Proposal for a COUNCIL REGULATION on the common organisation of the market in rice

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. Introduction

The European rice market is in serious unbalance.

At the beginning of the 1999/2000 marketing year a total of 495 402 tonnes of paddy rice (equivalent to about 303 000 tonnes of milled rice) were stored in public intervention, which represents about 20% of internal production. Under present status quo, this quantity risks to increase at a rhythm of 150 000 to 200 000 tonnes milled equivalent per year of which only some occasional sales under food aid programs could be deducted. Financial costs are important since, due to deterioration during storage, rice risks to loose its value after 2 to 3 years.

Market prices are continuously below intervention price levels.

The unbalance is caused by a combination of increased imports and increased production as well as the limitation of subsidised exports under the GATT agreement.

A rapid solution to this problem must be found via a revision of the Common Market Organisation for rice which should enter into force as soon as possible, i.e. marketing year 2001/2002. This solution should be obtained by increasing the competitiveness of the European product as well as by improving the fluidity of the rice market. European production should also be reduced.

2. Present and Future Market situation

Historical production of rice in the Community consists of Japonica rice (round and medium grain) consumed in the producing Member States (Italy, Spain, Greece, France and Portugal).

However, consumption in Northern Member States consists mainly of Indica rice (long grain) imported from the US, ACP/OCT countries, Thailand, India and Pakistan.

From 1988 to 1993, in order to reconvert from surplus Japonica to Indica, the Community encouraged the production of Indica varieties by means of a direct payment to producers. After that period, even without a direct payment, Indica production increased as a result of demand from Northern Member States (from 27 000 ha in 1988/89 to 120 000 ha in 1999/2000), covering about 55% of the consumption of this type of rice in the Community.

Table 1: EU rice balance sheet 1994/95-1999/2000

>TABLE POSITION>

Production has increased since 1996/97 due to the increase of the area sown to rice as well as good yields subsequent to the end of the drought in Spain and the good general climate conditions. For 1998/99, some decrease of rice production can be noted probably caused by depressed market prices (see paragraph 3).

Imports have increased since 1994/95 as a consequence of the implementation of the Agreement of the Uruguay Round (especially Basmati) and the implementation of preferential regimes (TRQ's, ACP).

Total exports have stabilised since 1996/97 since food aid operations have partly replaced commercial exports.

Consumption has increased since 1995/96 mainly as a consequence of the accession of new Member States.

Since 1996/97, the EU has started to accumulate intervention stocks due to a combination of increased imports and increased production. Over the last three years, a total of 818 000 tonnes of paddy rice have been bought into intervention. This is on average 273 000 tonnes per year of paddy or 164 000 of fully milled rice.

Table 2: Intervention purchases of rice in the EU

>TABLE POSITION>

Provisional figures for 1999/2000 indicate a quantity offered for intervention of around 130 000 tonnes of milled rice equivalent. As already indicated, rice in storage is sensitive to deterioration and special costly conditions have to be assured to avoid as much as possible such deterioration.

Some quantities could be used as food aid for third countries (North Korea and Russia) as well as for the most deprived persons in the EU, but overall public stocks have increased to 303 000 tonnes in milled equivalent, or 20% of yearly production.

Future possibilities for subsidised exports will be further limited due to the GATT limit of 133 400 tonnes per year.

If status quo is maintained, one can expect an accumulation of intervention stocks at a rate of 250 000 to 350 000 tonnes of paddy per year (or 150 000 to 210 000 tonnes of milled rice per year). Each 100 000 t of paddy rice bought into intervention represents an immediate budgetary cost of 10 Mio EUR (depreciation and entry costs) and a subsequent yearly budgetary cost of 4 Mio EUR (storage and financial costs).

This means that the situation becomes unsustainable from an economical and budgetary point of view.

3. Evolution of producer prices (paddy rice)

In 1995/96, the EU production was still reduced as a consequence of the drought in Spain. During that year, average internal prices were higher than intervention prices.

In 1996/97, due to an increase in production and imports, internal average prices came down to levels well below the intervention price.

During the marketing years 1997/98 and 1998/99, internal prices were also lower than the intervention price for both Japonica and Indica rice. They were particularly low in Greece for Indica rice.

Table 3: Internal average prices as percentage of the intervention price

>TABLE POSITION>

One can conclude that, over the last 3 years, prices at the most representative markets have been well below intervention price levels (intervention itself is open for 4 months as from 1 April).

4. The import regime

4.1 The fixed tariff

During the Uruguay Round negotiations, it was agreed to convert variable levies into fixed tariffs and to reduce them by a total of 36% until 2000. Such was also the case for rice and table 4 shows the agreed tariffs for paddy, husked and milled rice.

Table 4: Import tariffs for rice as fixed in GATT schedule

>TABLE POSITION>

4.2 The Ceiling System

However, the EU agreed to insert in its GATT schedule a special headnote 7 for rice, resulting in a ceiling price for imported husked rice equal to:

- for Japonica rice: 188% of the intervention price for paddy,

- for Indica rice: 180% of the intervention price for paddy,

irrespective of the price/quality of the rice concerned.

In practice, this means a lower duty for higher priced rice while, under a normal "ad valorem" system, this is just the reverse.

Since Basmati rice prices (aromatic Indica rice from India and Pakistan) were on average 250 EUR/t higher than the world market reference prices to be used for calculating the duty, a special abatement of an equivalent amount had to be granted to this rice [1]. As a consequence, Basmati imports increased from about 40 000 tonnes in 1994/95 to about 100 000 tonnes in 1998/99 entering at low or "0" duty.

[1] In 1995/1996, this abatement was only 50 EUR/t for Pakistani Basmati.

Due to this ceiling system, between July 1995 and February 2000, the applied import duty for husked Indica rice came down from around 390 EUR/t to around 200 EUR/t. This is 89 EUR/t below the agreed fixed tariff for 1999/00.

4.3 The Cumulative Recovery System (CRS)

The United States requested twice (November 1995 and February 1997) the establishment of a WTO dispute settlement panel on the Community's import system for rice and cereals as they considered the Community representative price system inconsistent with the GATT. According to them, the headnote had to be applied on a consignment by consignment basis. To avoid a panel, the Community introduced a Cumulative Recovery System (CRS) for husked rice for a trial period from 1 July 1997 to 31 December 1998 in order to calculate import duties on the basis of prices declared consignment by consignment.

A consequence of the application of the CRS was that, during 1997/98, average import duties for common husked rice decreased to around 200 EUR/t, thus further reducing the Community external protection.

4.4 The present import duty calculation

In December 1998, after consultations between the Commission and the USA, it was decided not to extend the CRS as it proved to be administrative cumbersome and a source of trade distortions. A new regime has been put in place based on the former representative prices for husked Indica rice increased by 8%, which brings the duty for this type of rice at present to around 200 EUR/t. (Basmati abatement is maintained at the same level of maximum 250 EUR/t).

4.5 The preferential imports

Besides imports under the ceiling system, the EU is importing considerable amounts of rice under preferential conditions of which the most important one is the quota of 160 000 tonnes of husked rice from ACP/OCT (35% of normal duty for ACP countries and 0 duty for OCTs).

In addition, tariff rate quota agreed on the basis of GATT Article XXIV.6 (accession of new Member States) had to be opened for

- 63 000 tonnes/year of milled rice at 0 duty

and

- 20 000 tonnes/year of husked rice at a duty of 88 EUR/t.

Those imports constitute about 40% of total imports and the average duty paid is about 15% of the tariff fixed under the GATT schedules.

While imports under the ceiling system have no quantitative limit, the above preferential conditions and TRQ's are restricted to certain quantities.

5. Reform proposal

After careful examination of all aspects, including GATT compatibility, the Commission has come to the conclusion that integration of the rice sector into the arable crop system combined with the abolition of the intervention price is the best possible scenario to solve present problems.

5.1 Integration of rice into the arable crop system

Full integration of rice into the arable crop system offers major advantages in terms of simplification and in terms of achieving market balance by enabling farmers to choose freely where possible between rice and other arable products.

In order to integrate rice different steps have to be taken:

- Member States' national base areas for arable crops need to be expanded taking into account the areas under rice production during the same reference years as were used in the case of the arable crops, i.e. 1989, 1990 and 1991,

- it is proposed to increase the present area payment for rice from the present 52.65 EUR/t to 63 EUR/t, which is the same area aid as the one foreseen for cereals from 2001/2002. The 63 EUR/t is to be multiplied by the regional yield to constitute the aid per hectare,

- Member States will also need to adapt their regionalisation plans to integrate rice,

- rice producing Member States will have the possibility to apply in their regionalisation plan a yield for rice which is different than the one for cereals. If this yield is higher than the one for cereals, a separate base area would have to be defined,

- in order to allow this integration without changing the possibility for Member States to maintain the status quo for the other arable crops, global national yields will need to be adapted to incorporate the existing rice areas.

Full integration of rice into the arable crop system also means application of set-aside. At the present rate of 10%, this would mean a reduction of production of around 150 000 tonnes of paddy (or 90 000 tonnes milled equivalent), which constitutes more than 50% of the average intake in intervention over the last 3 years.

5.2 Abolition of the intervention price

Intervention should constitute in its ideal form a real safety net for surplus production. However, one has to admit that, in practice, it often constitutes an obstacle for market fluidity as well as an obstacle for orientation of production towards real market demand.

During the 1995 reform for rice, it was already decided to diminish the role of intervention by reducing the intervention period from 7 to 4 months (April to July).

It is now proposed to fully abolish intervention.

The integration of rice into the arable crop system will allow farmers to better react to market signals as regards demand. Market balance will also improve due to the application of set-aside. As explained in paragraph 5.1, farmers will receive increased area payments, which will compensate them for market price fluctuations in the absence of intervention.

A legal base is proposed to allow the Commission to open private storage in order to overcome market disturbances in the absence of intervention.

In case serious market disturbances continue to occur subsequent to the abolition of the intervention mechanism, a special legal base is created to allow the Commission to take additional appropriate measures.

Regarding imports, as indicated in paragraph 4.2, the headnote for rice was added to the application of the general system of fixed tariffs (variable levies converted into fixed tariffs and gradually reduced by 36%). If the headnote becomes inapplicable in the absence of an intervention price, the fixed tariff should in principle be applied to all rice imports now entering the Community under the ceiling system. In this case, Community preference would increase since present applied duties under the headnote would increase from around 200 EUR/t for husked rice to the fixed tariff of 264 EUR/t and abatements for Basmati (maximum 250 EUR/t) would no longer apply.

Following this scenario, the quantities imported under preferential conditions (around 200 000 tonnes or 40% of present imports) would continue to be imported since they enter at "0" or low duty levels.

Other qualities such as US parboiled, Thai fragrant and Basmati which have obtained important market shares (presently around 275 000 tonnes) would most probably continue to do so because of their special type and the particular consumer preference. Therefore even in the case of application of the full tariff, it is not expected that overall import quantities would diminish. Removal of the headnote would mean in practice the removal of an instrument, which is economically difficult to justify since it leads to discrimination between different qualities as well as distortion of trade. Returning to fixed tariffs will greatly simplify the system making it more transparent for all operators and therefore will create a more stable international trading environment.

The return to fixed tariffs will lead to the application of the tariff rates bound under the schedule and will render headnote 7 ineffective. Since this will have an impact on our trade with the supplying countries, the Commission is ready to find a solution in negotiations with them, which takes account of our international obligations. At the appropriate time, the Commission intends to make a recommendation to the Council to this effect, which is an accordance with WTO procedures and will take the interest of developing countries into consideration.

It is proposed to maintain the legal base to subsidise consignments to the French overseas department of Réunion in the basic regulation for rice. This legal base will be taken over by a horizontal regulation to be proposed by the Commission.

As regards the rice-growing area in French Guyana, a provision has to be inserted in the same horizontal regulation applying from 1 July 2001, which defines its specific position in terms of non-application of set-aside and support limited to a maximum area.

6. Budget costs

In case of full integration of rice in the arable crop sector budget expenditure for the payments per hectare will increase by about 27 Mio EUR per year.

However, the abolition of the intervention system will lead to savings that will more than neutralise the additional expenditure. The moment existing public stocks have been eliminated, savings will be in the order of 38 Mio EUR per year.

7. Final observations

In order to implement the integration of the rice sector into the arable crop system, Council Regulation (EC) n° 1251/1999 establishing a support system for producers of certain arable crops, needs to be amended. Provision has to be made to adapt national base areas as well as average yields to incorporate rice.

Since the Commission recently proposed to amend Regulation (EC) n° 1251/1999 also in the context of the reform of the support system for flax and hemp, this regulation will need to be consolidated after adoption by the Council of both amendments.

As explained above, it is proposed to remove the intervention mechanism from the present basic regulation for rice (Regulation (EC) No 3072/95).

Given the importance of the above amendments and the necessity to harmonise the regulations of different Common market organisations, it is proposed to replace the present basic regulation for rice by a new one.

Since this proposal has the potential to restore the balance at the internal rice market, it will contribute to safeguard the income of rice farmers in the longer term - which is a key objective of this proposal - and permit the continuation of rice production in the European Community.

The proposed measures have the potential to restore and maintain the competitiveness of EU rice and should therefore be beneficial to the many small and medium sized agricultural enterprises active in this sector.

The proposed measures also respect the environment and the multi-functionality of agriculture since their objective is to ensure the continuation of rice growing in areas where a careful water-management is important for the maintenance of specific environmental characteristics. The Commission is convinced of the importance of rice being grown in specific traditional zones and requests the Member States to submit a special report by 31 December 2003 on the impact of the measures proposed as well as any national measures taken in this respect.

In this context it is important to note that Council Regulation (EC) n° 1259/1999, establishing common rules for direct support schemes under the common agricultural policy, also applies on rice and especially its Article 3 on the protection of the environment. Moreover, the present rural development regulation (Regulation (EC) No 1257/1999, chapter VI) allows Member States to take rice land more permanently out of production (at least 5 years), for instance in order to create natural reserves for birds.

The proposed measures contribute greatly to budget discipline since the expensive accumulation of intervention stocks cannot continue and will be stopped.

In order to allow farmers to be informed sufficiently in advance and to allow Member States to take the necessary administrative measures, it is important that the Council decides on this proposal as soon as possible.

2000/0151 (CNS)

Proposal for a COUNCIL REGULATION on the common organisation of the market in rice

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 [2],

[2] OJ C , ..., p.

Having regard to the opinion of the European Parliament [3],

[3] OJ C , ..., p.

Having regard to the opinion of the Economic and Social Committee [4],

[4] OJ C , ..., p.

Whereas:

(1) The operation and development of the common market for agricultural products must be accompanied by the establishment of a common agricultural policy to include, in particular, a common organisation of agricultural markets which may take various forms depending on the product.

(2) The European rice market is in serious unbalance; the volume of rice stored in public intervention is very large, equivalent to about one fifth of Community output, and increasing significantly each year. The imbalance is caused by increases in both domestic output and imports and by the restrictions on exports with refunds in accordance with the Agriculture Agreement.

(3) This problem must be solved by revising the common market organisation for rice, in such a way as to take control of output, improve the equilibrium and fluidity of the market and enhance the competitiveness of Community agriculture, while pursuing the other aims of Article 33 of the Treaty, including maintaining suitable income support for producers.

(4) After careful consideration of all aspects of the situation, it appears that the most suitable solution is to integrate rice into the scheme to support the incomes of producers of certain arable crops, governed by Council Regulation (EC) No 1251/1999 [5], amended by Regulation (EC) No 2704/1999 [6], while discontinuing the intervention price arrangements. This integration is achieved by means of Regulation (EC) No [...]/2000 [7].

[5] OJ L 327, 21.12.1999, p. 12.

[6] OJ L 327, 21.12.1999, p. 12.

[7] See p. of this Official Journal.

(5) The application to imports of the Common Customs Tariff, combined with increased market fluidity, will restore equilibrium in the sector and enhance the competitiveness of Community production. The income support system will compensate producers for the discontinuation of the intervention arrangements.

(6) However, provision should be made for private storage aid, and for measures to be taken when distortion or the risk of distortion on the Community market endangers the prospect of achieving the aims of Article 33 of the Treaty.

(7) There should be a production refund for rice starch and derived products by analogy with the refund laid down for the products referred to in Article 7 of Council Regulation (EEC) No 1766/92 of 30 June 1992 on the common organisation of the market in cereals [8], last amended by Regulation (EC) No 1253/1999 [9], with which they compete.

[8] OJ L 181, 1.7.1992, p. 21.

[9] OJ L 160, 26.6.1999, p. 18.

(8) The creation of a single Community market for rice involves the introduction of a trading system at the external frontiers of the Community; A trading system including import duties and export refunds should, in principle, stabilise the Community market; The trading system should be based on the undertakings accepted under the Uruguay Round of multilateral negotiations.

(9) In order to be able constantly to monitor trade movements, provision should be made for an import and export licence scheme with the lodging of a security to ensure that the transactions for which such licences are requested are effected.

(10) In order to prevent or eliminate adverse effects on the Community market which could result from imports of certain products, imports of one or more such products may be subject to payment of an additional import duty, if certain conditions are fulfilled.

(11) It is appropriate to confer on the Commission the power to open and administer tariff quotas resulting from international agreements concluded in accordance with the Treaty or from other acts of the Council;

(12) Provisions for granting a refund on exports to third countries, based on the difference between prices within the Community and on the world market, and falling within the limits set by the WTO Agreement on agriculture, should serve to safeguard Community participation in international trade in rice. These refunds should be subject to limits in terms of quantity and value.

(13) Compliance with the limits in terms of value should be ensured at the time when refunds are fixed through the monitoring of payments under the rules relating to the European Agricultural Guidance and Guarantee Fund. Monitoring can be facilitated by the compulsory advance fixing of refunds, while allowing the possibility, in the case of differentiated refunds, of changing the specified destination within a geographical area to which a single refund rate applies. In the case of a change of destination, the refund applicable to the actual destination should be paid, with a ceiling of the amount applicable to the destination fixed in advance.

(14) Ensuring compliance with the quantity limits calls for the introduction of a reliable and effective system of monitoring. To that end, the granting of refunds should be made subject to an export licence. Refunds should be granted up to the limits available, depending on the particular situation of each product concerned. Exceptions to that rule can only be permitted in the case of processed products not listed in Annex I to the Treaty, to which value ceilings do not apply, and in the case of food-aid operations which are exempt from any limitation. Provision should be made for derogations from strict compliance with management rules where exports benefiting from refunds are not likely to exceed the quantity ceilings laid down.

(15) In addition to the system described above, and to the extent necessary for its proper working, provision should be made for regulating or, when the situation on the market so requires, prohibiting the use of inward and outward processing arrangements.

(16) The customs duty system makes it possible to dispense with all other protective measures at the external frontiers of the Community. However, the internal market and duty mechanism could, in exceptional circumstances, prove defective. In such cases, so as not to leave the Community market without defence against disturbances that might ensue, the Community should be able to take all necessary measures without delay. All such measures must comply with the obligations arising from the World Trade Organisation agreements.

(17) The achievement of a single market would be jeopardised by the grant of certain types of aid. The Treaty provisions governing the appraisal of aid granted by Member States and the prohibition of aid incompatible with the common market should be applied to the rice sector.

(18) As the common market in rice develops, the Member States and the Commission must keep each other supplied with the information necessary for applying this Regulation.

(19) To facilitate implementation of this Regulation, provision should be made for a procedure instituting close cooperation between the Member States and the Commission. The measures required for the implementation hereof will be adopted under Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission [10].

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

(20) Expenditure incurred by the Member States as a result of the obligations arising out of the application of this Regulation should be financed by the Community in accordance with Council Regulation (EC) No 1258/1999 of 17 May 1999 on the financing of the common agricultural policy [11].

[11] OJ L 160, 26.6.1999, p. 103.

(21) The common organisation of the market in the rice sector must take proper and simultaneous account of the objectives set out in Articles 33 and 131 of the Treaty.

(22) The common organisation of the market in rice laid down by Council Regulation (EC) No 3072/95 [12], as last amended by Regulation (EC) No 2072/98 [13], has been amended a number of times. By reason of their number, their complexity and their dispersal among several Official Journals, these texts are difficult to use and lack the clarity that should be an essential feature of all legislation. Under these circumstances, they should be consolidated in a new Regulation and the aforementioned Regulation (EEC) No 3072/95 should be repealed. Similarly, in view of the discontinuation of the intervention price arrangements, Council Regulation (EC) No 3073/95 of 22 December 1995 determining the standard quality of rice [14], which laid down rules for fixing the intervention price, should be repealed.

[12] OJ L 265, 30.9.1998, p. 4.

[13] OJ L 329, 30.12.1995, p. 18.

[14] OJ L 329, 30.12.1995, p. 33.

(23) The change from the arrangements in Regulation (EC) No 3072/95 to those in this Regulation could raise problems that are not foreseen here. In order to deal with that eventuality, provision should be made for the Commission to adopt the necessary transitional measures. In order to ensure the correct operation of the scheme, it is also appropriate to authorise the Commission to resolve individual and specific problems on a temporary and exceptional basis.

(24) Provision should be made for the application of the new common market organisation from 1 July 2001,

HAS ADOPTED THIS REGULATION:

Article 1

1. The common organisation of the market in rice shall comprise a scheme for an internal market and trade with third countries, and cover the following products:

CN Code // Description

(a) 1006 10 21 to 1006 10 98 // Rice in the husk (paddy or rough)

1006 20 // Husked rice (cargo rice or brown rice)

1006 30 // Semi-milled or wholly milled rice, including polished or glazed rice

(b) 1006 40 00 // Broken rice

(c) 1102 30 00 // Rice meal

1103 14 00 // Rice groats and meal

1103 29 50 // Pellets of rice

1104 19 91 // Rolled or flaked grains of rice

1108 19 10 // Rice starch

2. For the purposes of this Regulation, the terms 'paddy rice', 'husked rice', 'semi-milled rice', 'wholly milled rice', 'round grain rice', 'medium grain rice', 'long grain rice' and 'broken rice' are defined in part I of Annex A.

Part II of Annex A provides definitions of grains and broken grains which are not of unimpaired quality.

The Commission, acting in accordance with the procedure laid down in Article 19(2):

- shall fix the conversion rates for rice at various states of processing, the processing costs and the value of by-products,

- may change the definitions referred to in paragraph 2.

Article 2

This Regulation shall apply without prejudice to the measures provided for by Regulation (EC) No 1251/1999 on support for certain arable crop producers.

TITLE I

INTERNAL MARKET

Article 3

1. A production refund may be granted for starch and certain derived products, obtained from rice and broken rice, used in the manufacture of certain products.

The refund shall be fixed periodically.

2. The Commission, acting in accordance with the procedure laid down in Article 19(2):

(a) shall determine the products for which the refund is granted;

(b) shall fix the amount of the refund;

(c) shall adopt detailed rules for the application of this Article.

Article 4

1. A subsidy may be fixed for consignments to the French overseas department of Réunion, intended for consumption there, of products falling within CN code 1006 (excluding code 1006 10 10) which come from the Member States and are in one of the situations referred to in Article 23(2) of the Treaty.

That subsidy shall be fixed, taking into account the supply requirements of the Réunion market, on the basis of the difference between the quotations or prices of the relevant products on the world market and the quotations or prices of those products on the Community market, and, if necessary, the price of those products delivered to Réunion.

2. The amount of the subsidy shall be fixed periodically. However, where the need arises, the Commission may, in the interval, at the request of a Member State or on its own initiative, alter the amount.

The amount of the subsidy may be fixed by a tendering procedure.

3. The Commission shall adopt detailed rules for the application of this Article in accordance with the procedure laid down in Article 19(2).

The amount of the subsidy shall be fixed according to the same procedure.

Article 5

When a substantial rise or fall in prices is recorded on the Community market and this situation is likely to continue, thereby disturbing or threatening to disturb the market, the necessary measures may be taken in accordance with the procedure laid down in Article 19(2). In particular, these measures may consist in private storage aid.

Article 6

Each year, the producer Member States shall provide the Commission, under arrangements to be determined in accordance with the procedure laid down in Article 19(2), with detailed information, broken down by variety, on the areas given over to rice, on output, on yields and on stocks held by producers and processors. Such information must be based on a system providing for compulsory declarations by producers and processors set up, administered and monitored by the Member State.

TITLE II

TRADE WITH THIRD COUNTRIES

Article 7

1. Imports into the Community, or exports therefrom, of any of the products listed in Article 1 shall be subject to presentation of a licence.

Licences shall be issued by the Member States to any applicant, irrespective of his place of establishment in the Community and without prejudice to measures taken for the application of Article 10.

Import and export licences shall be valid throughout the Community. Such licences shall be issued subject to the lodging of a security guaranteeing that the products are imported or exported during the term of validity of the licence; except in cases of force majeure, the security shall be forfeit in whole or in part if import or export is not carried out, or is carried out only partially, within that period.

2. Detailed rules for the application of this Article shall be adopted in accordance with the procedure laid down in Article 19(2).

Section I

Provisions applicable to imports

Article 8

1. Unless this Regulation provides otherwise, the rates of duty in the Common Customs Tariff shall apply to the products listed in Article 1.

2. Notwithstanding paragraph 1, rates of duty on imports of the following products into the French overseas department of Réunion, intended for consumption there, shall be as follows:

(a) no customs duty shall be levied on products falling within CN code 1006 10 and CN codes 1006 20 and 1006 40 00;

(b) the duty to be charged on imports of products falling within CN code 1006 30 shall be multiplied by a coefficient of 0.30.

3. The Commission shall adopt any detailed rules required for implementing this Article in accordance with the procedure laid down in Article 19(2), and in particular shall include the possibility, if appropriate, in specific cases, of enabling operators to know the charge which will be applied prior to dispatch of the consignments concerned.

Article 9

1. In order to counteract or sanction adverse effects on the market in the Community which may result from imports of certain products listed in Article 1, imports of one or more of such products at the rate of duty laid down in Article 8 shall be subject to the payment of an additional import duty if the conditions set out in Article 5 of the Agreement on Agriculture concluded in accordance with Article 300 of the Treaty in the framework of the Uruguay Round of multilateral trade negotiations have been fulfilled unless the imports are unlikely to disturb the Community market, or where the effects would be disproportionate to the intended objective.

2. The trigger prices below which an additional duty may be imposed shall be those forwarded by the Community to the World Trade Organisation.

The trigger volumes above which an additional import duty may be imposed shall be determined in particular on the basis of imports into the Community in the three years preceding the year in which the adverse effects referred to in paragraph 1 arise or are likely to arise.

3. The import prices to be taken into consideration for imposing an additional import duty shall be determined on the basis of the cif import prices of the consignment under consideration.

Cif import prices shall be checked to that end against the representative prices for the product on the world market or on the Community import market for that product.

4. The Commission shall adopt detailed rules for the application of this Article in accordance with the procedure laid down in Article 19(2). Such detailed rules shall specify in particular:

(a) the products to which additional import duties may be applied under the terms of Article 5 of the Agreement on Agriculture;

(b) the other criteria necessary for application of paragraph 1 in accordance with Article 5 of the said Agreement on agriculture.

Article 10

1. Tariff quotas for imports of the products listed in Article 1 resulting from agreements concluded in accordance with Article 300 of the Treaty or from any other act of the Council shall be opened and administered by the Commission in accordance with detailed rules adopted in accordance with the procedure laid down in Article 19(2).

2. Quotas may be administered using one of the following methods or a combination thereof:

- a method based on the chronological order in which applications are lodged (on a "first come, first served" basis),

- a method of distribution in proportion to the quantities requested when the applications were lodged (using the "simultaneous examination" method),

- a method taking traditional trade patterns into account (using the "traditional importers/new arrivals" method).

Other methods may be used.

Any method used shall avoid unjustified discrimination between the operators involved.

3. Where necessary, the method of administration shall take account of the supply needs of the Community market, and of the need to preserve its equilibrium, without prejudice to rights arising under the agreements concluded as part of the Uruguay Round.

4. The detailed rules shall provide for annual tariff quotas, suitably phased over the year, and shall, if necessary, determine the administrative method to be used and, where appropriate, shall include:

(a) guarantees covering the nature, provenance and origin of the product, and

(b) recognition of the document used for verifying the guarantees referred to in (a), and

(c) the conditions under which import licences are issued and their term of validity.

Section II

Provisions applicable to exports

Article 11

1. To the extent necessary to enable the products listed in Article 1 to be exported without further processing or in the form of goods listed in Annex B on the basis of quotations or prices for those products on the world market and within the limits resulting from agreements concluded in accordance with Article 300 of the Treaty, the difference between those quotations or prices and prices in the Community may be covered by export refunds.

Export refunds on the products listed in Article 1 in the form of goods listed in Annex B may not be higher than those applicable to such products exported without further processing.

2. The method to be adopted for the allocation of the quantities which may be exported with a refund shall be the method which:

(a) is most suited to the nature of the product and the situation on the market in question, allowing the most efficient possible use of the resources available, account being taken of the efficiency and structure of Community exports without, however, creating discrimination between large and small operators;

(b) is least cumbersome administratively for operators, account being taken of administration requirements;

(c) precludes discrimination between the operators concerned.

3. Refunds shall be the same for the whole Community.

They may vary according to destination, where the world market situation or the specific requirements of certain markets make this necessary.

Refunds shall be fixed by the Commission in accordance with the procedure laid down in Article 19(2). Refunds may be fixed:

(a) at regular intervals;

(b) by invitation to tender for products for which that procedure is appropriate.

Refunds fixed at regular intervals, may, if necessary, be amended in the interval by the Commission at the request of a Member State or on its own initiative.

Refunds fixed at regular intervals shall be fixed at least once a month.

4. The following shall be taken into account when refunds are being fixed:

(a) the existing situation and future trends with regard to:

- prices and availability of rice and broken rice on the Community market;

- prices of rice and broken rice on the world market;

(b) the aims of the common organisation of the market in rice, which are to ensure equilibrium and the natural development of prices and trade on this market;

(c) limits resulting from agreements concluded in accordance with Article 300 of the Treaty;

(d) the importance of avoiding disturbances on the Community market;

(e) the economic aspects of the proposed exports.

5. Refunds for products listed in Article 1(1)(a) and (b) shall be fixed in accordance with the following specific criteria:

- prices ruling on the representative Community markets,

- prices obtaining for exports,

- marketing costs and the most favourable transport charges from the Community markets referred to in the first indent to ports or other points of export in the Community serving these markets, as well as costs incurred in placing the goods on the world market.

When prices in international trade listed in paragraph 1 are being determined account shall be taken of:

- the prices on third-country markets,

- the most favourable prices in third countries of destination for third-country imports,

- free-at-Community-frontier offer prices.

Article 12

1. Refunds on products exported without further processing shall only be granted on application and on presentation of an export licence.

2. The refund applicable to products exported without further processing shall be that applicable on the day of application for the licence and, in the case of a differentiated refund, that applicable on the same day:

(a) for the destination indicated on the licence

(b) for the actual destination if it differs from the destination indicated on the licence. In that case the amount applicable may not exceed the amount applicable to the destination indicated on the licence.

Appropriate measures may be taken to prevent abuse of the flexibility provided for in this paragraph.

3. The scope of paragraphs 1 and 2 may be extended to apply to products exported in the form of goods listed in Annex B in accordance with the procedure laid down in Article 16 of Council Regulation (EC) No 3448/93 [15].

[15] OJ L 318, 20.12.1993, p. 18.

4. Paragraphs 1 and 2 may be waived in the case of products on which refunds are paid under food-aid operations, in accordance with the procedure laid down in Article 19(2).

5. Export refunds on the products listed in Article 1 in the form of goods listed in Annex B may be adjusted as a function of prices on the Community market, to be established in accordance with the procedure laid down in Article 19(2). The Commission may, where necessary, alter the corrective amounts.

6. The refund on the products referred to in Article 1(a) and (b) shall be paid upon proof that:

- the products were wholly obtained in the Community within the meaning of Article 23 of Regulation (EEC) No 2913/92, except where paragraph 6 applies,

- the products have been exported from the Community,

and

- in the case of a differentiated refund, have reached the destination indicated on the licence or another destination for which a refund was fixed, without prejudice to point (b) of paragraph 2. However, exceptions may be made to this rule in accordance with the procedure laid down in Article 19(2), provided that conditions are laid down which offer equivalent guarantees.

Additional provisions may be adopted in accordance with the same procedure.

7. No export refund shall be granted on rice imported from third countries and re-exported to third countries, unless the exporter proves that:

- the product to be exported and the product previously imported are one and the same, and

- the levy was collected when the goods were released for free circulation.

In such cases the refund on each product shall be equal to the duties collected on importation where the latter are lower than the refund applicable; where the duties collected on importation are higher than that refund, the latter shall apply.

8. Observance of the volume limits resulting from the agreements concluded in accordance with Article 300 of the Treaty shall be ensured on the basis of the export licences issued for the reference periods provided for which apply to the products concerned. With regard to compliance with the obligations arising under the Agreement on Agriculture, the ending of a reference period shall not affect the validity of export licences.

Article 13

1. Detailed rules for the application of Articles 11 and 12, including provisions on the redistribution of exportable quantities which have not been allocated or utilised, shall be adopted by the Commission in accordance with the procedure laid down in Article 19(2). These detailed rules may include provisions governing the quality of the products eligible for an export refund.

Annex B shall be amended in accordance with the same procedure.

2. Detailed rules for the application of Article 11(1) to products exported in the form of goods referred to in Annex B shall be adopted in accordance with the procedure laid down in Article 16 of Regulation (EC) No 3448/93.

Section III

Common provisions

Article 14

1. To the extent necessary for the proper working of the common organisation of the market in rice, the Council, acting by a qualified majority, on a proposal from the Commission, may, in special cases, prohibit in whole or in part the use of inward or outward processing arrangements in respect of products listed in Article 1.

2. However, by way of derogation from paragraph 1, if the situation referred to in paragraph 1 arises with exceptional urgency and the Community market is disturbed or is liable to be disturbed by the inward or outward processing arrangements, the Commission shall, at the request of a Member State or on its own initiative, decide on the necessary measures; the Council and the Member States shall be notified of such measures, which shall be valid for no more than six months and shall be immediately applicable. If the Commission receives a request from a Member State, it shall take a decision thereon within a week following receipt of the request.

3. Measures decided on by the Commission may be referred to the Council by any Member State within a week of the day on which they were notified. The Council, acting by a qualified majority, may confirm, amend or repeal the Commission's decision. If the Council has not reached a decision within three months, the Commission's decision shall be deemed to have been repealed.

Article 15

1. The general rules for the interpretation of the Combined Nomenclature and the detailed rules for its application shall apply to the tariff classification of products covered by this Regulation. The tariff nomenclature resulting from the application of this Regulation, including the definitions listed in part I of Annex A, shall be incorporated in the Common Customs Tariff.

2. Save as otherwise provided for in this Regulation or in provisions adopted pursuant thereto, the following shall be prohibited in trade with third countries:

- the levying of any charge having equivalent effect to a customs duty,

- the application of any quantitative restriction or measure having equivalent effect.

Article 16

1. If, by reason of imports or exports, the Community market in one or more of the products listed in Article 1 is affected by, or is threatened with, serious disturbance likely to jeopardise the achievement of the objectives set out in Article 33 of the Treaty, appropriate measures may be applied in trade with third countries until such disturbance or threat of disturbance has ceased.

The Council, acting by a qualified majority, on a proposal from the Commission, shall adopt general rules for the application of this paragraph and shall define the circumstances and limits within which Member States may adopt protective measures.

2. If the situation mentioned in paragraph 1 arises, the Commission shall, at the request of a Member State or on its own initiative, decide upon the necessary measures; the measures shall be communicated to the Member States and shall be immediately applicable. If the Commission receives a request from a Member State, it shall take a decision thereon within three working days following receipt of the request.

3. Measures decided upon by the Commission may be referred to the Council by any Member State within three working days of the day on which they were notified. The Council shall meet without delay. It may, acting by a qualified majority, amend or repeal the measure in question within one month following the day on which it was referred to the Council.

4. Provisions adopted under this Article shall be applied having regard to the obligations arising from agreements concluded in accordance with Article 300(2) of the Treaty.

TITLE III

GENERAL PROVISIONS

Article 17

Articles 87, 88 and 89 of the Treaty shall apply to production of and trade in the products referred to in Article 1.

Article 18

Member States and the Commission shall send each other any information necessary for the application of this Regulation. The information to be communicated shall be determined in accordance with the procedure laid down in Article 19(2). Detailed rules for the communication and distribution of such information shall be adopted in accordance with the same procedure.

Article 19

1. The Commission shall be assisted by the Management Committee for Cereals set up under Article 23 of Regulation (EEC) No 1766/92.

2. Where reference is made to this paragraph, Articles 4 and 7 of Decision 1999/468/EC shall apply, in compliance with Article 8 thereof.

3. The period laid down in Article 4(3) of Decision 1999/468/EC shall be set at one month.

Article 20

The Committee may consider any question referred to it by its chairman either on his own initiative or at the request of the representative of a Member State.

Article 21

Regulation (EC) No 1258/1999 and the provisions adopted in implementation thereof shall apply to the products listed in Article 1.

Article 22

This Regulation shall be so applied that appropriate account is taken at the same time of the objectives set out in Articles 33 and 131 of the Treaty.

TITLE IV

TRANSITIONAL AND FINAL RULES

Article 23

The Commission shall adopt, in accordance with the procedure laid down in Article 19(2):

(a) the measures required to facilitate the transition from the arrangements provided in Regulation (EEC) No 3072/95 to those established by this Regulation, in particular, those measures shall cover the disposal of products bought in to intervention pursuant to that Regulation;

(b) the measures required to resolve specific practical problems. Such measures - if duly justified - may derogate from certain parts of this Regulation.

Article 24

1. Regulations (EC) No 3072/95 and (EC) No 3073/95 are hereby repealed.

2. References to Regulation (EC) No 3072/95 shall be construed as references to this Regulation and should be read in accordance with the correlation table in Annex C.

Article 25

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

It shall apply from 1 July 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 A

I. DEFINITIONS

1. (a) Paddy rice: rice which has retained its husk after threshing.

(b) Husked rice: paddy rice from which only the husk has been removed. Examples of rice falling within this definition are those with the commercial descriptions "brown rice", "cargo rice", "loonzain" and "riso sbramato".

(c) Semi-milled rice: paddy rice from which the husk, part of the germ and the whole or part of the outer layers of the pericarp but not the inner layers have been removed.

(d) Wholly milled rice: paddy rice from which the husk, the whole of the outer and inner layers of the pericarp, the whole of the germ in the case of long grain or medium grain rice and at least part thereof in the case of round grain rice have been removed, but in which longitudinal white striations may remain on not more than 10% of the grains.

2. (a) Round grain rice: rice, the grains of which are of a length not exceeding 5.2 mm and of a length/width ratio of less than 2.

(b) Medium grain rice: rice, the grains of which are of a length exceeding 5.2 mm but not exceeding 6.0 mm and of a length/width ratio no greater than 3.

(c) Long grain rice:

(i) rice, the grains of which are of a length exceeding 6.0 mm and of which the length/width ratio is greater than 2 but less than 3;

(ii) rice, the grains of which are of a length exceeding 6.0 mm and of which the length/width ratio is equal to or greater than 3.

(d) Measurements of the grains: grain measurements are taken on wholly milled rice by the following method:

(i) take a sample representative of the batch;

(ii) sieve the sample so as to retain only whole grains, including immature grains;

(iii) carry out two measurements of 100 grains each and work out the average;

(iv) express the result in millimetres, rounded off to one decimal place.

3. Broken rice: grain fragments the length of which does not exceed three quarters of the average length of the whole grain.

II. DEFINITION OF GRAINS AND BROKEN GRAINS WHICH ARE NOT OF UNIMPAIRED QUALITY

A. Whole grains

Grains from which only part of the end has been removed, irrespective of characteristics produced at each stage of milling.

B Clipped grains

Grains from which the entire end has been removed.

C. Broken grains or fragments

Grains from which a part of the volume greater than the end has been removed; broken grains include:

- large broken grains (pieces of grain of a length not less than half that of a grain, but not constituting a complete grain),

- medium broken grains (pieces of grain of a length not less than a quarter of the length of a grain but which are smaller than the minimum size of "large broken grains"),

- fine broken grains (pieces of grain less than a quarter of the size of a grain but too large to pass through a sieve with a mesh of 1.4 mm),

- fragments (small pieces or particles of grain which can pass through a sieve with a mesh of 1.4 mm); split grains (pieces produced by a longitudinal split in the grain) come under this definition.

D. Green grains

Grains which are not fully ripened.

E. Grains showing natural malformation

Natural malformation means malformation, whether or not of hereditary origin, as compared with the morphological characteristics typical of the variety.

F. Chalky grains

Grains at least three-quarters of the surface of which looks opaque and chalky.

G. Grains striated with red

Grains showing longitudinal red striations of differing intensity and shades, due to residues from the pericarp.

H. Spotted grains

Grains showing a well-defined small circle of dark colour of more or less regular shape; spotted grains also include those which show slight black striations on the surface only; the striations and spots must not show a yellow or dark aureole.

I. Stained grains

Grains which have undergone, on a small area of their surface, an obvious change in their natural colour; the stains may be of different colours (blackish, reddish, brown); deep black striations are also to be regarded as stains. If the colour of the stains is sufficiently marked (black, pink, reddish-brown) to be immediately visible and if they cover an area not less than half that of the grain, the grains must be considered to be yellow grains.

J. Yellow grains

Grains which have undergone, totally or partially, otherwise than by drying, a change in their natural colour and have taken on a lemon or orange-yellow tone.

K. Amber grains

Grains which have undergone, otherwise than by drying, a slight uniform change in colour over the whole surface; this change alters the colour of the grains to a light amber-yellow.

ANNEX B

CN code // Description

0403 // Buttermilk, curdled milk and cream, yoghurt, kephir and other fermented or acidified milk and cream, whether or not concentrated or containing added sugar or other sweetening matter or flavoured or containing added fruit or cocoa

ex 1704 // Sugar confectionery (including white chocolate), not containing cocoa:

1704 90 51 to 1704 90 99 // - - Other

ex 1806 // Chocolate and other food preparations containing cocoa, except those coming under subheadings 1806 10, 1806 20 70, 1806 90 60, 1806 90 70 et 1806 90 90

1901 // Malt extract; food preparations of flour, meal, starch or malt extract, not containing cocoa or containing less than 40% by weight of cocoa calculated on a totally defatted basis , not elsewhere specified or included; food preparations of products under headings 0401 to 0404, not containing cocoa or containing less than 5% by weight of cocoa calculated on a totally defatted basis , not elsewhere specified or included;

ex 1902 // Pasta, whether or not cooked or stuffed (with meat or other substances) or otherwise prepared, such as spaghetti, macaroni, noodles, lasagne, gnocchi, ravioli, cannelloni; couscous, whether or not prepared:

1902 20 91 // - - - Cooked

1902 20 99 // - - - Other

1902 30 // - Other pasta

1902 40 90 // - - Other

1904 // Prepared foods obtained by the swelling or roasting of cereals or cereal products (for example, corn flakes); cereals (other than maize (corn)) in grain form or in the form of flakes or other worked grains (except flour and meal), pre-cooked, or otherwise prepared, not elsewhere specified or included

ex 1905 // Bread, pastry, cakes, biscuits and other bakers' wares, whether or not containing cocoa; communion wafers, empty cachets of a kind suitable for pharmaceutical use, sealing wafers, rice paper and similar products:

1905 90 20 // communion wafers, empty cachets of a kind suitable for pharmaceutical use, sealing wafers, rice paper and similar products:

ex 2004 // Other vegetables prepared or preserved otherwise than by vinegar or acetic acid, frozen: other than products of heading No 2006.

2004 10 91 // - - - potatoes in the form of flour, meal or flakes

ex 2005 // Other vegetables prepared or preserved otherwise than by vinegar or acetic acid, not frozen: other than products of heading No 2006.

2005 20 10 // - - potatoes in the form of flour, meal or flakes

ex 2008 // Fruit, nuts and other edible parts of plants otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included:

2008 11 10 // - - - Peanut butter

ex 2101 // Extracts, essences and concentrates, of coffee, tea or maté preparations with a basis of these products or with a basis of coffee, tea or maté; roasted chicory and other roasted coffee substitutes and extracts, essences and concentrates, thereof:

2101 12 // - - Preparations with a basis of these extracts, essences or concentrates of coffee.

210120 92 2101 20 98 // - - - Preparations with a basis of these extracts, essences or concentrates of tea or maté

2105 00 // Ice cream and other edible ice, whether or not containing cocoa

2106 // Food preparations not elsewhere specified or included:

ex 3505 // Dextrins and other modified starches (for example, pregelatinised or esterified starches); except esterified or etherified starches under sub-heading 3505 10 50; glues based on starches or on dextrins or other modified starches

ex 3809 // Finishing agents, dye carriers to accelerate the dyeing or fixing of dyestuffs and other products and preparations (for example, dressings and mordants), of a kind used in the textile, paper, leather or like industries, not elsewhere specified or included

ex 3809 10 // - with a basis of amylaceous substances

ANNEX C

CORRELATION TABLE

Regulation (EC) No 3072/95 // This Regulation

Article 1 // Article 1

Article 2

Article 2 // --

Article 3 // --

Article 4 // --

Article 5 // --

Article 6 // --

Article 7 // Article 3

Article 8 // --

Article 9 // Article 7

Article 10 // Article 4

// Article 5

// Article 6

Article 11(1) // Article 8(1)

Article 11(3) // Article 8(2)

Article 11(4) // Article 8(3)

Article 12(1), (2), (3) and (4) // Article 9(1), (2), (3) and (4)

// Article 10

Article 13(1), (2) and (3) // Article 11(1), (2) and (3)

Article 13(4) and (5) // Article 11(4) and (5)

Article 13(6) // --

Article 13(7) to (14) // Article 12

Article 13(15) // Article 13

Article 14 // Article 14

Article 15 // Article 15

Article 16 // --

Article 17 // Article 16

Article 18 // --

Article 19 // Article 17

Article 20 // --

Article 21 // Article 18

Article 22 // Article 19

Article 23 // Article 20

Article 24 // Article 22

Article 25(1), (2), (3) and (4) // Article 24

Article 25(5) // Article 23

Article 26 // Article 21

Article 27 // Article 25

Annex A // Annex A -- Part I

// Annex A -- Part II

Annex B // Annex B

Annex C // Annex C