Proposal for a COUNCIL REGULATION introducing specific measures for certain agricultural products for the Canary Islands

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. Introduction

On 14 March 2000, at the invitation of the Cologne European Council, the Commission adopted a report on the measures to implement Article 299(2) of the EC Treaty on the outermost regions of the European Union [1]. The report was addressed to the Council and Parliament and was also transmitted to the Committee of the Regions and the Economic and Social Committee. In June, the Feira European Council invited the Commission to present appropriate proposals.

[1] COM(2000)147 final.

The report stated that in 2000 the Commission would present reports on the implementation since 1992 of the agricultural sections of the Posei programmes in those regions, together with proposals to amend the Council Regulations where justified. The three attached draft regulations concern those measures.

2. The agricultural section of the POSEI programmes

The Council adopted programmes of options specific to the remote and insular nature of certain Community regions (POSEI), in 1989 for the French overseas departments, and in 1991 for the Canary Islands and the Azores and Madeira [2].

[2] Poseidom - Decision 89/687/EEC - OJ L 399, 30.12.1989, p. 39. Poseima - Decision 91/315/EEC - OJ L 171, 29.6.1991, p. 10. Poseican - Decision 91/314/EEC - OJ L 171, 29.6.1991, p. 5.

The common agricultural policy applies fully to the agricultural production of the most remote regions through the common organisations of the market and a substantial package of agricultural measures under Council Regulations (EEC) No 3763/91 (POSEIDOM) [3], No 1600/92 (POSEIMA) [4] and No 1601/92 (POSEICAN) [5], the goal of which is to adapt the common policies to take account of the specific conditions of those regions.

[3] Council Regulation (EEC) No 3763/91, OJ L 356, 24.12.1991, p. 1.

[4] Council Regulation (EEC) No 1600/91, OJ L 173, 27.6.1992, p. 1.

[5] Council Regulation (EEC) No 1601/91, OJ L 173, 27.6.1992, p. 13.

The agricultural section of the POSEI programmes addresses the permanent handicaps (difficult terrain, particular climate, distance, small size of holdings) and specific constraints (lack of economies of scale, dependency, very high production costs). It is financed by the EAGGF Guarantee Section (around EUR 200 million/year) and provides, in particular, for two types of measure: specific supply arrangements and specific measures to assist local agricultural production. It also includes derogations from veterinary, plant-health and structural measures, as well as a graphic symbol.

3. The results of the agricultural section of the POSEI programmes

The French, Portuguese and Spanish authorities have sent the Commission reports on the implementation of these programmes as well as some requests for amendments of the Council Regulations.

In the context of SEM 2000, the Commission appointed external consultants to draw up reports evaluating the agricultural section of the POSEIDOM, POSEIMA and POSEICAN programmes. These consultants examined the achievement of the programmes' objectives and proposed some possible improvements.

On this basis, the Commission presented reports on the implementation (between 1992 and 1998) of the measures provided for in these Regulations, taking account of the experience gained and the impact of the measures implemented.

Overall, the measures have had a positive impact.

Examination of the results of the specific supply arrangements shows that administration of the arrangements has improved, and the supply balances have stabilised somewhat in terms of the local requirements. Supplies to these regions are guaranteed, and prices are lowered by promoting competition between sources of supply. This measure has had beneficial effects for the economic development of the regions concerned.

Following the changes introduced by the CAP reform and the Community's undertakings after the latest GATT agreements (Uruguay Round), and in view of the narrowing gap between world and Community prices, unit aid granted for the supply of Community products, mainly based on current export prices, has been reduced for certain products, particularly cereals. This phenomenon has given rise to some concern about achieving the goal of alleviating the additional cost of remoteness and insularity and bringing down production costs. Within the limits of the existing rules, the Commission has taken care to cushion the effects of these changes in the international context.

This analysis shows that one of the shortcomings of the current arrangements is a lack of objective criteria for quantifying the additional costs to be offset. The measure has reduced the effects of the additional cost of supply to differing degrees depending on the products and economic circumstances concerned.

Examination of the measures to support local production shows that they have alleviated some of the production cost constraints. As a supplement to support from the CAP, they have helped improve local production in terms of both quality and quantity. Their effectiveness depends on the structure of each sector and its ability to capitalise on the possibilities offered. Aid has been most effective where it has been adapted to real local conditions and consistent with the supply arrangements, and where the creation of implementing conditions suited to the context has made possible some synergy with general aid granted under the CAP. Measures which were too unwieldy and complex (like the initiative programmes for fruit and vegetables) have failed.

4. Guidelines for review

The Commission is intending to consolidate and adapt the achievements so far, and to improve the existing agricultural arrangements for these regions, while staying within the limits of the financial perspective. To achieve this, the Commission is aiming for budget neutrality.

The Commission plans to simplify the management of these arrangements and improve their transparency and cost effectiveness. It also intends to strengthen the monitoring and control of all the measures.

The logic of the specific supply arrangements is to provide the regions concerned with supply arrangements which will enable them to align their production costs on those in the rest of the Union, thereby benefiting from the advantages of the single market to which they belong despite the particular geographical and economic conditions which set them apart. That logic still applies.

The proposals review the list of products covered by the supply arrangements. Specifically, in order to ensure the survival of traditional livestock farming, it is proposed in some cases to introduce additional inputs for animal nutrition (alfalfa and oil-cake).

In order to lighten the administrative burden of the arrangements, it is proposed to empower the Commission to review the product list, and to simplify administration of the supply balance.

It is proposed to adjust the means used to achieve the goal of the arrangements to reduce the additional costs of supplying these regions and bring down prices by promoting competition among sources of supply. This is to be achieved by adding the principle that aid should take account of the cost of transport to the most remote regions from the rest of the Union. This would introduce some stability and clarity to the objective of enabling these regions to enjoy the benefits of the single market.

Turning to the agricultural production measures, the adjustments to be made arise from the analysis of the local needs of each of the regions concerned. The Commission has sought to ensure that these measures more closely reflect a partnership approach to integrated development.

The agricultural production measures which experience has shown to be poorly suited to the local reality (as in the case of the livestock and milk sectors in the Canary Islands and Madeira where self-sufficiency is low), have been adapted to make them more attractive and effective. In particular, the eligibility criteria have been adjusted.

Changes have been made to existing measures, such as the adjustment of the level of some aids and quantities eligible for assistance (e.g. the quantity of milk produced in the overseas departments eligible for production aid).

In the interests of uniformity and in order to align the arrangements under POSEIMA and POSEICAN in the beef and veal sector with those in force for the French overseas departments, the annexes to Regulation (EC) No 1254/1999 on the common organisation of the market in beef and veal should be amended.

New measures are introduced to take account of specific local conditions and requirements without departing from the objectives of the POSEI programmes, particularly in the fruit and vegetable sector in the Canary Islands, the Azores and Madeira. Lessons have been learned in this sector from the successful experiment of local marketing aid.

Across-the-board approaches by sector or comprehensive programmes (inter-branch) are introduced to improve the structure of the different sectors.

To find a solution to the problem of quota overruns in the Azores, the Commission will shortly be presenting a proposal for a plan to buy back quotas.

5. Conclusion

The proposed amendments aim at taking better account of the specific local conditions in these regions, as provided for in Article 299(2) of the Treaty. They concern the three Council regulations and are proposed on the basis of the new Article 299(2) of the Treaty.

They are unlikely to disrupt the single market or the application of the common policies.

The budget impact of these changes is chiefly covered by savings arising from the introduction of the Agenda 2000 CAP reform, in particular the likely consequences for the supply arrangements (cereals, beef and veal, milk products).

These proposals for regulations introducing specific measures for certain agricultural products in the French overseas departments, the Canary Islands, the Azores and Madeira are a recasting of the arrangements currently in force. As in the past, all derogations are to be grouped together in a single regulation for each region. The proposed regulations therefore also contain a Title IV dealing with the structural derogations.

That title contains a provision with wording which is identical to that used in the proposal submitted to the Council for a regulation amending Regulations (EEC) Nos 3763/91, 1600/92 and 1601/92. Adoption of the structural derogations is a matter of some urgency because of the deadlines for effective implementation of the programming of structural measures. It is therefore essential to propose that the Council adopt these derogations in a preliminary regulation amending the current arrangements, and to include these amendments subsequently in the recasting of the regulations introducing specific measures for certain agricultural products in the French overseas departments, the Canary Islands, the Azores and Madeira.

2000/0316 (CNS)

Proposal for a COUNCIL REGULATION introducing specific measures for certain agricultural products for the Canary Islands

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Articles 36, 37 and 299(2) thereof,

Having regard to the proposal from the Commission [6],

[6] OJ C , , p. .

Having regard to the opinion of the European Parliament [7],

[7] OJ C , , p. .

Whereas:

(1) Under Council Regulation (EEC) No 1911/91 of 26 June 1991 on the application of the provisions of Community law to the Canary Islands [8], the Canary Islands are part of the Community's customs territory and all the common policies apply there without prejudice to any special measures adopted to take account of their specific constraints and traditional economic and taxation system. Articles 2 and 10 of that Regulation rule that full application of the common agricultural policy is subject to the entry into force of specific supply arrangements. In addition, application of the common agricultural policy is to be accompanied by specific measures relating to agricultural production in the islands.

[8] OJ L 171, 29.6.1991, p. 1.

(2) By Decision 91/314/EEC of 26 June 1991 the Council adopted a programme of options specific to the remote and insular nature of the Canary Islands (POSEICAN) [9] in accordance with the Community's policy of assistance for the most remote regions. The purpose of the programme is to facilitate the economic and social development of the region and enable it to benefit from the advantages of the single market of which it is an integral part despite the objective factors leaving it geographically and economically isolated. The programme calls for the CAP to be applied in the region and provides for special measures to be adopted, in particular to improve the conditions in which agricultural products are produced and marketed there and to mitigate the effects of its exceptional geographical situation and constraints as since recognised in Article 299(2) of the Treaty.

[9] OJ L 171, 29.6.1991, p. 5.

(3) The particular geographical situation of the Canary Islands imposes additional transport costs in supplying essential products for human consumption, for processing and as agricultural inputs. In addition, objective factors arising as a result of insularity impose further constraints on economic operators and producers in the Canary Islands that severely handicap their activities. These handicaps can be alleviated by lowering the price of these essential products. It is therefore appropriate to introduce specific supply arrangements to guarantee supply to these islands and compensate for the additional costs arising from their insularity and remoteness.

(4) To that end, notwithstanding Article 23 of the Treaty, imports of the products concerned from third countries should be exempt from the applicable import duties.

(5) In order to achieve the goal of lowering prices in the Canary Islands and mitigating the additional costs of their remoteness and insularity while maintaining the competitiveness of Community products and preventing disruption of traditional trade flows, aid should be granted for the supply to these islands of products of Community origin. Such aid must take account of the additional cost of transport to the Canary Islands and the prices applied to exports to third countries and, in the case of agricultural inputs and products intended for processing, the additional costs of insularity.

(6) Since the quantities covered by the specific supply arrangements are limited to the supply requirements of the Canary Islands, those arrangements do not impair the proper functioning of the internal market. In addition, the economic advantages of the specific supply arrangements must not provoke deflections of trade in the products concerned. Re-exportation or re-dispatching of those products from the Canary Islands should therefore be prohibited unless authorised by the Commission. In the case of processing, this prohibition should not apply to traditional exports and consignments.

(7) The economic advantages of the specific supply arrangements must be passed on so as to reduce production costs and bring down prices throughout the production and distribution chain to the end user, culminating in lower consumer prices. They should therefore be granted only on condition that they actually are passed on, and monitoring must be carried out to that end.

(8) Traditional livestock farming activities should be supported in order to help meet local consumption needs. To that end, derogations are needed from some of the provisions of the common market organisations which restrict production, to take account of the development and particular conditions of local production, which are quite different from those in the rest of the Community. This objective may also be pursued indirectly by financing genetic improvement programmes involving the purchase of pure-bred breeding animals, by purchasing commercial breeds more suited to local conditions and by supplementing the suckler cow premium and the slaughter premium, and, pending the development of local livestock farming, temporary provision should be made for the supply of male animals for fattening, the number of such animals to be supplied each year being limited so as not to compromise the above-mentioned objective. The estimate of local consumption requirements is drawn up in a periodic balance. To ensure that Community support can be mobilised effectively, an annual financial allocation must enable the sectors concerned to define and implement strategies tailored to the local context for economic development, spatial organisation of production and increasing the professionalism of producers.

(9) In the interests of uniformity and in order to align the arrangements under POSEIMA and POSEICAN in the beef and veal sector with those in force for the French overseas departments, the annexes to Regulation (EEC) No 1254/1999 on the common organisation of the market in beef and veal should be amended.

(10) The sheep and goat sector receives support through a supplementary premium granted to producers in the Canary Islands for heavy lambs. This measure has made it possible to develop local production, which is of social, economic and environmental importance because this activity is concentrated in the most disadvantaged areas of the islands where no other alternatives exist. This measure should be continued.

(11) In order to support milk production in the sheep and goat sector, to structure that sector, alleviate difficulties in the processing and marketing of local farm cheeses made from ewe's and goat's milk, rectify the fragmentation of supply, improve the quality of milk and assist diversification, a programme is hereby introduced for producers and producer organisations.

(12) Aid for human consumption of fresh cow's milk products is paid to dairies so that the milk produced can be disposed of in the normal fashion on the local market. Extending the aid to cover other products has enabled the sector to adapt to changing consumption habits. The level of self-sufficiency is still very low, and so the measure should be continued.

(13) The area aid scheme for fruit and edible vegetables, roots and tubers, flowers and live plants has proved unsuitable, especially because of the slowness and complexity of procedures and the way the proposed aid was structured. Lessons should be learned from the encouraging results of the POSEIDOM reform in that sector, and marketing and processing aid should be envisaged with a view to supplying the market in the Canary Islands. Such aid must help local produce compete with products from elsewhere on high-growth markets, better satisfy the requirements of consumers and new distribution channels, improve the productivity of farms and upgrade the quality of products. The marketing of these products, both fresh and processed, should be continued and they should be promoted on the Community market. An economic study will help to refine the structure of the sector.

(14) Potato production is essential in the Canary Islands, for both economic and social and environmental reasons. The cultivated areas are situated in areas of average altitude where the difficult terrain and small size of holdings (terrace cultivation), together with the high prices of inputs, make for very high production costs. Specific aid is granted for growing potatoes for human consumption in order to support domestic production to satisfy the islands' consumption patterns. Abolition of the temporary measure restricting the deliveries of potatoes for human consumption during sensitive periods for the marketing of local production has left the sector very vulnerable. It is therefore planned to grant aid for local marketing of this potato production.

(15) It is economically and environmentally imperative that vineyards, the most widespread crop, continue to be cultivated, because winegrowing is practised in dry areas and on land that is particularly vulnerable to erosion. In order to help support domestic production, a flat-rate area aid is granted for the cultivation of vines for producing quality wines produced in specified regions. Likewise, compulsory and voluntary distillation and abandonment premiums do not apply here.

(16) Tobacco growing is of historical importance on the islands. Economically speaking, tobacco preparation continues to be one of the chief industrial activities in the region. In social terms, tobacco cultivation is very labour intensive and carried out by small farms. Since the crop is not sufficiently profitable it is in danger of dying out. Tobacco is currently cultivated only on a small area on the island of La Palma, where it is used for the artisanal manufacture of cigars. Spain should therefore be authorised to continue to grant aid in addition to the Community aid so that this traditional crop can be maintained with a view to supporting the artisanal activity associated with it. In addition, to maintain the manufacture of tobacco products, imports into the Canary Islands of raw and semi-manufactured tobacco should continue to be exempt from customs duty, up to an annual limit of 20 000 tonnes of stripped raw tobacco equivalent.

(17) Traditional honey production in the Canary Islands is produced by a local breed of bees well suited to local conditions but not very productive. This breed is in danger of dying out, to be replaced by breeds which will be more profitable to beekeepers. The aid being paid to associations of beekeepers producing traditional honey of specific quality should therefore be continued, and the number of hives of local bees eligible for the aid should be adapted.

(18) Agricultural producers in the Canary Islands should be encouraged to supply quality products and the marketing of these should be assisted. Using the Community's graphic symbol might help achieve this. Promotion of the symbol should therefore be funded.

(19) The structures of certain farms and processing and marketing firms in these islands are seriously defective and face specific difficulties. It should therefore be possible to derogate for some types of investment from the provisions restricting the grant of some of the structural aid provided for in Council Regulation (EC) No 1257/1999.

(20) A derogation may be granted from the Commission's consistent policy of not authorising State operating aid for the production, processing and marketing of agricultural products covered by Annex I to the Treaty in order to mitigate the specific constraints on farming in the Canary Islands as a result of their remoteness, insularity, small area, mountainous terrain and climate and their economic dependency on a small number of products,

HAS ADOPTED THIS REGULATION:

Article 1

This Regulation lays down specific measures to remedy the difficulties caused by the remote and insular nature of the Canary Islands in respect of certain agricultural products.

TITLE I Specific supply arrangements

Article 2

1. Specific supply arrangements are hereby introduced for the agricultural products listed in Annex I to this Regulation, which are essential for human consumption, for processing and as agricultural inputs in the Canary Islands.

2. A forecast supply balance shall be drawn up stating the quantity of the agricultural products listed in Annex I needed to meet supply requirements each year. A separate forecast balance may be drawn up for the requirements of the industries processing and packaging products intended for the local market and for traditional export or consignment to the rest of the Community.

Article 3

1. No duties shall apply to direct imports into the Canary Islands of products covered by the specific supply arrangements if they originate in third countries, within the limit of the quantities determined in the supply balance.

Products which have entered the Community's customs territory under inward processing or customs warehousing arrangements shall be considered as direct imports for the purposes of this Title.

2. To ensure coverage of the requirements established in accordance with Article 2 in terms of quantity, price and quality, while taking care to maintain the Community's share in supplies, aid shall be granted to supply the Canary Islands with Community products held in public intervention storage or available on the Community market.

Such aid shall be fixed to take account of the additional cost of transport to the Canary Islands and the prices applied to exports to third countries and, in the case of agricultural inputs and products intended for processing, the additional costs of insularity.

3. In implementing the scheme introduced by this Article, account shall be taken, in particular, of the following:

-the specific requirements of the Canary Islands and, in the case of products intended for processing and agricultural inputs, the specific quality requirements,

-traditional trade flows with the rest of the Community,

-the economic aspect of the proposed aid.

4. Entitlement under the supply arrangements provided for in this Title shall be subject to the condition that the economic advantage derived either from exemption from import duties or from aid in the case of supply from the rest of the Community is actually passed on to the end user.

5. Products covered by the specific supply arrangements introduced by this Title may not be re-exported to third countries or re-dispatched to the rest of the Community without authorisation from the Commission. The Commission shall determine the conditions for such authorisation, which shall include, in particular, reimbursement of the aid received under the specific supply arrangements for the products referred to in Article 3(2) or payment of the import duty on the products referred to in Article 3(1).

Where the products concerned are processed in the Canary Islands, the aforesaid prohibition shall not apply to traditional exports or shipments of the processed products to the rest of the Community. In the case of traditional exports, no refund shall be granted.

6. Detailed rules for applying this Title shall be adopted in accordance with the procedure referred to in Article 22(2). These shall include:

-the fixing of aid for supply from the rest of the Community,

-provisions to ensure that the advantages granted are actually passed on to the end user,

-introduction if necessary of a system of import or delivery licences.

The Commission shall draw up supply balances in accordance with the procedure referred to in the first subparagraph. It may revise those balances, and the list of products in Annex I, in accordance with the same procedure, in the light of changes in the Canary Islands' requirements.

TITLE II Measures to assist local products

Chapter I Livestock and milk products

Article 4

1. In the livestock sector, aid shall be granted for the supply to the Canary Islands of the pure-bred animals, animals of commercial breeds and livestock products, originating in the Community.

2. The terms for granting aid shall be laid down taking account, in particular, of the supply requirements of the Canary Islands for starting up production and genetic improvement of livestock and the need for the breeds best suited to local conditions. The aid shall be paid for the delivery of goods which fulfil the requirements specified in Community rules.

3. The following shall be taken into account when aid is being fixed:

-the conditions and in particular the costs of supply to the Canary Islands resulting from their geographical situation,

-the price of products on the Community market and on the world market,

-whether or not duties are charged on imports from third countries,

-the economic aspect of the proposed aid.

4. Article 3(4) and (5) shall apply to goods qualifying for aid under paragraph 1.

5. The list of products, the level of the aid referred to in paragraph 1 and the detailed rules for applying this Article shall be adopted in accordance with the procedure referred to in Article 22(2).

Article 5

1. Until the local numbers of young male bovines reach a level sufficient to maintain traditional beef production, and within the limit referred to in Article 6:

(a) the customs duties referred to in Article 30 of Regulation (EC) No 1254/1999 shall not be applied to imports of bovine animals from third countries for on-site fattening and consumption in the islands;

(b) aid shall be granted for the supply of animals as referred to in (a) originating in the Community, up to a limit of 4 000 head. Priority shall be given to producers holding animals for fattening at least 50% of which are of local origin.

Article 3(4) and (5) shall apply to goods qualifying for aid under paragraph 1.

2. The numbers of animals qualifying for the measures referred to in paragraph 1 shall be determined in a periodic forecast supply balance, taking account of the development of local production. These numbers, the amount of the aid referred to in paragraph 1(b) and detailed rules for applying this Article, including in particular the minimum duration of the fattening period, shall be fixed in accordance with the procedure referred to in Article 22(2).

Article 6

1. The aid provided for in paragraph 2 and 3 below shall be granted to assist traditional activities connected with beef and veal production and measures to improve product quality, within the limits of the consumption needs of the islands as assessed in the context of a periodic supply balance.

The balance shall also take account of breeding animals supplied under Article 4 and animals covered by the measures provided for in Article 5.

2. A supplement to the slaughter premium of EUR 25 per head shall be paid to producers for each animal slaughtered under Article 11 of Regulation (EC) No 1254/1999.

3. A supplement to the premium for maintaining suckler cows provided for in Article 6 of Regulation (EC) No 1254/1999 shall be paid to beef and veal producers. The amount of this supplement shall be EUR 50 per suckler cow held by the producer on the day on which the application is submitted.

4. The provisions relating to:

(a) the regional ceiling laid down by Article 4 of Regulation (EC) No 1254/1999 as regards the basic special premium;

(b) the individual ceiling for animals kept on the holding as laid down in Article 6 of the aforementioned Regulation, as regards the basic suckler cow premium;

(c) the national ceiling laid down under Article 11 of the above Regulation as regards the basic slaughter premium;

(d) the stocking density for animals kept on the farm, laid down in Article 12 of that Regulation, as regards the basic special premium and the basic suckler cow premium,

shall not apply in the Canary Islands in the case of the basic special premium, the basic suckler cow premium, the slaughter premium or the supplementary premiums referred to in paragraphs 2 and 3.

5. The basic and supplementary premiums referred to in paragraphs 2 and 3 shall be granted each year for a maximum of 10 000 male bovine animals, 5 000 suckler cows and 15 000 slaughtered animals, respectively.

6. Detailed rules for applying this Article shall be adopted in accordance with the procedure referred to in Article 19(2). They shall cover drawing up the balances referred to in paragraph 1 and any reviews to take account of changing requirements and:

(a) as regards the special premium for male bovine animals, they shall provide for:

-the "freezing", within the regional ceiling set in Article 4 of Regulation (EC) No 1254/1999, of the number of animals for which the special premium was granted in the Canary Islands for the year 2000,

-the grant of basic premiums within the limit of 90 animals per age group, per calendar year and per holding;

(b) as regards the suckler cow premium, these detailed rules:

-shall include provisions to guarantee, to the extent necessary, the rights of producers to whom a premium has been granted under Article 6 of Regulation (EC) No 1254/1999,

-may provide for the establishment of a specific reserve for the Canary Islands and special conditions for allocating or reallocating rights, taking into account the objectives pursued in the livestock farming sector; the size of the reserve shall be determined on the basis of the ceiling set in paragraph 5 and the number of premiums granted for the year 2000;

(c) as regards the slaughter premium, they shall provide for:

-the "freezing", within the ceiling set in Article 38(1) of Regulation (EC) No 2342/1999, of the number of animals for which the slaughter premium was granted for 2000.

The detailed implementing rules may include additional conditions for granting supplementary premiums.

The Commission may review the ceilings fixed in paragraph 5 in accordance with the same procedure.

Article 7

During the period 2001-05, a flat-rate financial allocation shall be granted to producer organisations or their associations to implement in the Canary Islands a comprehensive programme to support the production and marketing of local produce in the livestock sector.

The programme may include measures to encourage improved quality and hygiene, the marketing of quality products, sector structuring, the rationalisation of production and marketing structures providing for grouped purchases and the provision of technical assistance.

The programme shall be prepared and implemented by the competent authorities designated by the Member State, working in close collaboration with the most representative producer organisations or their associations in the sectors concerned. It may not include the granting of aid in addition to the individual premiums paid directly to producers under this Regulation in the livestock sector.

Each year the Spanish authorities shall present a report on implementation of the programme.

Detailed rules for applying this Article, the measures and the amount of aid shall be fixed and may be reviewed in accordance with the procedure referred to in Article 22(2).

Article 8

1. A supplementary premium shall be granted, in addition to the ewe premium payable under Article 5(3) of Council Regulation (EC) No 2467/98 of 3 November 1998 on the common organisation of the market in sheepmeat and goatmeat [10], to producers of light lambs as defined in Article 4(3) of that Regulation.

[10] OJ L 312, 20.11.1998, p. 1. Regulation last amended by Regulation (EC) No 1669/2000 (OJ L 193, 29.7.2000, p. 8).

The amount of the supplementary premium shall be equal to the difference between the amounts of the premiums determined under Article 5(2) and (3) of Regulation (EC) No 2467/98 payable to producers of heavy lambs and producers of light lambs, respectively, plus the difference between the amounts of the specific aids for rural measures referred to in the first and second indents of Article 1(1) of Council Regulation (EEC) No 1323/90 of 14 May 1990 instituting specific aid for sheep and goat farming in certain less-favoured areas of the Community [11].

[11] OJ L 132, 23.5.1990, p. 17. Regulation last amended by Regulation (EC) No 193/98 (OJ L 20, 27.11.1998, p. 18).

2. The supplementary premium determined in accordance with paragraph 1 shall also be paid to producers of goat meat, without prejudice to payment of the premium provided for in Article 5(5) of Regulation (EC) No 2467/98.

3. The premiums referred to in paragraphs 1 and 2 shall be granted on the same terms as those laid down for the grant of the premium to producers of sheepmeat and goat meat under Article 5 of Regulation (EC) No 2467/98.

4. Detailed rules for applying this Article shall be adopted as necessary in accordance with the procedure referred to in Article 22(2).

Article 9

1. During the period 2001-05, financial assistance shall be granted to producers and producer organisations recognised by the competent authorities to implement a comprehensive programme to support production and marketing in the sheep and goat sector in the Canary Islands, in particular cheese, the chief product of that sector.

The operational programmes must be approved by the competent authorities and shall include measures such as incentives to structure the sector, achieve genetic improvement of herds, and improve the technical and health conditions on farms, the quality of milk and cheese and the image of local products, industrial production, marketing and concentration of artisanal supply.

These programmes may not include aid in addition to the premiums paid under Article 8.

3. Additional detailed rules of application, the measures and the amount of aid shall be fixed and may be reviewed in accordance with the procedure referred to in Article 22(2).

Article 10

1. Aid shall be granted for the human consumption of locally produced fresh cow's milk products, within the limits of the consumption needs of the islands as assessed periodically. The aid shall be paid to the dairies. The aid shall amount to EUR 8,45 per 100 kg of whole milk.

2. The Commission shall review the aid referred to in paragraph 1 and adopt detailed rules for applying this Article in accordance with the procedure referred to in Article 22(2). Payment shall be subject to the benefit derived therefrom being actually passed on to the consumer.

Chapter II Fruit, vegetables, plants and flowers

Article 11

1. Aid shall be granted for the fruits, edible vegetables, roots and tubers, flowers and live plants listed in Chapters 6, 7 and 8 of the combined nomenclature harvested in the Canary Islands and intended to supply the market in the Canary Islands.

The aid shall be granted for products which conform to common standards fixed by Community legislation or, where no such standards exist, to specifications written into the supply contracts.

Grant of the aid shall be subject to the conclusion of supply contracts lasting one or more years between producers or producer organisations as referred to in Articles 11, 13 and 14 of Council Regulation (EC) No 2200/96 of 28 October 1996 on the common organisation of the market in fruit and vegetables [12] and the food industry or distributors, restaurants and the like or local authorities.

[12] OJ L 297, 20.11.1996, p. 1. Regulation last amended by Regulation (EC) No 1257/1999 (OJ L 160, 26.6.1999, p. 80).

The aid shall be paid out to the above-mentioned producers or producer organisations within the limits of annual quantities established for each product category.

The amount of the aid shall be fixed on a flat-rate basis for each of the product categories to be determined, based on the average value of the products covered. The amount of aid shall be differentiated according to whether the beneficiary is a producer or one of the producer organisations referred to in Articles 11, 13 and 14 of Regulation (EC) No 2200/96.

The aid shall not be granted for bananas falling within CN code 0803 00, tomatoes falling within CN code 0702 00 or new potatoes falling within CN code 0701 90 51.

2. Detailed rules for applying this Article shall be adopted in accordance with the procedure referred to in Article 22(2). The product categories and amounts of aid referred to in paragraph 1 shall be fixed in accordance with the same procedure.

Article 12

1. Aid shall be granted for the conclusion of annual contracts concerning the marketing of fresh and processed products as specified in Article 11 and harvested in the Canary Islands.

The contracts shall be concluded between individual producers or producer organisations as referred to in Articles 11, 13 and 14 of Regulation (EC) No 2200/96 established in the Canary Islands and natural or legal persons established in the rest of the Community.

2. The amount of the aid shall be 10% of the value of the production marketed, free at destination.

This aid shall be paid up to a limit of a volume of 10 000 tonnes per product per year.

3. The aid shall be granted to purchasers who undertake to market the Canary Islands products under the contracts referred to in paragraph 1.

4. Where marketing of the products referred to in paragraph 1 is undertaken by joint ventures constituted, with the aim of marketing produce from the Canary Islands, by producers in those islands or producer organisations as referred to in Articles 11, 13 and 14 of Regulation (EC) No 2200/96 and natural or legal persons established in the rest of the Community, and where the partners undertake to pool the knowledge and know-how required to achieve the objective of the joint venture over a minimum period of three years, the amount of the aid shall be increased to 13% of the value of the annual production marketed jointly.

5. Detailed rules for applying this Article shall be adopted in accordance with the procedure referred to in Article 22(2).

Article 13

1. The Community shall contribute up to a maximum of EUR 100 000 towards the financing of an economic analysis and forward study of the fresh and processed fruit and vegetable sector in the Canary Islands, paying particular attention to tropical produce.

The study shall produce an economic and technical assessment of the sector. It shall pay particular attention to supply data and processing costs and examine the conditions and scope for development and sales at regional and international level, having regard to competition on the world market.

2. Detailed rules for applying this Article shall be adopted in accordance with the procedure referred to in Article 22(2).

Chapter III Wine

Article 14

Chapter II of Title II of Council Regulation (EC) No 1493/1999 of 17 May 1999 on the common organisation of the market in wine [13] and Chapter III of Commission Regulation (EC) No 1227/2000 of 31 May 2000 laying down detailed rules for the application of Council Regulation (EC) No 1493/1999 on the common organisation of the market in wine [14], as regards production potential shall not apply to the Canary Islands.

[13] OJ L 179, 14.7.1999, p. 1.

[14] OJ L 143, 16.6.2000, p. 1.

Article 15

1. Aid per hectare shall be granted for the continued cultivation of vines for the production of quality wines psr in the traditional production zones.

The following areas shall be eligible for aid:

(a) areas planted to vine varieties included among the varieties classified by the Member States as being suitable for the production of each of the quality wines psr produced in their territory, as referred to in Article 19 of Regulation (EC) No 1493/1999, and

(b) areas where the yield per hectare is lower than a maximum to be fixed by the Member State, expressed as quantities of grapes, grape musts or wine, under the terms of Annex VI(1) to Regulation (EC) No 1493/1999.

2. The amount of the aid shall be EUR 476,76 per hectare per year. The aid shall be paid to producer groups or their associations.

However, the aid shall also be granted to individual producers during a transitional period. During that period, all the aid shall be paid through the regulatory boards for designations of origin, in accordance with rules to be laid down in accordance with the procedure referred to in paragraph 3.

3. Detailed rules for applying this Article shall be adopted as necessary in accordance with the procedure referred to in Article 22(2).

Chapter IV Potatoes

Article 16

1. Aid per hectare shall be granted for the cultivation of potatoes for human consumption falling within CN codes 0701 90 51, 0701 90 59 and 0701 90 90.

2. The maximum amount of the aid shall be EUR 596 per hectare.

The aid shall be paid up to a limit of 9 000 hectares cultivated and harvested per year.

3. Detailed rules for applying this Article shall be adopted in accordance with the procedure referred to in Article 22(2).

Chapter V Tobacco

Article 17

Spain is hereby authorised to grant tobacco production aid to the Canary Islands in addition to the premium provided for in Title I of Regulation (EEC) No 2075/92. The grant of this aid may not result in discrimination between producers in the islands.

The amount of the aid shall not be more than the Community premium referred to in the first paragraph. The additional aid shall be paid for up to 10 tonnes each year.

Article 18

1. No customs duties shall be applied to direct imports into the Canary Islands of raw and semi-manufactured tobacco falling, respectively, within:

-CN code 2401,

-and subheadings:

-2401 10 Tobacco, not stemmed/stripped,

-2401 20 Tobacco, partly or wholly stemmed/stripped,

-ex 2401 20 outer coverings for cigars presented on supports, in reels for the manufacture of tobacco,

-2401 30 Tobacco waste,

-ex 2402 10 00 Unfinished cigars without wrapping,

-ex 2403 10 00 Cigarette rag (finished mixtures of tobacco for the manufacture of cigarettes, cigars, cheroots and cigarillos),

-ex 2403 91 00 Homogenised or reconstituted tobacco, whether or not put up in sheets or strips,

-ex 2403 99 90 Expanded tobacco [15],

[15] OJ L 172, 8.7.1999, p. 32.

The exemption referred to in the first subparagraph shall apply to products intended for the local manufacture of tobacco products, up to an annual import limit of 20 000 of raw stripped tobacco equivalent.

2. Detailed rules for applying this Article shall be adopted in accordance with the procedure referred to in Article 22(2).

Chapter VI Honey

Article 19

1. Aid shall be granted for the production of quality honey specific to the Canary Islands, produced by the local breed of 'black bees'.

The aid shall be paid to beekeepers' associations recognised by the competent authorities on the basis of the number of hives of black bees in production, up to a limit of 15 000 hives.

The amount of the aid shall be EUR 20 per hive in production per marketing year. For the purposes of this Article, the marketing year shall begin on 1 July and end on 30 June the following year.

2. Detailed rules for applying this Article shall be adopted as necessary in accordance with the procedure referred to in Article 22(2).

Chapter VII Graphic symbol

Article 20

1. The conditions for using the graphic symbol introduced with a view to ensuring greater awareness and consumption of quality agricultural products, whether natural or processed, specific to the Canary Islands as most remote regions, shall be proposed by the professional organisations. The Spanish authorities shall forward such proposals, with their opinion, to the Commission for approval.

Use of the symbol shall be monitored by an official authority or a body approved by the competent Spanish authorities.

2. Detailed rules for applying this Article shall be adopted as necessary in accordance with the procedure referred to in Article 22(2).

TITLE III Structural derogations

Article 21

1. Notwithstanding Article 7 of Regulation (EC) No 1257/1999, the total value of the aid, expressed as a percentage of the volume of eligible investments, shall not exceed 75% for investments intended in particular to encourage diversification, restructuring or a shift towards sustainable agriculture on agricultural holdings of very small economic size to be defined in the programming complement referred to in Article 18(3) of Regulation (EC) No 1260/1999 [16].

[16] OJ L 161, 26.6.1999, p. 1.

2. Notwithstanding Article 28(2) of Regulation (EC) No 1257/1999, the total value of the aid, expressed as a percentage of the volume of eligible investments, shall not exceed 65% for investments in small and medium-sized enterprises engaged in processing and marketing agricultural products consisting mainly of local produce in sectors to be defined in the programming complement referred to in Article 18(3) of Regulation (EC) No 1260/1999.

3. The measures planned under this Article shall be described in the operational programmes for these regions, as referred to in Article 18 of Regulation (EC) No 1260/1999.

TITLE IV General and final provisions

Article 22

1. The Commission shall be assisted by the Management Committee for Cereals established by Article 22 of Council Regulation (EEC) No 1766/92 of 30 June 1992 on the common organisation of the market in cereals [17], or by the management committees established by the other regulations on the common organisation of the markets for the products concerned.

[17] OJ L 181, 1.7.1992, p. 21. Regulation last amended by Regulation (EC) No 1666/2000 (OJ L 193, 29.7.2000, p. 1).

In the case of agricultural products covered by Regulation (EEC) No 827/68 and products not covered by a common organisation of the market, the Commission shall be assisted by the Management Committee for Hops established by Article 20 of Council Regulation (EEC) No 1696/71 of 26 July 1971 on the common organisation of the market in hops [18].

[18] OJ L 175, 4.8.1971, p. 1. Regulation last amended by Regulation (EC) No 191/2000 (OJ L 23, 28.1.2000, p. 4).

In the case of the graphic symbol and other cases provided for in this Regulation, the Commission shall be assisted by the Management Committee for Fresh Fruit and Vegetables established by Council Regulation (EC) No 2200/96 of 28 October 1996 on the common organisation of the market in fruit and vegetables [19].

[19] OJ L 297, 20.11.1996, p. 1. Regulation last amended by Regulation (EC) No 1257/1999 (OJ L 160, 26.6.1999, p. 80).

For the purposes of implementing Title IV, the Commission shall be assisted by the Committee on Agricultural Structures and Rural Development established by Article 50 of Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds [20].

[20] OJ L 161, 26.6.1999, p. 1.

2. Where reference is made to this paragraph, the management procedure provided for in Article 4 of Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission [21] shall apply, subject to Article 7(3) of that Decision.

[21] OJ L184, 17.7.1999, p. 23.

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

Article 23

For the agricultural products covered by Annex I to the Treaty, to which Articles 87, 88 and 89 thereof apply, the Commission may authorise operating aid in the sectors producing, processing and marketing those products, with a view to mitigating the specific constraints on farming in the Canary Islands as a result of their remoteness and insularity.

Article 24

The measures provided for in this Regulation, except for Article 21, shall constitute intervention intended to stabilise the agricultural markets within the meaning of Article 2(2) of Council Regulation (EC) No 1258/1999 [22].

[22] Council Regulation (EC) No 1258/1999 of 17 May 1999 on the financing of the common agricultural policy (OJ L 160, 26.6.1999, p. 103).

Article 25

The Member States shall take the measures necessary to ensure compliance with this Regulation, in particular as regards controls and administrative penalties, and shall inform the Commission thereof.

The detailed rules for applying this Article shall be adopted by the procedure provided for in Article 22(2).

Article 26

1. Spain shall present to the Commission an annual report on the implementation of the measures provided for in this Regulation.

2. At the end of the fifth year of application of the system the Commission shall submit to Parliament and the Council a general report showing the impact of the action taken under this Regulation.

Article 27

Council Regulation (EEC) No 1601/92 of 15 June 1992 concerning specific measures for the Canary Islands with regard to certain agricultural products [23] is hereby repealed. References to Regulation (EEC) No 1601/92 shall be construed as references to this Regulation and should be read in accordance with the correlation table in Annex II.

[23] OJ L 173, 27.6.1992, p. 13. Regulation last amended by Regulation (EC) No 1257/1999 (OJ L 160, 26.6.1999, p. 80).

Article 28

This Regulation shall enter into force on the 20th day following its publication in the Official Journal of the European Communities.

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

LIST OF PRODUCTS COVERED BY THE SPECIFIC SUPPLY ARRANGEMENTS PROVIDED FOR IN ARTICLE 3

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ANNEX II

Correlation table

Regulation (EEC) No 1601/92 // This Regulation

Article 1 // Article 1

Article 2 // Article 2

Article 3(1) // First subparagraph of Article 3(1)

// Second subparagraph of Article 3(1)

Article 3(2) // Article 3(2)

Article 3(3) // Article 3(3)

Article 4 // Article 4

Article 5 // Article 5

Article 6 // Article 18

Article 7 // Article 3(4)

Article 8(1) // First subparagraph of Article 3(5)

// Second subparagraph of Article 3(5)

Article 8(2) // Third subparagraph of Article 3(5)

Article 8(3) // Deleted

Article 9 // Third subparagraph of Article 3(5)

Article 10(1) // Article 6(1)

Article 10(2) // Deleted

// Article 6(2)

Article 10(3) // Article 6(3)

// Article 6(4)

// Article 6(5)

// Article 7

Article 11 // Article 10

Article 12 // Deleted

Article 13 // Article 8

// Article 9

Article 14 // Deleted

Article 15 // Article 11

Article 16 // Article 12

Article 17 // Article 13

Article 18 // Article 14

Article 19 // Article 15

Article 20 // Article 16

Article 21 // Deleted

Article 22 // Deleted

Article 23 // Article 17

Article 24 // Article 19

Article 25 // Deleted

Article 26 // Article 20

Article 27 // Article 21

Article 28 // Deleted

// Article 22

// Article 23

Article 29 // Article 24

// Article 25

Article 30 // Article 26

// Article 27

Article 31 // Article 28

Annex // Annex I

// Annex II

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