amount of the aid is set out in Table 1 of Annex I. However:

(a) where the contract referred to in Article 2(1) covers more than one marketing year and a minimum quantity of citrus fruit, to be determined in accordance with the procedure laid down in Article 45 of Regulation (EC) No 2200/96, the amount of the aid shall be that indicated in Table 2 of Annex I;

(b) for quantities delivered under the provisions of Article 4, the amount of the aid shall be that indicated in Table 3 of Annex I.

3. Without prejudice to the application of Article 5, the aid shall be paid by the Member States to producer organisations which apply therefor as soon as the inspecting authorities of the Member State in which processing is undertaken have established that the products covered by the contracts have been delivered to the processing industry. The aid received by the producer organisations shall be paid to their members.

4. Measures shall be adopted in accordance with the procedure laid down in Article 45 of Regulation (EC) No 2200/96 to ensure that the processing industry meets its obligation to process the products delivered by the producer organisations."

2. Article 5 is replaced by the following:

"Article 5

1. Processing thresholds shall be established for the Community and for each producer Member State, on the one hand for lemons, oranges and grapefruit separately and, on the other hand, for mandarins, clementines and satsumas taken together. The thresholds shall be as set out in Annex II.

2. Whenever a Community processing threshold is overrun, the aid fixed for the product in question in accordance with Article 3(2) shall be reduced in all the Member States in which the corresponding threshold has been overrun. For the purposes of applying the first subparagraph, threshold overruns shall be calculated by comparing the threshold with the average quantity processed with aid under this Regulation over the three marketing years or equivalent periods preceding the marketing year for which the aid must be set. However, to calculate the overrun of the thresholds fixed for each Member State, any quantities still available below the threshold of a Member State but not processed shall be allocated to the other Member States, in proportion to their respective thresholds. The reduction in aid shall be proportional to the volume of overrun relative to the relevant threshold."

3. The Annex becomes "Annex I".

4. The content of Annex III to this Regulation is inserted after Annex I.

Article 4

This Regulation shall enter into force on the third day following its publication in the Official Journal of the European Communities.

It shall apply to each product or group of products from the 2001/02 marketing year. However, Article 1 (1) shall apply to operational funds from 2001.

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

Done at Brussels,

For the Council

The President

ANNEX I Processed products referred to in Article 2

CN code // Description

ex 0710 80 70 // Peeled tomatoes, whole or in pieces, frozen

ex 0712 90 30 // Tomato flakes

2002 10 10 // Peeled tomatoes, whole or in pieces

2002 10 90 // Unpeeled tomatoes, whole or in pieces

ex 2002 90 // Other (crush or pizza sauce)

ex 2002 90 11

ex 2002 90 19 // Tomato juice (including passata)

ex 2002 90 31

ex 2002 90 39

ex 2002 90 91

ex 2002 90 99 // Tomato concentrate

ex 2008 40 51

ex 2008 40 59

ex 2008 40 71

ex 2008 40 79

ex 2008 40 91

ex 2008 40 99 // Williams and Rocha pears in syrup and/or in natural fruit juice

ex 2008 70 61

ex 2008 70 69

ex 2008 70 71

ex 2008 70 79

ex 2008 70 92

ex 2008 70 94

ex 2008 70 99 // Peaches in syrup and/or in natural fruit juice

ex 2008 92

ex 2008 99 // Mixtures of fruit, whole or in pieces, in syrup and/or in natural fruit juice, containing at least [60%] peaches and pears

2009 50 // Tomato juice

ANNEX II "Annex III Processing thresholds referred to in Article 5

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n.r. = not relevant"

ANNEX III "Annex II Processing thresholds referred to in Article 5

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n.r. = not relevant"

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ANNEX

The amounts given represent the net impact of the proposed amendments, calculated as the difference in relation to the current situation, i.e. assuming that the levels of production and processing remain stable in future marketing years.

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The distribution by EAGGF financial year is based on established payment rates:

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1. PO operational funds

It is very difficult to put a figure on the financial impact of setting a single rate at 3% given the nature of the factors involved. The approach selected is based on an assumption that the factors in the equation are stable. On that basis, and provided that each PO maintains its current requested rate for financing its fund, one could consider this measure as being budget-neutral. In fact, for the last two years, the maximum ceiling for EAGGF (2.5% of the marketed production of the POs) led to fixing a maximum limit for POs of 2.89% for 1998 and of 3.61% for 1999, which corresponds to an average individual ceiling of 3.25%.

2. citrus fruit withdrawals

The fall in competitiveness of processing harbours a serious threat of large quantities of citrus fruit being transferred to withdrawals. Although limited to 15% for the 2001/02 marketing year (20% for 2000/01), these withdrawals should rather be set at about 10%, due to this situation and assuming that quantities equal to the new threshold levels are processed. Such withdrawals would cost EUR 45.2 million (2000 budget and 2001 PDB are already based on roughly such withdrawals, for expenditures of EUR 47.2 million and 47 million respectively). The setting of the limit at 10% for the 2001/02 marketing year and at 5% onwards (instead of the 10% authorised by Regulation (EC) Nr. 2200/96) leaves the expenditure unchanged for the first marketing year but leads to a permanent saving of EUR 22.6 million for the following ones (in comparison, the saving compared with 2001 PDB is about EUR 24 million).

3. tomatoes for processing

The measure has been designed to be financially neutral, the increase in the threshold being compensated by a reduction in aid so as to ensure neutrality. In assessing this measure, it has been assumed that the quantities processed in each country will be at the level of the new thresholds.

4. processed peaches and pears

The measure has been designed to be financially neutral. Assessment of expenditure is thus based solely on the quantities taken into consideration, which have been estimated for all marketing years at the level of the average of the last three years for which data are available. Traditionally, expenditure in a given year falls in year n + 1.

In the case of peaches, annual expenditure is stable given that processing in the marketing years prior to the entry into force of the new mechanism - and therefore the resultant three-year average - is at a lower level than the new threshold.

In the case of pears, taking account of the quantities estimated in this way leads, as a result of the three-year average, to some variation in expenditure from one marketing year to the next, and stabilisation from 2003/04 onwards.

5. processed citrus fruit

Given the restriction on withdrawals, set in parallel to the increase in the thresholds, the quantities sent for processing will probably remain stable at current levels. On that basis, the 10% threshold increase produces a rise in expenditure of EUR 30.2 million per marketing year, of which EUR 19.1 million for oranges. For the impact by budget, it has been assumed that stabilisation of the sector and greater awareness of the aid would bring payments to an estimated steady rate of 75% for financial year n + 1 and 25% for n + 2.

6. Budget neutrality

Budget neutrality is ensured. In other words, the expenditure resulting from this proposal is at the same level as the expenditure would be under current regulations for the same products. In terms of expenditure by EAGGF financial year, budget neutrality is perfect until 2003. The increase of EUR 7.5 million from the 2004 financial year is negligible in relation to the total fruit and vegetable budget.